Owens Realty Mortgage, Inc. (Form: 8-K12G3, Received: 05/20/2013 16:26:57)

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

CURRENT REPORT PURSUANT TO

SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1933

Date of Report (Date of earliest event reported): May 20, 2013

OWENS REALTY MORTGAGE, INC.

(Exact Name of Registrant as Specified in its Charter)


Maryland	000-17248	46-0778087

(State or Other Jurisdiction	(Commission	(IRS Employer
of Incorporation)	File Number)	Identification No.)


2221 Olympic Boulevard
Walnut Creek, California		94595

(Address of Principal Executive Offices)	(Zip Code)

Registrant’s telephone number, including area code: (925) 935-3840

Not Applicable

(Former Name or Former Address, if Changed Since Last Report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

As further described below, as part of a plan to reorganize the business operations of Owens Mortgage Investment Fund, a California Limited Partnership (the “Predecessor Registrant”) so that it can elect to qualify as a real estate investment trust (a “REIT”) for federal income tax purposes, the Predecessor Registrant merged with and into Owens Realty Mortgage, Inc., a Maryland corporation (the “Registrant”) on May 20, 2013 pursuant to an Agreement and Plan of Merger, dated as of January 23, 2013 (which is attached hereto as Exhibit 2.1), with the Registrant as the surviving corporation (the “REIT Conversion Merger”). At the effective time of the REIT Conversion Merger, the Registrant commenced conducting all of the business conducted by the Predecessor Registrant immediately prior to the REIT Conversion Merger.

This current report on Form 8-K is being filed for the purpose of establishing the Registrant as the successor issuer to the Predecessor Registrant pursuant to Rule 12g-3(a) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and to timely disclose events required to be disclosed on Form 8-K with respect to the Predecessor Registrant and the Registrant.

Item 1.01 Entry into a Material Definitive Agreement

Management Agreement

In connection with the REIT Conversion Merger, on May 20, 2013, the Registrant entered into a management agreement (the “Management Agreement”) with Owens Financial Group, Inc. (“OFG”), the general partner of the Predecessor Registrant, pursuant to which OFG agreed to serve as manager of the Registrant. Bryan H. Draper and William C. Owens, each of whom serves as a director and officer of OFG and own equity in OFG, serve as officers and directors of the Registrant and own equity in the Registrant.

Under the Management Agreement, subject to the oversight of the Registrant’s board of directors and in accordance with the Registrant’s charter and bylaws, OFG will be responsible for the day-to-day operations of the Registrant and its subsidiaries and will perform such services and activities relating to the assets and operations of the Registrant and its subsidiaries as may be appropriate, including those expressly set forth in the Management Agreement, and will also perform, on behalf of the Registrant and its subsidiaries, portfolio management services with respect to their investments and monitoring services with respect to any loan servicing activities provided by third parties. OFG will provide the Registrant and its subsidiaries with a management team and other support personnel in order to provide the management services to the Registrant and its subsidiaries. None of the officers, employees or other personnel of OFG will be dedicated exclusively to the Registrant.

Under the Management Agreement, in exchange for its services as manager of the Registrant, OFG will be compensated as set forth in the Registrant’s charter, the relevant provisions of which may not be changed without the approval of the Registrant’s board of directors and the holders of a majority of the outstanding shares of stock of the Registrant. OFG will be entitled to receive from the Registrant the following fees:

•	Management Fee . OFG will receive a management fee payable monthly, subject to a maximum fee of 2.75% per year of the average unpaid balance of the Registrant’s mortgage loans at the end of each month in the calendar year.

•	Loan Servicing Fee . OFG may act as servicing agent with respect to the Registrant’s mortgage loans, in consideration for which it will be entitled to receive from the Registrant a monthly fee, which, when added to all other fees paid in connection with the servicing of a particular loan, does not exceed the lesser of the customary, competitive fee in the community where the loan is placed for the provision of such mortgage services on that type of loan, or up to 0.25% per year of the unpaid balance of the Registrant’s mortgage loans at the end of each month.

OFG will be entitled to receive directly from borrowers the following fees:

•	Acquisition and Origination Fees . OFG or its affiliates will be entitled to receive and retain all fees and commissions paid or payable to it by any party other than the Registrant and any subsidiary in connection with the Registrant making or investing in mortgage loans.


•	Late Payment Charges . OFG will be entitled to receive and retain all additional charges paid by borrowers on delinquent loans and loans past maturity held by the Registrant, including additional interest and late payment fees.

The Management Agreement will continue in effect for the duration of the existence of the Registrant, unless earlier terminated by its terms.

Certain provisions of the Management Agreement, including OFG’s obligation to comply with the investment policies contained in the Registrant’s charter, the compensation to be paid by the Registrant to OFG for its management services, and the term of the Management Agreement, and the vote required to amend such provisions, may only be amended with the approval of holders of a majority of the outstanding shares of common stock of the Registrant entitled to vote on the matter.

The foregoing description of the Management Agreement does not purport to be complete and is qualified in its entirety by reference to the Management Agreement, which is attached hereto as Exhibit 10.1 and incorporated herein by reference.

Item 2.01 Completion of Acquisition or Disposition of Assets

On May 20, 2013, as part of a plan to reorganize the business operations of the Predecessor Registrant in order to qualify it as a REIT for federal income tax purposes, the REIT Conversion Merger was consummated. The Registrant intends to elect to be taxed as a REIT under the U.S. Internal Revenue Code as soon as possible.

The REIT Conversion Merger was approved by the requisite vote of limited partners of the Predecessor Registrant at a special meeting held on April 16, 2013. As a result of the REIT Conversion Merger, the Registrant succeeded to all the business, assets, and liabilities of the Predecessor Registrant and owns all the assets previously held by, and carries on the business of, the Predecessor Registrant.

In the REIT Conversion Merger, limited partners of the Predecessor Registrant receive one share of common stock, par value $ 0.01 per share, of the Registrant, or Common Stock, for every 25 limited partner units of the Predecessor Registrant, or LP Units, that they own. The units of the Predecessor Registrant representing the general partner interest of OFG are treated as follows: (a) the 1,496,600 units representing the general partner interest that was an expense of the Predecessor Registrant are cancelled upon consummation of the REIT Conversion Merger; and (b) the approximate 1,378,256 units representing the general partner interest relating to cash contributions made by OFG to the capital of Predecessor Registrant (the “GP Contribution Units”) are converted into shares of Common Stock in the same manner LP Units are converted into shares of Common Stock. These conversion formulas resulted in the Predecessor Registrant unitholders that had made cash contributions receiving their corresponding pro-rata portion of the issued and outstanding Common Stock following the REIT Conversion Merger. The 1,000 shares of Common Stock owned by William C. Owens, the sole stockholder of the Registrant prior to the REIT Conversion Merger, are cancelled in exchange for $1,000 in the REIT Conversion Merger, which is the same amount William C. Owens contributed to the Registrant to obtain the aforementioned 1,000 shares. No fractional shares of Common Stock are issued in connection with the REIT Conversion Merger; instead, cash adjustments will be paid in respect of any shares of Common Stock that would otherwise be issuable.

As stated above under “ Item 1.01 Entry into a Material Definitive Agreement ”, Bryan H. Draper and William C. Owens, each of whom serves as a director and officer of OFG and own equity in OFG, serve as officers and directors of the Registrant and own equity in the Registrant. OFG will serve as manager of the Registrant.

The shares of Common Stock issued pursuant to the REIT Conversion Merger were registered under the Securities Act of 1933, as amended, pursuant to the Registrant’s Registration Statement on Form S-4 (File No. 333-184392) (the “Registration Statement”), which was declared effective by the Securities and Exchange Commission (the “SEC”) on February 12, 2013. Pursuant to Rule 12g-3(a) under the Exchange Act, the Registrant is deemed to be the successor issuer to the Predecessor Registrant and the Registrant’s Common Stock is deemed registered under Section 12(g) of the Exchange Act. The Registrant intends to file a Form 8A to register the Common Stock under Section 12(b) of the Exchange Act, which will become effective upon receipt by the SEC of certification from the NYSE MKT, LLC.

Item 3.03 Material Modification to Rights of Security Holders

As described above, upon the consummation of the REIT Conversion Merger, the Registrant will succeed to the Predecessor Registrant and each 25 LP Units and GP Contribution Units will be automatically converted into one share of Common Stock. The form of stock certificate for the Common Stock is set forth in Exhibit 4.1 hereto. The Common Stock is subject to certain share ownership and transfer restrictions as discussed below.

At the effective time of the REIT Conversion Merger, the rights of the stockholders of the Registrant are governed by Maryland law, the Registrant’s charter (the “Charter”) and the Registrant’s Bylaws (the “Bylaws”). To satisfy requirements under the Internal Revenue Code of 1986, as amended, that are applicable to REITs in general and otherwise to address concerns relating to capital stock ownership, the Charter generally prohibits, among other prohibitions, any stockholder from owning more than 9.8%, in value or in number of shares, whichever is more restrictive, of the outstanding shares of Common Stock and 9.8% in value of the outstanding shares of all classes or series of the Registrant’s stock.

A description of the Common Stock, the Bylaws, the Charter and the rights of holders of the Common Stock are contained in the following sections of the Registrant Statement: “Description of Owens Realty Mortgage, Inc. Common Stock”; “Certain Provisions of Maryland Law and of Our Charter and Bylaws”; and “Comparison of Rights of Limited Partners of OMIF and Stockholders of Owens Realty Mortgage, Inc.”, which are attached hereto as Exhibit 99.1and incorporated herein by reference. In addition, the foregoing is qualified in its entirety by reference to the Charter and the Bylaws, copies of which are attached hereto as Exhibits 3.1 and 3.2, respectively, and incorporated herein by reference.

Item 5.07 Submission of Matters to a Vote of Security Holders

On May 20, 2013, in lieu of holding an annual meeting of the Registrant, the sole stockholder of the Registrant voted by written consent to approve the REIT Conversion Merger and to elect William C. Owens, Bryan H. Draper, M. Lyman Bates, Jr., Dennis G. Schmal and James M. Kessler (collectively, the “Directors”) as directors of the Registrant, to hold office until the next annual meeting of stockholders of the Registrant and until his successor is duly elected and qualifies.

Item 9.01 Financial Statements and Exhibits

(a) Financial Statements of Businesses Acquired

Pursuant to Item 9.01(a) (4) of Form 8-K, the Registrant shall file any financial statements required by Item 9.01(a) by amendment not later than 71 calendar days after the date this Report on Form 8-K must be filed.

(b) Pro Forma Financial Information

Pursuant to Item 9.01(b) (2) of Form 8-K, the Registrant shall file any pro forma financial information required by Item 9.01(b) by amendment not later than 71 calendar days after the date this Report on Form 8-K must be filed.

Exhibit No.		Description

2.1		Agreement and Plan of Merger, dated January 23, 2013, by and between Owens Realty Mortgage, Inc. and Owens Mortgage Investment Fund*
3.1		Charter of Owens Realty Mortgage, Inc. **

3.2		Bylaws of Owens Realty Mortgage, Inc.***

4.1		Form of Stock Certificate of Owens Realty Mortgage, Inc.****
10.1		Management Agreement +
99.1		Description of Owens Realty Mortgage, Inc. Common Stock, Certain Provisions of Maryland Law and of Owens Realty Mortgage Inc.’s Charter and Bylaws, and Comparison of Rights of Limited Partners of OMIF and Stockholders of Owens Realty Mortgage, Inc. +

*Incorporated by reference from Exhibit 2.1 to Amendment No. 2 to the Registrant’s Registration

Statement on Form S-4 (File No. 333-184392) filed with the Commission on January 25, 2013.

**Incorporated by reference from Exhibit 3.1 to Amendment No. 2 to the Registrant’s Registration

Statement on Form S-4 (File No. 333-184392) filed with the Commission on January 25, 2013.

*** Incorporated by reference from Exhibit 3.2 to Amendment No. 2 to the Registrant’s Registration Statement on Form S-4 (File No. 333-184392) filed with the Commission on January 25, 2013.

**** Incorporated by reference from Exhibit 4.1 to Amendment No. 2 to the Registrant’s Registration Statement on Form S-4 (File No. 333-184392) filed with the Commission on January 25, 2013.

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

OWENS REALTY MORTGAGE, INC.,

a Maryland corporation

Dated: May 20, 2013 By: /s/ William C. Owens

William C. Owens, President and Chief Executive Officer

		EXHIBIT INDEX
Exhibit No.		Description

2.1		Agreement and Plan of Merger, dated January 23, 2013, by and between Owens Realty Mortgage, Inc. and Owens Mortgage Investment Fund*
3.1		Charter of Owens Realty Mortgage, Inc. **

3.2		Bylaws of Owens Realty Mortgage, Inc.***

4.1		Form of Stock Certificate of Owens Realty Mortgage, Inc.****
10.1		Management Agreement +
99.1		Description of Owens Realty Mortgage, Inc. Common Stock, Certain Provisions of Maryland Law and of Owens Realty Mortgage Inc.’s Charter and Bylaws, and Comparison of Rights of Limited Partners of OMIF and Stockholders of Owens Realty Mortgage, Inc. +

*Incorporated by reference from Exhibit 2.1 to Amendment No. 2 to the Registrant’s Registration

Statement on Form S-4 (File No. 333-184392) filed with the Commission on January 25, 2013.

**Incorporated by reference from Exhibit 3.1 to Amendment No. 2 to the Registrant’s Registration

Statement on Form S-4 (File No. 333-184392) filed with the Commission on January 25, 2013.

*** Incorporated by reference from Exhibit 3.2 to Amendment No. 2 to the Registrant’s Registration Statement on Form S-4 (File No. 333-184392) filed with the Commission on January 25, 2013.

**** Incorporated by reference from Exhibit 4.1 to Amendment No. 2 to the Registrant’s Registration Statement on Form S-4 (File No. 333-184392) filed with the Commission on January 25, 2013.

MANAGEMENT AGREEMENT

THIS MANAGEMENT AGREEMENT is made as of May 20, 2013, by and between OWENS REALTY MORTGAGE, INC., a Maryland corporation (the “Company”), and OWENS FINANCIAL GROUP, INC., a California corporation (the “Manager”).

WHEREAS, the Company is a corporation that intends to elect and to qualify to be taxed as a REIT for federal income tax purposes; and

WHEREAS, the Company desires to retain the Manager to provide investment and other management services to the Company and the Subsidiaries (as defined below) on the terms and conditions hereinafter set forth, and the Manager wishes to be retained to provide such services.

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

Section 1. Definitions . The following terms shall have the following meanings assigned to them:

(a) “ Affiliate ” means a Person that directly, or indirectly through one or more intermediaries, controls or is controlled by, or is under common control with, the Person specified.

(b) “ Agreement ” means this Management Agreement, as amended from time to time.

(c) “ Bankruptcy ” means, with respect to any Person: (i) the filing by such Person of a voluntary petition seeking liquidation, reorganization, arrangement or readjustment, in any form, of its debts under Title 11 of the United States Code or any other federal, state or foreign insolvency law, or such Person’s filing an answer consenting to or acquiescing in any such petition; (ii) the making by such Person of any assignment for the benefit of its creditors; (iii) the expiration of 60 days after the filing of an involuntary petition under Title 11 of the Unites States Code, an application for the appointment of a receiver for a material portion of the assets of such Person, or an involuntary petition seeking liquidation, reorganization, arrangement or readjustment of its debts under any other federal, state or foreign insolvency law, provided that the same shall not have been vacated, set aside or stayed within such 60-day period; or (iv) the entry against it of a final and non-appealable order for relief under any bankruptcy, insolvency or similar law now or hereinafter in effect.

(d) “ Board of Directors ” means the Board of Directors of the Company.

(e) “ Charter ” means the charter of the Company, as amended, as accepted for record by the SDAT of Maryland.

(f) “ Code ” means the Internal Revenue Code of 1986, as amended.

(g) “ Common Stock ” means the common stock, par value $0.01 per share, of the Company.

(h) “ Company ” has the meaning set forth in the first paragraph of this Agreement.

(i) “ Company Account ” has the meaning set forth in Section 5 of this Agreement.

(j) “ Company Indemnified Party ” has the meaning set forth in Section 11(b) of this Agreement.

(k) “ Charter Amendment ” means an amendment to the Compensation Provision that modifies the compensation to which the Manager is entitled, which amendment the Manager has not previously consented to in writing .

(l) “ Compensation Provision ” means Article IX of the Charter, as amended, or any successor provision thereto.

(m) “ Controlling Person ” means any Person, whatever their title, who performs functions for the Manager similar to those of: (i) chairman or member of the board of directors; (ii) executive or senior management, such as the president, vice-president, or chief financial officer; or (iii) those holding 5% or more equity interest in the Manager or a Person having the power to direct or cause the direction of the Manager, whether through the ownership of voting securities, by contract, or otherwise.

(n) “ Exchange Act ” means the Securities Exchange Act of 1934, as amended.

(o) “ Governing Documents ” means, with regard to any entity, the articles or certificate of incorporation and bylaws in the case of a corporation, certificate of limited partnership (if applicable) and the partnership agreement in the case of a general or limited partnership, the articles or certificate of formation and the operating agreement in the case of a limited liability company, the trust instrument in the case of a trust, or similar governing documents, in each case as amended from time to time.

(p) “ Indemnitee ” has the meaning set forth in Section 11(b) of this Agreement.

(q) “ Indemnitor ” has the meaning set forth in Section 11(c) of this Agreement.

(r) “ Independent Directors ” means the members of the Board of Directors who are not officers, employees or directors of the Manager or any Person directly or indirectly controlling or controlled by the Manager, and who are otherwise “independent” in accordance with the Company’s Governing Documents and policies and, if applicable, the rules of any national securities exchange on which the Common Stock is listed.

(s) “ Investment Company Act ” means the Investment Company Act of 1940, as amended.

(t) “ Investment Policies ” means the investment and operating policies and other restrictions set forth in Article VIII of the Charter, or any successor provision thereof, as amended.

(u) “ Investments ” means the investments of the Company and the Subsidiaries, including Mortgage Loans.

(v) “ Manager ” has the meaning set forth in the first paragraph of this Agreement.

(w) “ Manager Account ” has the meaning set forth in Section 5 of this Agreement.

(x) “ Manager Indemnified Party ” has the meaning set forth in Section 11(a) of this Agreement.

(y) “ Monitoring Services ” has the meaning set forth in Section 2(b) of this Agreement.

(z) “ Mortgage Loans ” means investments of the Company that are notes, debentures, bonds and other evidence of indebtedness or obligations that are negotiable or non-negotiable, which are secured or collateralized by mortgages or deeds of trust.

(aa) “ NYSE MKT ” means the NYSE MKT LLC.

(bb) “ Person ” means any individual, corporation, partnership, joint venture, limited liability company, estate, trust, unincorporated association, any federal, state, county or municipal government or any bureau, department or agency thereof and any fiduciary acting in such capacity on behalf of any of the foregoing.

(cc) “ Portfolio Management Services ” has the meaning set forth in Section 2(b) of this Agreement.

(dd) “ REIT ” means a “real estate investment trust” as defined under the Code.

(ee) “ SDAT ” means the State Department of Assessments and Taxation of Maryland.

(ff) “ Securities Act ” means the Securities Act of 1933, as amended.

(gg) “ Subsidiary ” means any subsidiary of the Company; any partnership, the general partner of which is the Company or any subsidiary of the Company; any limited liability company, the managing member of which is the Company or any subsidiary of the Company; and any corporation or other entity of which a majority of (i) the voting power of the voting equity securities or (ii) the outstanding equity interests is owned, directly or indirectly, by the Company or any subsidiary of the Company.

(hh) “ Termination Notice ” has the meaning set forth in Section 8(b) of this Agreement.

Section 2. Appointment and Duties of the Manager .

(a) The Company, for itself and the Subsidiaries, hereby appoints the Manager to manage the assets of the Company and the Subsidiaries subject to the further terms and conditions set forth in this Agreement, and the Manager hereby agrees to use its commercially reasonable efforts to perform each of the duties set forth herein. The appointment of the Manager shall be exclusive to the Manager except to the extent that the Manager otherwise agrees, in its sole and absolute discretion, and except to the extent that the Manager elects, pursuant to the terms of this Agreement, to cause the duties of the Manager hereunder to be provided by third parties.

(b) The Manager, in its capacity as manager of the assets and the day-to-day operations of the Company and the Subsidiaries, at all times will be subject to the Company’s Governing Documents and the supervision of the Board of Directors and will have only such functions and authority as the Company may delegate to it, including the functions and authority identified herein and delegated to the Manager hereby. Subject to the obligations and restrictions set forth in Section 7 hereof, the Manager will be responsible for the day-to-day operations of the Company and the Subsidiaries and will perform (or cause to be performed) such services and activities relating to the assets and operations of the Company and the Subsidiaries as may be appropriate, including, without limitation:

(i) serving as the Company’s and the Subsidiaries’ consultant with respect to the formulation of investment criteria, interest rate risk management and the Board of Directors’ preparation of policy guidelines;

(ii) investigating, analyzing and selecting possible investment opportunities and acquiring, financing, retaining, selling, restructuring or disposing of Investments consistent with the Investment Policies;

(iii) with respect to prospective purchases, sales or exchanges of Investments, conducting negotiations on behalf of the Company and the Subsidiaries with sellers, purchasers and brokers and, if applicable, their respective agents and representatives;

(iv) negotiating and entering into, on behalf of the Company and the Subsidiaries, repurchase agreements, credit finance agreements, securitizations, agreements relating to borrowings under programs established by the U.S. government, commercial papers, interest rate swap agreements and other hedging instruments, custodial agreements, warehouse facilities and all other agreements and engagements required for the Company and the Subsidiaries to conduct their business;

(v) advising, negotiating, managing and overseeing the origination, extension, modification, re-financing, evaluation, selection, acquisition, processing, brokerage and servicing of Mortgage Loans;

(vi) foreclosing upon real property and other collateral on behalf of the Company or any Subsidiary and advising, developing, managing and either holding for investment on behalf of the Company or any Subsidiary, or disposing of real property or other collateral acquired by the Company or any Subsidiary through foreclosure of any secured assets, either directly or through general partnerships, joint ventures or otherwise;

(vii) coordinating and managing operations of any joint venture or co-investment interests held by the Company and the Subsidiaries and conducting all matters with the joint venture or co-investment partners;

(viii) providing executive and administrative personnel, office space and office services required in rendering services to the Company and the Subsidiaries;

(ix) administering the day-to-day operations and performing and supervising the performance of such other administrative functions necessary to the management of the Company and the Subsidiaries as may be agreed upon by the Manager and the Board of Directors, including the collection of revenues and the payment of the debts and obligations of the Company and the Subsidiaries and maintenance of appropriate computer and technological services to perform such administrative functions;

(x) communicating on behalf of the Company and the Subsidiaries with the holders of any of their equity or debt securities as required to satisfy the reporting and other requirements of any governmental bodies or agencies or trading markets and to maintain effective relations with such holders;

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

(xii) evaluating and recommending to the Board of Directors hedging strategies and engaging in hedging activities (consistent with such strategies as so modified from time to time) on behalf of the Company and the Subsidiaries, consistent with the Company’s qualification as a REIT and with the Investment Policies;

(xiii) counseling the Company regarding the maintenance of its qualification as a REIT and monitoring compliance with the various REIT qualification tests and other rules set out in the Code and Treasury Regulations promulgated thereunder and using commercially reasonable efforts to cause the Company to qualify for taxation as a REIT;

(xiv) counseling the Company and the Subsidiaries regarding the maintenance of their exemptions from the status of an investment company required to register under the Investment Company Act, monitoring compliance with the requirements for maintaining such exemptions and using commercially reasonable efforts to cause them to maintain such exemptions from such status;

(xv) assisting the Company and the Subsidiaries in developing criteria for asset purchase commitments that are specifically tailored to the Investment Policies and making available to the Company and the Subsidiaries its knowledge and experience with respect to mortgage loans, real estate, real estate-related securities, other real estate-related assets and non-real estate-related assets;

(xvi) furnishing reports and statistical and economic research to the Company and the Subsidiaries regarding activities and services performed for the Company and the Subsidiaries by the Manager;

(xvii) monitoring the operating performance of Investments and providing periodic reports with respect thereto to the Board of Directors, including comparative information with respect to such operating performance and budgeted or projected operating results;

(xviii) investing and reinvesting any moneys and securities of the Company and the Subsidiaries (including investing in short-term Investments pending investment in other Investments, payment of fees, costs and expenses, or payments of dividends or other distributions to stockholders and partners of the Company and the Subsidiaries) and advising the Company and the Subsidiaries as to their capital structure and capital raising;

(xix) purchasing and maintaining, on behalf of the Company, liability and other insurance coverage for the Company;

(xx) causing the Company and the Subsidiaries to retain qualified accountants, auditors and legal counsel, as applicable, to assist in developing appropriate accounting procedures and systems, internal controls and other compliance procedures and testing systems with respect to financial reporting obligations and compliance with the provisions of the Code applicable to REITs and to conduct quarterly and other compliance reviews with respect thereto;

(xxi) assisting the Company and the Subsidiaries in qualifying to do business in all applicable jurisdictions and to obtain and maintain all appropriate licenses;

(xxii) maintaining records for and accounts of the Company’s operations and expenditures;

(xxiii) assisting the Company and the Subsidiaries in complying with all regulatory requirements applicable to them in respect of their business activities, including preparing or causing to be prepared all financial statements required under applicable regulations and contractual undertakings and all reports and documents, if any, required under the Exchange Act, the Securities Act, or by the NYSE MKT or other national securities exchange upon which the Company’s securities are listed or admitted to trading;

(xxiv) assisting the Company and the Subsidiaries in taking all necessary action to enable them to make required tax filings and reports, including soliciting stockholders and partners for required information to the extent required by the provisions of the Code applicable to REITs;

(xxv) placing, or arranging for the placement of, all orders pursuant to the Manager’s investment determinations for the Company and the Subsidiaries, either directly with the issuer or with a broker or dealer (including any affiliated broker or dealer);

(xxvi) handling and resolving all claims, disputes or controversies (including all litigation, arbitration, settlement or other proceedings or negotiations) in which the Company and/or the Subsidiaries may be involved or to which they may be subject arising out of their day-to-day operations (other than with the Manager or its Affiliates), subject to such limitations or parameters as may be imposed from time to time by the Board of Directors;

(xxvii) using commercially reasonable efforts to cause expenses incurred by the Company and the Subsidiaries or on their behalf to be commercially reasonable or commercially customary and within any budgeted parameters or expense guidelines set forth herein and by the Board of Directors from time to time;

(xxviii) representing and making recommendations to the Company and the Subsidiaries in connection with the purchase and financing of, and commitment to purchase and finance, Mortgage Loans (including on a portfolio basis), real estate, real estate-related securities and loans, other real estate-related assets and non-real estate-related assets, and the sale and commitment to sell such assets;

(xxix) advising the Company and the Subsidiaries with respect to obtaining appropriate repurchase agreements, warehouse facilities or other secured and unsecured forms of borrowing for their assets;

(xxx) advising the Company on preparing, negotiating and entering into applications and agreements relating to programs established by the U.S. government and other government-type or related entities;

(xxxi) advising the Company and the Subsidiaries with respect to, and structuring long-term financing vehicles for, their portfolio of assets, and offering and selling securities publicly or privately in connection with any such structured financing;

(xxxii) performing such other services as may be required from time to time for management of and other activities relating to the Investments, assets and business of the Company and the Subsidiaries as the Board of Directors shall reasonably request or the Manager shall deem appropriate under the particular circumstances; and

(xxxiii) using commercially reasonable efforts to cause the Company and the Subsidiaries to comply with all applicable laws.

Without limiting the foregoing, the Manager will perform portfolio management services (the “ Portfolio Management Services ”) on behalf of the Company and the Subsidiaries with respect to the Investments. Such services will include consulting with the Company and the Subsidiaries on the purchase and sale of, and other investment opportunities in connection with, the Company’s portfolio of assets; the collection of information and the submission of reports pertaining to the Company’s assets, interest rates and general economic conditions; periodic review and evaluation of the performance of the Company’s portfolio of assets; acting as liaison between the Company and the Subsidiaries and banking, mortgage banking, investment banking and other parties with respect to the purchase, financing and disposition of assets; and other customary functions related to portfolio management. Additionally, the Manager will perform monitoring services (the “ Monitoring Services ”) on behalf of the Company and the Subsidiaries with respect to any loan servicing activities provided by third parties. Such Monitoring Services will include negotiating servicing agreements; acting as a liaison between the servicers of the assets and the Company and the Subsidiaries; review of servicers’ delinquency, foreclosure and other reports on assets; supervising claims filed under any insurance policies; and enforcing the obligation of any servicer to repurchase assets.

(c) For the term of and on the terms and conditions set forth in this Agreement, the Company and each of the Subsidiaries hereby constitutes, appoints and authorizes the Manager as its true and lawful agent and attorney-in-fact, in its name, place and stead, to negotiate, execute, deliver and enter into such credit finance agreements and arrangements and securities repurchase and reverse repurchase agreements and arrangements, brokerage agreements, interest rate swap agreements, custodial agreements and such other agreements, instruments and authorizations on their behalf, on such terms and conditions as the Manager, acting in its sole and absolute discretion, deems necessary or appropriate. This power of attorney is deemed to be coupled with an interest.

(d) The Manager may enter into agreements with other parties, including its Affiliates, for the purpose of engaging one or more parties for and on behalf, and at the sole cost and expense, of the Company and the Subsidiaries to provide property management, asset management, leasing, development and/or other services to the Company and the Subsidiaries (including Portfolio Management Services and Monitoring Services) pursuant to agreement(s) with terms which are then customary for agreements regarding the provision of services to companies that have assets similar in type, quality and value to the assets of the Company and the Subsidiaries; provided that: (i) any such agreements entered into with Affiliates of the Manager shall (A) be on terms no more favorable to such Affiliate than would be obtained from a third party on an arm’s-length basis and (B) fall within the provisions of the Investment Policies; (ii) with respect to Portfolio Management Services, (A) any such agreements shall be subject to the Company’s prior written approval and (B) the Manager shall remain liable for the performance of such Portfolio Management Services; and (iii) with respect to Monitoring Services, any such agreements shall be subject to the Company’s prior written approval.

(e) In addition, to the extent that the Manager deems necessary or advisable, the Manager may, from time to time, propose to retain one or more additional entities for the provision of sub-advisory services to the Manager in order to enable the Manager to provide the services to the Company and the Subsidiaries specified by this Agreement; provided that any such agreement (i) shall be on terms and conditions substantially identical to the terms and conditions of this Agreement or otherwise not adverse to the Company and the Subsidiaries; and (ii) shall be approved by the Independent Directors of the Company.

(f) The Manager may retain, for and on behalf and at the sole cost and expense of the Company and the Subsidiaries, such services of accountants, legal counsel, appraisers, insurers, brokers, transfer agents, registrars, developers, investment banks, financial advisors, due diligence firms, underwriting review firms, banks and other lenders and others as the Manager deems necessary or advisable in connection with the management and operations of the Company and the Subsidiaries. Notwithstanding anything contained herein to the contrary, the Manager shall have the right to cause any such services to be rendered by its employees or Affiliates. Except as otherwise provided herein, the Company and the Subsidiaries shall pay or reimburse the Manager or its Affiliates performing such services for the cost thereof; provided that such costs and reimbursements are no greater than those which would be payable to outside professionals or consultants engaged to perform such services pursuant to agreements negotiated on an arm’s-length basis.

(g) The Manager may effect transactions by or through the agency of another person with it or its Affiliates which have an arrangement under which that party or its Affiliates will from time to time provide to or procure for the Manager and/or its Affiliates goods, services or other benefits (including research and advisory services; economic and political analysis, including valuation and performance measurement; market analysis, data and quotation services; computer hardware and software incidental to the above goods and services; clearing and custodian services; and investment related publications), the nature of which is such that provision can reasonably be expected to benefit the Company and the Subsidiaries as a whole and may contribute to an improvement in the performance of the Company and the Subsidiaries or the Manager or its Affiliates in providing services to the Company and the Subsidiaries on terms that no direct payment is made but instead the Manager and/or its Affiliates undertake to place business with that party.

(h) As frequently as the Manager may deem necessary or advisable, or at the direction of the Board of Directors, the Manager shall, at the sole cost and expense of the Company and the Subsidiaries, prepare, or cause to be prepared, reports and other information as may be reasonably requested by the Company with respect to any Investment.

(i) The Manager shall prepare, or cause to be prepared, at the sole cost and expense of the Company and the Subsidiaries, all reports, financial or otherwise, with respect to the Company and the Subsidiaries reasonably required by the Board of Directors in order for the Company and the Subsidiaries to comply with their Governing Documents or any other materials required to be filed with any governmental body or agency, and shall prepare, or cause to be prepared, all materials and data necessary to complete such reports and other materials including an annual audit of the Company’s and the Subsidiaries’ books of account by a nationally recognized registered independent public accounting firm.

(j) The Manager shall prepare regular reports for the Board of Directors to enable the Board of Directors to review the Company’s and the Subsidiaries’ acquisitions, portfolio composition and characteristics, credit quality, performance and compliance with the Investment Policies and other policies approved by the Board of Directors.

(k) Notwithstanding anything contained in this Agreement to the contrary, except to the extent that the payment of additional moneys is proven by the Company to have been required as a direct result of the Manager’s acts or omissions which result in the right of the Company and the Subsidiaries to terminate this Agreement pursuant to Section 15 of this Agreement, the Manager shall not be required to expend money in connection with any expenses that are required to be paid for or reimbursed by the Company and the Subsidiaries pursuant to Section 9 in excess of that contained in any applicable Company Account or otherwise made available by the Company and the Subsidiaries to be expended by the Manager hereunder.

(l) In performing its duties under this Section 2, the Manager shall be entitled to rely reasonably on qualified experts and professionals (including accountants, legal counsel and other service providers) hired by the Manager at the Company’s and the Subsidiaries’ sole cost and expense.

Section 3. Devotion of Time; Additional Activities .

(a) The Manager and its Affiliates will provide the Company and the Subsidiaries with a management team and other support personnel, to provide the management services to be provided by the Manager to the Company and the Subsidiaries hereunder, the members of which team shall devote such portion of their time to the management of the Company and the Subsidiaries as the Manager, in good faith, deems reasonably necessary to enable the Company and the Subsidiaries to operate their business.

(b) Nothing in this Agreement shall: (i) prevent the Manager or any of its Affiliates, officers, directors, employees or personnel, from engaging in other businesses or from rendering services of any kind to any other Person, including, without limitation, investing in, or rendering advisory services to others investing in, any type of business (including, without limitation, acquisitions of assets that meet the principal objectives of the Company), whether or not the objectives or policies of any such other Person or entity are similar to those of the Company; or (ii) in any way bind or restrict the Manager or any of its Affiliates, officers, directors, employees or personnel from buying, selling or trading any securities or assets for their own accounts or for the account of others for whom the Manager or any of its Affiliates, officers, directors, employees or personnel may be acting.

(c) Managers, partners, officers, employees, personnel and agents of the Manager or Affiliates of the Manager may serve as directors, officers, employees, personnel, agents, nominees or signatories for the Company and/or any Subsidiary, to the extent permitted by their Governing Documents. When executing documents or otherwise acting in such capacities for the Company or the Subsidiaries, such persons shall use their respective titles in the Company or the Subsidiaries.

Section 4. Agency . The Manager shall act as agent of the Company and the Subsidiaries in making, acquiring, financing and disposing of Investments, disbursing and collecting the funds of the Company and the Subsidiaries, paying the debts and fulfilling the obligations of the Company and the Subsidiaries, supervising the performance of professionals engaged by or on behalf of the Company and the Subsidiaries and handling, prosecuting and settling any claims of or against the Company and the Subsidiaries, the Board of Directors, holders of the Company’s securities or representatives or properties of the Company and the Subsidiaries.

Section 5. Bank Accounts . At the direction of the Board of Directors, the Manager may establish and maintain one or more bank accounts in the name of the Company or any Subsidiary (any such account, a “ Company Account ”), and may collect and deposit funds into any such Company Account or Company Accounts, and disburse funds from any such Company Account or Company Accounts, under such terms and conditions as the Board of Directors may approve. The Manager may establish and maintain one or more bank accounts in its own name (any such account, a “ Manager Account ”) and may collect and deposit funds from borrowers or other related parties into any such Manager Account or Manager Accounts and subsequently transfer funds from such Manager Account or Manager Accounts to a Company Account or Company Accounts. The Manager shall from time to time render appropriate accountings of such collections and payments to the Board of Directors and, upon request, to the auditors of the Company or any Subsidiary.

Section 6. Records; Confidentiality . The Manager shall maintain appropriate books of accounts and records relating to services performed under this Agreement, and such books of account and records shall be accessible for inspection by representatives of the Company or any Subsidiary at any time during normal business hours upon reasonable advance notice. The Manager shall keep confidential any and all information obtained in connection with the services rendered under this Agreement and shall not disclose any such information (or use the same except in furtherance of its duties under this Agreement) to unaffiliated third parties, except: (i) with the prior written consent of the Board of Directors; (ii) to legal counsel, accountants and other professional advisors of the Company; (iii) to appraisers, financing sources and others in the ordinary course of the Company’s business; (iv) to governmental officials having jurisdiction over the Company or any Subsidiary; (v) in connection with any governmental or regulatory filings of the Company or any Subsidiary or disclosure or presentations to Company investors; or (vi) as required by law or legal process to which the Manager or any Person to whom disclosure is permitted hereunder is a party. The foregoing shall not apply to information which has previously become publicly available through the actions of a Person other than the Manager not resulting from the Manager’s violation of this Section 6. The provisions of this Section 6 shall survive the expiration or earlier termination of this Agreement for a period of one year.

Section 7. Obligations of Manager; Restrictions .

(a) The Manager shall be subject to, and shall at all times act in accordance with, the Investment Policies.

(b) The Manager shall require each seller or transferor of investment assets to the Company and the Subsidiaries to make such representations and warranties regarding such assets as may, in the judgment of the Manager, be necessary and appropriate. In addition, the Manager shall take such other action as it deems necessary or appropriate with regard to the protection and realization of the Investments.

(c) The Manager shall refrain from any action that, in its sole judgment: (i) would adversely and materially affect the status of the Company as a REIT under the Code; (ii) would adversely and materially affect the Company’s or any Subsidiary’s status as an entity intended to be exempted or excluded from investment company status under the Investment Company Act; or (iii) would violate any law, rule or regulation of any governmental body or agency having jurisdiction over the Company or any Subsidiary or that would otherwise not be permitted by the Company’s Governing Documents. If the Manager is ordered to take any such action by the Board of Directors, the Manager shall promptly notify the Board of Directors of the Manager’s judgment that such action would adversely and materially affect such status or violate any such law, rule or regulation or the Governing Documents. Notwithstanding the foregoing, the Manager, its officers, stockholders, members, managers, personnel, directors, any Person controlling or controlled by the Manager and any Person providing sub-advisory services to the Manager shall not be liable to the Company or any Subsidiary, the Board of Directors, or the Company’s or any Subsidiary’s stockholders, members or partners, for any act or omission by any such Person except as provided in Section 11 of this Agreement.

(d) The Board of Directors shall periodically review the Company’s portfolio of Investments but will not review each proposed investment, except as otherwise provided herein. If a majority of the Independent Directors determine in their periodic review of transactions that a particular transaction does not comply with the Investment Policies, then a majority of the Independent Directors will consider what corrective action, if any, can be taken. The Manager shall be permitted to rely upon the direction of the Secretary of the Company to evidence the approval of the Board of Directors or the Independent Directors with respect to a proposed investment.

(e) Neither the Company nor the Subsidiaries shall invest in any security structured or issued by an entity managed by the Manager or any Affiliate thereof, or purchase or sell any Asset from or to any entity managed by the Manager or its Affiliates, unless: (i) the transaction is made in accordance with the Investment Policies; and (ii) the transaction is made in accordance with applicable laws.

(f) The Manager shall use its best efforts to at all times during the term of this Agreement maintain “errors and omissions” insurance coverage and other insurance coverage which is customarily carried by property, asset and investment managers performing functions similar to those of the Manager under this Agreement with respect to assets similar to the assets of the Company and the Subsidiaries, in an amount which is comparable to that customarily maintained by other managers or servicers of similar assets.

Section 8. Compensation .

(a) In consideration of the services rendered by the Manager to the Company and the Subsidiaries under this Agreement, the Manager shall be entitled to receive the fees and compensation set forth in the Compensation Provision. Notwithstanding the foregoing, the Manager and the Company may amend this Section 8(a), in accordance with the provisions of Section 27 of this Agreement and the Compensation Provision, to adjust the compensation to which the Manager shall be entitled. In the event of such an amendment, the Manager shall be entitled to receive the fees and compensation as set forth therein, notwithstanding the Compensation Provision.

(b) Notwithstanding Section 8(a) of this Agreement, within 10 days of a Charter Amendment being accepted for record by the SDAT, the Company shall provide written notice to the Manager of such Charter Amendment. Upon receipt of such notice, the Manager shall have 30 days to provide: (i) its written consent to such Charter Amendment, in which case the Manager shall have waived any right to terminate this Agreement in connection with such Charter Amendment and this Agreement shall continue in full force and effect, or (ii) written notice of its intent to terminate this Agreement (a “ Termination Notice ”), in which case this Agreement shall terminate, such termination to be effective on the date which is the later of (A) 30 days following the receipt by the Company of such Termination Notice and (B) the effective date of termination set forth in such Termination Notice. If, within 30 days of receiving written notice from the Company of a Charter Amendment, the Manager fails to provide its written consent to such Charter Amendment or a Termination Notice, the Manager shall be deemed to have consented to such Charter Amendment and to have waived any right to terminate this Agreement in connection with such Charter Amendment, and this Agreement shall continue in full force and effect.

(c) Notwithstanding the provisions of Section 8(a) and (b) of this Agreement, the Manager from time to time may voluntarily accept compensation that is less than the maximum compensation to which the Manager is entitled, so long as no such change in compensation to the Manager will result in a significant adverse impact on the stockholders of the Company.

Section 9. Expenses of the Company . All of the expenses of the Company and the Subsidiaries shall be billed directly, to the extent practicable, to and paid by the Company. Reimbursement to the Manager, or its Affiliates, for any expenses paid by the Manager, or its Affiliates, including, without limitation, legal and accounting expenses, filing fees, printing costs, goods, services and materials used by or for the Company or the Subsidiaries will be paid by the Company immediately following the expenditure. Except as indicated in this Section 9, the Manager or any Affiliate shall not be reimbursed by the Company for services for which the Manager is entitled to compensation by way of a separate fee. Excluded from the allowable reimbursement shall be: (i) rent and depreciation, utilities, capital equipment and other administrative items; and (ii) salaries, fringe benefits, travel expenses and other administrative items incurred or allocated to any Controlling Person of the Manager or its Affiliates. The Company, however, may reimburse the Manager and its Affiliates for salaries (and related salary expenses, but excluding expenses incurred in connection with the administration of the Company) for nonmanagement and nonsupervisory services which could be performed directly for the Company by independent parties, such as legal, accounting, transfer agent, data processing and duplicating. There shall be no reimbursement for management and supervisory personnel ( e.g. , services of employees of the Manager or its Affiliates who oversee the work which would have been performed by an independent party if such party had been so engaged). The amounts charged to the Company shall not exceed the lesser of: (a) the actual cost of such services; or (b) the amounts which the Company would be required to pay to independent parties for comparable services. Reimbursement may also be made for the allocable cost charged by independent parties for maintenance and repair of data processing and other special purpose equipment used for or by the Company.

Section 10. Calculations of Expenses . The Manager shall maintain a statement documenting the expenses of the Company and the Subsidiaries and the expenses incurred by the Manager on behalf of the Company and the Subsidiaries, and shall deliver such statement to the Company upon request. Expenses incurred by the Manager on behalf of the Company and the Subsidiaries that are reimbursable under Section 9 of this Agreement shall be reimbursed by the Company to the Manager promptly following the date of delivery of such statement or otherwise in the ordinary course; provided, however, that such reimbursements may be offset by the Manager against amounts due to the Company and the Subsidiaries.

Section 11. Limits of Manager Responsibility; Indemnification .

(a) The Manager assumes no responsibility under this Agreement other than to render the services called for under this Agreement 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 Manager, including as set forth in Section 7(c) of this Agreement. The Manager, its officers, stockholders, members, managers, directors, employees, consultants, personnel, any Person controlling or controlled by the Manager and any of such Person’s officers, stockholders, members, managers, directors, employees, consultants and personnel, and any Person providing sub-advisory services to the Manager (each a “ Manager Indemnified Party ”) will not be liable to the Company or any Subsidiary, to the Board of Directors, or the Company’s or any Subsidiary’s stockholders, members or partners for any acts or omissions by any such Person (including, without limitation, trade errors that may result from ordinary negligence, such as errors in the investment decision making process or in the trade process), made, committed or taken pursuant to or in accordance with this Agreement, except by reason of acts or omissions constituting bad faith, willful misconduct, gross negligence or reckless disregard of the Manager’s duties under this Agreement, as determined by a final non-appealable order of a court of competent jurisdiction. The Company shall, to the fullest extent permitted by law, reimburse, indemnify and hold each Manager Indemnified Party harmless of and from any and all expenses, losses, damages, liabilities, demands, charges and claims of any nature whatsoever (including attorneys’ fees) in respect of or arising from any acts or omissions of such Manager Indemnified Party made in good faith in the performance of the Manager’s duties under this Agreement and not constituting such Manager Indemnified Party’s bad faith, willful misconduct, gross negligence or reckless disregard of the Manager’s duties under this Agreement.

(b) The Manager shall, to the fullest extent permitted by law, reimburse, indemnify and hold the Company (and each Subsidiary), its stockholders, directors and officers and each other Person, if any, controlling the Company (each, a “ Company Indemnified Party ” and together with a Manager Indemnified Party, the “ Indemnitee ”), harmless of and from any and all expenses, losses, damages, liabilities, demands, charges and claims of any nature whatsoever (including attorneys’ fees) in respect of or arising from the Manager’s bad faith, willful misconduct, gross negligence or reckless disregard of its duties under this Agreement or any claims by the Manager’s personnel relating to the terms and conditions of their employment by the Manager.

(c) The Indemnitee will promptly notify the party against whom indemnity is claimed (the “ Indemnitor ”) of any claim for which it seeks indemnification; provided, however, that the failure to so notify the Indemnitor will not relieve the Indemnitor from any liability which it may have hereunder, except to the extent such failure actually prejudices the Indemnitor. The Indemnitor shall have the right to assume the defense and settlement of such claim that is brought against an Indemnitee by a third party; provided, that the Indemnitor notifies the Indemnitee of its election to assume such defense and settlement within 30 days after the Indemnitee gives the Indemnitor notice of the claim. In such case, the Indemnitee will not settle or compromise such claim, and the Indemnitor will not be liable for any such settlement made without its prior written consent. If the Indemnitor is entitled to, and does, assume such defense by delivering the aforementioned notice to the Indemnitee, the Indemnitee will: (i) have the right to approve the counsel selected by the Indemnitor (which approval will not be unreasonably withheld, delayed or conditioned); (ii) be obligated to cooperate in furnishing evidence and testimony and in any other manner in which the Indemnitor may reasonably request; and (iii) be entitled to participate in (but not control) the defense of any such action, with its own counsel and at its own expense.

Section 12. No Joint Venture . Nothing in this Agreement shall be construed to make the Company and the Manager partners or joint venturers or impose any liability as such on either of them.

Section 13. Term . This Agreement shall be in effect for the duration of the existence of the Company, as set forth in the Charter, unless earlier terminated by the affirmative vote of the holders of a majority of the outstanding shares of Common Stock, by the Manager in accordance with Section 8(b) of this Agreement, automatically in accordance with Section 14(a) of this Agreement or by the Company or the Manager in accordance with Section 15 of this Agreement.

Section 14. Assignment .

(a) Except as set forth in Section 14(b) of this Agreement, this Agreement shall terminate automatically in the event of its assignment, in whole or in part, by the Manager, unless such assignment is consented to in writing by the Company with the approval of the Board of Directors and the holders of a majority of the outstanding shares of Common Stock entitled to vote on the matter. Any such permitted assignment shall bind the assignee under this Agreement in the same manner as the Manager is bound, and the Manager shall be liable to the Company for all errors or omissions of the assignee under any such assignment. In addition, the assignee shall execute and deliver to the Company a counterpart of this Agreement naming such assignee as Manager. This Agreement shall not be assigned by the Company without the prior written consent of the Manager, except in the case of assignment by the Company to another REIT or other organization which is a successor (by merger, consolidation, purchase of assets, or similar transaction) to the Company, in which case such successor organization shall be bound under this Agreement and by the terms of such assignment in the same manner as the Company is bound under this Agreement and the consent of the Manager shall not be required.

(b) Notwithstanding any provision of this Agreement, the Manager may subcontract and assign any or all of its responsibilities under Sections 2(d), 2(e) and 2(f) of this Agreement to any of its Affiliates in accordance with the terms of this Agreement applicable to any such subcontract or assignment, and the Company hereby consents to any such assignment and subcontracting. In addition, provided that the Manager provides prior written notice to the Company for informational purposes only, nothing contained in this Agreement shall preclude any pledge, hypothecation or other transfer of any amounts payable to the Manager under this Agreement.

Section 15. Termination for Cause .

(a) The Company may terminate this Agreement effective upon 30 days’ prior written notice of termination from the Company to the Manager if: (i) the Manager, its agents or its assignees materially breaches any provision of this Agreement and such breach shall continue for a period of 30 days after written notice thereof specifying such breach and requesting that the same be remedied in such 30-day period (or 90 days after written notice of such breach if the Manager takes steps to cure such breach within 30 days of the written notice); (ii) the Manager engages in any act of fraud, misappropriation of funds, or embezzlement against the Company or any Subsidiary; (iii) there is an event of gross negligence, willful misconduct or intentional breach of the terms of this Agreement on the part of the Manager in the performance of its duties under this Agreement; (iv) there is a commencement of any proceeding relating to the Manager’s Bankruptcy or insolvency, including an order for relief in an involuntary bankruptcy case or the Manager authorizing or filing a voluntary bankruptcy petition; (v) there is a dissolution of the Manager; or (vi) the Manager is convicted of (including a plea of nolo contendere ) a felony.

(b) The Manager may terminate this Agreement effective upon 60 days’ prior written notice of termination to the Company in the event that the Company shall default in the performance or observance of any material term, condition or covenant contained in this Agreement and such default shall continue for a period of 30 days after written notice thereof specifying such default and requesting that the same be remedied in such 30-day period.

(c) The Manager may terminate this Agreement in the event the Company becomes regulated as an “investment company” under the Investment Company Act, with such termination deemed to have occurred immediately prior to such event.

Section 16. Action Upon Termination . From and after the effective date of termination of this Agreement, pursuant to Section 8(b), 13, 14(a) or 15 of this Agreement, the Manager shall not be entitled to compensation for further services under this Agreement, but shall be paid all compensation accruing to the date of termination. Upon such termination, the Manager 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 a Subsidiary all money collected and held for the account of the Company or a Subsidiary 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 a Subsidiary; and

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

Section 17. Release of Money or Other Property Upon Written Request . The Manager agrees that any money or other property of the Company or any Subsidiary held by the Manager under this Agreement shall be held by the Manager as custodian for the Company or Subsidiary, and the Manager’s records and accounts shall be appropriately marked clearly to reflect the ownership of such money or other property by the Company or such Subsidiary. Upon the receipt by the Manager of a written request signed by a duly authorized officer of the Company requesting the Manager to release to the Company or any Subsidiary any money or other property then held by the Manager for the account of the Company or any Subsidiary under this Agreement, the Manager shall release such money or other property to the Company or any Subsidiary within a reasonable period of time, but in no event later than 30 days following such request. The Manager shall not be liable to the Company, any Subsidiary, the Independent Directors, or the Company’s or a Subsidiary’s stockholders, members or partners for any acts performed or omissions to act by the Company or any Subsidiary in connection with the money or other property released to the Company or any Subsidiary in accordance with the second sentence of this Section 17. The Company and any Subsidiary shall indemnify the Manager and the other Manager Indemnified Parties against any and all expenses, losses, damages, liabilities, demands, charges and claims of any nature whatsoever, which arise in connection with the Manager’s release of such money or other property to the Company or any Subsidiary in accordance with the terms of this Section 17. Indemnification pursuant to this provision shall be in addition to any right of the Manager or any such other Manager Indemnified Party to indemnification under Section 11 of this Agreement.

Section 18. Notices . Unless expressly provided otherwise in this Agreement, 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 against receipt or upon actual receipt of: (i) personal delivery; (ii) delivery by reputable overnight courier; (iii) delivery by facsimile transmission with telephonic confirmation; or (iv) delivery by registered or certified mail, postage prepaid, return receipt requested, addressed as set forth below:

(a)

If to the Company, including any Subsidiary:

Owens Realty Mortgage, Inc.

2221 Olympic Boulevard

Walnut Creek, California 94595

Facsimile: (925) 935-1486

Attention: Chairman of the Board of Directors

(b)

If to the Manager:

Owens Financial Group, Inc.

2221 Olympic Boulevard

Walnut Creek, California 94595

Facsimile: (925) 935-1486

Attention: William C. Owens

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 18 for the giving of notice.

Section 19. 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 permitted assigns as provided in this Agreement.

Section 20. Entire Agreement . This Agreement contains the entire agreement and understanding among the parties hereto with respect to the subject matter of this Agreement, and supersedes all prior and contemporaneous agreements, understandings, inducements and conditions, express or implied, oral or written, of any nature whatsoever with respect to the subject matter of this Agreement. The express terms of this Agreement control and supersede any course of performance and/or usage of the trade inconsistent with any of the terms of this Agreement. This Agreement may not be modified or amended other than by an agreement in writing signed by the parties hereto.

Section 21. GOVERNING LAW . THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES UNDER THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF CALIFORNIA WITHOUT REGARD TO CONFLICTS OF LAW PRINCIPLES TO THE CONTRARY.

Section 22. No Waiver; Cumulative Remedies . No failure to exercise and no delay in exercising, on the part of any party hereto, any right, remedy, power or privilege hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege. The rights, remedies, powers and privileges herein provided are cumulative and not exclusive of any rights, remedies, powers and privileges provided by law. No waiver of any provision hereunder shall be effective unless it is in writing and is signed by the party asserted to have granted such waiver.

Section 23. Headings . The headings of the sections of this Agreement have been inserted for convenience of reference only and shall not be deemed part of this Agreement.

Section 24. 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 of this Agreement, individually or taken together, shall bear the signatures of all of the parties reflected hereon as the signatories.

Section 25. Severability . Any provision of this Agreement that is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.

Section 26. Gender . 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.

Section 27. Amendment . This Agreement may not be amended, modified or changed (in whole or in part), except by a formal, definitive written agreement expressly referring to this Agreement, which agreement is executed by all of the parties and which agreement has been approved by a majority of the Independent Directors. Notwithstanding the foregoing, Sections 7(a), 7(e), 8, 13 and 14 of this Agreement and this Section 27 may only be amended with the approval of holders of a majority of the outstanding shares of Common Stock entitled to vote on the matter; provided, that the Manager

and the Company, without any action by the stockholders of the Company, may amend Section 8 of this Agreement or enter into one or more other agreements together to adjust the Manager’s compensation, so long as such adjustment will not have a significant adverse impact on the stockholders of the Company.

[SIGNATURE PAGE FOLLOWS]

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

OWENS REALTY MORTGAGE, INC.

By: /s/ William C. Owens

Name: William C. Owens

Title: Chief Executive Officer

OWENS FINANCIAL GROUP, INC.

By: /s/ Bryan H. Draper

Name: Bryan H. Draper

Title: Chief Financial Officer

[ Signature Page to Management Agreement ]

DESCRIPTION OF OWENS REALTY MORTGAGE, INC. STOCK

The following summary description of Owens Realty Mortgage, Inc. stock is subject to, and qualified in its entirety by, reference to the MGCL and the provisions of the charter and bylaws of Owens Realty Mortgage, Inc. and does not purport to be complete. See also “Comparison of Rights of Limited Partners of OMIF and Stockholders of Owens Realty Mortgage, Inc.” Copies of the charter and bylaws of Owens Realty Mortgage, Inc. are attached to this proxy statement/prospectus as Annex B and Annex C, respectively.

Our charter provides that we may issue up to 50,000,000 shares of Common Stock and up to 5,000,000 shares of preferred stock, $0.01 par value per share. Our charter authorizes our board of directors to amend our charter, with the approval of a majority of the entire board of directors and without stockholder approval, to increase or decrease the aggregate number of shares of stock that we are authorized to issue or the number of authorized shares of stock of any class or series. After giving effect to the REIT conversion, up to 11,199,351 shares of our Common Stock will be issued and outstanding, and no shares of preferred stock will be issued and outstanding. Under Maryland law, our stockholders are not generally liable for our debts or obligations.

Shares of Common Stock

All of the shares of Common Stock will be duly authorized, fully paid and nonassessable. Subject to the preferential rights, if any, of holders of any other class or series of our stock and to the provisions of our charter regarding the restrictions on ownership and transfer of our stock, holders of outstanding shares of our Common Stock are entitled to receive dividends on such shares of Common Stock out of assets legally available therefor if, as and when authorized by our board of directors and declared by us, and the holders of outstanding shares of our Common Stock will be entitled to share ratably in our assets legally available for distribution to our stockholders in the event of our liquidation, dissolution or winding up, after payment of or adequate provision for all of our known debts and liabilities.

Subject to the provisions of our charter regarding the restrictions on ownership and transfer of our stock and except as may otherwise be specified in the terms of any class or series of Common Stock, each outstanding share of Common Stock entitles the holder to one vote on all matters submitted to a vote of stockholders, including the election of directors, and, except as may be provided with respect to any other class or series of our stock, the holders of shares of our Common Stock will possess the exclusive voting power. There is no cumulative voting in the election of directors, and directors will be elected by a plurality of the votes cast in the election of directors. Consequently, the holders of a majority of the outstanding shares of our Common Stock can elect all of the directors then standing for election, and the holders of the remaining shares will not be able to elect any directors.

Holders of shares of our Common Stock have no preference, conversion, exchange, sinking fund, redemption or appraisal rights and have no preemptive rights to subscribe for any securities of Owens Realty Mortgage, Inc. Subject to the provisions of our charter regarding the restrictions on ownership and transfer of our stock, shares of our Common Stock will have equal dividend, liquidation and other rights.

Under the MGCL, a Maryland corporation generally cannot dissolve, amend its charter, merge or consolidate with another entity, sell all or substantially all of its assets or engage in a statutory share exchange unless the action is advised by the board of directors and approved by the affirmative vote of stockholders entitled to cast at least two-thirds of the votes entitled to be cast on the matter, unless a lesser percentage (but not less than a majority of all of the votes entitled to be cast on the matter) is specified in the corporation’s charter. Our charter provides that these actions must be approved by a majority of all of the votes entitled to be cast on the matter.

Maryland law also permits a corporation to transfer all or substantially all of its assets without the approval of its stockholders to an entity owned, directly or indirectly, by the corporation. Because our operating assets may be held by our wholly-owned subsidiaries, these subsidiaries may be able to merge or transfer all or substantially all of their assets without the approval of our stockholders.

Power to Reclassify Unissued Shares of Our Stock

Our charter authorizes our board of directors to classify and reclassify any unissued shares of our common or preferred stock into other classes or series of stock, including one or more classes or series of stock that have priority over our Common Stock with respect to voting rights, dividends or upon liquidation, and authorize us to issue the newly classified shares. Prior to the issuance of shares of each new class or series, our board of directors is required by Maryland law and by our charter to set, subject to the provisions of our charter regarding the restrictions on ownership and transfer of our stock, the preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends or other distributions, qualifications and terms and conditions of redemption for each class or series. Our board of directors may take these actions without stockholder approval unless stockholder approval is required by the rules of any stock exchange or automated quotation system on which our securities may be listed or traded. Therefore, our board could authorize the issuance of shares of common or preferred stock with terms and conditions that could have the effect of delaying, deferring or preventing a change in control or other transaction that might involve a premium price for shares of our Common Stock or otherwise be in the best interests of our stockholders. No shares of preferred stock are presently outstanding, and we have no present plans to issue any shares of preferred stock.

Power to Increase or Decrease Authorized Shares of Stock and Issue Additional Shares of Common and Preferred Stock

Our charter authorizes our board of directors, with the approval of a majority of the entire board and without stockholder approval, to amend our charter to increase or decrease the aggregate number of shares of stock, or the number of shares of any class or series of stock, that we are authorized to issue. These actions can be taken without stockholder approval, unless stockholder approval is required by applicable law, the terms of any other class or series of our stock or the rules of any stock exchange or automated quotation system on which our securities may be listed or traded.

We believe that the power of our board of directors to approve amendments to our charter to increase or decrease the number of authorized shares of stock, to authorize us to issue additional authorized but unissued shares of common or preferred stock and to classify or reclassify unissued shares of common or preferred stock and thereafter to authorize us to issue such classified or reclassified shares of stock will provide us with increased flexibility in structuring possible future financings and acquisitions and in meeting other needs that might arise. Although our board of directors has no current plans to do so, it could authorize us to issue a class or series of stock that could, depending upon the terms of the particular class or series, delay, defer or prevent a change in control or other transaction that might involve a premium price for shares of our Common Stock or otherwise be in the best interests of our stockholders.

Restrictions on Ownership and Transfer

In order for us to qualify as a REIT under the Code, shares of our stock must be owned by 100 or more persons during at least 335 days of a taxable year of 12 months (other than the first year for which an election to qualify as a REIT has been made) or during a proportionate part of a shorter taxable year. Also, not more than 50% of the value of the outstanding shares of our stock may be owned, directly or indirectly, by five or fewer individuals (as defined in the Code to include certain entities) during the last half of a taxable year (other than the first year for which an election to be a REIT has been made). To qualify as a REIT, we must satisfy other requirements as well. See “ Material United States Federal Income Tax Consequences—United States Federal Income Taxation of Owens Realty Mortgage, Inc. Following the Merger .”

Our charter contains restrictions on the ownership and transfer of our stock that, among other purposes, are intended to assist us in complying with these requirements and continuing to qualify as a REIT. The restrictions on ownership and transfer of our stock will become effective upon the completion of the REIT conversion. The relevant sections of our charter provide that, subject to the exceptions described below, from and after the closing of the REIT conversion, no person or entity may own, or be deemed to own, beneficially or by virtue of the applicable constructive ownership provisions of the Code, more than 9.8%, in value or in number of shares, whichever is more restrictive, of the outstanding shares of our Common Stock, or the common stock ownership limit, or 9.8% in value of the outstanding shares of all classes or series of our stock, or the aggregate stock ownership limit. We refer to the

common stock ownership limit and the aggregate stock ownership limit collectively as the “ownership limits.” We refer to the person or entity that, but for operation of the ownership limits or another restriction on ownership and transfer of our stock as described below, would beneficially own or constructively own shares of our stock in violation of such limits or restrictions and, if appropriate in the context, a person or entity that would have been the record owner of such shares of our stock as a “prohibited owner.”

The constructive ownership rules under the Code are complex and may cause shares of stock owned actually, beneficially or constructively by a group of related individuals and/or entities to be owned beneficially or constructively by one individual or entity. As a result, the acquisition of less than 9.8%, in value or in number of shares, whichever is more restrictive, of the outstanding shares of our Common Stock, or 9.8% in value of the outstanding shares of all classes and series of our stock (or the acquisition by an individual or entity of an interest in an entity that owns, actually, beneficially or constructively, shares of our stock), could, nevertheless, cause that individual or entity, or another individual or entity, to own beneficially or constructively shares of our stock in excess of the ownership limits.

Our board of directors, in its sole discretion, may exempt, prospectively or retroactively, a particular stockholder from the ownership limits or establish a different limit on ownership, or “excepted holder limit,” if we obtain such representations and undertakings from such stockholder as are reasonably necessary for our board of directors to determine that:

	•	no individual’s beneficial or constructive ownership of our stock will result in our being “closely held” under Section 856(h) of the Code (without regard to whether the ownership interest is held during the last half of a taxable year) or otherwise failing to qualify as a REIT; and

	•	such stockholder does not and will not own, actually or constructively, an interest in a tenant of ours (or a tenant of any entity owned or controlled by us) that would cause us to own, actually or constructively, more than a 9.9% interest (as set forth in Section 856(d)(2)(B) of the Code) in such tenant (or our board of directors determines that revenue derived from such tenant will not affect our ability to qualify as a REIT).

Any violation or attempted violation of any such representations or undertakings will result in such stockholder’s shares of stock being automatically transferred to a charitable trust. As a condition of granting the waiver or establishing the excepted holder limit, our board of directors may require an opinion of counsel or a ruling from the IRS, in either case in form and substance satisfactory to our board of directors, in its sole discretion, in order to determine or ensure our status as a REIT. Our board of directors may impose such conditions or restrictions as it deems appropriate in connection with granting such a waiver or establishing an excepted holder limit.

In connection with granting a waiver of the ownership limits or creating an excepted holder limit or at any other time, our board of directors may from time to time increase or decrease the common stock ownership limit, the aggregate stock ownership limit or both, for all other persons, unless, after giving effect to such increase, five or fewer individuals could beneficially own, in the aggregate, more than 49.9% in value of our outstanding stock or we would otherwise fail to qualify as a REIT. A reduced ownership limit will not apply to any person or entity whose percentage ownership of our Common Stock or our stock of all classes and series, as applicable, is, at the effective time of such reduction, in excess of such decreased ownership limit until such time as such person’s or entity’s percentage ownership of our Common Stock or our stock of all classes and series, as applicable, equals or falls below the decreased ownership limit, but any further acquisition of shares of our Common Stock or stock of all other classes or series, as applicable, will violate the decreased ownership limit.

Upon the completion of the REIT conversion, our charter will further prohibit:

	•	any person from beneficially or constructively owning, applying certain attribution rules of the Code, shares of our stock that would result in our being “closely held” under Section 856(h) of the Code (without regard to whether the ownership interest is held during the last half of a taxable year) or otherwise cause us to fail to qualify as a REIT; and

	•	any person from transferring shares of our stock if the transfer would result in shares of our stock being beneficially owned by fewer than 100 persons (determined under the principles of Section 856(a)(5) of the Code).

Any person who acquires or attempts or intends to acquire beneficial or constructive ownership of shares of our stock that will or may violate the ownership limits or any of the other restrictions on ownership and transfer of our stock described above, or who would have owned shares of our stock transferred to the trust as described below, must immediately give notice to us of such event or, in the case of an attempted or proposed transaction, give us at least 15 days prior written notice and provide us with such other information as we may request in order to determine the effect of such transfer on our status as a REIT. The foregoing restrictions on ownership and transfer of our stock will not apply if our board of directors determines that it is no longer in our best interests to attempt to qualify, or to continue to qualify, as a REIT or that compliance with the restrictions and limitations on ownership and transfer of our stock described above is no longer required in order for us to qualify as a REIT.

If any transfer of shares of our stock would result in shares of our stock being beneficially owned by fewer than 100 persons, the transfer will be null and void and the intended transferee will acquire no rights in the shares. In addition, if any purported transfer of shares of our stock or any other event would otherwise result in any person violating the ownership limits or an excepted holder limit established by our board of directors, or in our being “closely held” under Section 856(h) of the Code (without regard to whether the ownership interest is held during the last half of a taxable year) or otherwise failing to qualify as a REIT, then that number of shares (rounded up to the nearest whole share) that would cause the violation will be automatically transferred to, and held by, a trust for the exclusive benefit of one or more charitable organizations selected by us, and the intended transferee or other prohibited owner will acquire no rights in the shares. The automatic transfer will be effective as of the close of business on the business day prior to the date of the violative transfer or other event that results in a transfer to the trust. If the transfer to the trust as described above is not automatically effective, for any reason, to prevent violation of the applicable ownership limits or our being “closely held” under Section 856(h) of the Code (without regard to whether the ownership interest is held during the last half of a taxable year) or our otherwise failing to qualify as a REIT, then our charter provides that the transfer of the shares will be null and void and the intended transferee will acquire no rights in such shares.

Shares of our stock held in the trust will be issued and outstanding shares. The prohibited owner will not benefit economically from ownership of any shares of our stock held in the trust and will have no rights to dividends or other distributions and no rights to vote or other rights attributable to the shares of our stock held in the trust. The trustee of the trust will exercise all voting rights and receive all dividends or other distributions with respect to shares held in the trust for the exclusive benefit of the charitable beneficiary of the trust. Any dividend or other distribution paid before we discover that the shares have been transferred to a trust as described above must be repaid by the recipient to the trustee upon demand by us. Subject to Maryland law, effective as of the date that the shares have been transferred to the trust, the trustee will have the authority to rescind as void any vote cast by a prohibited owner before our discovery that the shares have been transferred to the trust and to recast the vote in accordance with the desires of the trustee acting for the benefit of the charitable beneficiary of the trust. However, if we have already taken irreversible corporate action, then the trustee may not rescind and recast the vote.

Shares of our stock transferred to the trustee are deemed offered for sale to us, or our designee, at a price per share equal to the lesser of (1) the price paid by the prohibited owner for the shares (or, in the case of a devise or gift, the market price at the time of such devise or gift) and (2) the market price on the date we accept, or our designee accepts, such offer. We may reduce the amount so payable to the trustee by the amount of any dividend or other distribution that we paid to the prohibited owner before we discovered that the shares had been automatically transferred to the trust and that are then owed by the prohibited owner to the trustee as described above, and we may pay the amount of any such reduction to the trustee for distribution to the charitable beneficiary. We have the right to accept such offer until the trustee has sold the shares of our stock held in the trust as discussed below. Upon a sale to us, the interest of the charitable beneficiary in the shares sold terminates, and the trustee must distribute the net proceeds of the sale to the prohibited owner and must distribute any dividends or other distributions held by the trustee with respect to such shares to the charitable beneficiary.

If we do not buy the shares, the trustee must, within 20 days of receiving notice from us of the transfer of shares to the trust, sell the shares to a person or entity designated by the trustee who could own the shares without violating the ownership limits or the other restrictions on ownership and transfer of our stock. After the sale of the shares, the interest of the charitable beneficiary in the shares transferred to the trust will terminate and the trustee must distribute to the prohibited owner an amount equal to the lesser of (1) the price paid by the prohibited owner for the shares (or, if the prohibited owner did not give value for the shares in connection with the event causing the shares to be held in the trust (for example, in the case of a gift, devise or other such transaction), the market price of the shares on the day of the event causing the shares to be held in the trust) and (2) the sales proceeds (net of any

commissions and other expenses of sale) received by the trust for the shares. The trustee may reduce the amount payable to the prohibited owner by the amount of any dividend or other distribution that we paid to the prohibited owner before we discovered that the shares had been automatically transferred to the trust and that are then owed by the prohibited owner to the trustee as described above. Any net sales proceeds in excess of the amount payable to the prohibited owner must be paid immediately to the charitable beneficiary, together with any dividends or other distributions thereon. In addition, if, prior to the discovery by us that shares of stock have been transferred to a trust, such shares of stock are sold by a prohibited owner, then such shares will be deemed to have been sold on behalf of the trust and, to the extent that the prohibited owner received an amount for or in respect of such shares that exceeds the amount that such prohibited owner was entitled to receive, such excess amount will be paid to the trustee upon demand. The prohibited owner has no rights in the shares held by the trustee.

In addition, if our board of directors determines in good faith that a transfer or other event that has occurred that would violate the restrictions on ownership and transfer of our stock described above, the board may take such action as it deems advisable to refuse to give effect to or to prevent such transfer, including, without limitation, causing us to redeem shares of our stock, refusing to give effect to the transfer on our books or instituting proceedings to enjoin the transfer.

Every owner of 5% or more (or such lower percentage as required by the Code or the regulations promulgated thereunder) of our stock, within 30 days after the end of each taxable year, must give us written notice stating the stockholder’s name and address, the number of shares of each class and series of our stock that the stockholder beneficially owns and a description of the manner in which the shares are held. Each such owner must provide to us in writing such additional information as we may request in order to determine the effect, if any, of the stockholder’s beneficial ownership on our status as a REIT and to ensure compliance with the aggregate stock ownership limit. In addition, any person or entity that is a beneficial owner or constructive owner of shares of our stock and any person or entity (including the stockholder of record) who is holding shares of our stock for a beneficial owner or constructive owner must, on request, provide to us such information as we may request in good faith in order to determine our status as a REIT and to comply with the requirements of any taxing authority or governmental authority or to determine such compliance.

Any certificates representing shares of our stock will bear a legend referring to the restrictions on ownership and transfer of our stock described above.

These restrictions on ownership and transfer of our stock will take effect upon consummation of the REIT conversion and will not apply if our board of directors determines that it is no longer in our best interests to attempt to qualify, or to continue to qualify, as a REIT or that compliance is no longer required in order for us to qualify as a REIT.

The restrictions on ownership and transfer of our stock described above could delay, defer or prevent a transaction or a change in control that might involve a premium price for our Common Stock or otherwise be in the best interests of our stockholders.

Transfer Agent and Registrar

We expect the transfer agent and registrar for our Common Stock to be Computershare.

CERTAIN PROVISIONS OF MARYLAND LAW AND OF OUR CHARTER AND BYLAWS

The following description of certain provisions of Maryland law and of our charter and bylaws is only a summary and is subject to and qualified in its entirety by reference to Maryland law and to our charter and bylaws, copies of which are attached to this proxy statement/prospectus as Annex B and Annex C, respectively .

Our Board of Directors

Our charter and bylaws provide that the number of directors we have may be established only by our board of directors but may never be less than the minimum number required by the MGCL (which is one), nor more than 15. Upon the completion of REIT conversion, subject to the terms of any class or series of preferred stock, any vacancy on our board of directors may be filled, at any regular meeting or at any special meeting called for that purpose, by a majority of the remaining directors, whether or not sufficient to constitute a quorum, except that a vacancy resulting from an increase in the number of directors must be filled by a majority of the entire board of directors.

Each of our directors is elected by our stockholders to serve until the next annual meeting of our stockholders and until his or her successor is duly elected and qualifies. Holders of shares of Common Stock will have no right to cumulative voting in the election of directors, and directors will be elected by a plurality of the votes cast in the election of directors. Consequently, at each annual meeting of our stockholders, the holders of a majority of the shares of Common Stock entitled to vote will be able to elect all of our directors.

Removal of Directors

Our charter provides that a director may be removed with or without cause and only by the affirmative vote of a majority of the votes entitled to be cast generally in the election of directors.

Business Combinations

Under the MGCL, certain “business combinations” (including a merger, consolidation, statutory share exchange or, in certain circumstances, an asset transfer or issuance or reclassification of equity securities) between a Maryland corporation and an interested stockholder (defined generally as any person who beneficially owns, directly or indirectly, 10% or more of the voting power of the corporation’s outstanding voting stock or an affiliate or associate of the corporation who, at any time during the two-year period prior to the date in question, was the beneficial owner of 10% or more of the voting power of the then-outstanding voting stock of the corporation) or an affiliate of such an interested stockholder are prohibited for five years after the most recent date on which the interested stockholder becomes an interested stockholder. Thereafter, any such business combination must generally be recommended by the board of directors of the corporation and approved by the affirmative vote of at least (a) 80% of the votes entitled to be cast by holders of outstanding voting stock of the corporation and (b) two-thirds of the votes entitled to be cast by holders of voting stock of the corporation, other than shares held by the interested stockholder with whom (or with whose affiliate) the business combination is to be effected or held by an affiliate or associate of the interested stockholder, unless, among other conditions, the corporation’s common stockholders receive a minimum price (as defined in the MGCL) for their shares and the consideration is received in cash or in the same form as previously paid by the interested stockholder for its shares. A person is not an interested stockholder under the statute if the board of directors approved in advance the transaction by which the person otherwise would have become an interested stockholder. A corporation’s board of directors may provide that its approval is subject to compliance with any terms and conditions determined by the board.

Pursuant to the statute, our board of directors has by resolution exempted business combinations:

	•	between us and any other person, provided that the business combination is first approved by our board of directors (including a majority of our directors who are not affiliates or associates of such person); and

	•	between us and Owens Financial Group, Inc. and its affiliates and associates.

Consequently, the five-year prohibition and the supermajority vote requirements will not apply to business combinations between us and any person described above, and, as a result, any person described above may be able to enter into business combinations with us that may not be in the best interests of our stockholders, without compliance with the supermajority vote requirement and other provisions of the statute. We cannot assure you that our board of directors will not amend or repeal this resolution in the future.

Control Share Acquisitions

The MGCL provides that a holder of “control shares” of a Maryland corporation acquired in a “control share acquisition” has no voting rights with respect to such shares except to the extent approved by the affirmative vote of at least two-thirds of the votes entitled to be cast by stockholders entitled to vote generally in the election of directors other than the person who has made or proposes to make the control share acquisition, an officer of the corporation or an employee of the corporation who is also a director of the corporation.

“Control shares” are voting shares of stock that, if aggregated with all other such shares of stock owned by the acquirer, or in respect of which the acquirer is able to exercise or direct the exercise of voting power (except solely by virtue of a revocable proxy), would entitle the acquirer to exercise voting power in electing directors within one of the following ranges of voting power:

	•	one-tenth or more but less than one-third;

	•	one-third or more but less than a majority; or

	•	a majority or more of all voting power.

Control shares do not include shares that the acquiring person is then entitled to vote as a result of having previously obtained stockholder approval or shares acquired directly from the corporation. A “control share acquisition” means the acquisition of issued and outstanding control shares, subject to certain exceptions.

A person who has made or proposes to make a control share acquisition, upon satisfaction of certain conditions (including an undertaking to pay expenses and making an “acquiring person statement” as described in the MGCL), may compel the board of directors to call a special meeting of stockholders to be held within 50 days of demand to consider the voting rights of the shares. If no request for a meeting is made, the corporation may itself present the question at any stockholders meeting.

If voting rights are not approved at the meeting or if the acquiring person does not deliver an “acquiring person statement” as required by the statute, then, subject to certain conditions and limitations, the corporation may redeem any or all of the control shares (except those for which voting rights have previously been approved) for fair value determined, without regard to the absence of voting rights for the control shares, as of the date of the last control share acquisition by the acquirer or as of any meeting of stockholders at which the voting rights of such shares are considered and not approved. If voting rights for control shares are approved at a stockholders meeting and the acquirer becomes entitled to vote a majority of the shares entitled to vote, all other stockholders may exercise appraisal rights, unless our charter or bylaws provide otherwise. The fair value of the shares as determined for purposes of such appraisal rights may not be less than the highest price per share paid by the acquirer in the control share acquisition.

The control share acquisition statute does not apply to shares acquired in a merger, consolidation or statutory share exchange if the corporation is a party to the transaction or acquisitions approved or exempted by the charter or bylaws of the corporation.

Our bylaws contain a provision exempting from the control share acquisition statute any and all acquisitions by any person of shares of our stock. There is no assurance that such provision will not be amended or eliminated at any time in the future.

Subtitle 8 of Title 3 of the MGCL permits the board of directors of a Maryland corporation with a class of equity securities registered under the Exchange Act and at least three independent directors to elect to be subject, by provision in its charter or bylaws or a resolution of its board of directors without a stockholder vote and notwithstanding any contrary provision in the charter or bylaws, to any or all of five provisions of the MGCL which provide, respectively, for:

	•	a classified board;

	•	a two-thirds vote requirement for removing a director;

	•	a requirement that the number of directors be fixed only by vote of the board of directors;

	•	a requirement that a vacancy on the board be filled only by the remaining directors in office and (if the board is classified) for the remainder of the full term of the class of directors in which the vacancy occurred; and

	•	a majority requirement for the calling of a stockholder-requested special meeting of stockholders.

We have not opted in to the provisions of Subtitle 8 of Title 3 of the MGCL. Through provisions in our charter and bylaws unrelated to Subtitle 8, we already vest in the board the exclusive power to fix the number of directorships.

Meetings of Stockholders

Pursuant to our bylaws, a meeting of our stockholders for the election of directors and the transaction of any business will be held annually on a date and at the time and place set by our board of directors. The chairman of our board of directors, our chief executive officer, our president or our board of directors may call a special meeting of our stockholders. Subject to the provisions of our bylaws, a special meeting of our stockholders to act on any matter that may properly be brought before a meeting of our stockholders must also be called by our secretary upon the written request of the stockholders entitled to cast more than 10% of all the votes entitled to be cast on such matter at the meeting and containing the information required by our bylaws. Our secretary will inform the requesting stockholders of the reasonably estimated cost of preparing and delivering the notice of meeting (including our proxy materials), and the requesting stockholder must pay such estimated cost before our secretary is required to prepare and deliver the notice of the special meeting. Unless requested by the stockholders entitled to cast a majority of all the votes entitled to be cast at such meeting, a special meeting need not be called to consider any matter which is substantially the same as a matter voted on at any special meeting of stockholders held during the preceding twelve months.

Amendments to Our Charter and Bylaws

Our charter generally may be amended only if the amendment is first advised by our board of directors and thereafter approved by the affirmative vote of stockholders entitled to cast a majority of all of the votes entitled to be cast on the matter.

Our board of directors has the exclusive power to adopt, alter or repeal any provision of our bylaws or to make new bylaws.

Dissolution of Owens Realty Mortgage, Inc.

The dissolution of Owens Realty Mortgage, Inc. must be advised by a majority of our entire board of directors and approved by the affirmative vote of stockholders entitled to cast a majority of all of the votes entitled to be cast on the matter. Owens Realty Mortgage, Inc. will be dissolved on December 31, 2034, unless our charter is amended to provide otherwise.

Advance Notice of Director Nominations and New Business

Our bylaws provide that, with respect to an annual meeting of our stockholders, nominations of individuals for election to our board of directors and the proposal of other business to be considered by our stockholders may be made only (1) pursuant to our notice of the meeting, (2) by or at the direction of our board of directors or (3) by any stockholder who was a stockholder of record both at the time of giving the notice required by our bylaws and at the time of the meeting, who is entitled to vote at the meeting on such business or in the election of such nominee and has provided notice to us within the time period, and containing the information and other materials, specified in the advance notice provisions of our bylaws.

With respect to special meetings of stockholders, only the business specified in our notice of meeting may be brought before the meeting. Nominations of individuals for election to our board of directors may be made only (1) by or at the direction of our board of directors, (2) by a stockholder that has requested that a special meeting be called for the purpose of electing directors in compliance with our bylaws and that has supplied the information required by our bylaws about each individual whom the stockholder proposes to nominate for election of directors or (3) provided that the meeting has been called for the purpose of electing directors, by any stockholder who was a stockholder of record both at the time of giving the notice required by our bylaws and at the time of the meeting, who is entitled to vote at the meeting in the election of each such nominee and has provided notice to us within the time period, and containing the information and other materials, specified in the advance notice provisions of our bylaws.

Effects of Certain Provisions of Maryland Law and of Our Charter and Bylaws

Our charter and bylaws and Maryland law contain provisions that may delay, defer or prevent a change in control or other transaction that might involve a premium price for shares of our Common Stock or otherwise be in the best interests of our stockholders, including restrictions on ownership and transfer of our stock and advance notice requirements for director nominations and stockholder proposals. In addition, Owens Realty Mortgage, Inc. is subject to certain anti-takeover provisions of Maryland law, including the Business Combination Act. Likewise, if the provision in our bylaws opting out of the control share acquisition provisions of the MGCL were rescinded or if we were to opt in to provisions of Subtitle 8, these provisions of the MGCL could have similar anti-takeover effects.

Indemnification and Limitation of Liability of Directors and Officers

Maryland law permits a Maryland corporation to include in its charter a provision limiting the liability of its directors and officers to the corporation and its stockholders for money damages, except for liability resulting from (a) actual receipt of an improper benefit or profit in money, property or services or (b) active and deliberate dishonesty that is established by a final judgment and is material to the cause of action. Our charter contains a provision that eliminates the liability of our directors and officers to the maximum extent permitted by Maryland law.

The MGCL requires us (unless our charter provides otherwise, which our charter does not) to indemnify a director or officer who has been successful, on the merits or otherwise, in the defense of any proceeding to which he or she is made a party by reason of his or her service in that capacity. The MGCL permits us to indemnify our present and former directors and officers, among others, against judgments, penalties, fines, settlements and reasonable expenses actually incurred by them in connection with any proceeding to which they may be made or threatened to be made a party by reason of their service in those or other capacities unless it is established that:

	•	the act or omission of the director or officer was material to the matter giving rise to the proceeding and (a) was committed in bad faith or (b) was the result of active and deliberate dishonesty;

	•	the director or officer actually received an improper personal benefit in money, property or services; or

	•	in the case of any criminal proceeding, the director or officer had reasonable cause to believe that the act or omission was unlawful.

Under the MGCL, we may not indemnify a director or officer in a suit by us or on our behalf in which the director or officer was adjudged liable to us or in a suit in which the director or officer was adjudged liable on the basis that personal benefit was improperly received. Nevertheless, a court may

order indemnification if it determines that the director or officer is fairly and reasonably entitled to indemnification, even though the director or officer did not meet the prescribed standard of conduct or was adjudged liable on the basis that personal benefit was improperly received. However, indemnification for an adverse judgment in a suit by us or on our behalf, or for a judgment of liability on the basis that personal benefit was improperly received, is limited to expenses.

In addition, the MGCL permits us to advance reasonable expenses to a director or officer upon our receipt of:

	•	a written affirmation by the director or officer of his or her good faith belief that he or she has met the standard of conduct necessary for indemnification by us; and

	•	a written undertaking by or on behalf of the director or officer to repay the amount paid or reimbursed by us if it is ultimately determined that the director or officer did not meet the standard of conduct.

Our charter authorizes us to obligate ourselves, and our bylaws obligate us, to the maximum extent permitted by Maryland law in effect from time to time, to indemnify and, without requiring a preliminary determination of the ultimate entitlement to indemnification, pay or reimburse reasonable expenses in advance of final disposition of a proceeding to:

	•	any present or former director or officer who is made or threatened to be made a party to a proceeding by reason of his or her service in that capacity; or

	•	any individual who, while a director or officer of Owens Realty Mortgage, Inc. and at our request, serves or has served as a director, officer, partner, trustee, member or manager of another corporation, REIT, limited liability company, partnership, joint venture, trust, employee benefit plan or any other enterprise and who is made or threatened to be made a party to the proceeding by reason of his or her service in that capacity.

Our charter and bylaws also permit us to indemnify and advance expenses to any person who served a predecessor of ours in any of the capacities described above and any employee or agent of Owens Realty Mortgage, Inc. or a predecessor of Owens Realty Mortgage, Inc.

We expect to enter into indemnification agreements with each of our directors and officers that provide for indemnification to the maximum extent permitted by Maryland law.

REIT Qualification

Our charter provides that our board of directors may authorize us to revoke or otherwise terminate our REIT election, without approval of our stockholders, if it determines that it is no longer in our best interests to continue to qualify as a REIT.

COMPARISON OF RIGHTS OF LIMITED PARTNERS OF OMIF AND STOCKHOLDERS OF OWENS REALTY MORTGAGE, INC.

The Certificate of Limited Partnership, the Partnership Agreement and the California Corporations Code currently govern the rights of Limited Partners. If the merger agreement and the transactions contemplated thereby are approved by Limited Partners and the merger is consummated, Limited Partners will become stockholders of Owens Realty Mortgage, Inc., and the rights of stockholders of Owens Realty Mortgage, Inc. will be governed by Maryland law and the charter and bylaws of Owens Realty Mortgage, Inc. The following chart compares some of the existing rights of Limited Partners with those of stockholders of Owens Realty Mortgage, Inc., as well as the form, governance and other material considerations of such entities. This comparison may not contain all of the information that is important to you and is qualified in its entirety by reference to the applicable governing documents and applicable California law and Maryland law. We encourage you to carefully read the charter and the bylaws of Owens Realty Mortgage, Inc., copies of which are attached to this proxy statement/prospectus as Annex B and Annex C, respectively.


	Owens Mortgage Investment Fund, a California Limited Partnership	Owens Realty Mortgage, Inc.
	LP Units	Common Stock

Form of Organization, Purpose and Duration	OMIF is a California Limited Partnership. Its purposes are to make or purchase first, second, third, wraparound, participating and construction mortgage loans and mortgage loans on leasehold interests, and to do all things reasonably related thereto, including, without limitation, developing, managing and either holding for investment or disposing of real property acquired through foreclosure. OMIF will dissolve on December 31, 2034, unless earlier dissolved or extended by a vote of the Limited Partners holding a majority of the outstanding LP Units (excluding LP Units held by Owens Financial Group, Inc.).	Owens Realty Mortgage, Inc. is a Maryland corporation. The purposes for which it is formed are to make or purchase first, second, third, wraparound, participating and construction mortgage loans and mortgage loans on leasehold interests, and to do all things reasonably related thereto, including, without limitation, developing, managing and either holding for investment or disposing of real property acquired through foreclosure, and to engage in any other lawful act or activity (including, without limitation or obligation, engaging in business as a REIT under the Code) for which corporations may be organized under the general laws of the State of Maryland. Owens Realty Mortgage, Inc. will be dissolved on December 31, 2034, unless its charter is amended.

Authorized Shares/ LP Units	The Partnership Agreement authorizes OMIF to issue, in Owens Financial Group, Inc.’s sole discretion, LP Units up to an aggregate outstanding amount of $500,000,000.	The charter of Owens Realty Mortgage, Inc. provides that it may issue up to 50,000,000 shares of Common Stock and 5,000,000 shares of preferred stock, $0.01 par value per share. The charter authorizes Owens Realty Mortgage, Inc.’s board of directors, with the approval of a majority of the entire board and without stockholder approval, to amend the charter to increase or decrease the aggregate number of authorized shares of stock or the number of authorized shares of stock of any class or series.

Public Market	The LP Units are not publicly traded.	We will apply to list the Common Stock on the NYSE MKT or on a national securities exchange acceptable to Owens Realty Mortgage, Inc. Approval for listing of the shares on the NYSE MKT, or on a national securities exchange acceptable to Owens Realty Mortgage, Inc. , is a condition to consummation of the merger and REIT conversion.


Restrictions on Ownership and Transfer		Limited Partners may generally transfer LP Units subject to the following conditions: (i) a Limited Partner may not transfer any LP Units if, as a result, such Limited Partner will own fewer than 2,000 LP Units; (ii) the transfer complies with any restrictions imposed under applicable state securities laws or regulations with regard to suitability standards; (iii) any transfer may not, in the opinion of tax counsel, jeopardize the status of OMIF as a partnership for federal or any applicable state income tax purposes; and (iv) the transferor must pay in advance all legal, recording and accounting costs in connection with the transfer and the cost of any necessary tax advice. All transfers and transferees are subject to the consent of Owens Financial Group, Inc.		In order for Owens Realty Mortgage, Inc. to qualify as a REIT under the Code, shares of Owens Realty Mortgage, Inc.’s stock must be beneficially owned by 100 or more persons during at least 335 days of a taxable year of 12 months (other than the first year for which an election to be a REIT has been made) or during a proportionate part of a shorter taxable year. Also, not more than 50% of the value of the outstanding shares of stock may be owned, directly or indirectly, by five or fewer individuals (as defined in the Code to include certain entities) during the last half of a taxable year (other than the first year for which an election to be a REIT has been made). Subject to certain exceptions, Owens Realty Mortgage, Inc.’s charter prohibits any stockholder from owning actually, beneficially or constructively more than 9.8%, in value or in number of shares, whichever is more restrictive, of the outstanding shares of Common Stock, and 9.8% in value of the outstanding shares of all classes or series of Owens Realty Mortgage, Inc.’s stock. The constructive ownership rules under the Code are complex and may cause the outstanding stock owned by a group of related individuals or entities to be deemed to be constructively owned by one individual or entity. As a result, the acquisition of less than 9.8% of Owens Realty Mortgage, Inc.’s outstanding Common Stock or the outstanding shares of all classes or series of Owens Realty Mortgage, Inc.’s stock by an individual or entity could cause that individual or entity to own constructively in excess of the relevant ownership limits. Owens Realty Mortgage, Inc.’s charter also prohibits any person from owning shares of Owens Realty Mortgage, Inc.’s stock that would result in Owens Realty Mortgage, Inc. being “closely held” under Section 856(h) of the Code or otherwise cause Owens Realty Mortgage, Inc. to fail to qualify as a REIT. Any attempt to own or transfer shares of Owens Realty Mortgage, Inc.’s stock in violation of these restrictions may result in the shares being automatically transferred to a charitable trust or may be void. In addition, if any transfer of shares of our stock would result in shares of our stock being beneficially owned by fewer than 100 persons, the transfer will be null and void and the intended transferee will acquire no rights in the shares. For more information, see “ Description of Owens Realty Mortgage, Inc. Stock—Restrictions on Ownership and Transfer.”

		Subject to these limitations and unless a holder is considered an “affiliate” of either OMIF or Owens Realty Mortgage, Inc. under the Securities Act, all shares of Common Stock to be received by Limited Partners of OMIF in connection with the merger will be freely transferable and may be sold to the public. Generally speaking, affiliates of Owens Realty Mortgage, Inc. would consist of its officers, directors and holders of 5% or more of Common Stock and any other persons controlling Owens Financial Group, Inc.

General Partner/ Directors	Owens Financial Group, Inc. is the exclusive manager and general partner of OMIF and controls all of its business and affairs. As the general partner, it determines, makes and manages all of OMIF’s investments, on terms that it believes are in OMIF’s best interests. Owens Financial Group, Inc. is accountable to OMIF as a fiduciary, and consequently owes duties of loyalty and care to OMIF and the Limited Partners. In addition, Owens Financial Group, Inc. is required to discharge its duties and exercise its rights consistently with the obligation of good faith and fair dealing. Except for the provision allowing competitive activities by Owens Financial Group, Inc., the Partnership Agreement does not modify any fiduciary standard imposed on Owens Financial Group, Inc. as general partner by California law. OMIF has no officers or directors. Limited Partners do not have the right to elect the general partner of OMIF on an annual or other continuing basis, and the general partner may not be removed except as described below. See “R emoval of General Partners/Directors” below.	Owens Realty Mortgage, Inc.’s business and affairs are managed under the direction of its board of directors. Owens Realty Mortgage, Inc. will enter into a contract with Owens Financial Group, Inc. to manage Owens Realty Mortgage, Inc.’s day-to-day business affairs and to provide it with other services. Officers serve at the pleasure of the board of directors. Under the MGCL, each director is required to perform his or her duties in good faith, in a manner he or she reasonably believes to be in the best interests of the corporation and with the care that an ordinarily prudent person in a like position would use under similar circumstances. Upon consummation of the REIT conversion, Owens Realty Mortgage, Inc.’s board of directors will have five members (a majority of which are independent). Owens Realty Mortgage, Inc.’s bylaws and charter provide that the number of directors it has may be established by its board of directors but may not be more than 15 nor less than the minimum number required by the MGCL, which is one. Pursuant to Owens Realty Mortgage, Inc.’s bylaws, each of the directors is elected by Owens Realty Mortgage, Inc.’s common stockholders entitled to vote, to serve until the next annual meeting of stockholders and until his or her successor is duly elected and qualifies. Holders of shares of Common Stock will have no right to cumulative voting in the election of directors, and directors will be elected by a plurality of the votes cast in the election of directors. Consequently, at each annual meeting of stockholders, the holders of a majority of the shares of Common Stock entitled to vote will be able to elect all of the directors of Owens Realty Mortgage, Inc.

		Any vacancy on Owens Realty Mortgage, Inc.’s board of directors may be filled, at any regular meeting or at any special meeting called for that purpose, by a majority of the remaining directors, even if less than a quorum, except that a vacancy resulting from an increase in the number of directors must be filled by a majority of the entire board of directors. Any individual so elected will serve until the next annual meeting of stockholders and until his or her successor is elected and qualifies.

Removal of General Partner/ Directors	Limited Partners holding a majority of the outstanding LP Units (excluding any LP Units held by Owens Financial Group, Inc.), by vote or written consent given in accordance with the Partnership Agreement, may remove the general partner of OMIF. In addition to removal by the Limited Partners, the management relationship between OMIF and the general partner will be terminated upon the dissolution, voluntary withdrawal, or adjudication of bankruptcy of the general partner. Such an event will dissolve OMIF and cause it to be wound up unless the Limited Partners holding a majority of the outstanding LP Units (excluding any LP Units held by Owens Financial Group, Inc.) agree to continue the business of OMIF and admit a new general partner within six months of the event.	The charter of Owens Realty Mortgage, Inc. provides that any director may be removed from office at any time, with or without cause, by the affirmative vote of the holders of at least a majority of the votes entitled to be cast generally in the election of directors. Any vacancy on Owens Realty Mortgage, Inc.’s board of directors may be filled, at any regular meeting or at any special meeting called for that purpose, by a majority of the remaining directors, even if less than a quorum, except that a vacancy resulting from an increase in the number of directors must be filled by a majority of the entire board of directors. Any individual so elected will serve until the next annual meeting of stockholders and until his or her successor is elected and qualifies.

Limitation on Liability and Exculpation	Consistent with the duty of care established for general partners under California’s partnership law, Owens Financial Group, Inc., as general partner of OMIF, is not liable to OMIF or Limited Partners for errors in judgment or other acts or omissions not amounting to gross negligence or reckless conduct, intentional misconduct, knowing violation of law or breach of the duty of loyalty. In addition, the Partnership Agreement provides that no Indemnified Party (as defined below) will be liable to any Limited Partner or Indemnitor (as defined below) for any Liabilities (as defined below) which may be imposed on, incurred by, or asserted against the Indemnified Party or OMIF in connection with services to or on behalf of OMIF (and with respect to an Indemnified Party which is an affiliate of Owens Financial Group, Inc. for an act for which	Maryland law permits a Maryland corporation to include in its charter a provision eliminating the liability of its directors and officers to the corporation and its stockholders for money damages, except for liability resulting from actual receipt of an improper benefit or profit in money, property or services or active and deliberate dishonesty established by a final judgment as being material to the cause of action. The charter of Owens Realty Mortgage, Inc. contains such a provision that eliminates such liability of its present and former directors and officers to the maximum extent permitted by Maryland law.

	Owens Financial Group, Inc., as general partner of OMIF, would be entitled to indemnification if such act were performed by it) which the Indemnified Party in good faith determined was in the best interest of OMIF. However, each Indemnified Party will be liable, and neither OMIF nor Indemnitor will be liable to an Indemnified Party, for any portion of the Liabilities which resulted from the Indemnified Party’s (i) own fraud, gross negligence or misconduct or knowing violation of law, (ii) breach of fiduciary duty to OMIF or any partner, or (iii) breach of the Partnership Agreement, regardless of whether or not the act was first determined by the Indemnified Party, in good faith, to be in the best interests of OMIF.

Indemnification	The Partnership Agreement provides that the Indemnitors must indemnify each Indemnified Party for any Liabilities which may be imposed on, incurred by, or asserted against the Indemnified Party or OMIF in connection with services to or on behalf of OMIF (and with respect to an Indemnified Party which is an affiliate of Owens Financial Group, Inc. for an act for which Owens Financial Group, Inc., as general partner of OMIF, would be entitled to indemnification if such act were performed by it) which the Indemnified Party in good faith determined was in the best interests of OMIF. However, each Indemnified Party will be liable, and neither OMIF nor an Indemnitor will be liable to an Indemnified Party, for any portion of the Liabilities which resulted from the Indemnified Party’s (i) own fraud, gross negligence or misconduct or knowing violation of law, (ii) breach of fiduciary duty to OMIF or any partner, or (iii) breach of the Partnership Agreement, regardless of whether or not the act was first determined by the Indemnified Party, in good faith, to be in the best interests of OMIF. If any action, suit or proceeding is pending against OMIF or any Indemnified Party relating to or arising out of any such action or inaction, the Indemnified Party will have the right to employ, at the reasonable expense of OMIF (subject to the provisions below), separate counsel of the Indemnified Party’s choice	The MGCL requires Owens Realty Mortgage, Inc. (unless its charter provides otherwise, which it does not) to indemnify a director or officer who has been successful, on the merits or otherwise, in the defense of any proceeding to which he is made or threatened to be made a party by reason of his service in that capacity. The MGCL permits a corporation to indemnify its present and former directors and officers, among others, against judgments, penalties, fines, settlements and reasonable expenses actually incurred by them in connection with any proceeding to which they may be made or threatened to be made a party by reason of their service in those or other capacities unless it is established that: (a) the act or omission of the director or officer was material to the matter giving rise to the proceeding and (1) was committed in bad faith or (2) was the result of active and deliberate dishonesty; (b) the director or officer actually received an improper personal benefit in money, property or services; or (c) in the case of any criminal proceeding, the director or officer had reasonable cause to believe that the act or omission was unlawful. However, under the MGCL, a Maryland corporation may not indemnify a director or officer in a suit by or in the right of the corporation in which the director or officer was adjudged liable to the corporation or in a proceeding in which the director or

in the action, suit or proceeding. The satisfaction of the obligations of OMIF as described above will be from and limited to the assets of OMIF, and no Limited Partner will have any personal liability for such obligations.

Cash advances from OMIF funds to an Indemnified Party for legal expenses and other costs incurred as a result of any legal action initiated against an Indemnified Party by a Limited Partner are prohibited. Cash advances from OMIF funds to an Indemnified Party for reasonable legal expenses and other costs incurred as a result of any legal action or proceeding are permissible if (i) the suit, action or proceeding relates to or arises out of any action or inaction on the part of the Indemnified Party in the performance of its duties or provision of its services on behalf of OMIF; (ii) the suit, action or proceeding is initiated by a third party who is not a Limited Partner; and (iii) the Indemnified Party undertakes by written agreement to repay any funds advanced in the cases in which the Indemnified Party would not be entitled to indemnification as described above. If advances are permissible, the Indemnified Party may bill OMIF for, or otherwise request OMIF to pay, at any time after the Indemnified Party becomes obligated to make such payments, any and all amounts for which the Indemnified Party believes in good faith that the Indemnified Party is entitled to indemnification as described above. If a final determination is made that OMIF is not so obligated for any amount paid by it to a particular Indemnified Party, such Indemnified Party will refund such amount, and in the event that a final determination is made that OMIF is so obligated for any amount not paid by OMIF to a particular Indemnified Party, OMIF will pay such amount.

Neither Owens Financial Group, Inc. nor any of its affiliates, agents, or attorneys, nor any person acting as a broker-dealer with respect to LP Units, will be indemnified from any liability, loss or damage incurred by them arising due to an alleged violation of federal or state securities laws unless (i) there has been a successful adjudication on the merits of each count involving alleged securities law violations as to the particular Indemnified Party, or (ii) such claims have been dismissed with prejudice on the merits by a court as to the particular Indemnified Party, or (iii) a court approves a settlement of the claims against the particular Indemnified Party and finds that indemnification of the

officer was adjudged liable on the basis that personal benefit was improperly received. Nevertheless, a court may order indemnification if it determines that the director or officer is fairly and reasonably entitled to indemnification, even though the director or officer did not meet the prescribed standard of conduct or was adjudged liable on the basis that personal benefit was improperly received. However, indemnification for an adverse judgment in a suit by Owens Realty Mortgage, Inc. or in its right, or for a judgment of liability on the basis that personal benefit was improperly received, is limited to expenses.

The charter of Owens Realty Mortgage, Inc. authorizes it to obligate itself and the bylaws of Owens Realty Mortgage, Inc. obligate it, to the maximum extent permitted by Maryland law in effect from time to time, to indemnify and, without requiring a preliminary determination of the ultimate entitlement to indemnification, pay or reimburse reasonable expenses in advance of final disposition of a proceeding to: (a) any present or former director or officer who is made or threatened to be made a party to the proceeding by reason of his or her service in that capacity; or (b) any individual who, while a director or officer of Owens Realty Mortgage, Inc. and at Owens Realty Mortgage, Inc.’s request, serves or has served another corporation, REIT, limited liability company, partnership, joint venture, trust, employee benefit plan or any other enterprise as a director, officer, partner, trustee, member or manager and who is made or threatened to be made a party to the proceeding by reason of his or her service in that capacity.

The charter and bylaws of Owens Realty Mortgage, Inc. also permit it to indemnify and advance expenses to any person who served a predecessor of Owens Realty Mortgage, Inc. in any of the capacities described above and to any employee or agent of Owens Realty Mortgage, Inc. or a predecessor of Owens Realty Mortgage, Inc.

The MGCL permits a corporation to advance reasonable expenses to a director or officer upon the corporation’s receipt of: (a) a written affirmation by the director or officer of his or her good faith belief that he or she has met the standard of conduct necessary for indemnification by the corporation; and (b) a written undertaking by the director or officer or on the director’s or officer’s behalf to repay the amount paid or reimbursed by the corporation if it is ultimately determined that the director or

	settlement and related costs should be made. Prior to seeking a court approval for indemnification, Owens Financial Group, Inc., as the general partner of OMIF, must undertake to cause the party seeking indemnification to apprise the court of the position of the SEC and the California Commissioner of the Department of Corporations with respect to indemnification for securities violations . OMIF may not incur the cost of the portion of any insurance which insures any party against any liability as to which such party is prohibited from being indemnified as set forth above. An affiliate, agent or attorney of Owens Financial Group, Inc. may be indemnified by OMIF only in circumstances where such person has performed an act on behalf of OMIF or Owens Financial Group, Inc. within the scope of the authority of Owens Financial Group, Inc. as general partner and for which Owens Financial Group, Inc. would have been entitled to indemnification had such act been performed by it. “Indemnified Party” means Owens Financial Group, Inc., as general partner of OMIF, and each of its affiliates, agents and attorneys. “Indemnitor” means OMIF, its receiver or trustee. “Liabilities” mean any and all liabilities, obligations, losses, damages, actions, judgments, suits, proceedings and reasonable costs and expenses (including reasonable costs and expenses of defense, appeal and settlement of any and all suits, actions or proceedings and all related reasonable costs of investigation).	officer did not meet the standard of conduct.

Management Fees and Expenses	The management fee Owens Financial Group, Inc., as general partner of OMIF, is entitled to receive is payable monthly and may not exceed 2.75% per year of the average unpaid balance of OMIF’s mortgage loans at the end of each month in the calendar year. Because this fee is paid monthly, it could exceed 2.75% of the unpaid balance of	Owens Financial Group, Inc. will be entitled to receive a management fee payable monthly, subject to a maximum of 2.75% per year of the average unpaid balance of Owens Realty Mortgage, Inc.’s mortgage loans at the end of each month in the calendar year. Since this fee is paid monthly, it could exceed 2.75% of the unpaid balance of OMIF’s mortgage loans in one or more

OMIF’s mortgage loans in one or more months, but the total fee in any one year is limited to a maximum of 2.75% of the average unpaid balance of OMIF’s mortgage loans at the end of each month in the calendar year, and any amount paid above this amount must be repaid by Owens Financial Group, Inc. to OMIF.

The Partnership Agreement permits Owens Financial Group, Inc. to receive from OMIF a monthly servicing fee, which, when added to all other fees paid in connection with the servicing of a particular loan, does not exceed the lesser of the customary, competitive fee in the community where the loan is placed for the provision of such mortgage services on that type of loan or up to 0.25% per year of the unpaid balance of mortgage loans held by OMIF at the end of each month.

Owens Financial Group, Inc. is required to contribute capital to OMIF in the amount of 0.5% of the Limited Partners’ aggregate capital accounts. In addition, if a minimum of 86.5% of OMIF’s capital contributions are committed to investment in mortgages, Owens Financial Group, Inc. receives a Carried Interest of 0.5% of the aggregate capital accounts of the Limited Partners as additional compensation.

In addition to compensation from OMIF, Owens Financial Group, Inc. also receives compensation from borrowers under the mortgage loans placed by Owens Financial Group, Inc. with OMIF. Owens Financial Group, Inc. is entitled to receive and retain all acquisition and origination fees paid or payable by borrowers for services rendered in connection with the evaluation and consideration of potential investments of OMIF. Owens Financial Group, Inc. is also entitled to receive and retain all late payment charges paid by borrowers on delinquent mortgage loans held by OMIF.

Reimbursement to Owens Financial Group, Inc. or its affiliates for any expenses they paid, including legal and accounting expenses, filing fees, printing costs, goods, services and materials used by or for OMIF, must be paid by OMIF immediately following the expenditure. Owens Financial Group, Inc. and its affiliates may not be reimbursed by

months, but the total fee in any one year is limited to a maximum of 2.75% of the average unpaid balance of OMIF’s mortgage loans at the end of each month in the calendar year, and any amount paid above this must be repaid by Owens Financial Group, Inc. to Owens Realty Mortgage, Inc.

Owens Financial Group, Inc. may receive a monthly servicing fee, which, when added to all other fees paid in connection with the servicing of a particular loan, does not exceed the lesser of the customary, competitive fee in the community where the loan is placed for the provision of such mortgage services on that type of loan, or up to 0.25% per year of the unpaid principal balance of mortgage loans held by Owens Realty Mortgage, Inc. at the end of each month.

In addition to compensation from Owens Realty Mortgage, Inc., Owens Financial Group, Inc. will also receive compensation from borrowers under the mortgage loans placed by Owens Realty Mortgage, Inc. with Owens Realty Mortgage, Inc. Owens Financial Group, Inc. will be entitled to receive and retain all acquisition and origination fees paid or payable by borrowers for services rendered in connection with the evaluation and consideration of investments of Owens Realty Mortgage, Inc. Owens Financial Group, Inc. will also be entitled to receive and retain all late payment charges paid by borrowers on delinquent mortgage loans held by Owens Realty Mortgage, Inc.

Reimbursement to Owens Financial Group, Inc. or its affiliates for any expenses they paid, including legal and accounting expenses, filing fees, printing costs, goods, services and materials used by or for Owens Realty Mortgage, Inc. or its subsidiaries, must be paid by Owens Realty Mortgage, Inc. immediately following the expenditure. Owens Financial Group, Inc. and its affiliates may not be reimbursed by Owens Realty Mortgage, Inc. for services for which Owens Financial Group, Inc. is entitled to compensation by way of a separate fee, except for salaries (and related salary expenses, but excluding expenses incurred in connection with the administration of Owens Realty Mortgage, Inc.) for nonmanagement and nonsupervisory services which could be performed directly for Owens Realty Mortgage, Inc. by independent parties, such as legal, accounting, transfer agent, data processing and duplicating. No reimbursement is allowed for rent and depreciation, utilities, capital equipment and other administrative items, and salaries, fringe benefits, travel expenses and other

	OMIF for services for which Owens Financial Group, Inc. is entitled to compensation by way of a separate fee, except for salaries (and related salary expenses, but excluding expenses incurred in connection with the administration of OMIF) for nonmanagement and nonsupervisory services which could be performed directly for OMIF by independent parties, such as legal, accounting, transfer agent, data processing and duplicating. No reimbursement is allowed for rent and depreciation, utilities, capital equipment and other administrative items, and salaries, fringe benefits, travel expenses and other administrative items incurred or allocated to any controlling person of Owens Financial Group, Inc. or its affiliates. Nor may there be reimbursement for management and supervisory personnel (for example, services of employees of Owens Financial Group, Inc. or its affiliates who oversee the work which would have been performed by an independent party if such party had been so engaged). The amounts charged to OMIF may not exceed the lesser of the actual cost of such services or the amounts which Owens Financial Group, Inc. would be required to pay to independent parties for comparable services. Reimbursement may also be made for the allocable cost charged by independent parties for maintenance and repair of data processing and other special purpose equipment used for or by OMIF.	administrative items incurred or allocated to any controlling person of Owens Financial Group, Inc. or its affiliates. Nor may there be reimbursement for management and supervisory personnel (for example, services of employees of Owens Financial Group, Inc. or its affiliates who oversee the work which would have been performed by an independent party if such party had been so engaged). The amounts charged to Owens Realty Mortgage, Inc. may not exceed the lesser of the actual cost of such services or the amounts which Owens Financial Group, Inc. would be required to pay to independent parties for comparable services. Reimbursement may also be made for the allocable cost charged by independent parties for maintenance and repair of data processing and other special purpose equipment used for or by Owens Realty Mortgage, Inc.

Management Indemnification	The General Partner, which manages OMIF, is indemnified as described above under the caption “ Indemnification .”	Owens Realty Mortgage, Inc. will, to the fullest extent permitted by law, indemnify Owens Financial Group, Inc., its officers, stockholders, directors, employees and advisors, among others, from all losses (including attorneys’ fees) arising from any acts or omissions of such person made in good faith in the performance of Owens Financial Group, Inc.’s duties under the Management Agreement and not constituting bad faith, willful misconduct, gross negligence or reckless disregard of such duties.

Voting Rights	Generally, Limited Partners have no right to take part in the management of OMIF. However, Limited Partners holding at least a majority of the outstanding LP Units (excluding LP Units held by Owens Financial Group, Inc.) may, without the concurrence of Owens Financial Group, Inc., vote or consent in writing: (i) to amend the Partnership Agreement	Subject to the provisions of Owens Realty Mortgage, Inc.’s charter regarding the restrictions on ownership and transfer of stock and except as may otherwise be specified in the terms of any class or series of our stock, each outstanding share of our stock entitles the holder to one vote on all matters submitted to a vote of stockholders, including the election of directors, and,

	(except that, provided that the rights of the Limited Partners will not be adversely affected as a result, Owens Financial Group, Inc. may amend the Partnership Agreement without the consent of the Limited Partners to cure any ambiguity or formal defect or omission, to grant additional rights, remedies, powers or authorities to Limited Partners, to conform the Partnership Agreement to applicable laws and regulations and to make any other change which, in the judgment of Owens Financial Group, Inc., does not adversely affect the rights of the Limited Partners), provided that any amendment which modifies the compensation or distributions to which Owens Financial Group, Inc. is entitled or which affects the duties of Owens Financial Group, Inc. shall require the written consent of Owens Financial Group, Inc.; (ii) to dissolve and wind up OMIF; (iii) to remove Owens Financial Group, Inc. as general partner of OMIF and elect one or more new general partners; or (iv) to approve or disapprove the sale, pledge, refinancing or exchange of all or substantially all of the assets of OMIF. In addition, without the concurrence of Limited Partners holding at least a majority of the outstanding LP Units (excluding LP Units held by Owens Financial Group, Inc.), Owens Financial Group, Inc. may not, among other things: (i) amend the Partnership Agreement in any way that adversely affects the rights of the Limited Partners; (ii) admit a person as a general partner; (iii) voluntarily withdraw as a general partner, unless such withdrawal would not affect OMIF’s tax status and would not materially adversely affect the Limited Partners; (iv) sell, pledge, refinance or exchange all or substantially all of OMIF’s assets; (v) dissolve OMIF; or (vi) cause the merger or other reorganization of OMIF.	except as may be provided with respect to any other class or series of our stock, the holders of shares of our Common Stock will possess the exclusive voting power. There is no cumulative voting in the election of directors, and directors will be elected by a plurality of the votes cast in the election of directors. For more information, see “ Certain Provisions of Maryland Law and of Our Charter and Bylaws .” Under Maryland law, a Maryland corporation generally may not dissolve, amend its charter, merge, consolidate, sell all or substantially all of its assets or engage in a statutory share exchange unless declared advisable by the board of directors and approved by the affirmative vote of stockholders entitled to cast at least two-thirds of all the votes entitled to be cast on the matter, unless a lesser percentage (but not less than a majority of the votes entitled to be cast on the matter) is set forth in the corporation’s charter. Owens Realty Mortgage, Inc.’s charter provides for the approval of these matters by a majority of the votes entitled to be cast on the matter.

Action by Written Consent	The Partnership Agreement provides that any action that may be taken at any meeting of the Limited Partners may be taken without a meeting, if a written consent that sets forth the action is signed by the Limited Partners holding at	Under the MGCL, any action required or permitted to be taken at any meeting of stockholders may be taken without a meeting if unanimous consent, in writing or by electronic transmission, that sets forth the action, is given by each stockholder entitled

	least a majority of the outstanding LP Units (excluding LP Units held by Owens Financial Group, Inc.).	to vote on the matter and is filed with the minutes of proceedings of stockholders. If authorized by the charter, the holders of Common Stock entitled to vote generally in the election of directors may take action by delivering a consent in writing or by electronic transmission of stockholders entitled to cast not less than the minimum number of votes that would be necessary to take the action at a stockholders meeting provided that the corporation gives notice of the action to each holder of the class of Common Stock not later than 10 days after the effective date of the action. The charter of Owens Realty Mortgage, Inc. contains such authorization, and its bylaws permit action to be taken either (i) by unanimous consent or (ii) by the consent of stockholders entitled to cast not less than the minimum number of votes that would be necessary to take the action at a stockholders meeting, subject to certain conditions.

Meeting of Holders; Right to Call Special Meetings	Owens Financial Group, Inc., as general partner of OMIF, may call meetings of the Limited Partners at any time and must call a meeting upon written request to Owens Financial Group, Inc. by Limited Partners holding more than 10% of the outstanding LP Units. Within 10 days of receiving such request, Owens Financial Group, Inc. must provide written notice of the meeting to the Limited Partners, which meeting will be held not less than 15 days nor more than 60 days after the sending of the notice of the meeting. There are no regular meeting dates.	Owens Realty Mortgage, Inc. will hold annual meetings of its stockholders for, among other purposes, the election of directors. The chairman of Owens Realty Mortgage, Inc.’s board of directors, chief executive officer, president or board of directors may call a special meeting of Owens Realty Mortgage, Inc.’s stockholders. Subject to the provisions of Owens Realty Mortgage, Inc.’s bylaws, a special meeting of Owens Realty Mortgage, Inc.’s stockholders must also be called by the secretary upon the written request of the stockholders entitled to cast more than 10% of all the votes entitled to be cast at the meeting on the matter before the meeting. The request must state, among other things, the purpose of the meeting and the matters proposed to be acted on at the meeting. The Owens Realty Mortgage, Inc. board of directors has the sole power to fix: (1) the record date for determining stockholders entitled to request a special meeting of stockholders and the record date for determining stockholders entitled to notice of, and to vote at, such special meeting; and (2) the date, time and place of the special meeting. With respect to special meetings of stockholders, only the business specified in the notice of meeting may be brought before the meeting. Nominations of individuals for election to the Owens Realty Mortgage, Inc. board of directors may be made only: (1) by or at the direction of the board of directors, (2) by a stockholder that has requested that a special meeting be called for

		the purpose of electing directors in compliance with our bylaws and that has supplied the information required by our bylaws about each individual whom the stockholder proposes to nominate for election of directors or (3) provided that the meeting has been called for the purpose of electing directors, by any stockholder who is a stockholder of record both at the time of giving the notice required by Owens Realty Mortgage, Inc.’s bylaws and at the time of the meeting, who is entitled to vote at the meeting in the election of each such nominee and has provided notice within the required time period, containing the information and other materials specified in the advance notice provisions of Owens Realty Mortgage, Inc.’s bylaws.

Limited Liability	A Limited Partner is not liable for the liabilities of OMIF in an amount in excess of such Limited Partner’s capital account, as determined in accordance with the Partnership Agreement.	Under Maryland law, Owens Realty Mortgage, Inc.’s stockholders are not generally liable for Owens Realty Mortgage, Inc.’s debts or obligations.

Access to Books and Records	OMIF’s books and records are maintained at the principal office of OMIF and are open to inspection and examination by Limited Partners and their designated representatives during normal business hours. An alphabetical list of the names, addresses and business telephone numbers of all Limited Partners along with the number of LP Units held by each of them is maintained as part of the books and records and will generally be made available on request for a stated purpose. Such list is updated quarterly and shall be made available to any Limited Partner requesting it within 10 business days of the request for a reasonable charge for the copy work.	Under Maryland law, any stockholder or his or her agent upon written request may inspect and copy the following corporate documents: (1) the bylaws; (2) minutes of the proceedings of stockholders; (3) the corporation’s annual statement of affairs; (4) any voting trust agreements deposited with the corporation; and (5) a statement showing all stock and securities issued by the corporation during a specified period of not more than 12 months before the date of the request. In addition, one or more persons who together are and for at least six months have been stockholders of record of at least 5% of the outstanding stock of any class of a Maryland corporation may inspect and copy the corporation’s books of account and stock ledger and may present a written request for a statement of the corporation’s affairs.

Reports	Within 60 days after the end of each fiscal year of OMIF, Owens Financial Group, Inc. delivers to each Limited Partner such information as is necessary for the preparation by each Limited Partner of his or her federal income tax return. Within 60 days after the end of each quarter of OMIF, Owens Financial Group, Inc. transmits to each Limited Partner a quarterly report. Within 120 days after the end of OMIF’s calendar year, Owens Financial Group, Inc. transmits to each Limited Partner an annual report.	As a reporting company under the Exchange Act, Owens Realty Mortgage, Inc., will be obligated to file annual reports on Form 10-K and quarterly reports on Form 10-Q.

	OMIF will provide upon written request for review by a Limited Partner the information filed with the SEC on Form 10-K not more than 90 days after the closing of the fiscal year end, and on Form 10-Q not more than 45 days after the closing of each other quarterly fiscal period, by providing the Form 10-K and Form 10-Q or other document containing substantially the same information as required by Form 10-K and Form 10-Q.

Investment Policies	OMIF’s investment policies are substantially similar to those of Owens Realty Mortgage, Inc., as described under the caption “ Policies with Respect to Certain Activities – Investment Policies ,” except that OMIF is subject to the following additional investment policies: OMIF may incur indebtedness for the purpose of making or purchasing mortgage loans, as determined by Owens Financial Group, Inc., or: (i) to prevent default under prior loans or to discharge them entirely if it becomes necessary to protect OMIF’s mortgage loans, or (ii) to assist in the development or operation of any real property on which OMIF has previously made or purchased a mortgage loan and has subsequently taken over the operation thereof as a result of default or to protect such mortgage loan. The total amount of indebtedness incurred by OMIF may not exceed the sum of 50% of the aggregate fair market value of all OMIF loans. Owens Financial Group, Inc. is prohibited from providing financing to OMIF. The cash capital contributions of Owens Financial Group, Inc., as the general partner of OMIF, of up to a maximum of 1/2 of 1% of the aggregate capital accounts of the Limited Partners, is also available as an additional contingency reserve if considered necessary by Owens Financial Group, Inc. OMIF will not reinvest its net income available for distribution, unless it is Limited Partners’ reinvested distributions under OMIF’s distribution reinvestment plan.	Owens Realty Mortgage, Inc.’s investment policies are described under the caption “ Policies with Respect to Certain Activities – Investment Policies .”

Distributions and Dividends	All net income available for distribution must be paid monthly in cash or credited to the Limited Partners’	Owens Realty Mortgage, Inc. intends to elect and qualify to be taxed as a REIT for U.S. federal income tax purposes

	capital accounts in proportion to the Limited Partners’ capital accounts. Net income available for distribution means profits and losses reduced by amounts set aside for the restoration or creation of reserves and increased by the reduction or elimination of reserves at the discretion of Owens Financial Group, Inc. Net proceeds received from the repayment of principal, the prepayment of a mortgage loan, a foreclosure sale or other disposition of a mortgage loan or property or the payment of insurance or a guarantee with respect to a mortgage loan may be reinvested, used to improve or maintain properties acquired through foreclosure, used to pay operating expenses or discharge indebtedness or distributed to Limited Partners at the discretion of Owens Financial Group, Inc. In no event may Owens Financial Group, Inc. distribute any net proceeds during any calendar year if and to the extent the sum of all withdrawals from the capital accounts of Limited Partners, together with certain permitted transfers, and distributions of net proceeds under the Partnership Agreement would exceed 10% of the aggregate capital accounts of all outstanding LP Units in any calendar year, except upon a vote of the Limited Partners to dissolve OMIF.	commencing with its taxable year ending 2013. U.S. federal income tax law requires that a REIT distribute with respect to each year at least 90% of its REIT taxable income, determined without regard to the deduction for dividends paid and excluding any net capital gain. If Owens Realty Mortgage, Inc.’s cash available for distribution is less than 90% of its REIT taxable income, it could be required to sell assets or borrow funds to pay cash dividends or it may make a portion of the required dividend in the form of a taxable stock dividend or dividend of debt securities. Owens Realty Mortgage, Inc. will generally not be required to pay dividends with respect to activities conducted through any domestic taxable REIT subsidiary. For more information, see “ Material United States Federal Income Tax Considerations. ” To satisfy the requirements to qualify as a REIT and generally not be subject to U.S. federal income and excise tax, Owens Realty Mortgage, Inc. intends to pay regular monthly dividends of all or substantially all of its taxable income to holders of its Common Stock out of assets legally available therefor and to distribute substantially all of its net capital gain each year. The timing and amount of any dividends Owens Realty Mortgage, Inc. pays to holders of its Common Stock will be at the discretion of Owens Realty Mortgage, Inc.’s board of directors and will depend upon various factors, including Owens Realty Mortgage, Inc.’s actual and projected results of operations, financial condition, liquidity and business, maintenance of Owens Realty Mortgage, Inc.’s REIT qualification, applicable provisions of the MGCL and such other factors as Owens Realty Mortgage, Inc.’s board of directors deems relevant.

Distribution Reinvestment Plan	Limited Partners who meet investor suitability standards may elect to participate in the distribution reinvestment plan, pursuant to which participating Limited Partners’ distributions are used to purchase additional LP Units. In April 2011, Owens Financial Group, Inc. temporarily suspended the distribution reinvestment plan for all Limited Partners, in an effort to ensure OMIF’s ability to continue to operate in compliance with the requirements of the Partnership Agreement.	Owens Realty Mortgage, Inc., expects to adopt a dividend reinvestment plan, and register the shares issuable thereunder, concurrently with or following the REIT conversion.


Withdrawal and Redemption Rights	A Limited Partner may withdraw, or partially withdraw, from OMIF and obtain the return of all or part of his, her or its capital account within 61 to 91 days after the Limited Partner delivers written notice of redemption to Owens Financial Group, Inc., subject to, among other things, the following limitations: (i) redemptions generally may not occur until at least one year after the Limited Partner purchased LP Units; (ii) redemptions are funded only from net proceeds and capital contributions; (iii) redemptions are limited to $100,000 per calendar quarter for each Limited Partner; (iv) Owens Financial Group, Inc. is not required to maintain a cash reserve or to sell or otherwise liquidate any of OMIF’s assets to fund redemptions; and (v) the combined total of the amount of net proceeds distributed to Limited Partners and the amount withdrawn by Limited Partners, including certain permitted transfers in any calendar year, may not exceed 10% of the aggregate capital accounts of Limited Partners in any calendar year, except upon OMIF’s dissolution. Withdrawal requests are honored in the order in which they are received by Owens Financial Group, Inc. If a Limited Partner’s capital account would have a balance of less than $2,000 following a redemption request, Owens Financial Group, Inc., at its discretion, may distribute to the Limited Partners the entire balance in the account.	A stockholder has no rights to require Owens Realty Mortgage, Inc. to redeem shares of Common Stock. Owens Realty Mortgage, Inc. will apply to list its Common Stock on the NYSE MKT or on a national securities exchange acceptable to Owens Realty Mortgage, Inc. Approval for listing of the shares on the NYSE MKT, or on a national securities exchange acceptable to Owens Realty Mortgage, Inc., is a condition to consummation of the merger and REIT conversion. Accordingly, the Common Stock may be sold publicly at market prices then in effect.

Conversion Rights	The LP Units are not convertible.	The Common Stock is not convertible.

Anti-Takeover Provisions	The Partnership Agreement contains provisions which could have the effect of delaying, deferring or preventing a transaction or a change in control of OMIF that might involve a premium price for LP Units or otherwise be in the best interest of the Limited Partners. These include the following: (i) Owens Financial Group, Inc. is not regularly elected, and can only be removed by the Limited Partners holding at least a majority of the outstanding LP Units (excluding LP Units held by Owens Financial Group, Inc.); and (ii) while the LP Units are generally freely transferable, they are subject to certain restrictions on transfer. For more information, see above “ Restrictions on Ownership and Transfer. ”	The charter and bylaws of Owens Realty Mortgage, Inc. include certain anti-takeover provisions that could have the effect of delaying, deterring or preventing a transaction or a change in the control, including (i) restrictions on ownership and transfer of Owens Realty Mortgage, Inc.’s stock and (ii) advance notice provisions for stockholder nominees for director and other stockholder proposals. In addition, Owens Realty Mortgage, Inc. is subject to certain anti-takeover provisions of Maryland law, including the Business Combination Act. Likewise, if the Owens Realty Mortgage, Inc. board of directors were to elect to be subject to the provisions of Subtitle 8 or if the provision in Owens Realty Mortgage, Inc.’s bylaws opting out of the

		control share acquisition provisions of the MGCL were amended or rescinded, these provisions of the MGCL could have similar anti-takeover effects. For more information, see “ Certain Provisions of Maryland Law and of Our Charter and Bylaws .”

Stockholders’ Rights Plan	OMIF does not have a stockholders’ rights plan or “poison pill” in effect.	Owens Realty Mortgage, Inc. does not have a stockholders’ rights plan or “poison pill” in effect.

Rights Upon Liquidation or Dissolution	Upon OMIF’s liquidation, dissolution or winding up, the Limited Partners are entitled to net proceeds, if any, after the payment of all debts of OMIF.	Upon Owens Realty Mortgage, Inc.’s liquidation, dissolution or winding up, the holders of Common Stock are entitled to receive ratably Owens Realty Mortgage, Inc.’s net assets available, if any, after the payment of all debts and other liabilities and subject to the prior rights of any outstanding preferred stock, if any.

Appraisal Rights	Limited Partners have no appraisal rights.	Holders of shares of Common Stock have no appraisal rights.

Amendment of Partnership Agreement and Charter and Bylaws	The Limited Partners holding at least a majority of the outstanding LP Units (excluding LP Units held by Owens Financial Group, Inc.) may, without the concurrence of Owens Financial Group, Inc., vote or consent in writing to amend the Partnership Agreement (except that, provided that the rights of the Limited Partners will not be adversely affected as a result, Owens Financial Group, Inc. may amend the Partnership Agreement without the consent of the Limited Partners to cure any ambiguity or formal defect or omission, to grant additional rights, remedies, powers or authorities to Limited Partners, to conform the Partnership Agreement to applicable laws and regulations and to make any other change which, in the judgment of Owens Financial Group, Inc., does not adversely affect the rights of the Limited Partners), provided that any amendment which modifies the compensation or distributions to which Owens Financial Group, Inc. is entitled or which affects the duties of Owens Financial Group, Inc. as general partner shall require the written consent of Owens Financial Group, Inc.	The charter of Owens Realty Mortgage, Inc. may be amended only if declared advisable by the board of directors and approved by the affirmative vote of stockholders entitled to cast a majority of all the votes entitled to be cast on the matter, except for those amendments to the charter of Owens Realty Mortgage, Inc. permitted to be made without stockholder approval under Maryland law or by specific provision in the charter. Under the terms of the charter of Owens Realty Mortgage, Inc., the board of directors has the power to (i) amend Owens Realty Mortgage, Inc.’s charter to increase or decrease the aggregate number of shares of stock, or the number of shares of any class or series of stock, that Owens Realty Mortgage, Inc. is authorized to issue and (ii) classify and reclassify any unissued shares of Owens Realty Mortgage, Inc.’s common or preferred stock into one or more classes or series of stock, and authorize Owens Realty Mortgage, Inc. to issue the newly classified shares. The board of directors of Owens Realty Mortgage, Inc. has the power, without the assent or vote of the stockholders, to adopt, alter or repeal any provision of Owens Realty Mortgage, Inc.’s bylaws and to make new bylaws.