8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

______________

FORM 8-K

CURRENT REPORT PURSUANT TO

SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1933

Date of Report (Date of earliest event reported):  April 21, 2015

OWENS REALTY MORTGAGE, INC.

(Exact Name of Registrant as Specified in its Charter)

Maryland	000-54957	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))

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Item 1.01 Entry into a Material Definitive Agreement.

On April 21, 2015, Owens Realty Mortgage, Inc. (the “Company”) signed an amendment and restatement of its secured revolving line of credit facility with California Bank and Trust (“CB&T”) (the “Credit Facility”) to increase the maximum potential borrowings from $20,000,000 to $30,000,000 and to add First Bank as an additional Lender.

The Amended and Restated Credit Agreement is dated as of April 16, 2015, and is among the Company, as Borrower, CB&T as administrative agent, swingline lender and lender, and First Bank as an additional lender.   The parties also entered into a related Amended and Restated Advance Formula Agreement, two Master Revolving Notes from the Company (one to CB&T in an amount up to $20,000,000 and the other to First Bank in an amount up to $10,000,000), a restated Security Agreement, and an Addendum to Credit Agreement (Agency Provisions). These agreements collectively amend and restate the prior agreements with CB&T dated February 5, 2014.  Capitalized terms used and not defined herein are further defined in the new Credit Facility agreements.

The maximum borrowings under the revolving Credit Facility is the lesser of $30,000,000 or the amount determined pursuant to a borrowing base calculation described in the Advance Formula Agreement. $6,551,000 is currently outstanding under the existing Credit Facility, and the Company’s current maximum borrowing availability under the borrowing base calculation is $11,655,000 ($5,104,000 of additional borrowings available). At any time that the aggregate principal amount of the total borrowings under the Credit Facility exceeds the maximum permitted pursuant to the borrowing base calculation, the Company must promptly repay an amount equal to such excess. 

Funds under the Credit Facility may be borrowed, repaid and redrawn, and all borrowings mature on February 5, 2016.  Such borrowings will bear interest payable monthly, in arrears, on the first business day of each month, at the prime rate of interest established by CB&T from time-to-time (currently 3.25%) plus one quarter percent (.25%) per annum. Upon a default under the Credit Facility such interest rate increases by 2.00%.

Borrowings under the Credit Facility are to be secured by certain assets of the Company. These collateral assets will include the grant to Lenders of first-priority deeds of trust on certain real property assets and trust deeds of the Company to be identified by the parties from time-to-time and all personal property of the Company, which collateral includes the assets described in the Security Agreement and in other customary collateral agreements that will be entered into by the parties from time-to-time.

The borrowing base calculation outlined in the Advance Formula Agreement equals the sum of: (a) the lesser of (i) 75% of the outstanding principal balance of those mortgage loan promissory notes issued by the Company in the ordinary course of business that qualify as “Eligible Loan Notes” according to criteria outlined in the Advance Formula Agreement and (ii) 50% of the then-current Appraised Value of the real property securing such Eligible Loan Notes; plus (b) 50% of the then-current Appraised Value of the real property owned by the Company that qualifies as “Eligible Owned Real Property” according to criteria outlined in the Advance Formula Agreement.

The Credit Facility contains affirmative, negative, and financial covenants which management believes are customary for loans of this type, including among others: approvals of new leases or lease renewals with respect to Company properties; maintaining the Company’s principal bank accounts with CB&T and maintenance of $2,000,000 of unencumbered liquid assets; maintenance of minimum debt-to-tangible net worth and debt service coverage ratios; limitations on repurchasing or redeeming stock of the Company; limitations on incurrence of liens or additional indebtedness; restrictions against guarantying debt outside the ordinary course of business; restrictions on asset dispositions, capital or corporate restructuring or other transactions outside the ordinary course of business; and restrictions on making certain investments. The amended Credit Facility is also subject to the payment of an additional fee of $25,000 per year, prorated from the effective date of the Note to Maturity, and certain administrative fees.

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The Credit Agreement contains certain events of default (subject to specified thresholds and, in certain cases, cure periods), which management believes are customary for loans of this type. If an event of default occurs and is continuing under the Credit Agreement, the lenders may, among other things, terminate their obligations to lend under the Credit Facility and require the Company to repay all amounts owed thereunder.

The foregoing descriptions of the Credit Facility agreements do not purport to be complete and are qualified in their entirety by reference to the full text of the Amended and Restated Credit Agreement, the two Master Revolving Notes, the Amended and Restated Advance Formula Agreement, the Security Agreement, and the Addendum to Credit Agreement (Agency Provisions) attached as Exhibits 10.1 through 10.6, respectively, to this Current Report on Form 8-K and incorporated herein by reference. A copy of a press release announcing the amendment and restatement of the Credit Facility is attached hereto as Exhibit 99.1 and is incorporated herein by reference.

Item 2.03 Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.

The information set forth under Item 1.01 above is incorporated herein by reference.

Forward-Looking Statements

This Current Report (including information included or incorporated by reference herein) contains “forward-looking statements” within the meaning of the safe harbor provisions of the United States Private Securities Litigation Reform Act of 1995. Forward-looking statements about the Company's plans, strategies, prospects, and anticipated events, including the transactions or other items discussed in this Current Report, are based on current information, estimates, and projections; they are subject to risks and uncertainties, as well as known and unknown risks, which could cause actual results to differ from expectations, estimates and projections and, consequently, readers should not rely on these forward-looking statements as predictions of future events. Words such as "expect," "target," "assume," "estimate," "project," "budget," "forecast," "anticipate," "intend," "plan," "may," "will," "could," "should," "believe," "predicts," "potential," "continue," and similar expressions are intended to identify such forward-looking statements.

Readers are cautioned not to place undue reliance upon any forward-looking statements, which speak only as of the date made. The Company does not undertake or accept any obligation to release publicly any updates or revisions to any forward-looking statement to reflect any change in its expectations or any change in events, conditions or circumstances on which any such statement is based. Additional information concerning these and other risk factors is contained in the Company's most recent filings with the Securities and Exchange Commission including those appearing under the heading “Item 1A. Risk Factors” in the Company’s most recent Annual Report on Form 10-K and each subsequent Quarterly Report on Form 10-Q. All subsequent written and oral forward-looking statements concerning the Company or matters attributable to the Company or any person acting on its behalf are expressly qualified in their entirety by the cautionary statements above.

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Item 9.01 Financial Statements and Exhibits

(d) Exhibits

Exhibit No.	Description
10.1	Amended and Restated Credit Agreement, dated as of April 16, 2015, by and among California Bank & Trust as Administrative Agent and a Lender, First Bank as a Lender and Owens Realty Mortgage, Inc. as Borrower.
10.2	Master Revolving Note of Owens Realty Mortgage, Inc., payable to the order of First Bank, dated as of April 16, 2015.
10.3	Master Revolving Note of Owens Realty Mortgage, Inc., payable to the order of California Bank & Trust, dated as of April 16, 2015.
10.4	Amended and Restated Advance Formula Agreement, dated as of April 16, 2015, by and among California Bank & Trust as Administrative Agent and a Lender, First Bank as a Lender and Owens Realty Mortgage, Inc. as Borrower.
10.5	Security Agreement, dated as of April 16, 2015, of Owens Realty Mortgage, Inc.
10.6	Addendum to Credit Agreement (Agency Provisions), dated as of April 16, 2015, by and among California Bank & Trust as Administrative Agent and a Lender, First Bank as a Lender and Owens Realty Mortgage, Inc. as Borrower
99.1	Press Release dated April 24, 2015.

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SIGNATURES

                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:            April 24, 2015                                             By: /s/ William C. Owens

Name:  William C. Owens

Title:    President and Chief Executive Officer

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		EXHIBIT INDEX
Exhibit No.		Description
10.1	Amended and Restated Credit Agreement, dated as of April 16, 2015, by and among California Bank & Trust as Administrative Agent and a Lender, First Bank as a Lender and Owens Realty Mortgage, Inc. as Borrower.
10.2	Master Revolving Note of Owens Realty Mortgage, Inc., payable to the order of First Bank, dated as of April 16, 2015.
10.3	Master Revolving Note of Owens Realty Mortgage, Inc., payable to the order of California Bank & Trust, dated as of April 16, 2015.
10.4	Amended and Restated Advance Formula Agreement, dated as of April 14, 2016, by and among California Bank & Trust as Administrative Agent and a Lender, First Bank as a Lender and Owens Realty Mortgage, Inc. as Borrower.
10.5	Security Agreement, dated as of April 14, 2016, of Owens Realty Mortgage, Inc.
10.6	Addendum to Credit Agreement (Agency Provisions), dated as of April 14, 2016, by and among California Bank & Trust as Administrative Agent and a Lender, First Bank as a Lender and Owens Realty Mortgage, Inc. as Borrower
99.1	Press Release dated April 24, 2015.

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EX-10.1

AMENDED AND RESTATED

CREDIT AGREEMENT

This Amended and Restated Credit Agreement (“Agreement”) is entered into as of April 16, 2015, by and among the financial institutions from time to time signatory hereto (individually, a “Lender” and collectively, the “Lenders”), California Bank & Trust, as Administrative Agent for the Lenders (in such capacity, the “Agent”), and Owens Realty Mortgage, Inc., a Maryland corporation (“Borrower”).  The Lenders are California Bank & Trust and First Bank and the terms “Lender” and “Lenders” includes Agent in its capacity as provider of Swing Line Loans.

This Agreement amends and restates in its entirety that certain Credit Agreement dated February 5, 2014 by and between California Bank & Trust and Borrower, and any indebtedness outstanding thereunder shall be deemed to be outstanding under this Agreement.

In consideration of all present and future loans and credit from time to time made available by Lenders to or in favor of Borrower, and in consideration of all present and future Indebtedness (as herein defined) of Borrower to Lenders, Borrower represents, warrants, covenants and agrees as follows:

SECTION 1                      DEFINITIONS.

           (a)  Defined Terms. As used in this Agreement, the following terms shall have the respective meanings set forth below:

“Addendum” shall mean the Addendum to Credit Agreement (Agency Provisions), attached hereto.

“Advance Formula” shall have the respective meaning ascribed to such term in the Advance Formula Agreement.

“Advance Formula Agreement” shall mean an Advance Formula Agreement executed and delivered by Borrower unto Agent, as the same may be amended, modified, restated, substituted and/or replaced from time to time.

“Affiliate” or “Affiliates” shall mean, when used with respect to any Person, any other Person which, directly or indirectly through one or more intermediaries, controls or is controlled by or is under common control with such Person.  For purposes of this definition, “control” (including, with correlative meanings, the terms “controlled by” and “under common control with”), with respect to any Person, shall mean possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities, by contract or otherwise.

“Affiliate Receivables” shall mean, as of any time of determination, any amounts (whether in respect of loans or advances, accounts receivable, notes receivable or otherwise) owing toBorrower or another Loan Party from any of its/their Subsidiaries or Affiliates (other than Affiliates which are Guarantors of all Indebtedness) at such time.

“Agreement”shall mean thisCreditAgreement, as the same may be amended or modified from time to time.

“Authorized Officer” shall mean the chief executive officer, the president or the chief financial officer, or in his/her absence, another responsible senior officer, ofBorrower or any other Loan Party, or the general partner of, or the partner or one of the partners required to bind,Borrower or any other Loan Party, as applicable.

“CPA” shall mean independent certified public accountants of recognized standing selected by Borrower or another Loan Party, as applicable, and acceptable to Agent.

“Capital Expenditure” shall mean any expenditure by a Person for (a) an asset which will be used in a year or years subsequent to the year in which the expenditure is made and which asset is properly classified in relevant financial statements of such Person as equipment, real property, a fixed asset or a similar type of capitalized asset in accordance with GAAP,or (b) an asset relating to or acquired in connection with an acquired business, and (c) any and all acquisition costs related to (a) or (b) above.

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“Collateral” shall mean all property, assets and rights in which a Lien or other encumbrance in favor of or for the benefit of Agent, for and on behalf of Lenders, is or has been granted or arises or has arisen, or may hereafter be granted or arise, under or in connection with any Loan Document, or otherwise, to secure the payment or performance of any portion of the Indebtedness.

“Commitment”  (a) As to each Lender, the commitment of such Lender to make its Pro Rata Share of the Loan and all advances with respect thereto in the aggregate amount equal to such Lender’s Commitment as shown in the Addendum to Credit Agreement; (b) as to all Lenders, the aggregate commitment of all Lenders to make Loans and all advances with respect thereto, which aggregate commitment shall be the Total Commitment.  The Swing Line Loans are a subfacility and do not increase the Total Commitment nor the Commitment amount of any Lender beyond its Commitment as a Lender.

“Compliance Certificate”shall meana Compliance Certificate in such form and detail as may be required by or otherwise satisfactory to Agent, certified by an Authorized Officer of Borrower, certifying that, as of the date thereof, to the best of such Authorized Officer’s knowledge, no Default or Event of Default shall have occurred and be continuing or exist, or if any Default or Event of Default shall have occurred and be continuing or exist, specifying, in detail, the nature and period of existence thereof and any action taken or proposed to be taken byBorrower and/or any other Loan Party in respect thereof, and also certifying as to whether Borrower and/or any other Loan Party, as applicable, is/are in compliance with any financial covenant(s) contained in this Agreement and as more particularly described in said Compliance Certificate (which Compliance Certificate shall set forth, in reasonable detail, thecalculations and the resultant ratios or financial tests of the Borrower and/or such Loan Party, as applicable, determined thereunder).

“Consolidated” or “consolidated” shall mean, when used with reference to any financial term in this Agreement, the aggregate for two or more persons of the amounts signified by such term for all such persons determined on a consolidated basis in accordance with GAAP.  Unless otherwise specified herein, references to "consolidated" financial statements or data of Borrower includes consolidation with its Subsidiaries in accordance with GAAP.

“Current Maturities of Long Term Debt” shall mean, in respect of any applicable Person(s) and as of any applicable date of determination thereof, that portion of the Long Term Debt of such Person(s) that should be classified as a current liability at such time in accordance with GAAP, including, without limitation, that portion of capital lease obligations of such Person(s) that would be so classified at such time, but excluding principal amounts due at maturity intended to be refinanced or outstanding amounts on lines of credit.

"Debt" shall mean, as of any applicable date of determination, the total liabilities of a Person at such time, as determined in accordance with GAAP. In the case of Borrower, the term "Debt" shall include, without limitation, the Indebtedness.

“Debt Service Coverage Ratio” shall mean, in respect of any applicable Person(s) and for any applicable period of determinationand as of any applicable date of determination, the ratio of (a) (i) the Net Income of such Person(s) for such period (before deduction for applicable income and other taxes of such Person(s) determined by reference to income or profits of such Person(s)), plus (ii), to the extent deducted in the computation of such Net Income, the amount of depreciation and amortization expense and interest expense of such Person(s) for such period, to (b) the sum of (i) the Current Maturities of Long Term Debt of such Person(s) at such time of determinationplus (ii) the interest expense of such Person(s) for such period, not including construction loan interest where an interest reserve is in place.

“Debt-to-Tangible Net Worth Ratio” shall mean, in respect of any applicable Person(s) and as of any applicable date of determination thereof, the ratio of (a) the total Debt of such Person(s) at such time,  to (b) the Tangible Net Worth of such Person(s) at such time.

“Default” shall mean any condition or event which, with the giving of notice or the passage of time, or both, would constitute an Event of Default.

“Distributions” shall mean, in respect of any applicable Person(s), dividends on, or other payments or distributions on account of, or the setting apart of money for a sinking or other analogous fund for, or the purchase, redemption, retirement or other acquisition of, any Equity Interest of such Person(s) or of any warrants, options or other rights to acquire the same.

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“Eligible Loan Note” shall have the meaning ascribed to such term in the Advance Formula Agreement.

“Eligible Owned Real Property” shall have the meaning ascribed to such term in the Advance Formula Agreement.

“Environmental Laws” shall mean all laws, statutes, codes, ordinances, rules, regulations, orders, decrees and directives issued by any federal, state, local, foreign or other governmental or quasi-governmental authority or body (or any agency, instrumentality or political subdivision thereof) relating to the environment or pertaining to Hazardous Materials; any so-called “superfund” or “superlien” law pertaining to Hazardous Materials on or about any Property at any time owned, leased or otherwise used byBorrower or any of its Subsidiaries(if applicable), or any portion thereof, including, without limitation, those relating to soil, surface, subsurface groundwater conditions and the condition of the ambient air; and any other federal, state, foreign or local statute, law, ordinance, code, rule, regulation, order or decree regulating, relating to, or imposing liability or standards of conduct concerning, any Hazardous Material, as now or at any time hereafter in effect.

“Equity Interest” shall mean, with respect to any Person, (i) all of the shares of capital stock of (or other ownership or profit interests in) such Person, (ii) all of the warrants, options or other rights for the purchase or acquisition from such Person of shares of capital stock of (or other ownership or profit interests in) such Person, (iii) all of the securities convertible into or exchangeable for shares of capital stock (or other ownership or profit interests in) such Person or warrants, rights or options for the purchase or acquisition from such Person of such shares (or such other interests), and (iv) all of the other ownership or profit interests in such Person (including, without limitation, partnership, member or trust interests therein), whether voting or nonvoting, and whether or not such shares, warrants, options, rights or other interests are authorized or otherwise existing on any date of determination.

“ERISA” shall mean the Employee Retirement Income Security Act of 1974, as amended, or any successor act or code.

“Event of Default” shall mean the occurrence or existence of any of the conditions or events set forth in Section 6of this Agreement.

“GAAP” shall mean generally accepted accounting principles consistently applied.

“Guarantor” or “Guarantors” shall mean, as the context dictates, any Person(s) (other than Borrower) who shall, at any time, guarantee or otherwise be or become obligated for the repayment of all or any part of the Indebtedness.

“Hazardous Materials” shall mean all of the following:  any asbestos, petroleum, petroleum by-products, flammable explosives, radioactive materials, and any hazardous or toxic materials, as defined in the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended (42 U.S.C. Sections 9601 et seq.), or in any other Environmental Law.

"Indebtedness" shall mean any and all present and future indebtedness, obligations or liabilities of the Borrower and/or any other Loan Party to Agent and/or any Lender arising under this Agreement or any other Loan Document, evidenced or incurred, whether absolute or contingent, direct or indirect, voluntary or involuntary, liquidated or unliquidated, joint or several, now or hereafter existing or arising, due or to become due, whether known or unknown, and whether originally payable to Agent, the Lenders or to a third party and subsequently acquired by Agent and/or any Lender, including, without limitation, (a) any and all direct indebtedness of the Borrower and/or any other Loan Party to Agent and/or any Lender, including indebtedness evidenced by any and all promissory notes executed in connection with this Agreement; (b) any and all indebtedness, obligations or liabilities of the Borrower and/or any other Loan Party to Agent and/or any Lender arising under any guaranty of the promissory notes evidencing this Agreement where the Borrower and/or any other Loan Party has guaranteed the payment of indebtedness owing to Agent and/or any Lender from a third party; (c) any and all indebtedness, obligations or liabilities of the Borrower and/or any other Loan Party to Agent and/or any Lender arising from applications or agreements for the issuance of letters of credit under this Agreement; (d) late charges, loan fees or charges and overdraft indebtedness; (e) any agreement to indemnify Agent and Lenders for environmental liability or to clean up hazardous waste; (f) any and all indebtedness, obligations or liabilities for which the Borrower and/or any other Loan Party would otherwise be liable to Agent and/or Lenders under this Agreement, any of the Loan Documents, any guaranty of the obligations under this Agreement or any environmental indemnity executed in connection with this Agreement, were it not for the invalidity, irregularity or unenforceability of them by reason of any bankruptcy, insolvency or other law or order of any kind, or for any other reason, including, without limit, liability for interest and attorneys' fees on, or in connection with, any of the Indebtedness from and after the filing by or against the Borrower and/or any other Loan Party of a bankruptcy petition, whether an involuntary or voluntary bankruptcy case, including, without limitation, all attorneys' fees and costs incurred in connection with motions for relief from stay, cash collateral motions, nondischargeability motions, preference liability motions, fraudulent conveyance liability motions, fraudulent transfer liability motions and all other motions brought by the Borrower, any other Loan Party, Agent or any Lender or third parties in any way relating to Agent’s or any Lender’s rights with respect to Borrower, any other Loan Party or third party and/or affecting any collateral securing any obligation owed under this Agreement by the Borrower, any other Loan Party or any third party, probate proceedings, on appeal or otherwise; (g) any and all amendments, modifications, restatements, renewals and/or extensions of any of the above, including, without limit, amendments, modifications, restatements, renewals and/or extensions which are evidenced by new or additional instruments, documents or agreements; (h) all costs incurred by Agent or any Lender in establishing, determining, continuing, or defending the validity or priority of its security interest, or in pursuing its rights and remedies under this Agreement, the other Loan Documents, any guaranty of the obligations of Borrower under this Agreement or any environmental indemnity executed in connection with this Agreement or in connection with any proceeding involving Agent as a result of any financial accommodation to Borrower; and (i) all costs of collecting Indebtedness, including, without limit, attorneys' fees and costs.

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“Leased Property” shall mean any real Property of Borrower or any of its Subsidiaries (if applicable) which constitutes Collateral and which is subject to a lease under which Borrower or such Subsidiary, to the extent applicable, is the lessor or landlord.

“Lien” shall mean any mortgage, pledge, encumbrance, security interest, assignment, lien or charge or other interest of any kind upon any property or assets, whether real, personal or mixed, to secure any indebtedness, obligation or liability owed to or claimed by any Person, whether arising under or based upon contract, law or otherwise.

“Liquid Assets” shall mean, in respect of any applicable Person(s) and as of any applicable date of determination, the sum of unrestricted cash, unrestricted marketable securities, FDIC insured accounts and United States government securities of such Person(s) at such time, but excluding any assets held in a “401K” account, individual retirement account (IRA), pension or other type of retirement account or annuity, Rule 144 securities, securities pledged to secure any debt whether or not the debt is currently outstanding, securities not fully transferable until conditions are met, and assets held in joint accounts with any party who is not the Borrower.

“Loan(s)” shall mean each loan (including Swing Line Loans), advance or other extension of credit made by Lenders to or otherwise in favor of Borrower.

“Loan Documents” shall mean this Agreement and any and all notes, instruments, documents, and agreements at any time evidencing, governing, securing or otherwise relating to any Loan(s) and/or any of the Indebtedness and Treasury Management Agreements, subject to the following:  “Loan Documents” do not include any environmental indemnity or any guaranty.  Notwithstanding any provision in any Loan Document, Borrower’s obligations under any environmental indemnity are not secured by any deed of trust or mortgage.

“Loan Party” shall mean eachBorrower, each Guarantor and each other Person who shall, at any time, be liable for the payment of all or any part of the Indebtedness or who shall own any property that is, at any time, subject to a Lien which secures all or any part of the Indebtedness.

“Long Term Debt” shall mean, in respect of any applicable Person(s) and as of any applicable date of determination thereof, all Debt of such Person(s) which should be classified as “funded indebtedness” or “long term indebtedness” on a balance sheet of such Person(s) as of such date in accordance with GAAP, including, without limitation, to the extent not otherwise included, capital lease obligations of such Person(s) to the extent classified as long term at such time.

“Master Revolving Notes” shall mean collectively, the Amended and Restated Master Revolving Note in the principal amount of $20,000,000, by Borrower to the order of California Bank & Trust and the Master Revolving Note in the principal amount of $10,000,000, by Borrower to the order of First Bank, each dated as of the date hereof (as each may have been amended, modified or supplemented).

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“Maturity Date” means the Maturity Date set forth in the Master Revolving Notes or any replacement notes issued by Lenders.

“Material Adverse Effect” shall mean any act, event, condition or circumstance which has had or could have a material and adverse effect on (i) the business, operations, condition (financial or otherwise), performance, prospects, assets or liabilities of any Loan Party, (ii) the ability of any Loan Party to perform its obligations under any Loan Document to which it is a party or by which it is bound, or the enforceability of any of the Indebtedness or any Loan Document or any rights or remedies of Agent or Lenders thereunder, or (iii) any Loan Party’s interest in, or the value, perfection or priority of Agent’s, for and on behalf of Lender’s security interest or lien in any Collateral or the ability of Agent to realize on any Collateral.

“Net Income” shall mean, in respect of any applicable Person(s) and for any applicable period of determination, the net income (or loss) of such Person(s) for such period, as determined in accordance with GAAP.

“PBGC” shall mean the Pension Benefit Guaranty Corporation, or any successor thereto.

"Person" or "person" shall mean any individual, corporation, partnership, joint venture, limited liability company, association, trust, unincorporated association, joint stock company, government, municipality, political subdivision or agency, or other entity.

“Primary Collateral” shall mean Collateral that is subject to a (a) Pledge Agreement (Real Property Secured Note) executed by Borrower or any other Loan Party in favor of Agent, for and on behalf of the Lenders, (b) Amended and Restated Pledge Agreement (Real Property Secured Note) executed by Borrower or any other Loan Party in favor of Agent, for and on behalf of the Lenders, (c) Limited Liability Company Membership Interest Pledge Agreement executed by Borrower in favor of Agent, for and on behalf of the Lenders; (d) Amended and Restated Security Agreement executed by Borrower in favor of Lender, or (e) deed of trust or mortgage executed by Borrower or any other Loan Party in favor of Agent, for and on behalf of the Lenders and Swing Line Lender.

“Property” shall mean any real or personal property now or at any time owned, occupied or operated by Borrower and/or any of its Subsidiaries(if applicable).

Pro Rata Share.  With respect to all matters relating to any Lender, the percentage obtained by dividing (a) the Commitment of that Lender by (b) the Total Commitment.  Any Swing Line Loan made by Agent will be included for Pro Rata Share purposes, as a Loan made by Agent as though that Loan were made by Agent as a Lender.

“Subordinated Debt" shall mean any Debt ofBorrower which has been subordinated to the Indebtedness pursuant to a subordination agreement in form and content satisfactory to Agent.

“Subsidiary” or “Subsidiaries” shall mean as to any particular parent entity, any corporation, partnership, limited liability company or other entity (whether now existing or hereafter organized or acquired) in which more than fifty percent (50%) of the outstanding equity ownership interests having voting rights as of any applicable date of determination, shall be owned directly, or indirectly through one or more Subsidiaries, by such parent entity.

“Swing Line Loan” shall mean any Loan funded with Agent’s funds as set forth in the Addendum, which Loan automatically converts on the following business day to a Loan to be settled among Lenders and repaid by Borrower.

“Tangible Net Worth” shall mean, in respect of any applicable Person(s) and as of any applicable date of determination, (a) the net book value of all assets of such Person(s) at such time (excluding Affiliate Receivables, patent rights, trademarks, trade names, franchises, copyrights, licenses, goodwill, and all other intangible assets of such Person(s)), after all appropriate deductions in accordance with GAAP(including, without limitation, reserves for doubtful receivables, obsolescence, depreciation and amortization), less (b) all Debt of such Person(s) at such time.

“Treasury Management Agreement” shall mean any agreement, document or instrument governing the provision of depository, treasury and/or cash management services, including, without limitation, deposit accounts, overdraft protection, credit, debit and purchase cards, funds transfer, automated clearinghouse, zero balance accounts, returned check concentration, controlled disbursement, lockbox, account reconciliation and reporting and trade finance services.

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Total Commitment.  Thirty Million Dollars ($30,000,000.00).

“Unencumbered” shall mean, in respect of any property or asset of any Person(s), such property or asset is free and clear of all Liens (other than Liens to or in favor of Agent, for and on behalf of Lenders), and no Lien of any nature whatsoever (other than Liens to or in favor of Agent, for and on behalf of Lenders) shall be placed or exist upon or in respect of any such property or asset.

“Uniform Commercial Code” shall mean the California Uniform Commercial Code, as amended, supplemented, revised or replaced from time to time.

(b)  Accounting Principles. Unless expressly provided to the contrary, all accounting and financial terms and calculations hereunder or pursuant hereto shall be defined and determined in accordance with GAAP.

(b)Section Headings and References. Section headings and numbers have been set forth herein for convenience only; unless the contrary is compelled by the context, everything contained in each Section applies equally to this entire Agreement.

(c)Construction and Interpretation. Unless the context of this Agreement clearly requires otherwise, references to the plural include the singular, references to the singular include the plural, and the term “including” is not limiting.  The words “hereof,” “herein,” “hereby,” “hereunder,” and similar terms in this Agreement refer to this Agreement as a whole and not to any particular provision of this Agreement.  Neither this Agreement nor any uncertainty or ambiguity herein shall be construed or resolved against Agent, Lenders or Borrower, whether under any rule of construction or otherwise; on the contrary, this Agreement has been reviewed by all parties and shall be construed and interpreted according to the ordinary meaning of the words used so as to fairly accomplish the purposes and intentions of all parties hereto.

SECTION 2                       LOAN DOCUMENTS.  Each Loan will be subject to the terms of the Advance Formula Agreement and shall be evidenced by a promissory note or other agreement or evidence of indebtedness acceptable to Lenders, in each case, executed and delivered by Borrower unto each Lender, as applicable; and each Loan shall be subject to the terms, covenants and conditions of each such promissory note or other agreement or evidence of indebtedness, together with this Agreement and the other Loan Documents. The funding, disbursement and extension of any Loan to or in favor of Borrower shall be subject to the execution and/or delivery unto Lenders or Agent of such Loan Documents as Agent or Lenders may reasonably require, and shall be further subject to the satisfaction of such other conditions and requirements as Agent and Lenders may from time to time require.

SECTION 3                      REPRESENTATIONS AND WARRANTIES. Borrower, for and on behalf of itself, hereby represents and warrants, and such representations and warranties shall be deemed to be continuing representations and warranties during the entire life of this Agreement, and thereafter, so long as any Indebtedness remains unpaid and outstanding:

(a)            Authority. It is duly organized, validly existing and in good standing under the laws of the State ofMaryland; it is duly qualified and authorized to do business in each jurisdiction where the character of its assets or the nature of its activities makes such qualification necessary, and it has the legal power and authority to own its properties and assets and to carry out its business as now being conducted in each such jurisdiction wherein such qualification is necessary; execution, delivery and performance of this Agreement, and any and all other Loan Documents to which Borrower is a party or by which it is otherwise bound, are withinBorrower’s respective powers and authorities, have been duly authorized by all requisite corporate or other necessary or appropriate action, and are not in contravention or violation of law or the terms ofBorrower’s organizational or other governing documents, and do not require the consent or approval of any governmental body, agency or authority.

(b)           Real Estate Investment Trust.  It is duly organized, validly existing and in good standing as a real estate investment trust, and has taken such actions as are necessary to preserve its status as a real estate investment trust.  It is also in compliance with the terms and provisions of its Articles of Incorporation and other organizational documents, as they have been amended, modified, and corrected.

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(c)            Enforceability of Agreement and Loan Documents. This Agreement, and any other Loan Documents contemplated hereby, when executed, issued and/or delivered by Borrower, or by which Borrower is otherwise bound, will be valid and binding and legally enforceable againstBorrower in accordance with their terms.

(d)           Non-Contravention. The execution, delivery and performance of this Agreement, and any other Loan Documents required under or contemplated by this Agreement to which Borrower is a party or by which it is otherwise bound, and the issuance of this Agreement and any such other Loan Documents by Borrower, and the borrowings and other transactions contemplated hereby and thereby, are not in contravention or violation of the unwaived terms of any indenture, agreement or undertaking to which Borrower is a party or by which it or any of its property or assets is bound, and will not result in the creation or imposition of any Lien of any nature whatsoever upon any of the property or assets ofBorrower, except to or in favor of Agent, for and on behalf of Lenders.

(e)           Litigation or Proceedings. No litigation or other proceeding before any court or administrative agency is pending, or, to the knowledge ofBorrower or any of its officers, is threatened against Borrower, the outcome of which could result in a Material Adverse Effect.

(f)            No Liens. There are no Liens on any of Borrower’s Property or assets, except Permitted Encumbrances (as hereinafter defined).

(g)    No Defaults. There exists no Default or Event of Default under any of the Indebtedness.

(h)           Financial Statements; No Material Adverse Change. The most recent financial statements with respect to Borrower delivered to Agent and to any Lender fairly present the financial condition of Borrower as of the date thereof and for the period(s) covered thereby in accordance with GAAP, and since September 30, 2013, there has been no material adverse change in the condition (financial or otherwise) of Borrower.

(i)            Subsidiaries. As of the date of this Agreement,Borrower has no Subsidiaries, except those, if any, disclosed on the Schedule of Subsidiaries attached to this Agreement, which Schedule sets forth the name, place of incorporation, and percentage of ownership ofBorrower in each such Subsidiary.

(j)            Regulation U or G; Margin Stock. Borrower is not engaged principally, or as one of itsimportant activities, in the business of extending credit to others for the purpose of purchasing or carrying “margin stock” or “margin securities” within the meanings of Regulation U or Regulation G of the Board of Governors of the Federal Reserve System, or any regulations, interpretations or rulings thereunder.

(k)           Legal Name. Borrower’s true and correct legal name is that set forth on the signature page to this Agreement. Except as disclosed in writing to Agent on or before the date of this Agreement, Borrower has not conducted business under any name other than that set forth on the signature page to this Agreement.

(l)            Solvency. Borrower is solvent and is able to pay its debts (including, without limit, trade debts) as they mature.

(m)           Taxes. All taxes, assessments and other similar imposts and charges levied, assessed or imposed uponBorrower and/or any of its property or assets have been paid, except to the extent being diligently contested in good faith.

(n)           Hazardous Materials. Borrower has not used Hazardous Materials on, in, under or otherwise affecting any Property now or at any time owned, occupied or operated by Borrower or upon which Borrower has a place of business in any manner which violates any Environmental Law(s), to the extent that any such violation could result in a Material Adverse Effect. Borrower has never received any notice of any violation of any Environmental Law(s), and to the best of Borrower’s knowledge, there have been no actions commenced or threatened by any party against Borrower or any of the Property for non-compliance with any Environmental Law(s), which, in any case, could result in a Material Adverse Effect.

(o)            Leases. All leases covering any Leased Property, if any, are in full force and effect, there are no defaults under any of the provisions thereof, and all conditions to the effectiveness or continuing effectiveness thereof required to be satisfied as of the date hereof have been satisfied.

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SECTION 4                      AFFIRMATIVE COVENANTS. So long as either Lender shall have any commitment or obligation, if any, to make or extend any Loans to or in favor of Borrower, and/or so long as any Indebtedness remains unpaid and outstanding, Borrower covenants and agrees that it shall:

(a)      Financial Statements; Reporting Requirements. Provide to Agent, or cause to be provided to Agent, the following, each of which shall be prepared in accordance with GAAP, and shall be in form and detail acceptable to Agent:

(i)   As soon as available, and in any event within ninety (90) days after and as of the end of eachfiscalyear of Borrower, annual CPA auditedconsolidated financial statements of Borrower for and as of the end of each such fiscal year, containing the balance sheet of Borroweras of the close of each such fiscal year, statements of income, expenses and retained earnings and a statement of cash flows ofBorrower for each such fiscal year, and such other comments and financial details as are usually included in similar reports or as may be requested by Agent, certified by an Authorized Officer of Borrower.

(ii)   As soon as available, and in any event within forty-five (45)days after and as of the end of each fiscal quarter of Borrower (i.e., March 31, June 30, September 30 and December 31),internally prepared consolidatedfinancial statements of Borrower, containing the balance sheet of Borrower as of the end of each such period, statements of income, expenses and retained earnings and a statement of cash flows for Borrower for such period and for the portion of the fiscal year of Borrower through the end of the period then ending, and such other comments and financial details as are usually included in similar reports or as may be requested by Agent, certified by an Authorized Officer of Borrower.

(iii)   Simultaneous with the delivery to Agent of the respective financial statements required above, a Compliance Certificate, in the form attached as a Schedule to this Agreement.

(iv)   Within twenty (20) days after and as of the end of each calendar month, a Borrowing Base Certificate of Borrower as of such time, each of which Borrowing Base Certificate shall include a schedule identifying (A) each Eligible Loan Note at such time, and such other matters and information relating to the Eligible Loan Notes as Agent may request, and (B) each Eligible Owned Property at such time, and such other matters and information relating to the Eligible Owned Property as Agent may request, with a certificate setting forth Borrower’s calculation of the Advance Formula as of the date of such borrowing base report. Each borrowing base certificate so delivered to Agent shall be certified by an Authorized Officer of Borrower.  The Borrowing Base Certificate shall be in the form attached as a Schedule to this Agreement.

(v)   As soon as available, and in any event within forty-five (45) days after and as of the end of each fiscal quarter of Borrower, a financial statement and rent roll for each parcel(s) of real Property securing any Eligible Loan Note, reflecting income, expenses, assets and liabilities attributable to such Property and the operations thereof, and the name of each lessee, the net monthly rental for each space in such Property and such other information as Agent may request, certified by an Authorized Officer of Borrower.

(vi)   Upon request by Agent, brokerage and bank statements for Borrower and such other information and documents as Agent may request to show Borrower’s Liquid Assets.

(vii)   No later than thirty (30) days prior to the end of each fiscal year of Borrower, updated financial projections for Borrower, including projected income, expenses, balance sheet and statement of cash flows, for the immediately following fiscal year.

(viii)   Promptly after becoming aware of the occurrence or existence of any Default or Event of Default, or of any other condition, occurrence or event which has had or could reasonably be expected to have a Material Adverse Effect, a written statement of an Authorized Officer of Borrower setting forth the details of such Default or Event of Default, or such other condition or occurrence, and the action which Borrower has taken or caused to be taken, or proposes to take or cause to be taken, with respect thereto.

(ix)   Such other information concerning Borrower, any other Loan Party, or the Collateral as Agent shall reasonably request from time to time.

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(b)Keeping of Books and Records; Inspections and Audits. Keep proper books of record and account in which full and correct entries shall be made of all of its financial transactions and its assets and businesses so as to permit the presentation of financial statements (including, without limitation, any financial statements required to be delivered to Agent pursuant to this Agreement) prepared in accordance with GAAP; permit Agent, or its representatives, at reasonable times and intervals, to visit all of Borrower’s offices and to make inquiries as to Borrower’s respective financial matters with its respective directors, officers, employees, and independent certified public accountants; and permit Agent, through Agent’s authorized attorneys, accountants and representatives, to inspect, audit and examine Borrower’s books, accounts, records, ledgers and assets and properties of every kind and description, wherever located, at all reasonable times during normal business hoursincluding, without limit, audits of Borrower’s accounts receivable, inventory and other Collateral to be conducted not less frequently than annually. Borrower shall reimburse Agent for all reasonable costs and expenses incurred by Agent in connection with such inspections, examinations and audits, and to pay to Agent such fees as Agent may reasonably charge in respect of such inspections, examinations and audits, or as otherwise mutually agreed upon by Borrowerand Agent.

(c) Maintain Insurance. Keep its insurable properties (including, without limitation, any Collateral at any time securing all or any part of the Indebtedness) adequately insured and maintain (i) insurance against fire and other risks customarily insured against under an “all-risk“ policy and such additional risks customarily insured against by companies engaged in the same or a similar business to that of Borrower, (ii) necessary workers’ compensation insurance, (iii) public liability and product liability insurance, and (iv) such other insurance as may be required by law or as may be reasonably required in writing by Agent, all of which insurance shall be in such amounts, contain such terms, be in such form, be for such purposes, prepaid for such time periods, and written by such companies as may be satisfactory to Agent.  All such policies shall contain a provision whereby they may not be canceled or materially amended except upon thirty (30) days’ prior written notice to Agent.  Borrower will promptly deliver to Agent, at Agent’s request, evidence satisfactory to Agent that such insurance has been so procured and, with respect to casualty insurance, made payable to Agent.  If Borrower fails to maintain satisfactory insurance as herein provided, Agent shall have the option (but not the obligation) to do so, and Borrower agrees to repay Agent, upon demand, with interest at the highest rate of interest applicable to any of the Indebtedness, all amounts so expended by Agent.

(d) Pay Taxes. Pay promptly and within the time that they can be paid without late charge, penalty or interest, all taxes, assessments and similar imposts and charges of every kind and nature lawfully levied, assessed or imposed upon Borrower and/or its property or assets, except to the extent being diligently contested in good faith and, if requested by Agent, bonded in an amount and manner satisfactory to Agent.  If Borrower fails to pay such taxes and assessments within the time they can be paid without penalty, late charge or interest, Agent shall have the option (but not the obligation) to do so, andBorrower agrees to repay Agent, upon demand, with interest at the highest rate of interest applicable to any of the Indebtedness, all amounts so expended by Agent.

(e)Maintain Existence. Do or cause to be done all things necessary to preserve and keep in full force and effectBorrower’s corporate or other applicable existence, including its status as a real estate investment trust, rights and franchises and comply with all applicable laws, ordinances and government rules and regulations to which it is subject; continue to conduct and operate its business substantially as conducted and operated during the present and preceding calendar year; at all times maintain, preserve and protect all franchises and trade names and preserve all the remainder of its property and keep the same in good repair, working order and condition; maintain all permits, licenses, approvals and agreements which it is required to maintain or comply with, where the failure to do so could result in a Material Adverse Effect; maintain Borrower’s same place(s) of business, chief executive officeor residence, as applicable, as currently exists, and not relocate said address(es) without giving Agent ninety (90) days’ prior written notice of such proposed change, but the giving of such notice shall not cure or remedy any Default or Event of Default caused by such change; and from time to time make, or cause to be made, all needed and proper repairs, renewals, replacements, betterments and improvements thereto so that the business carried on in connection therewith may be properly and advantageously conducted at all times.

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(f)Environmental Laws. Comply, and cause each of its Subsidiaries (to the extent applicable) to comply, in all material respects with all applicable Environmental Laws, and maintain all material permits, licenses and approvals required under applicable Environmental Laws, where the failure to do so could result in a Material Adverse Effect; and promptly provide to Agent, immediately upon receipt thereof, copies of any material correspondence, notice, pleading, citation, indictment, complaint, order, decree, or other document from any source asserting or alleging a violation of any Environmental Laws byBorrower and/or any of its Subsidiaries, or of any circumstance or condition which requires or may require a financial contribution by Borrower and/or any of its Subsidiaries, or a clean-up, removal, remedial action or other response by or on behalf ofBorrower and/or any of its Subsidiaries under applicable Environmental Law(s), or which seeks damages or civil, criminal, or punitive penalties fromBorrower and/or any of its Subsidiaries for any violation or alleged violation of any Environmental Law(s) byBorrower and/or any of its Subsidiaries. Borrowerhereby indemnifies, saves and holds Agent and Lenders, and any of Agent’s and Lender’s past, present and future officers, directors, shareholders, employees, representatives and consultants, harmless from and against any and all losses, damages, suits, penalties, costs, liabilities and expenses (including, without limitation, reasonable legal expenses and attorneys’ fees) incurred or arising out of any claim, loss or damage of any property, injuries to or death of any persons, contamination of or adverse effects on the environment, or other violation or asserted violation of any applicable Environmental Law(s); provided, however, that the foregoing indemnification shall not be applicable, and Borrower shall not be liable for any such losses, damages, suits, penalties, costs, liabilities or expenses, to the extent (but only to the extent) the same arise or result from any gross negligence or willful misconduct of Agent or any of its agents or employees. The provisions of this Section shall survive repayment of the Indebtedness and satisfaction of all obligations of Borrower to Lenders and termination of this Agreement.

(g)Maintain Bank Accounts. Maintain all of Borrower’s principal bank accounts with Agent and notify Agent immediately in writing of the establishment or existence of any other bank account, deposit account or other account into which money may be deposited (other than with Agent); provided, however, providing any such notice to Agent shall not waive the occurrence or existence of any Default or Event of Default arising or existing as a result of the establishment or existence of any account(s) in violation of this Section. At Agent’s and Borrower’s collective discretion, Borrower may keep certain accounts with any Lender.

(h)  Copies of Leases. Deliver to Agent copies of all leases existing and in effect with respect to any Leased Property, and deliver to Agent copies of all proposed leases (whether as of the date of this Agreement or hereafter) with respect to any such Leased Property prior to execution thereof. All leases with respect to any such Leased Property (and renewals, extensions and material modifications thereof), and all tenants of such Leased Property, shall be subject to Agent’s written approval prior to execution of any lease (or any renewal, extension or material modification thereof), including, without limitation, Agent’s approval of the financial statements of each proposed tenant, which approval shall be in the sole discretion of Agent.  Agent may require financial information concerning each proposed tenant of any such Leased Property, including a minimum of one (1) year's operating statements. Borrower shall use its best efforts to keep any such Leased Property fully leased.  Borrower shall fully and faithfully perform each and every covenant, agreement, or obligation of lessor or landlord under any and all leases covering any portion of any such Leased Property.  Upon the request of Agent, Borrower shall provide Agent with a current rent roll supplying the name of each tenant of any such Leased Property and the net monthly rental for each space and such other information as Agent may request.

 (i)  ERISA Compliance. At all times meet, and cause each of its Subsidiaries to meet, the minimum funding requirements of ERISA with respect to any employee benefit plans subject to ERISA; promptly after Borrower knows or has reason to know of the occurrence of any event, which would constitute a reportable event or prohibited transaction under ERISA, or that the PBGC or Borrower has instituted or will institute proceedings to terminate an employee pension plan, deliver to Agent a certificate of an Authorized Officer ofBorrower setting forth details as to such event or proceedings and the action which Borrower proposes to take with respect thereto, together with a copy of any notice of such event which may be required to be filed with the PBGC; and upon the request of Agent, furnish to Agent (or cause the plan administrator to furnish Agent) a copy of the annual return (including all schedules and attachments) for each plan covered by ERISA, and filed with the Internal Revenue Service by Borrower or any of its Subsidiaries not later than ten (10) days after such report has been so filed.Borrower shall be permitted to voluntarily terminate employee pension or benefit plans, so long as any such voluntary termination is done in accordance with ERISA and does not result in a material liability or obligation to suchBorrower and does not result in a Material Adverse Effect.

 (j)   Liquid Assets. Atall times, be and remain the owner ofUnencumbered Liquid Assets having a value (as such value is determined by Agent) of not less than Two Million Dollars ($2,000,000.00).

 (k)  Debt-to-Tangible Net Worth Ratio. Maintain, at all times, a Debt-to-Tangible Net Worth Ratio of not more than 0.50to 1.00.

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 (l)  Debt Service Coverage Ratio. Maintaina consolidatedDebt Service Coverage Ratio of not less than 1.50 to 1.00 as of the end of each of Borrower’s fiscal quarters through and including Borrower’s fiscal quarter ending December 31, 2014, and not less than 1.75 to 1.00 as of Borrower’s fiscal quarter ending March 31, 2015 and as of the end of each fiscal quarter thereafter. For purposes of this Agreement, the Debt Service Coverage Ratio shall be calculated quarterly as of the end of each fiscal quarter of Borrower, commencing with the fiscalquarter ending as of March 31, 2014,and the relevant period of determination for the calculation to occur as of March 31, 2014,shall be the one (1) fiscal quarter period ending as of such date; the relevant period of determination for the quarterly calculation to occur as of June 30, 2014, shall be the two (2) fiscal quarter period ending as of such date; the relevant period of determination for the quarterly calculation to occur as of September 30, 2014,shall be the three (3) fiscal quarter period ending as of such date; and the relevant period of determination for the quarterly calculation to occur as of December 31, 2014,and for each succeeding quarterly calculation, shall be the four (4) fiscal quarter period ending as of each such date.  When the relevant period of determination for any calculation is less than four (4) fiscal quarters, the percentage of Current Maturities of Long Term Debt to be included in the calculation shall be based on the applicable number of quarters covered (i.e., 25% of Current Maturities of Long Term Debt when the relevant period of determination is one fiscal quarter; 50% of Current Maturities of Long Term Debt when the relevant period of determination is two fiscal quarters; and 75% of Current Maturities of Long Term Debt when the relevant period of determination is three fiscal quarters).

(m)  Disbursement Requests.  Submit requests for disbursements under the Loan in the form of the Disbursement Request attached as a schedule to this Agreement.

SECTION 5                NEGATIVE COVENANTS. So long as Agent or any Lender shall have any commitment or obligation, if any, to make or extend any Loans to or in favor of Borrower, and/or so long as any Indebtedness remains unpaid and outstanding, Borrower covenants and agrees that it shall not, without the prior written consent of Agent:

(a)   Redeem Stock. Purchase, redeem, retire or otherwise acquire any of the shares of its capital stock, or make any commitment to do so, unless Borrower has previously provided to Agent a proforma compliance certificate showing compliance with the Agreement immediately following such purchase, redemption, retirement or acquisition.

(b)  Liens. Create, incur, assume or suffer to exist any Lien of any kind upon any of its property or assets, whether now owned or hereafter acquired, other than the following (collectively, “Permitted Encumbrances”):

    (i) Liens to or in favor of Agent created by the Loan Documents;

(ii)   Liens for taxes, assessments or other governmental charges incurred in the ordinary course of business and for which no interest, late charge or penalty is attaching or which is being contested in good faith by appropriate proceedings diligently pursued (provided the period of time for such contestation does not exceed thirty (30) days) and, if requested by Agent, bonded in an amount and manner satisfactory to Agent;

(iii)   Liens, not delinquent, created by statute in connection with workers’ compensation, unemployment insurance, social security, old age pensions (subject to the applicable provisions of this Agreement) and similar statutory obligations;

(iii)   Liens in favor of mechanics, materialmen, carriers, warehousemen or other like statutory or common law Liens securing obligations incurred in good faith in the ordinary course of business that are not yet due and payable; and

(iv)   other Liens described in the Schedule attached hereto, entitled “Additional Permitted Liens.”

(c)       Debt. Incur, create, assume or permit to exist any Debt of any kind or nature whatsoever, except  (without duplication) for (i) the Indebtedness, (ii) Subordinated Debt, (iii) existing indebtedness (if any) to the extent set forth in the Schedule of Debt attached hereto or in the most recent financial statements of Borrower delivered to Agent prior to the date of this Agreement, (iv) unsecured trade indebtedness, utility indebtedness and non-extraordinary accounts payable incurred and paid in the ordinary course of business, (v) secured Debt incurred in the ordinary course of Borrower’s business that is secured by Liens of the type described in Section B of the Schedule of Additional Permitted Liens attached hereto and that satisfies all of the requirements in Section B of the Schedule of Additional Permitted Liens attached hereto; (vi)other unsecured Debt not to exceed Five Hundred Thousand Dollars ($500,000.00),in aggregate, at any time outstanding; and (vii) secured Debt not to exceed an aggregate of Twenty Million Dollars ($20,000,000.00) that is secured by Liens of the type described in Section A of the Schedule of Additional Permitted Liens attached hereto and that satisfies all of the requirements in Section A in the Schedule of Additional Permitted Liens attached hereto.

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(e)       Loans and Advances. Make loans, advances or extensions of credit to any Person, except as authorized by Borrower’s Articles of Incorporation, as amended.

(f)Guaranties. Guarantee or otherwise, directly or indirectly, in any way be or become responsible for obligations of any other Person, except (i) guaranties in favor of Agent; and (ii) the endorsement of negotiable instruments in the ordinary course of business for deposit or collection.

(g)       Asset Dispositions; Dissolution; Mergers; Capital Structure; Business Purpose. (i) Sell, lease (as lessor), transfer or otherwise dispose of any of its properties or assets, except as to the sale of inventory in the ordinary course of business; (ii) change its name,  its corporate identity or structure, its form of organization or the state in which it has been formed or organized; (iii) dissolve or liquidate or consolidate with or merge into any other Person, or permit any other Person to merge into it; (iv) acquire all or substantially all the properties or assets of any other Person; (v) enter into any reorganization or recapitalization, or reclassify its capital stock; (vi) enter into any sale-leaseback transaction; (vii) permit any levy, attachment or restraint to be made affecting any of Borrower's assets; (viii) permit any judicial officer or assignee to be appointed or to take possession of any or all of Borrower's assets; or (ix) make any other change in Borrower's financial structure or in any of its business objects, purposes or operations which, in the opinion of Agent, could result in a Material Adverse Effect; (x) enter into any transaction not in the ordinary course of Borrower’s business; or (xi) make any payment on account of any Subordinated Debt in violation of the provisions of any subordination agreement between Agent and the applicable subordinated debt holder, or otherwise fail to comply with the terms and conditions set forth in any such subordination agreement.

(i)       Investments. Purchase or hold beneficially any stock or other securities of, or make any investment or acquire any interest whatsoever in, any other Person, except for (i) the common stock of any Subsidiaries owned by Borrower on the date of this Agreement, as more particularly described in the Schedule of Subsidiaries attached hereto, (ii) certificates of deposit or time deposits with Agent or any Lender, and (iii) direct obligations of the United States of America, or any agency thereof, maturing within one (1) year from the date of acquisition thereof.

(j)       Apply Proceeds to Purchase or Carry Margin Stock. Apply any of the proceeds of any loan, advance or other extension of credit by Agent or Lenders to or in favor of Borrower, directly or indirectly to the purchase or carrying of any “margin stock” or “margin securities” within the meanings of Regulation U or Regulation G of the Board of Governors of the Federal Reserve System, or any regulations, interpretations or rulings thereunder; or extend credit to others directly or indirectly for the purpose of purchasing or carrying any such margin stock or margin securities.

(k)       Pension Plans; PBGC. Allow any fact, condition or event to occur or exist with respect to any employee pension or profit sharing plan established or maintained by it which might constitute grounds for termination of any such plan or for the court appointment of a trustee to administer any such plan; or permit any such plan to be the subject of termination proceedings (whether voluntary or involuntary) from which termination proceedings there may result in a liability of Borrower to the PBGC which, in the opinion of Agent, will result in a Material Adverse Effect.

SECTION 6                      EVENTS OF DEFAULT.  An “Event of Default” shall be deemed to have occurred or exist under this Agreement upon the occurrence and/or existence of any of the following conditions or events:

(a) Borrower and/or any other Loan Party shall fail to pay the principal of or interest on or shall otherwise fail to pay any other amount owing by Borrower and/or such Loan Party to Agent or Lenders, when due, whether under any of the Indebtedness or otherwise, and such default in payment shall continue unremedied or uncured beyond any applicable period of grace provided with respect thereto, if any, in the relevant Loan Document(s);

(b) any representation, warranty, certification or statement made or deemed to have been made byBorrower and/or any other Loan Party herein, or in any certificate, financial statement or other document or agreement delivered by or on behalf of Borrower and/or any such Loan Party in connection with the Indebtedness or any of the Loan Documents shall prove to be untrue or incomplete in any material respect;

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(c)            Borrower or any other Loan Party shall fail to maintain in effect insurance required on any of the Primary Collateral in accordance with the requirements of the Loan Documents;

(d)            Borrower or any other Loan Party shall fail to observe or perform any condition, covenant or agreement set forth herein or in any other Loan Document; provided, however, that notwithstanding any provision to the contrary in this Agreement or such other Loan Document, if such failure does not constitute an Event of Default under any of the other subsections of this Section and is capable of being remedied or cured, it shall not constitute an Event of Default unless it continues for 30 days or more after the earlier to occur of (i) written notice thereof to Borrower from Agent; and (ii) the date on which Borrower or such other Loan Party knew or should have known of the occurrence of such failure;

(e) if there shall be any change, for any reason whatsoever, in the management, ownership or control of Borrower or any other Loan Party which, in the sole discretion of Agent, could result in a Material Adverse Effect;

(f) if (i) any party subordinating its claims to that of Agent's or Lenders’ terminates, rescinds, revokes or violates the terms of its subordination, or (ii) any Loan Party (other than Borrower) dies or terminates, rescinds, revokes or violates the terms of any guaranty, pledge, collateral assignment, subordination agreement or other document, instrument or agreement entered into by such Loan Party in favor of Agent or either Lender, including, without limitation, any document evidencing the pledge by such Loan Party of property that is subject to a Lien which secures all or any part of the Indebtedness;

(g) Borrower and/or any other Loan Party shall (i) fail to pay when due any of its Debt (other than to Lenders and Agent), or shall fail to observe or perform any term, condition, covenant or agreement of Borrower and/or any such Loan Party set forth in any document, instrument or agreement evidencing, securing or relating to such Debt, and such failure shall remain unremedied or uncured beyond any applicable period of grace or cure, if any, provided with respect thereto so as to permit the holder(s) of such Debt to accelerate the maturity or payment of such Debt, or (ii) shall fail to observe or perform any term, condition, covenant or agreement of Borrower and/or any such Loan Party set forth in any material agreement, contract, indenture, instrument or undertaking to which Borrower and/or any such Loan Party is a party with any one or more third parties (other than the Loan Documents, environmental indemnity in favor of Agent and Lenders or any guaranty of the Indebtedness) or by which it may be otherwise bound, and such failure could result in the acceleration of the maturity or payment of Borrower's indebtedness to others, whether under any such agreement, contract, indenture, instrument or undertaking or otherwise, or which failure could result in a Material Adverse Effect;

(h) if Borrower and/or any other Loan Party (i) become(s) insolvent or the subject of a voluntary or involuntary proceeding in bankruptcy, or a reorganization, arrangement or creditor composition proceeding, (ii) cease(s) doing business as a going concern, (iii) is enjoined restrained or in any way prevented by court order or other legal or administrative action or proceedings from continuing to conduct all or any material part of its business affairs, (iv)  is the subject of a dissolution, merger or consolidation, or (v) has any of its property or assets attached, seized, subject to a writ or distress warrant, or come into the possession of any trustee, receiver, controller, custodian, assignee for the benefit of creditors or any other person or entity having powers or duties like or similar to the powers and duties of trustee, receiver, controller, custodian or assignee for the benefit of creditors, and the same are not released, discharged or bonded against within thirty (30) days thereafter;

(i) if any reportable event, which the Agent determines constitutes grounds for the termination of any deferred compensation plan by the PBGC or for the appointment by the appropriate United States District Court of a trustee to administer any such plan, shall have occurred and be continuing thirty (30) days after written notice of such determination shall have been given toBorrower by Agent, or any such plan shall be terminated within the meaning of Title IV of ERISA, or a trustee shall be appointed by the appropriate United States District Court to administer any such plan, or the PBGC shall institute proceedings to terminate any plan;

13

(j) if (i) there shall be rendered against Borrowerand/or any other Loan Partyone or more judgments for the payment of money  which has or have become non-appealable and shall remain undischarged, unsatisfied by insurance and unstayed for more than thirty (30) days, whether or not consecutive; or (ii) a levy, lien, writ of attachment or garnishment against any of the property or assets ofBorrower and/or any other Loan Partyshall be issued and levied in any action(s) and not released or appealed and bonded in an amount and manner satisfactory to Agent within thirty (30) days after such issuance and levy, or (iii) a settlement, or a series of related settlements, is agreed upon by Borrower and/or any other Loan Party for the payment or money or the delivery of goods or services by Borrower and/or such Loan Party;

(k)            if (i) Agent deems itself or Lenders insecure, believing that the prospect of payment or performance of any of the Indebtedness is impaired or shall fear deterioration, removal or waste of any of the Collateral; or (ii) in the opinion of Agent, a Material Adverse Effect has resulted or occurred or could result or occur; or

(l) the occurrence or existence of any “Default” or “Event of Default”, as the case may be, set forth in any other Loan Document.

SECTION 7                      REMEDIES.  Upon the occurrence and at any time during the continuance or existence of any Event of Default, Agent may, with or without notice to Borrower,declare all outstanding Indebtedness to be due and payable, whereupon all such Indebtedness then outstanding shall immediately become due and payable, without further notice or demand, and any commitment or obligation, if any, on the part of Agent and Lenders to make or extend Loans shall immediately terminate. Further, upon the occurrence or at any time during the continuance or existence of any Event of Default hereunder, Agent may collect, deal with and dispose of all or any part of any Collateral in any manner permitted or authorized by the Uniform Commercial Code or other applicable law (including public or private sale), and after deducting expenses (including, without limitation, reasonable attorneys’ fees and expenses), Agent may apply the proceeds thereof in part or full payment of any of the Indebtedness, whether due or not, in any manner or order Agent elects (subject to the terms of this Agreement).  In addition to the foregoing, upon the occurrence and at any time during the continuance or existence of any Event of Default hereunder, Agent may exercise any and all rights and remedies available to it as a result thereof, whether under this Agreement or other Loan Documents, at law (including, without limit, the Uniform Commercial Code), or otherwise. Notwithstanding anything to the contrary set forth in any other Loan Document, Lenders shall not be obligated to make or extend any Loans or advances to any Borrower(s) during the existence of any Default or Event of Default.

SECTION 8                      APPLICATION OF PROCEEDS FOLLOWING EVENT OF DEFAULT TO PAYMENT OF AGENT FEES AND EXPENSES.  Notwithstanding anything to the contrary in this Agreement, following the occurrence of an Event of Default and the termination of Lenders’ obligation to make disbursements, the acceleration of the indebtedness owing by Borrower to Lenders under this Agreement or the other Loan Documents, or the exercise of any remedy in accordance with the provisions of the Loan Documents, Agent shall apply the proceeds of the collateral, together with any offsets, voluntary payments by Borrower or others and any other sums received or collected in respect of such indebtedness first, to pay all incurred and unpaid fees and expenses (including attorney’s fees) of Agent under the Loan Documents and any protective advances made by Agent with respect to the collateral under or pursuant to the terms of any Loan Document, next to the indebtedness owed to Lenders in accordance with their Pro Rata Shares and then, if there is any excess, to Borrower.

SECTION 9                      DEMAND BASIS LOANS. Borrower hereby acknowledges and agrees that in the event that any of the Indebtedness shall at any time be on a demand basis, Borrower’s compliance with the terms and conditions set forth herein, and the absence of any Event of Default hereunder, shall not, in any way whatsoever, limit, restrict or otherwise affect or impair Agent’s right or ability to make demand for payment of any or all of such Indebtedness which may be on a demand basis at any such time, in Agent’s sole and absolute discretion, with or without reason or cause, and the existence of any Event of Default hereunder shall not be the sole reason or basis for enabling Agent to make demand for payment of all or any part of such Indebtedness.

14

SECTION 10                    WAIVERS OF DEFAULTS; NO FORBEARANCE.  No Event of Default shall be waived by Agent or Lenders except in writing and a waiver of any Event of Default shall not be a waiver of any other default or of the same default on a future occasion. No forbearance on the part of the Agent and Lenders in enforcing any of its rights or remedies under this Agreement or any other Loan Document, nor any renewal, extension or rearrangement of any payment or covenant to be made or performed by Borrower hereunder or any such other Loan Document, shall constitute a waiver of any of the terms of this Agreement or such Loan Document or of any such right or remedy. No single or partial exercise of any right, power or privilege hereunder, or any delay in the exercise hereof, shall preclude other or further exercise of the rights of the parties under this Agreement and/or the other Loan Documents.

SECTION 11                     GOVERNING LAW.  This Agreement shall be governed by and construed and enforced in accordance with the laws of the State of California.

SECTION 12                     SUCCESSORS AND ASSIGNS.  This Agreement shall inure to the benefit of and shall be binding upon the parties hereto and their respective successors and assigns; provided, however, that Borrower shall not assign or transfer any of its respective rights or obligations hereunder or otherwise in respect of any of the Indebtedness without the prior written consent of Agent.

SECTION 13                      COUNTERPARTS.  This Agreement may be executed in several counterparts, each of which shall constitute an original instrument, but when taken together shall constitute one and the same instrument.

SECTION 14                      USA PATRIOT ACT.  To help the government fight the funding of terrorism and money laundering activities, Federal law requires all financial institutions to obtain, verify, and record information that identifies each person who opens an account.  WHAT THIS MEANS FOR YOU:  when you open an account, Agent or any Lender will ask your name, address, date of birth, and other information that will allow Agent and Lenders to identify you.  Agent or any Lender may also ask to see your driver’s license, or other identifying documents.

SECTION 15                      NOTICES.  Unless otherwise provided in this Agreement, all notices and other communications by any party to the other party(ies) relating to this Agreement shall be in writing and shall be given by personal delivery, by United States mail, postage prepaid, by reputable overnight courier or by facsimile, and addressed or delivered to the respective party(ies) at the addresses stated below, or to such other addresses as suchparty(ies) may from time to time specify to the other(s) in writing.  Requests for information made to Borrower by Agent from time to time hereunder may be made orally or in writing, at Agent’s discretion.

Borrower Address:

Owens Realty Mortgage, Inc.

2221 Olympic Boulevard

Walnut Creek, California 94595

Facsimile No.:  (925) 935-1486

Attention: William C. Owens

Agent Address:

California Bank & Trust

456 Montgomery Street, 23rd Floor

San Francisco, California 94104

Facsimile No.: (415) 875-1456

Attention:  Thomas C. Paton, Jr.

Lender Address:

See Signature Page(s)

SECTION 16                      COSTS AND EXPENSES.  Borrowershall pay or reimburse Agent and Lenders for (a) all costs, expenses, fees and charges paid or incurred by Agent or any Lender (including, without limitation, Agent's and each Lender’s attorneys' fees and costs and/or fees, transfer charges and costs of Agent's and Lender’s in-house counsel) in connection with the preparation, closing and consummation of this Agreement and/or the other Loan Documents and/or the Loans or transactions contemplated hereby or thereby, or in connection with the administration or enforcement of this Agreement or any of the other Loan Document, and (b) all stamp and other taxes and duties (except for taxes on the overall net income of Agent and any Lender imposed by the jurisdiction in which Agent's and each Lender’s principal executive office is located) payable or determined to be payable in connection with the execution, delivery, filing or recording of this Agreement and the other Loan Documents and the consummation of the transactions contemplated hereby, and any and all liabilities with respect to or resulting from any delay in paying or omitting to pay such taxes or duties.  In addition, Borrower shall immediately and without demand reimburse Agent and Lenders for all sums expended by Agent or Lenders in connection with any action brought by Agent or Lenders in respect of any Default or Event of Default or to enforce any provision of this Agreement or the other Loan Documents and/or to exercise or enforce any rights or remedies of Agent or Lenders.  Borrower authorizes and approves all advances and payments by Agent and Lenders for items described in this Section as Indebtedness secured by the Collateral.

15

SECTION 17                      INDEMNIFICATION AND HOLD HARMLESS.  WITHOUT LIMITING ANY OTHER PROVISIONS OF THIS AGREEMENT, BORROWER AGREES TO INDEMNIFY AND HOLD AGENT AND EACH LENDER HARMLESS FROM AND AGAINST ALL LOSSES, COSTS, DAMAGES, LIABILITIES AND EXPENSES, INCLUDING, WITHOUT LIMITATION, OUTSIDE ATTORNEYS’ FEES AND DISBURSEMENTS, INCURRED BY AGENT AND ANY LENDER IN CONNECTION WITH THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS OR ANY LOANS OR TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY OR BY REASON OF ANY DEFAULT OR EVENT OF DEFAULT, OR ENFORCING THE OBLIGATIONS OF BORROWER OR ANY LOAN PARTY UNDER THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS, AS APPLICABLE, OR IN EXERCISING ANY RIGHTS OR REMEDIES OF AGENT OR ANY LENDER OR IN THE PROSECUTION OR DEFENSE OF ANY ACTION OR PROCEEDING CONCERNING ANY MATTER GROWING OUT OF OR CONNECTED WITH THIS AGREEMENT OR ANY OF THE LOAN DOCUMENTS; PROVIDED, HOWEVER, THAT THE FOREGOING SHALL NOT BE APPLICABLE, AND THE BORROWER SHALL NOT BE LIABLE FOR ANY SUCH LOSSES, COSTS, DAMAGES, LIABILITIES OR EXPENSES, TO THE EXTENT (BUT ONLY TO THE EXTENT) THE SAME ARISE OR RESULT FROM THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF THE PARTY SEEKING TO BE INDEMNIFIED OR ANY OF ITS AGENTS OR EMPLOYEES. THE PROVISIONS OF THIS SECTION SHALL SURVIVE REPAYMENT OF THE INDEBTEDNESS AND SATISFACTION OF ALL OBLIGATIONS OF BORROWER TO LENDERS AND TERMINATION OF THIS AGREEMENT.

SECTION 18                      AMENDMENTS AND WAIVERS.  All amendments to or waivers or terminations of this Agreement or the other Loan Documents must be in writing.  All prior agreements, understandings, representations, warranties, and negotiations between the parties hereto with respect to the subject matter of this Agreement and the other Loan Documents, if any, are hereby superseded and merged into this Agreement and the Loan Documents.  Time is of the essence for the performance of all obligations set forth in this Agreement.  Each provision of this Agreement shall be severable from every other provision of this Agreement for the purpose of determining the legal enforceability of any specific provision.Borrower acknowledges that Agent and Lenders may provide information regarding Borrower and the Loans to Agent's and each Lender’s parent, Subsidiaries, Affiliates and service providers.

SECTION 19                      REINSTATEMENT; SEVERABILITY.  Agent’s and each Lender’s rights under this Agreement and the other Loan Documents shall be reinstated and revived, and the enforceability of this Agreement and the other Loan Documents shall continue, with respect to any amount at any time paid on account of the Indebtedness which thereafter shall be required to be restored or returned by Agent or any Lender, all as though such amount had not been paid.  The rights of Agent and Lenders created or granted herein and the enforceability of this Agreement and the other Loan Documents at all times shall remain effective to cover the full amount of all the Indebtedness even though the Indebtedness, including any part thereof or any other security or guaranty therefor, may be or hereafter may become invalid or otherwise unenforceable as againstBorrower.

SECTION 20                      WAIVER OF JURY TRIAL.  BORROWER, AGENT AND EACH LENDER ACKNOWLEDGE THAT THE RIGHT TO TRIAL BY JURY IS A CONSTITUTIONAL ONE, BUT THAT IT MAY BE WAIVED UNDER CERTAIN CIRCUMSTANCES.  TO THE EXTENT PERMITTED BY LAW, EACH PARTY, AFTER CONSULTING (OR HAVING HAD THE OPPORTUNITY TO CONSULT) WITH COUNSEL OF THEIR CHOICE, KNOWINGLY AND VOLUNTARILY, AND FOR THEIR MUTUAL BENEFIT, WAIVE ANY RIGHT TO TRIAL BY JURY IN THE EVENT OF LITIGATION REGARDING THE PERFORMANCE OR ENFORCEMENT OF, OR IN ANY WAY RELATED TO, THIS AGREEMENT OR THE INDEBTEDNESS.

16

This Agreement was executed as of the date first written above.

AGENT:                                                                                     BORROWER:

CALIFORNIA BANK & TRUST	OWENS REALTY MORTGAGE, INC.,
	a Maryland corporation
By:_________________________________	By:_________________________________
Thomas C. Paton, Jr.	William C. Owens
Senior Vice President and Manager	President

LENDERS:

CALIFORNIA BANK & TRUST
By:_________________________________	Address:  456 Montgomery Street, 23rd Floor
Thomas C. Paton, Jr.	San Francisco, CA  94104
Senior Vice President and Manager	Facsimile No.: (415) 875-1456
	Attn: Thomas C. Paton, Jr.

FIRST BANK
By:_________________________________	Address:  456 Montgomery Street, Suite 400
William G. Nelle, Jr.	San Francisco, CA  94104
Senior Vice President	Facsimile No.: (415) 398-7190
	Attn: William G. Nelle, Jr.

ACKNOWLEDGED AND AGREED:

CALIFORNIA BANK & TRUST

By: _______________________________

          Thomas C. Paton, Jr.

          Senior Vice President and Manager

17

SCHEDULE OF SUBSIDIARIES

(Section 3(i))

Subsidiary Name	State of Organization	Fictitious Business Name
720 University, LLC	Wyoming
Baldwin Ranch Subdivision, LLC	California
The Last Resort and Marina, LLC	California	The Last Resort and Marina
Lone Star Golf, Inc.	Maryland	Auburn Valley Golf Club
Wolfe Central, LLC	California
54th Street Condos, LLC	Arizona
AMFU, LLC	Arizona
Phillips Road, LLC	Washington
TOTB Miami, LLC	Florida
Broadway & Commerce, LLC	Washington
Bensalem Primary Fund, LLC*	Pennsylvania
Brannan Island, LLC	California
Tahoe Stateline Venture, LLC	California
Sandmound Marina, LLC	California	Piper Point Marina

*Being dissolved

18

SCHEDULE OF DEBT

(Section 5(c))

None.

19

SCHEDULE OF ADDITIONAL PERMITTED LIENS

(Section 5(b))

A. Liens to which Agent has consented in writing and are subject to an intercreditor agreement between Agent, for and on behalf of Lenders and such other secured party in form and substance satisfactory to Agent.  Agent agrees to not unreasonably withhold its consent to Liens on real or personal property (other than Primary Collateral) in favor of one other secured party that satisfies each of the following conditions:

1. The principal indebtedness secured or potentially to be secured by the Liens is $20,000,000.00 or less;

2. The conditions, terms and covenants for the indebtedness secured or potentially to be secured by the Liens are not materially different than the conditions, terms and covenants for Borrower’s indebtedness to Lenders; and

3. The Liens secure (a) real property owned by Borrower and/or (b) promissory notes payable to Borrower secured by real property that, in Agent’s reasonable judgment, have an aggregate fair market value that, in Agent’s judgment, do not materially exceed the value of the collateral secured the indebtedness.

B. Liens on real property owned by Borrower (other than Primary Collateral) that secures property acquisition loans, construction loans and long-term financing related to that real property made to Borrower, incurred by Borrower in the ordinary course of its business.

C. Liens on real or personal property owned by Borrower (i) that are junior in priority to a Lien in favor of Agent and Lenders; and (ii) to which Agent, in its sole and absolute discretion, has consented in writing.

20

FORM OF COMPLIANCE CERTIFICATE

(Section 4(a)(iii))

To:          California Bank & Trust

456 Montgomery Street, 23rd Floor

San Francisco, CA  94104

Attn.: Thomas C. Paton, Jr.

From:      Owens Realty Mortgage, Inc.

This Compliance Certificate is given pursuant to Section 4(a)(iii) of the Amended and Restated Credit Agreement, dated April 16, 2015 between California Bank & Trust (“Agent”) and Owens Realty Mortgage, Inc. (“Borrower”), as it may have been amended, modified or supplemented (“Credit Agreement”).  All initially capitalized terms used but not defined in this Compliance Certificate shall have the meanings assigned to such terms in the Credit Agreement.

The undersigned hereby certifies that:

1.I am an Authorized Officer of Borrower, and hold the following position with Borrower: _________________________.   I am authorized to execute and deliver this Certificate to Agent on behalf of Borrower.

2.I have reviewed and am familiar with the terms of the Credit Agreement and the other Loan Documents and have made, or caused to be made under my supervision, a detailed review of the transactions and condition (financial and otherwise) of Borrower during the accounting period covered by the attached financial statements.

3.Attached hereto are the following [check as applicable]:

____   Consolidated financial statements of Borrower for and as of its fiscal year ending _________________, containing the balance sheet of Borrower for and as of the close of such fiscal year, statements of income, expenses and retained earnings and a statement of cash flows of Borrower for such fiscal year, and such other comments and financial details as are usually included in similar reports, prepared in accordance with GAAP, all of which are true, complete and correct to the best of my knowledge, and which have been audited by and are accompanied by a report and opinion of an independent certified public accountant.

____           Internally prepared consolidated financial statements of Borrower for and as of its fiscal quarter ending ___________________, containing the balance sheet of Borrower as of the end of such quarter, statements of income, expenses and retained earnings and a statement of cash flows for Borrower for such quarter and for the portion of the fiscal year of Borrower through the end of the period then ending, and such other comments and financial details as are usually included in similar reports, prepared in accordance with GAAP, all of which are true, complete and correct to the best of my knowledge.

4.The review described in paragraph 2 above did not disclose, and, to the best of my knowledge, there existed no condition, event or occurrence which constituted a Default or Event of Default during, or at the end of, the accounting period covered by the attached financial statements, and there exists no condition, event or occurrence which constitutes a Default or Event of Default as of the date of this Compliance Certificate, except as set forth in paragraph 5, below.

5.Describe any exceptions to paragraph 4 hereof by listing, in detail and with specific reference to specific sections of the Credit Agreement or applicable Loan Document, the nature of the condition, event or occurrence, the period during which it has existed and the actions that Borrower and/or any other Loan Party has taken, is taking or proposes to take with respect to such condition, event or circumstance.

6.The schedules attached hereto and incorporated herein by this reference set forth the financial data and computations evidencing Borrower’s compliance, or non-compliance, with the covenants set forth in Credit Agreement Section 4(j) (Unencumbered Liquid Assets), Section 4(k) (Debt-to-Tangible Effective Net Worth Ratio), and Section 4(l) (Debt Service Coverage Ratio), all of which data and computations are true and correct.

21

7.This Compliance Certificate is effective and correct as of _________________________.

8.I represent and warrant that the foregoing is true, complete and correct, and that the information reflected in this Compliance Certificate and the attachments complies with the representations and warranties contained in the Credit Agreement and the other Loan Documents.

9.This Compliance Certificate, together with the financial statements and the computations set forth in the schedules attached hereto are made and delivered to Agent on _________________.

OWENS REALTY MORTGAGE, INC.,

a Maryland corporation

By:_____________________________________

Name:

Title:

22

Schedule to Compliance Certificate

As of:________________

Financial Covenants

I           Liquid Assets (per Credit Agreement  Section 4-j)

Unencumbered Liquid Assets                                                                                 ___________

Requirement: Not less than $2,000,000

In Compliance?                                                                                                           Yes/No

II           Debt-To-Tangible Net Worth Ratio (Section 4-k)

A.   Debt                                                                                                                     ___________

B.   Tangible Net Worth                                                                                          ___________

C.   Ratio of-A to B                                                                                                   ___________

Requirement:  Not to exceed 0.50 to 1

In compliance?                                                                                                           Yes/No

III           Debt Service Coverage Ratio (Section 4-l)

A.   EBITDA (for the period beginning_____and ending________)             ___________

B.   Debt Service

1.   Total Interest Expense (per financial statement)                                  ___________

2.   Less interest expense excluded (as defined)                                         ___________

3.   Net Interest Expense ( B 1 less B 2)                                                        ___________

4.   Current Maturity of Long Term Debt (per financial statement) at   ___________

5.   Less excluded items

(a) principal amounts due at maturity intended to be refinanced__________

(b) outstanding amounts on lines of credit if included in B 4).___________

6.   Net Current Maturity of Long Term Debt (B 4 less B 5 (a&b)    ___________

7.   Applicable %  of Current Portion of Long Term Debt (Section 4-l (4))_________

8.   Applicable Current Maturity of Long Term Debt (B 6 times  B 7)___________

Ratio of A to B 8                                                                                           ___________

Requirement through the quarter ending 12/31/2014 not less than 1.50 to 1

Thereafter not less than 1.75 to 1

In Compliance?                                                                                                      Yes/No

23

FORM OF BORROWING BASE CERTIFICATE

(Section 4(a)(iv))

To:          California Bank & Trust

456 Montgomery Street, 23rd Floor

San Francisco, CA  94104

Attn.: Thomas C. Paton, Jr.

From:      Owens Realty Mortgage, Inc.

This Borrowing Base Certificate is given pursuant to Section 4(a)(iv) of the Amended and Restated Credit Agreement, dated April 16, 2015 among California Bank & Trust (“Agent”), the financial institutions from time to time signatory thereto (“Lenders”) and Owens Realty Mortgage, Inc. (“Borrower”), as it may have been amended, modified or supplemented (“Credit Agreement”), and the Amended and Restated Advance Formula Agreement dated April 16, 2015 among Agent, Lenders and Borrower, as it may have been amended, modified or supplemented (“Advance Formula Agreement”).  All initially capitalized terms used but not defined in this Borrowing Base Certificate shall have the meanings assigned to such terms in the Credit Agreement or the Advance Formula Agreement, as applicable.

The undersigned hereby certifies that:

10.I am an Authorized Officer of Borrower, and hold the following position with Borrower: _________________________.   I am authorized to execute and deliver this Certificate to Agent on behalf of Borrower.

11.I have reviewed and am familiar with the terms of the Credit Agreement, the Advance Formula Agreement, the other Loan Documents, and have made, or caused to be made under my supervision, a detailed review of the transactions and condition of Borrower, the Eligible Loan Notes, and the Eligible Owned Real Properties.

12.Each of the following is an Eligible Loan Note, with a statement of the current outstanding principal balance and Appraised Value of the real property securing the Eligible Loan Note:

	Note	Outstanding Principal Balance of Note	Appraised Value of Real Property Securing Note	Borrowing Availability (Lesser of 75% of Outstanding Principal Balance of Note and 50% of Appraised Value of Real Property Securing Note)
a.
b.

Each of the Eligible Loan Notes satisfies all of the requirements set forth in Section 1(B) of the Advance Formula Agreement.

The aggregate amount of borrowing availability based on Eligible Loan Notes is $_________________,

13.Each of the following is an Eligible Owned Real Property, with a statement of its Appraised Value:

	Property	Appraised Value	Borrowing Availability (50% of Appraised Value)
a.
b.

Each of the Eligible Owned Real Properties satisfies all of the requirements set forth in Section 1(C) of the Advance Formula Agreement.

24

The aggregate amount of borrowing availability based on Eligible Owned Real Property is $____________.

14.Under the Advance Formula Agreement, the maximum amount that may be borrowed from Lenders (including from Agent with respect to a Swing Line Loan) is $______________, consisting of the lesser of (a) $30,000,000.00 or (b) the sum of (i) the borrowing availability under the Eligible Loan Notes plus (ii) the borrowing availability under the Eligible Owned Real Properties.

15.The current outstanding principal balance owed by Borrower to Lenders (including to Agent with respect to any Swing Line Loan) under the Advance Formula Agreement is $___________________.

16.The remaining borrowing availability under the Advance Formula Agreement is $___________________.

17.This Borrowing Base Certificate is effective and correct as of __________________.

18.I represent and warrant that the foregoing is true, complete and correct, and that the information reflected in this Borrowing Base Certificate complies with the representations and warranties contained in the Credit Agreement, the Advance Formula Agreement, and the other Loan Documents.

19.This Borrowing Base Certificate is made and delivered to Agent on _________________.

OWENS REALTY MORTGAGE, INC.,

a Maryland corporation

By:_____________________________________

Name:

Title:

25

FORM OF DISBURSEMENT REQUEST

(Section 4(m))

To:          California Bank & Trust

456 Montgomery Street, 23rd Floor

San Francisco, CA  94104

Attn.: Thomas C. Paton, Jr.

From:      Owens Realty Mortgage, Inc.

This Disbursement Request is given pursuant to the Amended and Restated Credit Agreement, dated April 16, 2015 among California Bank & Trust (“Agent”), the financial institutions signatory thereto from time to time (“Lenders”) and Owens Realty Mortgage, Inc. (“Borrower”), as it may have been amended, modified or supplemented (“Credit Agreement”), the Amended and Restated Advance Formula Agreement, dated April 16, 2015 among Agent, Lenders and Borrower, as it may have been amended, modified or supplemented (“Advance Formula Agreement”), the Master Revolving Note in the principal amount of $20,000,000, by Borrower to the order of California Bank & Trust (as it may have been amended, modified or supplemented, the “CB&T Note”) and the Master Revolving Note in the principal amount of $10,000,000, by Borrower to the order of First Bank, each dated as of the date of the Loan Agreement (as it may have been amended, modified or supplemented, the “First Bank Note” and together with the CB&T Note, the “Master Revolving Notes”).  All initially capitalized terms used but not defined in this Disbursement Request shall have the meanings assigned to such terms in the Credit Agreement.

The undersigned hereby certifies that:

1.   I am an Authorized Officer of Borrower, and hold the following position with Borrower: _________________________.   I am authorized to execute and deliver this Disbursement Request to Agent on behalf of Borrower.

2.   On behalf of Borrower, I represent and warrant that the statements made in the Compliance Certificate and Borrowing Base Certificate most recently delivered to Agent are true, complete and correct as of the dates thereof, and that Borrower is entitled under the Loan Documents, as of the date hereof, to receive the disbursement requested by this Disbursement Request.

3.   On behalf of Borrower, I request that Agent disburse the sum of $_______________ to Borrower pursuant to the Credit Agreement, the Advance Formula Agreement and the Master Revolving Notes in the following manner:

□           Swing Line Loan in the amount of $___________________.

□           Loan in the amount of $___________________.

4.   This Disbursement Request is made and delivered to Agent on _________________.

OWENS REALTY MORTGAGE, INC.,

a Maryland corporation

By:_____________________________________

                                                                                                          Name:

Title:

26

EX-10.2

MASTER REVOLVING NOTE

PRIME RATE

amount   $10,000,000.00   note date   April 16, 2015   maturity date   February 5, 2016  

On or before the Maturity Date set forth above, FOR VALUE RECEIVED, the undersigned promise(s) to pay to the order of First Bank (herein called “Bank”), at any office of the Bank in the State of California, the principal sum of Ten Million Dollars ($10,000,000.00), or so much of said sum as has been advanced and is then outstanding under this Note, together with interest thereon at a per annum rate equal to the Prime Rate plus the Applicable Margin.

This Note is a note under which advances, repayments and re-advances may be made from time to time, subject to the terms and conditions of this Note.

THE BANK SHALL HAVE NO OBLIGATION TO MAKE ANY ADVANCES TO THE UNDERSIGNED PURSUANT TO THIS NOTE (NOTWITHSTANDING ANYTHING EXPRESSED OR IMPLIED IN THIS NOTE OR ELSEWHERE TO THE CONTRARY, INCLUDING, WITHOUT LIMIT, IF THE BANK SUPPLIES THE UNDERSIGNED WITH A BORROWING FORMULA) IN THE EVENT THAT ANY DEFAULT, OR ANY CONDITION OR EVENT WHICH, WITH THE GIVING OF NOTICE OR THE PASSAGE OF TIME, OR BOTH, WOULD CONSTITUTE A DEFAULT, SHALL HAVE OCCURRED AND BE CONTINUING OR EXIST.

Accrued and unpaid interest on the unpaid principal balance outstanding hereunder shall be payable monthly, in arrears, on the first Business Day of each month, until maturity (whether as stated herein, by acceleration, or otherwise). Interest accruing hereunder shall be computed on the basis of a year of 360 days, and shall be assessed for the actual number of days elapsed, and in such computation, effect shall be given to any change in the applicable interest rate as a result of any change in the Prime Rate on the date of each such change. No interest shall accrue under this Note until the date of the first advance made by the Bank; after that, interest on all advances shall accrue and be computed on the principal balance outstanding from time to time under this Note in accordance with the terms hereof until the same is paid in full.

From and after the occurrence of any Default hereunder, and so long as any such Default remains unremedied or uncured thereafter, the Indebtedness outstanding under this Note shall bear interest at a per annum rate of two percent (2%) above the otherwise applicable interest rate hereunder, which interest shall be payable upon demand. In addition to the foregoing, a late payment charge equal to five percent (5%) of each late payment hereunder may be charged on any payment not received by Bank within ten (10) calendar days after the payment due date therefor, but acceptance of payment of any such charge shall not constitute a waiver of any Default hereunder.

In no event shall the interest payable under this Note at any time exceed the maximum rate permitted by law.

The amount and date of each advance hereunder, its applicable interest rate and the amount and date of any repayment shall be noted on Bank’s records, which records shall be conclusive evidence thereof, absent manifest error; provided, however, any failure by Bank to make any such notation, or any error in any such notation, shall not relieve the undersigned of its/their obligations to repay Bank all amounts payable by the undersigned to Bank under or pursuant to this Note, when due in accordance with the terms hereof.

In the event that any payment under this Note becomes due and payable on any day which is not a Business Day, the due date thereof shall be extended to the next succeeding Business Day, and, to the extent applicable, interest shall continue to accrue and be payable thereon during such extension at the rate(s) set forth in this Note.

All payments to be made by the undersigned to Bank under or pursuant to this Note shall be in immediately available United States funds, without setoff or counterclaim, and in the event that any payments submitted hereunder are in funds not available until collected, said payments shall continue to bear interest until collected.

The undersigned may prepay all or part of the outstanding balance of any Indebtedness hereunder at any time without premium or penalty. Any prepayment hereunder shall also be accompanied by the payment of all accrued and unpaid interest on the amount so prepaid.

If any Change in Law shall (a) subject Bank to any tax, duty or other charge with respect to this Note or any Indebtedness hereunder, or shall change the basis of taxation of payments to Bank of the principal of or interest under this Note or any other amounts due under this Note in respect thereof (except for changes in the rate of tax on the overall net income of Bank imposed by the jurisdiction in which Bank’s principal executive office is located); or (b) impose, modify or deem applicable any reserve (including, without limitation, any imposed by the Board of Governors of the Federal Reserve System), special deposit or similar requirement against assets of, deposits with or for the account of, or credit extended by Bank, or shall impose on Bank or the foreign exchange and interbank markets any other condition affecting this Note or the Indebtedness hereunder; and the result of any of the foregoing is to increase the cost to Bank of maintaining any part of the Indebtedness hereunder or to reduce the amount of any sum received or receivable by Bank under this Note by an amount deemed by the Bank to be material, then the undersigned shall pay to Bank, within fifteen (15) days of the undersigned’s receipt of written notice from Bank demanding such compensation, such additional amount or amounts as will compensate Bank for such increased cost or reduction.  A certificate of Bank, prepared in good faith and in reasonable detail by Bank and submitted by Bank to the undersigned, setting forth the basis for determining such additional amount or amounts necessary to compensate Bank shall be conclusive and binding for all purposes, absent manifest error.

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In the event that any Change in Law affects or would affect the amount of capital required or expected to be maintained by Bank (or any corporation controlling Bank), and Bank determines that the amount of such capital is increased by or based upon the existence of any obligations of Bank hereunder or the maintaining of any Indebtedness hereunder, and such increase has the effect of reducing the rate of return on Bank’s (or such controlling corporation’s) capital as a consequence of such obligations or the maintaining of such Indebtedness hereunder to a level below that which Bank (or such controlling corporation) could have achieved but for such circumstances (taking into consideration its policies with respect to capital adequacy), then the undersigned shall pay to Bank, within fifteen (15) days of the undersigned’s receipt of written notice from Bank demanding such compensation, additional amounts as are sufficient to compensate Bank (or such controlling corporation) for any increase in the amount of capital and reduced rate of return which Bank reasonably determines to be allocable to the existence of any obligations of the Bank hereunder or to maintaining any Indebtedness hereunder.  A certificate of Bank as to the amount of such compensation, prepared in good faith and in reasonable detail by the Bank and submitted by Bank to the undersigned, shall be conclusive and binding for all purposes absent manifest error.

This Note and any other indebtedness and liabilities of any kind of the undersigned (or any of them) to the Bank, and any and all modifications, renewals or extensions of it, whether joint or several, contingent or absolute, now existing or later arising, and however evidenced and whether incurred voluntarily or involuntarily, known or unknown, or originally payable to the Bank or to a third party and subsequently acquired by Bank, including, without limitation, any late charges; loan fees or charges; overdraft indebtedness; costs incurred by Bank in establishing, determining, continuing or defending the validity or priority of any security interest, pledge or other lien or in pursuing any of its rights or remedies under any loan document (or otherwise) or in connection with any proceeding involving the Bank as a result of any financial accommodation to the undersigned (or any of them); and reasonable costs and expenses of attorneys and paralegals, whether inside or outside counsel is used, and whether any suit or other action is instituted, and to court costs if suit or action is instituted, and whether any such fees, costs or expenses are incurred at the trial court level or on appeal, in bankruptcy, in administrative proceedings, in probate proceedings or otherwise (collectively “Indebtedness”) are secured by and the Bank is granted a security interest in and lien upon all items deposited in any account of any of the undersigned with the Bank and by all proceeds of these items (cash or otherwise), all account balances of any of the undersigned from time to time with the Bank, by all property of any of the undersigned from time to time in the possession of the Bank and by any other collateral, rights and properties described in each and every deed of trust, mortgage, security agreement, pledge, assignment and other security or collateral agreement which has been, or will at any time(s) later be, executed by any (or all) of the undersigned to or for the benefit of the Bank (collectively “Collateral”). Notwithstanding the above, (i) to the extent that any portion of the Indebtedness is a consumer loan, that portion shall not be secured by any deed of trust or mortgage on or other security interest in any of the undersigned’s principal dwelling or in any of the undersigned’s real property which is not a purchase money security interest as to that portion, unless expressly provided to the contrary in another place, or (ii) if the undersigned (or any of them) has (have) given or give(s) Bank a deed of trust or mortgage covering California real property, that deed of trust or mortgage shall not secure this Note or any other indebtedness of the undersigned (or any of them), unless expressly provided to the contrary in another place.

If (a) the undersigned (or any of them) or any guarantor under a guaranty of all or part of the Indebtedness (“guarantor”) (i) fail(s) to pay this Note or any of the Indebtedness when due, by maturity, acceleration or otherwise, or fail(s) to pay any Indebtedness owing on a demand basis upon demand; or (ii) fail(s) to comply with any of the terms or provisions of any agreement between the undersigned (or any of them) or any guarantor and the Bank, and any such failure continues beyond any applicable grace or cure period, if any, expressly provided with respect thereto; or (iii) become(s) insolvent or the subject of a voluntary or involuntary proceeding in bankruptcy, or a reorganization, arrangement or creditor composition proceeding, (if a business entity) cease(s) doing business as a going concern, (if a natural person) die(s) or become(s) incompetent, (if a partnership) dissolve(s) or any general partner of it dies, becomes incompetent or becomes the subject of a bankruptcy proceeding, or (if a corporation or a limited liability company) is the subject of a dissolution, merger or consolidation; or (b) any warranty or representation made by any of the undersigned or any guarantor in connection with this Note or any of the Indebtedness shall be discovered to be untrue or incomplete; or (c) there is any termination, notice of termination, or breach of any guaranty, pledge, collateral assignment or subordination agreement relating to all or any part of the Indebtedness; or (d) there is any failure by any of the undersigned or any guarantor to pay when due any of its indebtedness (other than to the Bank) or in the observance or performance of any term, covenant or condition in any document evidencing, securing or relating to such indebtedness; or (e) the Bank deems itself insecure, believing that the prospect of payment or performance of this Note or any of the Indebtedness is impaired or shall fear deterioration, removal or waste of any of the Collateral; or (f) there is filed or issued a levy or writ of attachment or garnishment or other like judicial process upon the undersigned (or any of them) or any guarantor or any of the Collateral, including, without limit, any accounts of the undersigned (or any of them) or any guarantor with the Bank; then the Bank, upon the occurrence and at any time during the continuance or existence of any of these events (each a “Default”), may, at its option and without prior notice to the undersigned (or any of them), cease advancing money or extending credit to or for the benefit of the undersigned (or any of them) under this Note or any other agreement between the undersigned (or any of them) and Bank, terminate this Note as to any future liability or obligation of Bank, but without affecting Bank’s rights and security interests in any Collateral and the Indebtedness of the undersigned to Bank, declare any or all of the Indebtedness to be immediately due and payable (notwithstanding any provisions contained in the evidence of it to the contrary), sell or liquidate all or any portion of the Collateral, set off against the Indebtedness any amounts owing by the Bank to the undersigned (or any of them), charge interest at the default rate provided in the document evidencing the relevant Indebtedness and exercise any one or more of the rights and remedies granted to the Bank by any agreement with the undersigned (or any of them) or given to it under applicable law.  In addition, if this Note is secured by a deed of trust or mortgage covering real property, then the trustor or mortgagor shall not mortgage or pledge the mortgaged premises as security for any other indebtedness or obligations.  This Note, together with all other indebtedness secured by said deed of trust or mortgage, shall become due and payable immediately, without notice, at the option of the Bank, (a) if said trustor or mortgagor shall mortgage or pledge the mortgaged premises for any other indebtedness or obligations or shall convey, assign or transfer the mortgaged premises by deed, installment sale contract or other instrument, or (b) if the title to the mortgaged premises shall become vested in any other person or party in any manner whatsoever, or (c) if there is any disposition (through one or more transactions) of legal or beneficial title to a controlling interest of said trustor or mortgagor.

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The undersigned authorize(s) the Bank to charge any account(s) of the undersigned (or any of them) with the Bank for any and all sums due hereunder when due; provided, however, that such authorization shall not affect any of the undersigned’s obligation to pay to the Bank all amounts when due, whether or not any such account balances that are maintained by the undersigned with the Bank are insufficient to pay to the Bank  any amounts when due, and to the extent that such account balances are insufficient to pay to the Bank all such amounts, the undersigned shall remain liable for any deficiencies until paid in full.

If this Note is signed by two or more parties (whether by all as makers or by one or more as an accommodation party or otherwise), the obligations and undertakings under this Note shall be that of all and any two or more jointly and also of each severally. This Note shall bind the undersigned, and the undersigned’s respective heirs, personal representatives, successors and assigns.

The undersigned waive(s) presentment, demand, protest, notice of dishonor, notice of demand or intent to demand, notice of acceleration or intent to accelerate, and all other notices, and agree(s) that no extension or indulgence to the undersigned (or any of them) or release, substitution or nonenforcement of any security, or release or substitution of any of the undersigned, any guarantor or any other party, whether with or without notice, shall affect the obligations of any of the undersigned. The undersigned waive(s) all defenses or right to discharge available under Section 3605 of the California Uniform Commercial Code and waive(s) all other suretyship defenses or right to discharge. The undersigned agree(s) that the Bank has the right to sell, assign, or grant participations or any interest in, any or all of the Indebtedness, and that, in connection with this right, but without limiting its ability to make other disclosures to the full extent allowable, the Bank may disclose all documents and information which the Bank now or later has relating to the undersigned or the Indebtedness.  The undersigned agree(s) that the Bank may provide information relating to this Note or relating to the undersigned to the Bank’s parent, affiliates, subsidiaries and service providers.

The undersigned agree(s) to pay or reimburse to Bank, or any other holder or owner of this Note, on demand, any and all costs and expenses of Bank (including, without limit, court costs, legal expenses and reasonable attorneys’ fees, whether inside or outside counsel is used, whether or not suit is instituted, and, if suit is instituted, whether at the trial court level, appellate level, in a bankruptcy, probate or administrative proceeding or otherwise ) incurred in connection with the preparation, execution, delivery, amendment, administration, and performance of this Note and the related documents, or incurred in collecting or attempting to collect this Note or the Indebtedness, or incurred in any other matter or proceeding relating to this Note or the Indebtedness.

The undersigned acknowledge(s) and agree(s) that there are no contrary agreements, oral or written, establishing a term of this Note and agree(s) that the terms and conditions of this Note may not be amended, waived or modified except in a writing signed by an officer of the Bank expressly stating that the writing constitutes an amendment, waiver or modification of the terms of this Note. As used in this Note, the word “undersigned” means, individually and collectively, each maker, accommodation party, endorser and other party signing this Note in a similar capacity. If any provision of this Note is unenforceable in whole or part for any reason, the remaining provisions shall continue to be effective. THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF CALIFORNIA, WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES.

For the purposes of this Note, the following terms have the following meanings:

“Applicable Margin” means one-quarter percent (0.25%) per annum.

“Business Day” means any day, other than a Saturday, Sunday or any other day designated as a holiday under Federal or applicable State statute or regulation, on which Bank is open for all or substantially all of its domestic and international business (including dealings in foreign exchange) in San Francisco, California.

“Change in Law” means the occurrence, after the date hereof, of any of the following: (i) the adoption or introduction of, or any change in any applicable law, treaty, rule or regulation (whether domestic or foreign) now or hereafter in effect and whether or not applicable to Bank on such date, or (ii) any change in interpretation, administration or implementation thereof of any such law, treaty, rule or regulation by any Governmental Authority, or (iii) the issuance, making or implementation by any Governmental Authority of any interpretation, administration, request, regulation, guideline, or directive (whether or not having the force of law), including any risk-based capital guidelines.  For purposes of this definition, (x) a change in law, treaty, rule, regulation, interpretation, administration or implementation shall include, without limitation, any change made or which becomes effective on the basis of a law, treaty, rule, regulation, interpretation, administration or implementation then in force, the effective date of which change is delayed by the terms of such law, treaty, rule, regulation, interpretation, administration or implementation, and (y) the Dodd-Frank Wall Street Reform and Consumer Protection Act (Pub. L. 111-203, H.R. 4173) and all requests, rules, regulations, guidelines, interpretations or directives promulgated thereunder or issued in connection therewith shall be deemed to be a “Change in Law”, regardless of the date enacted, adopted, issued or promulgated, whether before or after the date hereof, and (z) all requests, rules, guidelines or directives promulgated by the Bank for International Settlements, the Basel Committee on Banking Supervision (or any successor or similar authority) or the United States regulatory authorities, in each case pursuant to Basel III, shall each be deemed to be a “Change in Law”, regardless of the date enacted, adopted, issued or implemented.

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“Governmental Authority” means the government of the United States of America or any other nation, or of any political subdivision thereof, whether state or local, and any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government (including, without limitation, any supranational bodies such as the European Union or the European Central Bank).

“Prime Rate” means the per annum interest rate established by California Bank & Trust as its prime rate for its borrowers, as such rate may vary from time to time, which rate is not necessarily the lowest rate on loans made by Bank at any such time.

No delay or failure of Bank in exercising any right, power or privilege hereunder shall affect such right, power or privilege, nor shall any single or partial exercise thereof preclude any further exercise thereof, or the exercise of any other power, right or privilege.  The rights of Bank under this Note are cumulative and not exclusive of any right or remedies which Bank would otherwise have, whether by other instruments or by law.

THE MAXIMUM INTEREST RATE SHALL NOT EXCEED THE HIGHEST APPLICABLE USURY CEILING.

THE UNDERSIGNED AND THE BANK, BY ACCEPTANCE OF THIS NOTE, ACKNOWLEDGE THAT THE RIGHT TO TRIAL BY JURY IS A CONSTITUTIONAL ONE, BUT THAT IT MAY BE WAIVED UNDER CERTAIN CIRCUMSTANCES.  TO THE EXTENT PERMITTED BY LAW, EACH PARTY, AFTER CONSULTING (OR HAVING HAD THE OPPORTUNITY TO CONSULT) WITH COUNSEL OF THEIR CHOICE, KNOWINGLY AND VOLUNTARILY, AND FOR THEIR MUTUAL BENEFIT, WAIVES ANY RIGHT TO TRIAL BY JURY IN THE EVENT OF LITIGATION REGARDING THE PERFORMANCE OR ENFORCEMENT OF, OR IN ANY WAY RELATED TO, THIS NOTE OR THE INDEBTEDNESS.

This Note is secured by, among other collateral, deeds of trust (“Deeds of Trust”), encumbering real property located in California and Arizona.  Each of the Deeds of Trust securing the indebtedness evidenced by this Note contains the following provision:  “That should Trustor sell, convey, transfer, dispose of or further encumber the Trust Estate or any part thereof or any interest therein or enter into a lease covering all or any portion thereof or an undivided interest therein, either voluntarily, involuntarily or otherwise, or enter into an agreement so to do, without the prior written consent of Beneficiary being first had and obtained, then Beneficiary may, at its option, declare all sums secured hereby immediately due and payable.  Consent to one such transaction shall not be deemed to be a waiver of the right to require such consent to future or successive transactions.”

This Note is dated and shall be effective as of the date set forth above.

BORROWER:

OWENS REALTY MORTGAGE, INC.,

a Maryland corporation

By: __________________________________________

William C. Owens

President

Borrower’s Address:  2221 Olympic Boulevard, Walnut Creek, California 94595

For Bank Use Only			CCAR #
LOAN OFFICER INITIALS	LOAN GROUP NAME	BASE RATE INDEX	OBLIGOR NAME Owens Realty Mortgage, Inc.
LOAN OFFICER I.D. NO.	LOAN GROUP NO.	OBLIGOR NO.	NOTE NO.	AMOUNT $10,000,000.00

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EX-10.3

AMENDED AND RESTATED MASTER REVOLVING NOTE

PRIME RATE

amount   $20,000,000.00   note date   April 16, 2015   maturity date   February 5, 2016  

On or before the Maturity Date set forth above, FOR VALUE RECEIVED, the undersigned promise(s) to pay to the order of California Bank & Trust (herein called “Bank”), at any office of the Bank in the State of California, the principal sum of Twenty Million Dollars ($20,000,000.00), or so much of said sum as has been advanced and is then outstanding under this Note, together with interest thereon at a per annum rate equal to the Prime Rate plus the Applicable Margin.

This Note is a note under which advances, repayments and re-advances may be made from time to time, subject to the terms and conditions of this Note.

THE BANK SHALL HAVE NO OBLIGATION TO MAKE ANY ADVANCES TO THE UNDERSIGNED PURSUANT TO THIS NOTE (NOTWITHSTANDING ANYTHING EXPRESSED OR IMPLIED IN THIS NOTE OR ELSEWHERE TO THE CONTRARY, INCLUDING, WITHOUT LIMIT, IF THE BANK SUPPLIES THE UNDERSIGNED WITH A BORROWING FORMULA) IN THE EVENT THAT ANY DEFAULT, OR ANY CONDITION OR EVENT WHICH, WITH THE GIVING OF NOTICE OR THE PASSAGE OF TIME, OR BOTH, WOULD CONSTITUTE A DEFAULT, SHALL HAVE OCCURRED AND BE CONTINUING OR EXIST.

Accrued and unpaid interest on the unpaid principal balance outstanding hereunder shall be payable monthly, in arrears, on the first Business Day of each month, until maturity (whether as stated herein, by acceleration, or otherwise). Interest accruing hereunder shall be computed on the basis of a year of 360 days, and shall be assessed for the actual number of days elapsed, and in such computation, effect shall be given to any change in the applicable interest rate as a result of any change in the Prime Rate on the date of each such change. No interest shall accrue under this Note until the date of the first advance made by the Bank; after that, interest on all advances shall accrue and be computed on the principal balance outstanding from time to time under this Note in accordance with the terms hereof until the same is paid in full.

From and after the occurrence of any Default hereunder, and so long as any such Default remains unremedied or uncured thereafter, the Indebtedness outstanding under this Note shall bear interest at a per annum rate of two percent (2%) above the otherwise applicable interest rate hereunder, which interest shall be payable upon demand. In addition to the foregoing, a late payment charge equal to five percent (5%) of each late payment hereunder may be charged on any payment not received by Bank within ten (10) calendar days after the payment due date therefor, but acceptance of payment of any such charge shall not constitute a waiver of any Default hereunder.

In no event shall the interest payable under this Note at any time exceed the maximum rate permitted by law.

The amount and date of each advance hereunder, its applicable interest rate and the amount and date of any repayment shall be noted on Bank’s records, which records shall be conclusive evidence thereof, absent manifest error; provided, however, any failure by Bank to make any such notation, or any error in any such notation, shall not relieve the undersigned of its/their obligations to repay Bank all amounts payable by the undersigned to Bank under or pursuant to this Note, when due in accordance with the terms hereof.

In the event that any payment under this Note becomes due and payable on any day which is not a Business Day, the due date thereof shall be extended to the next succeeding Business Day, and, to the extent applicable, interest shall continue to accrue and be payable thereon during such extension at the rate(s) set forth in this Note.

All payments to be made by the undersigned to Bank under or pursuant to this Note shall be in immediately available United States funds, without setoff or counterclaim, and in the event that any payments submitted hereunder are in funds not available until collected, said payments shall continue to bear interest until collected.

The undersigned may prepay all or part of the outstanding balance of any Indebtedness hereunder at any time without premium or penalty. Any prepayment hereunder shall also be accompanied by the payment of all accrued and unpaid interest on the amount so prepaid.

If any Change in Law shall (a) subject Bank to any tax, duty or other charge with respect to this Note or any Indebtedness hereunder, or shall change the basis of taxation of payments to Bank of the principal of or interest under this Note or any other amounts due under this Note in respect thereof (except for changes in the rate of tax on the overall net income of Bank imposed by the jurisdiction in which Bank’s principal executive office is located); or (b) impose, modify or deem applicable any reserve (including, without limitation, any imposed by the Board of Governors of the Federal Reserve System), special deposit or similar requirement against assets of, deposits with or for the account of, or credit extended by Bank, or shall impose on Bank or the foreign exchange and interbank markets any other condition affecting this Note or the Indebtedness hereunder; and the result of any of the foregoing is to increase the cost to Bank of maintaining any part of the Indebtedness hereunder or to reduce the amount of any sum received or receivable by Bank under this Note by an amount deemed by the Bank to be material, then the undersigned shall pay to Bank, within fifteen (15) days of the undersigned’s receipt of written notice from Bank demanding such compensation, such additional amount or amounts as will compensate Bank for such increased cost or reduction.  A certificate of Bank, prepared in good faith and in reasonable detail by Bank and submitted by Bank to the undersigned, setting forth the basis for determining such additional amount or amounts necessary to compensate Bank shall be conclusive and binding for all purposes, absent manifest error.

In the event that any Change in Law affects or would affect the amount of capital required or expected to be maintained by Bank (or any corporation controlling Bank), and Bank determines that the amount of such capital is increased by or based upon the existence of any obligations of Bank hereunder or the maintaining of any Indebtedness hereunder, and such increase has the effect of reducing the rate of return on Bank’s (or such controlling corporation’s) capital as a consequence of such obligations or the maintaining of such Indebtedness hereunder to a level below that which Bank (or such controlling corporation) could have achieved but for such circumstances (taking into consideration its policies with respect to capital adequacy), then the undersigned shall pay to Bank, within fifteen (15) days of the undersigned’s receipt of written notice from Bank demanding such compensation, additional amounts as are sufficient to compensate Bank (or such controlling corporation) for any increase in the amount of capital and reduced rate of return which Bank reasonably determines to be allocable to the existence of any obligations of the Bank hereunder or to maintaining any Indebtedness hereunder.  A certificate of Bank as to the amount of such compensation, prepared in good faith and in reasonable detail by the Bank and submitted by Bank to the undersigned, shall be conclusive and binding for all purposes absent manifest error.

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This Note and any other indebtedness and liabilities of any kind of the undersigned (or any of them) to the Bank, and any and all modifications, renewals or extensions of it, whether joint or several, contingent or absolute, now existing or later arising, and however evidenced and whether incurred voluntarily or involuntarily, known or unknown, or originally payable to the Bank or to a third party and subsequently acquired by Bank, including, without limitation, any late charges; loan fees or charges; overdraft indebtedness; costs incurred by Bank in establishing, determining, continuing or defending the validity or priority of any security interest, pledge or other lien or in pursuing any of its rights or remedies under any loan document (or otherwise) or in connection with any proceeding involving the Bank as a result of any financial accommodation to the undersigned (or any of them); and reasonable costs and expenses of attorneys and paralegals, whether inside or outside counsel is used, and whether any suit or other action is instituted, and to court costs if suit or action is instituted, and whether any such fees, costs or expenses are incurred at the trial court level or on appeal, in bankruptcy, in administrative proceedings, in probate proceedings or otherwise (collectively “Indebtedness”) are secured by and the Bank is granted a security interest in and lien upon all items deposited in any account of any of the undersigned with the Bank and by all proceeds of these items (cash or otherwise), all account balances of any of the undersigned from time to time with the Bank, by all property of any of the undersigned from time to time in the possession of the Bank and by any other collateral, rights and properties described in each and every deed of trust, mortgage, security agreement, pledge, assignment and other security or collateral agreement which has been, or will at any time(s) later be, executed by any (or all) of the undersigned to or for the benefit of the Bank (collectively “Collateral”). Notwithstanding the above, (i) to the extent that any portion of the Indebtedness is a consumer loan, that portion shall not be secured by any deed of trust or mortgage on or other security interest in any of the undersigned’s principal dwelling or in any of the undersigned’s real property which is not a purchase money security interest as to that portion, unless expressly provided to the contrary in another place, or (ii) if the undersigned (or any of them) has (have) given or give(s) Bank a deed of trust or mortgage covering California real property, that deed of trust or mortgage shall not secure this Note or any other indebtedness of the undersigned (or any of them), unless expressly provided to the contrary in another place.

If (a) the undersigned (or any of them) or any guarantor under a guaranty of all or part of the Indebtedness (“guarantor”) (i) fail(s) to pay this Note or any of the Indebtedness when due, by maturity, acceleration or otherwise, or fail(s) to pay any Indebtedness owing on a demand basis upon demand; or (ii) fail(s) to comply with any of the terms or provisions of any agreement between the undersigned (or any of them) or any guarantor and the Bank, and any such failure continues beyond any applicable grace or cure period, if any, expressly provided with respect thereto; or (iii) become(s) insolvent or the subject of a voluntary or involuntary proceeding in bankruptcy, or a reorganization, arrangement or creditor composition proceeding, (if a business entity) cease(s) doing business as a going concern, (if a natural person) die(s) or become(s) incompetent, (if a partnership) dissolve(s) or any general partner of it dies, becomes incompetent or becomes the subject of a bankruptcy proceeding, or (if a corporation or a limited liability company) is the subject of a dissolution, merger or consolidation; or (b) any warranty or representation made by any of the undersigned or any guarantor in connection with this Note or any of the Indebtedness shall be discovered to be untrue or incomplete; or (c) there is any termination, notice of termination, or breach of any guaranty, pledge, collateral assignment or subordination agreement relating to all or any part of the Indebtedness; or (d) there is any failure by any of the undersigned or any guarantor to pay when due any of its indebtedness (other than to the Bank) or in the observance or performance of any term, covenant or condition in any document evidencing, securing or relating to such indebtedness; or (e) the Bank deems itself insecure, believing that the prospect of payment or performance of this Note or any of the Indebtedness is impaired or shall fear deterioration, removal or waste of any of the Collateral; or (f) there is filed or issued a levy or writ of attachment or garnishment or other like judicial process upon the undersigned (or any of them) or any guarantor or any of the Collateral, including, without limit, any accounts of the undersigned (or any of them) or any guarantor with the Bank; then the Bank, upon the occurrence and at any time during the continuance or existence of any of these events (each a “Default”), may, at its option and without prior notice to the undersigned (or any of them), cease advancing money or extending credit to or for the benefit of the undersigned (or any of them) under this Note or any other agreement between the undersigned (or any of them) and Bank, terminate this Note as to any future liability or obligation of Bank, but without affecting Bank’s rights and security interests in any Collateral and the Indebtedness of the undersigned to Bank, declare any or all of the Indebtedness to be immediately due and payable (notwithstanding any provisions contained in the evidence of it to the contrary), sell or liquidate all or any portion of the Collateral, set off against the Indebtedness any amounts owing by the Bank to the undersigned (or any of them), charge interest at the default rate provided in the document evidencing the relevant Indebtedness and exercise any one or more of the rights and remedies granted to the Bank by any agreement with the undersigned (or any of them) or given to it under applicable law.  In addition, if this Note is secured by a deed of trust or mortgage covering real property, then the trustor or mortgagor shall not mortgage or pledge the mortgaged premises as security for any other indebtedness or obligations.  This Note, together with all other indebtedness secured by said deed of trust or mortgage, shall become due and payable immediately, without notice, at the option of the Bank, (a) if said trustor or mortgagor shall mortgage or pledge the mortgaged premises for any other indebtedness or obligations or shall convey, assign or transfer the mortgaged premises by deed, installment sale contract or other instrument, or (b) if the title to the mortgaged premises shall become vested in any other person or party in any manner whatsoever, or (c) if there is any disposition (through one or more transactions) of legal or beneficial title to a controlling interest of said trustor or mortgagor.

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The undersigned authorize(s) the Bank to charge any account(s) of the undersigned (or any of them) with the Bank for any and all sums due hereunder when due; provided, however, that such authorization shall not affect any of the undersigned’s obligation to pay to the Bank all amounts when due, whether or not any such account balances that are maintained by the undersigned with the Bank are insufficient to pay to the Bank  any amounts when due, and to the extent that such account balances are insufficient to pay to the Bank all such amounts, the undersigned shall remain liable for any deficiencies until paid in full.

If this Note is signed by two or more parties (whether by all as makers or by one or more as an accommodation party or otherwise), the obligations and undertakings under this Note shall be that of all and any two or more jointly and also of each severally. This Note shall bind the undersigned, and the undersigned’s respective heirs, personal representatives, successors and assigns.

The undersigned waive(s) presentment, demand, protest, notice of dishonor, notice of demand or intent to demand, notice of acceleration or intent to accelerate, and all other notices, and agree(s) that no extension or indulgence to the undersigned (or any of them) or release, substitution or nonenforcement of any security, or release or substitution of any of the undersigned, any guarantor or any other party, whether with or without notice, shall affect the obligations of any of the undersigned. The undersigned waive(s) all defenses or right to discharge available under Section 3605 of the California Uniform Commercial Code and waive(s) all other suretyship defenses or right to discharge. The undersigned agree(s) that the Bank has the right to sell, assign, or grant participations or any interest in, any or all of the Indebtedness, and that, in connection with this right, but without limiting its ability to make other disclosures to the full extent allowable, the Bank may disclose all documents and information which the Bank now or later has relating to the undersigned or the Indebtedness.  The undersigned agree(s) that the Bank may provide information relating to this Note or relating to the undersigned to the Bank’s parent, affiliates, subsidiaries and service providers.

The undersigned agree(s) to pay or reimburse to Bank, or any other holder or owner of this Note, on demand, any and all costs and expenses of Bank (including, without limit, court costs, legal expenses and reasonable attorneys’ fees, whether inside or outside counsel is used, whether or not suit is instituted, and, if suit is instituted, whether at the trial court level, appellate level, in a bankruptcy, probate or administrative proceeding or otherwise ) incurred in connection with the preparation, execution, delivery, amendment, administration, and performance of this Note and the related documents, or incurred in collecting or attempting to collect this Note or the Indebtedness, or incurred in any other matter or proceeding relating to this Note or the Indebtedness.

The undersigned acknowledge(s) and agree(s) that there are no contrary agreements, oral or written, establishing a term of this Note and agree(s) that the terms and conditions of this Note may not be amended, waived or modified except in a writing signed by an officer of the Bank expressly stating that the writing constitutes an amendment, waiver or modification of the terms of this Note. As used in this Note, the word “undersigned” means, individually and collectively, each maker, accommodation party, endorser and other party signing this Note in a similar capacity. If any provision of this Note is unenforceable in whole or part for any reason, the remaining provisions shall continue to be effective. THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF CALIFORNIA, WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES.

For the purposes of this Note, the following terms have the following meanings:

“Applicable Margin” means one-quarter percent (0.25%) per annum.

“Business Day” means any day, other than a Saturday, Sunday or any other day designated as a holiday under Federal or applicable State statute or regulation, on which Bank is open for all or substantially all of its domestic and international business (including dealings in foreign exchange) in San Francisco, California.

“Change in Law” means the occurrence, after the date hereof, of any of the following: (i) the adoption or introduction of, or any change in any applicable law, treaty, rule or regulation (whether domestic or foreign) now or hereafter in effect and whether or not applicable to Bank on such date, or (ii) any change in interpretation, administration or implementation thereof of any such law, treaty, rule or regulation by any Governmental Authority, or (iii) the issuance, making or implementation by any Governmental Authority of any interpretation, administration, request, regulation, guideline, or directive (whether or not having the force of law), including any risk-based capital guidelines.  For purposes of this definition, (x) a change in law, treaty, rule, regulation, interpretation, administration or implementation shall include, without limitation, any change made or which becomes effective on the basis of a law, treaty, rule, regulation, interpretation, administration or implementation then in force, the effective date of which change is delayed by the terms of such law, treaty, rule, regulation, interpretation, administration or implementation, and (y) the Dodd-Frank Wall Street Reform and Consumer Protection Act (Pub. L. 111-203, H.R. 4173) and all requests, rules, regulations, guidelines, interpretations or directives promulgated thereunder or issued in connection therewith shall be deemed to be a “Change in Law”, regardless of the date enacted, adopted, issued or promulgated, whether before or after the date hereof, and (z) all requests, rules, guidelines or directives promulgated by the Bank for International Settlements, the Basel Committee on Banking Supervision (or any successor or similar authority) or the United States regulatory authorities, in each case pursuant to Basel III, shall each be deemed to be a “Change in Law”, regardless of the date enacted, adopted, issued or implemented.

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“Governmental Authority” means the government of the United States of America or any other nation, or of any political subdivision thereof, whether state or local, and any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government (including, without limitation, any supranational bodies such as the European Union or the European Central Bank).

“Prime Rate” means the per annum interest rate established by Bank as its prime rate for its borrowers, as such rate may vary from time to time, which rate is not necessarily the lowest rate on loans made by Bank at any such time.

No delay or failure of Bank in exercising any right, power or privilege hereunder shall affect such right, power or privilege, nor shall any single or partial exercise thereof preclude any further exercise thereof, or the exercise of any other power, right or privilege.  The rights of Bank under this Note are cumulative and not exclusive of any right or remedies which Bank would otherwise have, whether by other instruments or by law.

THE MAXIMUM INTEREST RATE SHALL NOT EXCEED THE HIGHEST APPLICABLE USURY CEILING.

THE UNDERSIGNED AND THE BANK, BY ACCEPTANCE OF THIS NOTE, ACKNOWLEDGE THAT THE RIGHT TO TRIAL BY JURY IS A CONSTITUTIONAL ONE, BUT THAT IT MAY BE WAIVED UNDER CERTAIN CIRCUMSTANCES.  TO THE EXTENT PERMITTED BY LAW, EACH PARTY, AFTER CONSULTING (OR HAVING HAD THE OPPORTUNITY TO CONSULT) WITH COUNSEL OF THEIR CHOICE, KNOWINGLY AND VOLUNTARILY, AND FOR THEIR MUTUAL BENEFIT, WAIVES ANY RIGHT TO TRIAL BY JURY IN THE EVENT OF LITIGATION REGARDING THE PERFORMANCE OR ENFORCEMENT OF, OR IN ANY WAY RELATED TO, THIS NOTE OR THE INDEBTEDNESS.

This Note amends, restates, supersedes and replaces that certain Master Revolving Note dated February 5, 2014, in the principal amount of Twenty Million Dollars ($20,000,000.00) made by the undersigned payable to Bank (the “Prior Note”); provided, however, (i) the execution and delivery by the undersigned of this Note shall not, in any manner or circumstance, be deemed to be a payment of, a novation of or to have terminated, extinguished or discharged any of the undersigned’s indebtedness evidenced by the Prior Note, all of which indebtedness shall continue under and shall hereinafter be evidenced and governed by this Note, and (ii) all collateral and guaranties securing or supporting the Prior Note shall continue to secure and support this Note.

This Note is secured by, among other collateral, deeds of trust (“Deeds of Trust”), encumbering real property located in California and Arizona.  Each of the Deeds of Trust securing the indebtedness evidenced by this Note contains the following provision:  “That should Trustor sell, convey, transfer, dispose of or further encumber the Trust Estate or any part thereof or any interest therein or enter into a lease covering all or any portion thereof or an undivided interest therein, either voluntarily, involuntarily or otherwise, or enter into an agreement so to do, without the prior written consent of Beneficiary being first had and obtained, then Beneficiary may, at its option, declare all sums secured hereby immediately due and payable.  Consent to one such transaction shall not be deemed to be a waiver of the right to require such consent to future or successive transactions.”

This Note is dated and shall be effective as of the date set forth above.

BORROWER:

OWENS REALTY MORTGAGE, INC.,

a Maryland corporation

By: __________________________________________

William C. Owens

President

ACKNOWLEDGED AND AGREED:

CALIFORNIA BANK & TRUST

By: _________________________________

          Thomas C. Paton, Jr.

          Senior Vice President and Manager

Borrower’s Address:  2221 Olympic Boulevard, Walnut Creek, California 94595

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For Bank Use Only			CCAR #
LOAN OFFICER INITIALS	LOAN GROUP NAME	BASE RATE INDEX	OBLIGOR NAME Owens Realty Mortgage, Inc.
LOAN OFFICER I.D. NO.	LOAN GROUP NO.	OBLIGOR NO.	NOTE NO.	AMOUNT $20,000,000.00

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EX-10.4

AMENDED AND RESTATED

ADVANCE FORMULA AGREEMENT

This Amended and Restated Advance Formula Agreement (the “Agreement”) is entered into as of April 16, 2015, by and among the financial institutions from time to time signatory hereto (individually, a “Lender” and collectively, the “Lenders”), California Bank & Trust, as Administrative Agent for the Lenders (in such capacity, the “Agent”), and Owens Realty Mortgage, Inc., a Maryland corporation (“Borrower”). The Lenders are California Bank & Trust and First Bank and the terms “Lender” and “Lenders” includes Agent in its capacity as provider of Swing Line Loans.

Concurrent herewith, Borrower has executed and delivered unto (a) California Bank & Trust (in its capacity as a lender), that certain Amended and Restated Master Revolving Note dated as of the date hereof, made in the principal amount of Twenty Million Dollars ($20,000,000.00) and (b) First Bank (in its capacity as a lender), that certain Master Revolving Note dated as of the date hereof, made in the principal amount of Ten Million Dollars ($10,000,000.00) (each as the same may be amended, modified, supplemented, extended, renewed, restated, substituted and/or replaced from time to time, and whether in a greater or lesser amount, the “Master Revolving Notes”).

Borrower’s liabilities, obligations and indebtedness under or pursuant to the Master Revolving Notes are secured pursuant to certain collateral documents, including, without limit, that document entitled Amended and Restated Security Agreement, those documents entitled Deed of Trust, Security Agreement and Fixture Filing (with Assignment of Rents and Leases), and those documents entitled Pledge Agreement (Real Property Secured Note) or Amended and Restated Pledge Agreement (Real Property Secured Note), each executed by Borrower with or for the benefit of Agent, for and on behalf of Lenders, and delivered to Agent (as the same may be amended, modified, supplemented, extended, renewed, restated, substituted and/or replaced from time to time, and together with other documents that may now or hereafter constitute or evidence a grant of a security interest by Borrower in favor of Agent, for and on behalf of Lenders. the “Collateral Agreements”).

This Agreement amends and restates in its entirety, without novation, that certain Advance Formula Agreement dated February 5, 2014 by and between California Bank & Trust and Borrower, and any indebtedness outstanding thereunder shall be deemed to be outstanding under this Agreement.

1.   DEFINITIONS

A.             APPRAISED VALUE.  “Appraised Value” means the “as-is” market value of real property, as determined by Agent from time to time using a reasonable and appropriate method which (i) conforms to then-current regulatory requirements, (ii) is determined by Agent to be reasonable and appropriate under the circumstances, and (iii) takes into account then-current market conditions, including vacancy factors, rental rates and concessions.

B.             ELIGIBLE LOAN NOTE. "Eligible Loan Note" means a Loan Note (as herein defined) acquired by Borrower* in the ordinary course of Borrower's business which meets each of the following requirements:

i.   The Loan Note is a promissory note payable to the order of Borrower;

ii.   The Loan Note is a valid, legally enforceable obligation of the maker of the Loan Note to Borrower, is not subject to any offset, counterclaim or other defense on the part of such maker or any claim on the part of such maker denying liability thereunder in whole or in part;

iii.   The outstanding principal balance owed on the Loan Note does not exceed Ten Million Dollars ($10,000,000.00) unless Agent in its sole and absolute discretion agrees otherwise;

iv.   The Loan Note is secured by a perfected first priority deed of trust or mortgage on real property located in the Western United States, by a perfected first priority assignment of rents and leases on such real property, and by a perfected first priority security interest in the improvements and personal property affixed to, attached to or located on such real property, and is not subject to a deed of trust/mortgage or other lien except in favor of Borrower;

v.   Borrower has provided to Agent such information and documents about the environmental condition of the real property subject to the deed of trust or mortgage that secures the Loan Note as Agent has requested, and Agent is satisfied with the environmental condition of the real property, in its sole and absolute discretion;

vi.   All payments payable under the Loan Note are either current or not more than 60 days past due if the Loan Note has not yet matured or, if the Loan Note has matured, are not more than 90 days past due;

vii.   All property taxes on the real property that secures the Loan Note have been paid current;

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viii.   Insurance, in type and amount acceptable to Agent, is in effect for the real property that secures the Loan Note, for which Borrower, Agent and Lenders are each named as loss payee and/or additional insured, as applicable;

ix.   Borrower has received title insurance, from a title insurance company and in type and amount acceptable to Agent, insuring Borrower’s interest in the deed of trust/mortgage and the real property that is the subject of the deed of trust/mortgage, and the title insurance policy states that successors in ownership of the indebtedness secured by the deed of trust/mortgage are also insureds;

x.   The ratio of (a) the outstanding principal balance of the Loan Note to (b) the then-current Appraised Value of the real property that secures the Loan Note is less than or equal to 75%;

xi.   The maker of the Loan Note is not an officer, employee, partner, joint venture, agent, subsidiary or affiliate of Borrower;

xii.   None of the following has occurred with respect to the maker of the Loan Note: (a) the maker, or any partner of the maker, has died; (b) the dissolution, liquidation, termination of existence, insolvency or business failure of the maker has occurred, (c) the appointment of a receiver for any part of the property of the maker has occurred, (d) an assignment for the benefit of creditors, the filing of a petition in bankruptcy, or the commencement of any proceeding under any bankruptcy or insolvency laws by or against the maker has occurred, or (e) Borrower or Agent has received notice of the imminent occurrence of any of the foregoing with respect to such maker;

xiii.   The Loan Note strictly complies with all Borrower’s representations and warranties to Agent and Lenders set forth in this Agreement, the Collateral Agreements and any other agreement(s) between Borrower and Agent or Borrower and Lenders or made by Borrower for the benefit of Agent and/or Lenders;

xiv.   Borrower has executed and delivered to Agent a Pledge Agreement (Real Property Secured Note), in form and substance satisfactory to Agent, with respect to the Loan Note;

xv.   The original Loan Note, duly endorsed by Borrower in blank, has been delivered by Borrower to Agent;

xvi.   A Collateral Assignment of Deed of Trust (or mortgage, as the case may be), duly executed and acknowledged in form acceptable to Agent, has been delivered by Borrower to Agent, which Agent may, in its sole and absolute discretion, record with the appropriate Recorder’s office;

xvii.   The Loan Note does not evidence or reflect financing made for any of the following purposes, and the loan was not used for any of the following purposes:  a land loan, a single purpose property loan, an acquisition and development loan or a construction loan;

xviii.   The Loan Note is accepted by Agent as an Eligible Loan Note, in its sole and absolute discretion.

A Loan Note which is at any time an Eligible Loan Note, but which subsequently fails to meet any of the foregoing requirements other than (xviii), shall forthwith cease to be an Eligible Loan Note and shall be immediately deducted from the calculation of Eligible Loan Notes.

*Notwithstanding the foregoing, if Agent in its sole and absolute discretion so agrees, a Note that otherwise qualifies as an Eligible Loan Note may qualify for that designation if it is payable to an entity that is a wholly owned subsidiary of Borrower (“Subsidiary”), Borrower has pledged to Agent, for and on behalf of Lenders, all of its  interest in Subsidiary by a document in form and substance satisfactory to Agent, and the term “Borrower” in each of clauses i, ii, iv, viii, ix, xiv, xv, xvi, above, applies to Subsidiary, each of clauses xi, xii, xiii applies to both Borrower and Subsidiary, and Subsidiary provides such information, documents and certifications to Agent about the Note as Agent may require.  Notwithstanding the foregoing, if Agent in its sole and absolute discretion so agrees in writing, a Loan Note that otherwise qualifies as an Eligible Loan Note may qualify for that designation if there is a lien on the real property that secures the Loan Note that is junior in priority to the deed of trust/mortgage, the assignment of rents and leases, and the security interest that secure the Loan Note.

C.             ELIGIBLE OWNED REAL PROPERTY.  “Eligible Owned Real Property” means “Owned Real Property” (as herein defined) which meets each of the following requirements:

i.   The Owned Real Property is owned by Borrower;**

ii.   The Owned Real Property is located in the western United States;

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iii.   The environmental condition of the Owned Real Property is acceptable to Agent, in its sole and absolute discretion;

iv.   All property taxes on the Owned Real Property have been paid current;

v.   The Owned Real Property is operating, has an occupancy rate of at least 70%, and is generating a positive cash flow before taking into account debt service payable to Agent and Lenders;

vi.   Agent, for and on behalf of Lenders has a perfected first priority deed of trust/mortgage on the Owned Real Property, a perfected first priority assignment of rents and leases on the Owned Real Property, and a perfected first priority security interest in the improvements and personal property affixed to, attached to or located on the Owned Real Property, and none of the foregoing is subject to a deed of trust/mortgage or other lien other than in favor of Agent, for and on behalf of Lenders;

vii.   Insurance, in type and amount acceptable to Agent, is in effect for the Owned Real Property, for which Agent, and each of the Lenders is named as loss payee and/or additional insured, as applicable;

viii.   Agent has received title insurance, from a title insurance company and in type and amount acceptable to Agent, insuring Agent’s and Lenders’ interest in the deed of trust/mortgage on the Owned Real Property;

ix.   Borrower has executed and delivered to Agent an environmental indemnity with respect to the Owned Real Property, in form and substance acceptable to Agent in its sole and absolute discretion;

x.   The Owned Real Property strictly complies with all Borrower’s representations and warranties to Agent and Lenders set forth in this Agreement, the Collateral Agreements and any other agreement(s) between Borrower and Agent and/or Lenders or made by Borrower for the benefit of Agent for and on behalf of Lenders;

xi.   The Owned Real Property is accepted by Agent as Eligible Owned Real Property, in its sole and absolute discretion.

Owned Real Property which is at any time Eligible Owned Real Property, but which subsequently fails to meet any of the foregoing requirements other than (xi), shall forthwith cease to be Eligible Real Property and shall be immediately deducted from the calculation of Eligible Owned Real Property.

**Notwithstanding the foregoing, if Agent in its sole and absolute discretion so agrees, Real Property that otherwise qualifies as Eligible Owned Real Property may qualify for that description if it is payable to an entity that is a wholly owned subsidiary of Borrower (“Subsidiary”), Borrower has pledged to Agent, for and on behalf of all of its interest in Subsidiary by a document in form and substance satisfactory to Agent, the term “Borrower” in clause i applies to Subsidiary, and Subsidiary provides to Agent such information, documents and certifications to Agent about the real property as Agent may require.  Notwithstanding the foregoing, if Agent in its sole and absolute discretion so agrees in writing, Owned Real Property that otherwise qualifies as Eligible Owned Real Property may qualify for that designation if there is a lien on the Owned Real Property that is junior in priority to the deed of trust/mortgage, the assignment of rents and leases, and the security interest in favor of Agent, for and on behalf of Lenders.

D.             FORMULA LOANS. “Formula Loans” means, collectively, loans (including Swing Line Loans), advances and other credit made or extended by Lenders to or in favor of Borrower under or pursuant to and evidenced by the Master Revolving Notes, subject to the terms and conditions of this Agreement, the Master Revolving Notes, the Collateral Agreements and any other agreement(s) among Borrower, Agent and Lenders or by Borrower for the benefit of Agent and Lenders related thereto (as the same may be amended, modified, extended, renewed, restated, substituted and/or replaced from time to time, but excluding any environmental indemnity or guaranty, the “Loan Documents”).

E.             LOAN NOTE. “Loan Note” means a promissory note payable to the order of Borrower, that is secured by a deed of trust or mortgage on real property.

F.             OWNED REAL PROPERTY. “Owned Real property” means real property owned by Borrower.

G.             SWING LINE LOANS.  “Swing Line Loan” means any Formula Loan funded with Agent’s funds, which Loan automatically converts on the following day to a Formula Loan to be settled among Lenders and repaid by Borrower.

2.   ADVANCE FORMULA. For and in consideration of Lenders making the Formula Loans available to Borrower, Borrower warrants and agrees that the aggregate unpaid principal balance of Borrower's indebtedness to Agent and Lenders outstanding under the Formula Loans shall not at any time exceed the Advance Formula. The “Advance Formula” means the lesser of (i) the aggregate face amount of the Master Revolving Notes, or (ii) the sum of the following:

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A.             With respect to each Eligible Loan Note, the lesser of 75% of the outstanding principal balance of that Eligible Loan Note and 50% of the then-current Appraised Value of the real property that secures that Eligible Loan Note; plus

B.             With respect to each Eligible Owned Real Property, 50% of the then-current Appraised Value of that Eligible Owned Real Property.

3.   FORMULA COMPLIANCE. If, at any time, the aggregate unpaid principal balance of Borrower's indebtedness to agent and Lenders outstanding under the Formula Loans exceeds the Advance Formula, Borrower shall immediately pay Agent sums sufficient to reduce the Formula Loans by the amount of such excess, without the necessity of notice or demand by Agent. The foregoing shall not limit, waive or otherwise affect any rights or remedies available to Agent or Lenders, whether under this Agreement, the Master Revolving Notes, the Collateral Agreements, or any other Loan Documents, at law or otherwise.

4.   LOAN FEE.  For and in consideration of First Bank making its portion of the Formula Loans available to Borrower, Borrower agrees to pay Agent, for the benefit of First Bank, a Loan Fee on the $10,000,000 made available by First Bank, in an amount equal to 0.25% per annum of such amount calculated on the number of days elapsing between the execution of this Agreement and the Maturity Date (as defined in the Master Revolving Notes) based on a 365 day year.  The Loan Fee is deemed earned, and immediately due, upon execution of this Agreement by Borrower, Lenders and Agent, and is not refundable.

5.   CERTIFICATES, SCHEDULES, REPORTS, AND RENT ROLLS. Borrower will deliver to Agent from time to time such agings, schedules, certificates, reports, and rent rolls as may be required by the Loan Documents. Borrower will deliver to Agent from time to time such additional schedules, certificates, reports, and rent rolls respecting all or any of the collateral pledged to Agent and Lenders (“Collateral”), the items or amounts received by Borrower in full or partial payment of any of the Collateral, and any goods (the sale or lease of which by Borrower shall have given rise to any of the Collateral) possession of which has been obtained by Borrower, all and as to such extent as Agent may request. Any such aging, schedule, certificate, report, or rent roll shall be executed by a duly authorized officer of Borrower and shall be in such form and detail as Agent may specify.

6.   INSPECTIONS; COMPLIANCE. Borrower shall permit Agent and its designees from time to time to make such inspections and audits, and to obtain such confirmations or other information, with respect to any of the Collateral as Agent is entitled to make or obtain under the Collateral Agreements or other Loan Document(s), and shall reimburse Agent on demand for all costs and expenses incurred by Agent in connection with such inspections and audits. Borrower shall further comply with all of the other terms and conditions of the Collateral Agreements and each of the other Loan Documents. Notwithstanding any of the provisions contained this Agreement or otherwise, Borrower hereby acknowledges and agrees that upon completion of any such inspection or audit Agent shall have the right to modify the percentage of Eligible Loan Notes and the percentage of Eligible Owned Real Property included within the Advance Formula under Section 2 above, based on its review of the results of such inspection or audit.

7.   DEFAULT. Any failure by Borrower to comply with this Agreement shall constitute a default under the Formula Loans and under the Master Revolving Notes, the Collateral Agreements and the Indebtedness, as defined therein, and each of the other Loan Documents, and Agent shall be entitled to exercise any and all rights and remedies available to it as a result of such default, whether under this Agreement, the Master Revolving Notes, the Collateral Agreements, or any other Loan Document(s), at law or otherwise.

8.   AMENDMENTS; WAIVERS; OTHER DOCUMENTS. This Agreement may be amended, modified or terminated only in writing duly executed by Borrower, Agent and Lenders. No delay by Agent or Lenders in requiring Borrower's compliance herewith shall constitute a waiver of such right. The rights granted to Agent and Lenders hereunder are cumulative, and in addition to any other rights Agent and Lenders may have by agreement or under applicable law. This Agreement shall supersede and replace in their entirety any prior advance formula agreements in effect between California Bank & Trust and Borrower. Borrower acknowledges and agrees that the Formula Loans are further subject to the terms and conditions of all other instruments, documents and agreements evidencing, governing, securing or otherwise relating to the Formula Loans.

9.   GOVERNING LAW. This Agreement shall be governed by and construed in accordance with the internal laws of the State of California, without regard to conflict of laws principles.

10.   JURY WAIVER.  BORROWER, AGENT AND EACH LENDER ACKNOWLEDGE THAT THE RIGHT TO TRIAL BY JURY IS A CONSTITUTIONAL ONE, BUT THAT IT MAY BE WAIVED UNDER CERTAIN CIRCUMSTANCES. TO THE EXTENT PERMITTED BY LAW, EACH PARTY, AFTER CONSULTING (OR HAVING HAD THE OPPORTUNITY TO CONSULT) WITH COUNSEL OF THEIR CHOICE, KNOWINGLY AND VOLUNTARILY, AND FOR THEIR MUTUAL BENEFIT WAIVES ANY RIGHT TO TRIAL BY JURY IN THE EVENT OF LITIGATION REGARDING THE PERFORMANCE OR ENFORCEMENT OF, OR IN ANY WAY RELATED TO, THIS AGREEMENT OR THE INDEBTEDNESS.

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IN WITNESS WHEREOF, this Agreement has been duly executed as of the day and year first above written.

AGENT:                                                                                     BORROWER:

CALIFORNIA BANK & TRUST,	OWENS REALTY MORTGAGE, INC.,
As Agent	a Maryland corporation
By:_________________________________	By:_________________________________
Thomas C. Paton, Jr.	William C. Owens
Senior Vice President and Manager	President

LENDERS:

CALIFORNIA BANK & TRUST
By:_________________________________	Address:  456 Montgomery Street, 23rd Floor
Thomas C. Paton, Jr.	San Francisco, CA  94104
Senior Vice President and Manager	Facsimile No.: (415) 875-1456
	Attn: Thomas C. Paton, Jr.

FIRST BANK
By:_________________________________	Address:  456 Montgomery Street, Suite 400
William G. Nelle, Jr.	San Francisco, CA  94104
Senior Vice President	Facsimile No.: (415) 398-7190
	Attn: William G. Nelle, Jr.

ACKNOWLEDGED AND AGREED:

CALIFORNIA BANK & TRUST

By: _______________________________

          Thomas C. Paton, Jr.

          Senior Vice President and Manager

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EX-10.5

SECURITY AGREEMENT

As of April 16, 2015, in connection with that certain Amended and Restated Credit Agreement and Amended and Restated Advance Formula Agreement, each dated April 16, 2015 by and among Owens Realty Mortgage, Inc., a Maryland corporation ("Borrower”), California Bank & Trust, as administrative agent for and on behalf of the Lenders (as defined therein) (in such capacity, the "Agent") and the Lenders party thereto, as amended, modified, extended, renewed or restated from time to time (collectively, the “Credit Agreement”), and for value received, the undersigned Borrower pledges, assigns and grants to Agent for and on behalf of the Lenders, a continuing security interest and lien (any pledge, assignment, security interest or other lien arising hereunder is sometimes referred to herein as a "security interest") in the Collateral (as defined below) to secure payment when due, whether by stated maturity, demand, acceleration or otherwise, of all existing and future Indebtedness (as defined in the Credit Agreement).  Any reference in this Agreement to attorneys' fees shall be deemed a reference to reasonable fees, charges, costs and expenses of counsel and paralegals, whether inside or outside counsel is used, and whether or not a suit or action is instituted, and to court costs if a suit or action is instituted, and whether attorneys' fees or court costs are incurred at the trial court level, on appeal, in a bankruptcy, administrative or probate proceeding or otherwise.  All costs and expenses shall be payable immediately by the Borrower to Agent when incurred by the Agent or Lenders, immediately upon demand, and until paid shall bear interest at the highest per annum rate applicable to any of the Indebtedness, but not in excess of the maximum rate permitted by law.

Borrower further covenants, agrees, represents and warrants as follows:

1.      Collateral. Collateral shall mean all personal property of Borrower including, without limitation, all of the following property Borrower now or later owns or has an interest in, wherever located:

all Accounts Receivable (for purposes of this Agreement, "Accounts Receivable" consists of all accounts, general intangibles (including, without limit, payment intangibles and software), chattel paper (including, without limit, electronic chattel paper and tangible chattel paper), contract rights, deposit accounts, documents (including, without limit, negotiable documents), instruments (including, without limit, promissory notes) and rights to payment evidenced by chattel paper, documents or instruments, health care insurance receivables, commercial tort claims, letters of credit, letter of credit rights, supporting obligations, money and rights to payment for money or funds advanced or sold),

all Inventory (including, without limit, returns and repossessions),

all Equipment and Fixtures,

all investment property (including, without limit, securities, securities entitlements, and financial assets), all securities accounts and all investment property contained therein, including, without limitation, all securities and securities entitlements, financial assets, instruments or other property contained in such securities accounts, and all other investment property, financial assets, instruments or other property at any time held or maintained in such securities accounts, together with all investment property, financial assets, instruments or other property at any time substituted for all or for any part of the foregoing, and all interest, dividends, increases, profits, new investment property, financial assets, instruments or other property and or other increments, distributions or rights of any kind received on account of any of the foregoing, and all other income received in connection therewith,

all Software (for purposes of this Agreement "Software" consists of all (i) computer programs and supporting information provided in connection with a transaction relating to the program, and (ii) computer programs embedded in goods and any supporting information provided in connection with a transaction relating to the program whether or not the program is associated with the goods in such a manner that it customarily is considered part of the goods, and whether or not, by becoming the owner of the goods, a person acquires a right to use the program in connection with the goods, and whether or not the program is embedded in goods that consist solely of the medium in which the program is embedded),

all general intangibles (including, without limit, software) acquired or used in connection with any of the Collateral,

all goods, instruments (including, without limit, promissory notes), documents (including, without limit, negotiable documents), policies and certificates of insurance, deposit accounts, deposits, money, investment property or other property (except real property which is not a fixture) which are now or later in possession or control of Agent, or as to which Agent now or later controls possession by documents or otherwise,

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all additions, attachments, accessions, parts, replacements, substitutions, renewals, interest, dividends, distributions, rights of any kind (including, but not limited to, stock splits, stock rights, voting and preferential rights), products, and all cash and non-cash proceeds of or pertaining to the above, including, without limit, insurance and condemnation proceeds, and cash or other property which were proceeds and are recovered by a bankruptcy trustee or otherwise as a preferential transfer by Borrower, and

all of Borrower’s books and records with respect to any of the foregoing (including, without limit, computer software and the computers and equipment containing said books and records).

In the definition of Collateral, a reference to a type of collateral shall not be limited by a separate reference to a more specific or narrower type of that collateral.

2.    Warranties, Covenants and Agreements. Borrower warrants, covenants and agrees as follows:

2.1 Borrower shall furnish to Agent, in form and at intervals as Agent may request, any information Agent may reasonably request and allow Agent and Lenders to examine, inspect, and copy any of Borrower's books and records. Borrower shall, at the request of Agent, mark its records and the Collateral to clearly indicate the security interest of Agent under this Agreement.

2.2 At the time any Collateral becomes, or is represented to be, subject to a security interest in favor of Agent, Borrower shall be deemed to have warranted that: (a) Borrower is the lawful owner of the Collateral and has the right and authority to subject it to a security interest granted to Agent; (b) except to the extent that Agent has previously consented otherwise in writing, none of the Collateral is subject to any security interest other than that in favor of Agent; (c) except to the extent that Agent has previously consented otherwise in writing, there are no financing statements on file in respect of any of the Collateral, other than in favor of Agent; (d) except to the extent that Agent has previously consented otherwise in writing, no person, other than Agent (or any Lender with Agent’s consent), has possession or control (as defined in the Uniform Commercial Code) of any Collateral of such nature that perfection of a security interest may be accomplished by control; and (e) Borrower acquired its rights in the Collateral in the ordinary course of its business.

2.3 Borrower will keep the Collateral free at all times from all claims, liens, security interests and encumbrances other than those in favor of Agent, except as Agent agrees otherwise in writing.  Borrower will not, without the prior written consent of Agent, sell, transfer or lease, or permit to be sold, transferred or leased, any or all of the Collateral, except for Inventory in the ordinary course of its business and will not return any Inventory to its supplier. Agent, any Lender or their representatives may, at all reasonable times inspect the Collateral and may enter upon all premises where the Collateral is kept or might be located. Borrower shall reimburse Agent for all reasonable costs and expenses incurred by Agent or any Lender in connection with such inspections.  

2.4 Borrower will do all acts and will execute and/or deliver or cause to be executed and/or delivered all writings requested by Agent to establish, maintain and continue an exclusive, perfected and first security interest of Agent in the Collateral. By executing this Agreement and becoming bound by the terms hereof, Borrower expressly authorizes the filing of financing statements and any amendments thereto covering the Collateral, and authorizes Agent or its representatives to take such other actions as may be necessary or appropriate to perfect and maintain Agent’s security interest in the Collateral. Borrower acknowledges and agrees that neither Agent nor Lenders have any obligation to acquire or perfect any lien on or security interest in any asset(s), whether realty or personalty, to secure payment of the Indebtedness, and Borrower is not relying upon assets in which the Agent or any Lender has or may have a lien or security interest for payment of the Indebtedness. In the event that any Collateral, or any of Borrower’s books or records relating to any Collateral, is at any time located or stored at or upon leased premises or with a bailee, warehouseman or other third party, Borrower shall promptly provide written notice thereof to Agent and, upon Agent’s request, cause such lessor, bailee, warehouseman or other third party to execute and deliver unto Agent such documents, instruments or agreements as Agent may reasonably require, in each case in form and substance acceptable to Agent, pursuant to which such lessor, bailee, warehouseman or other third party acknowledges Agent’s security interest in such Collateral and that it is holding such Collateral for the benefit of Agent and permits Agent access to and possession of such Collateral.

2.5 Borrower will pay, within the time that they can be paid without interest or penalty, all taxes, assessments and similar charges which at any time are or may become a lien, charge, or encumbrance upon any Collateral, except to the extent contested in good faith and bonded in a manner satisfactory to Agent. If Borrower fails to pay any of these taxes, assessments, or other charges in the time provided above, Agent has the option (but not the obligation) to do so and Borrower agrees to repay all amounts so expended by Agent or Lenders immediately upon demand, together with interest at the highest lawful default rate which could be charged by Agent or Lenders on any Indebtedness. Any such payments made by Agent or Lenders shall not constitute (a) any agreement by Agent or Lenders to make similar payments in the future, or (b) a waiver by Agent or Lenders of any Event of Default under this Agreement. Agent need not inquire as to, or contest the validity of, any such taxes, assessments and similar charges, and the usual official notice of such taxes, assessments and similar charges shall be conclusive evidence that the same are validly due and owing. Such payments shall constitute Indebtedness secured by this Agreement.

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2.6 Borrower will keep the Collateral in good condition and will protect it from loss, damage, or deterioration from any cause. Borrower has and will maintain at all times (a) with respect to the Collateral, insurance under an "all risk" policy against fire and other risks customarily insured against, and (b) public liability insurance and other insurance as may be required by law or reasonably required by Agent. All of such insurance policies shall be in amount, form and content, and written by companies as may be satisfactory to Agent, and shall contain a lender's loss payable endorsement in favor of and acceptable to Agent. All such policies shall contain a provision whereby they may not be canceled or materially amended except upon thirty (30) days’ prior written notice to Agent.  Borrower will promptly deliver to Agent, at Agent’s request, evidence satisfactory to Agent that such insurance has been so procured and, with respect to casualty insurance, made payable to Agent.  Borrower hereby appoints Agent, or any employee or agent of Agent, as Borrower’s attorney-in-fact, which appointment is coupled with an interest and irrevocable, and authorizes Agent, or any employee or agent of Agent, on behalf of Borrower, to adjust and compromise any loss under said insurance and to endorse any check or draft payable to Borrower in connection with returned or unearned premiums on said insurance or the proceeds of said insurance, and any amount so collected may be applied toward satisfaction of the Indebtedness; provided, however, that Agent shall not be required hereunder so to act. If Borrower fails to maintain satisfactory insurance, Agent has the option (but not the obligation) to do so and Borrower agrees to repay all amounts so expended to Agent immediately upon demand, together with interest at the highest lawful default rate which could be charged by Agent or any Lender on any Indebtedness. Such amounts so expended by Agent or any Lender shall constitute Indebtedness secured by this Agreement.

2.7 On each occasion on which Borrower evidences to Agent the account balances on and the nature and extent of the Accounts Receivable, Borrower shall be deemed to have warranted that, except as otherwise indicated: (a) each of those Accounts Receivable is valid and enforceable without performance by Borrower of any act; (b) each of those account balances are in fact owing; (c) there are no setoffs, recoupments, credits, contra accounts, counterclaims or defenses against any of those Accounts Receivable; (d) as to any Accounts Receivable represented by a note, trade acceptance, draft or other instrument or by any chattel paper or document, the same has/have been endorsed and/or delivered by Borrower to Agent; (e) Borrower has not received with respect to any Account Receivable, any notice of the death of the related account debtor, nor of the dissolution, liquidation, termination of existence, insolvency, business failure, appointment of a receiver for, assignment for the benefit of creditors by, or filing of a petition in bankruptcy by or against, the account debtor; and (f) as to each Account Receivable, except as may be expressly permitted by Agent to the contrary in another document, the account debtor is not an affiliate of Borrower, the United States of America or any department, agency or instrumentality of it, or a citizen or resident of any jurisdiction outside of the United States. Borrower will do all acts and will execute all writings requested by Agent to perform, enforce performance of, and collect all Accounts Receivable. Borrower will deliver to Agent such documents, instruments and other writings evidencing or otherwise relating to the Accounts Receivable as Agent may reasonably request from time to time. Borrower shall neither make nor permit any modification, compromise or substitution for any Account Receivable without the prior written consent of Agent. Agent may at any time and from time to time verify Accounts Receivable directly with account debtors or by other methods acceptable to Agent without notifying Borrower. Borrower agrees, at Agent’s request, to arrange or cooperate with Agent in arranging for verification of Accounts Receivable.

2.8 Borrower at all times shall be in strict compliance with all applicable laws, including, without limit, any laws, ordinances, directives, orders, statutes, or regulations an object of which is to regulate or improve health, safety, or the environment ("Environmental Laws").

2.9 If Agent, acting in its sole discretion, redelivers Collateral to Borrower or Borrower's designee for the purpose of (a) the ultimate sale or exchange thereof; or (b) presentation, collection, renewal, or registration of transfer thereof; or (c) loading, unloading, storing, shipping, transshipping, manufacturing, processing or otherwise dealing with it preliminary to sale or exchange; such redelivery shall be in trust for the benefit of Agent and shall not constitute a release of Agent’s security interest in it or in the proceeds or products of it, unless Agent specifically so agrees in writing. If Borrower requests any such redelivery, Borrower expressly authorizes Agent to file a financing statement in form and substance satisfactory to Agent in respect of such Collateral. Any proceeds of Collateral coming into Borrower's possession as a result of any such redelivery shall be held in trust for Agent and immediately delivered to Agent for application on the Indebtedness. Agent may (in its sole discretion) deliver any or all of the Collateral to Borrower, and such delivery by Agent shall discharge Agent from all liability or responsibility for such Collateral. Agent, at its option, may require delivery of any Collateral to Agent at any time with such endorsements or assignments of the Collateral as Agent may request.

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2.10 At any time and without notice, Agent may, as to any Collateral: (a) cause any or all of such Collateral to be transferred to its name or to the name of its nominees; (b) receive or collect, by legal proceedings or otherwise, all dividends, interest, principal payments and other sums and all other distributions at any time payable or receivable on account of such Collateral, and hold the same as Collateral, or apply the same to the Indebtedness, the manner and distribution of the application to be in the sole discretion of Agent; (c) enter into any extension, subordination, reorganization, deposit, merger or consolidation agreement or any other agreement relating to or affecting such Collateral, and deposit or surrender control of such Collateral, and accept other property in exchange for such Collateral and hold or apply the property or money so received pursuant to this Agreement; and (d) take such actions in its own name or in Borrower's name as Agent, in its sole discretion, deems necessary or appropriate to establish exclusive control (as defined in the Uniform Commercial Code) over any Collateral of such nature that perfection of the Agent’s security interest may be accomplished by control.

2.11 Agent may assign any of the Indebtedness and deliver any or all of the Collateral to its assignee, who then shall have with respect to Collateral so delivered all the rights and powers of Agent under this Agreement, and after that Agent shall be fully discharged from all liability and responsibility with respect to Collateral so delivered.

2.12 Borrower agrees that no security or guarantee now or later held by Agent or any Lender for the payment of any indebtedness, whether from Borrower, any guarantor or otherwise, and whether in the nature of a security interest, pledge, lien, assignment, setoff, suretyship, guaranty, indemnity, insurance or otherwise, shall affect in any manner the security interests or other rights or interests of Agent or Lenders under this Agreement or any of the obligations of Borrower under this Agreement, and Agent, in its sole discretion, without notice to Borrower, may release, exchange, modify, enforce and otherwise deal with any security or guaranty without affecting in any manner the unconditional pledge of Borrower under this Agreement.

        2.13 Borrower shall defend, indemnify and hold harmless Agent, each Lender and each of their employees, agents, shareholders, affiliates, officers, and directors from and against any and all claims, damages, fines, expenses, liabilities or causes of action of whatever kind, including, without limit, consultant fees, legal expenses, and attorneys fees, suffered by any of them as a direct or indirect result of any actual or asserted violation of any law, including, without limit, Environmental Laws, or of any remediation relating to any property required by any law, including, without limit, Environmental Laws, except and to the extent (but only to the extent) caused by Agent’s gross negligence or willful misconduct.  The obligations contained in this Section shall survive termination of this Agreement.

2.14 Borrower delivers this Agreement based solely on Borrower's independent investigation of (or decision not to investigate) the financial condition of Borrower and is not relying on any information furnished by Agent or any Lender. Borrower assumes full responsibility for obtaining any further information concerning the Borrower's financial condition, the status of the Indebtedness or any other matter which the Borrower may deem necessary or appropriate now or later. Borrower waives any duty on the part of Agent and Lenders, and agrees that Borrower is not relying upon nor expecting Agent or any Lender to disclose to Borrower any fact now or later known by Agent or such Lender, whether relating to the operations or condition of Borrower, the existence, liabilities or financial condition of any guarantor of the Indebtedness, the occurrence of any default with respect to the Indebtedness, or otherwise, notwithstanding any effect such fact may have upon Borrower's risk or Borrower's rights against Borrower. Borrower knowingly accepts the full range of risk encompassed in this Agreement, which risk includes, without limit, the possibility that Borrower may incur Indebtedness to Agent or Lenders after the financial condition of Borrower, or Borrower's ability to pay debts as they mature, has deteriorated.

2.15 Borrower agrees that no security or guarantee now or later held by Agent for the payment of any Indebtedness, whether from Borrower, any guarantor, or otherwise, and whether in the nature of a security interest, pledge, lien, assignment, setoff, suretyship, guaranty, indemnity, insurance or otherwise, shall affect in any manner the security interests or other interests granted by Borrower to or in favor of Agent or Lenders under this Agreement, or any obligations of Borrower hereunder or pursuant hereto, and Agent, in its sole discretion, without notice to Borrower, may release, exchange, modify, enforce and otherwise deal with any security or guaranty without affecting in any manner such security interests or other interests of Agent or any such obligations of Borrower under this Agreement.  Borrower acknowledges and agrees that neither Agent nor any Lender have any obligation to acquire or perfect any lien on or security interest in any assets, whether realty or personalty, or to obtain any guaranty to secure payment of the Indebtedness, and Borrower is not relying upon any guaranty which Agent or any Lender has or may have or assets in which Agent or any Lender has or may have a lien or security interest for payment of the Indebtedness.

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2.16 Borrower absolutely, unconditionally, knowingly, and expressly waives:

(a) Notice of: (i) acceptance hereof; (ii) any loans or other financial accommodations made or extended to Borrower or the creation or existence of any Indebtedness; (iii) notice of the amount of the Indebtedness, subject, however, to Borrower’s right to make inquiry of Agent or any Lender to ascertain the amount of the Indebtedness at any reasonable time; and (iv) any default or breach under the terms of any of the Indebtedness; and all other notices (except if such notice is specifically required to be given to Borrower hereunder) and demands to which Borrower might otherwise be entitled.

(b) Its right under Sections 2845 or 2850 of the California Civil Code, or otherwise, to require Agent to institute suit against, or to exhaust any rights and remedies which Agent or any Lender has or may have against, Borrower or any third party, or against any collateral for the Indebtedness provided by Borrower or any third party.  In this regard, Borrower is bound to the payment of all Indebtedness whether now existing or hereafter accruing, as fully as if such Indebtedness were directly owing to Agent by Borrower.  Borrower waives any defense arising by reason of any disability or other defense (other than the defense that the Indebtedness shall have been fully and finally performed and indefeasibly paid) of Borrower or by reason of the cessation from any cause whatsoever of the liability of Borrower in respect thereof.

(c) (i) Any rights to assert against Agent or any Lender any defense (legal or equitable), set-off, counterclaim, or claim which Borrower may now or at any time hereafter have against the Borrower or any other party liable to Agent or any Lender; (ii) any defense, set-off, counterclaim, or claim, of any kind or nature, arising directly or indirectly from the present or future lack of perfection, sufficiency, validity, or enforceability of the Indebtedness or any security therefor; (iii) any defense Borrower has to performance hereunder, and any right Borrower has to be exonerated, provided by Sections 2819, 2822, or 2825 of the California Civil Code, or otherwise, arising by reason of: the impairment or suspension of Agent’s or any Lender’s rights or remedies against Borrower; the alteration by Agent or Lenders of the Indebtedness; any discharge of the Indebtedness by operation of law as a result of Agent’s or any Lender’s intervention or omission; or the acceptance by Agent or any Lender of anything in partial satisfaction of the Indebtedness; (iv) the benefit of any statute of limitations affecting Borrower’s liability hereunder or the enforcement thereof, and any act which shall defer or delay the operation of any statute of limitations applicable to the Indebtedness shall similarly operate to defer or delay the operation of such statute of limitations applicable to Borrower’s liability hereunder.

(d) Any defense arising by reason of or deriving from (i) any claim or defense based upon an election of remedies by Agent or any Lender; or (ii) any election by Agent or the Lenders under the Bankruptcy Code Section 1111(b) to limit the amount of, or any collateral securing, its claim against Borrower.

        2.17 Without notice to or by Borrower, and without affecting or impairing the obligations of Borrower hereunder, Agent may (or authorize Lenders to), by action or inaction:

(a) compromise, settle, extend the duration or the time for the payment of, or discharge the performance of, or may refuse to or otherwise not enforce this Agreement, the Indebtedness, or any part thereof, with respect to Borrower or any other person;

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(b) release Borrower or any other person or grant other indulgences to Borrower or any other person in respect thereof;

(c) amend or modify in any manner and at any time (or from time to time) any documents, instruments or agreements evidencing, governing, securing or otherwise relating to any of the Indebtedness; or

(d) release or substitute any guarantor, if any, of the Indebtedness, or enforce, exchange, release, or waive any security for the Indebtedness or any guaranty of the Indebtedness, or any portion thereof.

        2.18 Agent and Lenders shall have all of the rights to seek recourse against Borrower to the fullest extent provided for herein and the Loan Documents.  No election by Agent to proceed in one form of action or proceeding, or against any party, or on any obligation, shall constitute a waiver of the Agent’s right to proceed in any other form of action or proceeding or against other parties, unless the Agent has expressly waived such right in writing.  Specifically, but without limiting the generality of the foregoing, no action or proceeding by Agent or any Lender under any document or instrument evidencing the Indebtedness shall serve to diminish the liability of the Borrower under this Agreement, except to the extent that Agent and Lenders finally and unconditionally shall have realized indefeasible payment by such action or proceeding.

2.19 Borrower waives all rights and defenses arising out of an election of remedies by the Agent or Lenders.

        2.20 WITHOUT LIMITING THE GENERALITY OF ANY OTHER WAIVER OR OTHER PROVISION SET FORTH IN THIS AGREEMENT, BORROWER HEREBY ABSOLUTELY, KNOWINGLY, UNCONDITIONALLY, AND EXPRESSLY WAIVES AND AGREES NOT TO ASSERT ANY AND ALL BENEFITS OR DEFENSES ARISING DIRECTLY OR INDIRECTLY UNDER ANY ONE OR MORE OF CALIFORNIA CIVIL CODE SECTIONS 2799, 2808, 2809, 2810, 2815, 2819, 2820, 2821, 2822, 2825, 2839, 2845, 2848, 2849, AND 2850, CALIFORNIA UNIFORM COMMERCIAL CODE SECTIONS 3116, 3118, 3119, 3419, 3605, 9610, 9611, 9615, 9617, 9618, 9624, 9625, AND 9627, AND CHAPTER 2 OF TITLE 14 OF PART 4 OF DIVISION 3 OF THE CALIFORNIA CIVIL CODE.

3.    Collection of Proceeds.

3.1 Borrower agrees to collect and enforce payment of all Collateral until Agent shall direct Borrower to the contrary. Immediately upon notice to Borrower by Agent and at all times after that, Borrower agrees to fully and promptly cooperate and assist Agent in the collection and enforcement of all Collateral and to hold in trust for Agent all payments received in connection with Collateral and from the sale, lease or other disposition of any Collateral, all rights by way of suretyship or guaranty and all rights in the nature of a lien or security interest which Borrower now or later has regarding Collateral. Immediately upon and after such notice, Borrower agrees to (a) endorse to Agent and immediately deliver to Agent all payments received on Collateral or from the sale, lease or other disposition of any Collateral or arising from any other rights or interests of Borrower in the Collateral, in the form received by Borrower without commingling with any other funds, and (b) immediately deliver to Agent all property in Borrower's possession or later coming into Borrower's possession through enforcement of Borrower's rights or interests in the Collateral. Borrower irrevocably authorizes Agent or any Agent employee or agent to endorse the name of Borrower upon any checks or other items which are received in payment for any Collateral, and to do any and all things necessary in order to reduce these items to money. Agent shall have no duty as to the collection or protection of Collateral or the proceeds of it, nor as to the preservation of any related rights, beyond the use of reasonable care in the custody and preservation of Collateral in the possession of Agent. Borrower agrees to take all steps necessary to preserve rights against prior parties with respect to the Collateral. Nothing in this Section 3.1 shall be deemed a consent by Agent or Lenders to any sale, lease or other disposition of any Collateral.

3.2 Borrower agrees that immediately upon Agent’s request (if an Event of Default has occurred and then exists), the Indebtedness shall be on a "remittance basis" in accordance with the following. In connection therewith, Borrower shall at its sole expense establish and maintain (and Agent, at Agent’s option, may establish and maintain at Borrower's expense):

(a) A United States Post Office lock box (the "Lock Box"), to which Agent shall have exclusive access and control. Borrower expressly authorizes Agent, from time to time, to remove contents from the Lock Box, for disposition in accordance with this Agreement. Borrower agrees to notify all account debtors and other parties obligated to Borrower that all payments made to Borrower (other than payments by electronic funds transfer) shall be remitted, for the credit of Borrower, to the Lock Box, and Borrower shall include a like statement on all invoices; and

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(b) A non-interest bearing deposit account with Agent which shall be titled as designated by Agent (the "Cash Collateral Account") to which Agent shall have exclusive access and control. Borrower agrees to notify all account debtors and other parties obligated to Borrower that all payments made to Borrower by electronic funds transfer shall be remitted to the Cash Collateral Account, and Borrower, at Agent’s request, shall include a like statement on all invoices. Borrower shall execute all documents and authorizations as required by Agent to establish and maintain the Lock Box and the Cash Collateral Account.

3.3 All items or amounts which are remitted to the Lock Box, to the Cash Collateral Account, or otherwise delivered by or for the benefit of Borrower to Agent on account of partial or full payment of, or with respect to, any Collateral shall, at Agent’s option, (a) be applied to the payment of the Indebtedness, whether then due or not, in such order or at such time of application as Agent may determine in its sole discretion, or, (b) be deposited to the Cash Collateral Account. Borrower agrees that neither Agent nor Lenders shall be liable for any loss or damage which Borrower may suffer as a result of Agent’s processing of items or its or any Lender’s exercise of any other rights or remedies under this Agreement, including without limitation indirect, special or consequential damages, loss of revenues or profits, or any claim, demand or action by any third party arising out of or in connection with the processing of items or the exercise of any other rights or remedies under this Agreement. Borrower agrees to indemnify and hold Agent and each Lender harmless from and against all such third party claims, demands or actions, and all related expenses or liabilities, including, without limitation, attorney's fees, except to the extent (but only to the extent) caused by Agent’s gross negligence or willful misconduct.

4. Defaults, Enforcement and Application of Proceeds.

4.1 The occurrence or existence of any of the following conditions or events shall constitute an "Event of Default" under this Agreement:

(a) Any failure to pay the Indebtedness when due, or such portion of it as may be due, by acceleration or otherwise; or

(b) Any failure or neglect to comply with, or breach of or default under, any term or provision of this Agreement or any of the Loan Documents; or any failure or neglect to comply with, or breach of or default under, any term or provision of any other agreement or commitment between Borrower or any guarantor of any of the Indebtedness ("Guarantor") and Agent or any Lender, and any such failure, neglect, breach or default continues beyond any applicable grace or cure period (if any) expressly provided with respect thereto; or

(c) Any warranty, representation, financial statement, or other information made, given or furnished to Agent or any Lender by or on behalf of Borrower or any Guarantor shall be, or shall prove to have been, false or materially misleading when made, given, or furnished; or

(d) Any loss, theft, substantial damage or destruction to or of any Collateral, or the issuance or filing of any attachment, levy, garnishment or the commencement of any proceeding in connection with any Collateral or of any other judicial process of, upon or in respect of Borrower, any Guarantor, or any Collateral; or

(e) Sale or other disposition by Borrower or any Guarantor of any substantial portion of its assets or property or voluntary suspension of the transaction of business by Borrower or any Guarantor, or death, dissolution, termination of existence, merger, consolidation, insolvency, business failure, or assignment for the benefit of creditors of or by Borrower or any Guarantor; or commencement of any proceedings under any state or federal bankruptcy or insolvency laws or laws for the relief of debtors by or against Borrower or any Guarantor; or the appointment of a receiver, trustee, court appointee, sequestrator or otherwise, for all or any part of the property of Borrower or any Guarantor; or

(f) Agent deems the margin of Collateral insufficient or itself insecure, in good faith believing that the prospect of payment or performance of the Indebtedness or performance of this Agreement is impaired or shall fear deterioration, removal, or waste of Collateral; or

(g) Any default or event of default shall occur under any instrument, agreement or other document evidencing, securing or otherwise relating to any of the Indebtedness.

4.2 Upon the occurrence and at any time during the continuance or existence of any Event of Default, Agent may at its discretion and without prior notice to Borrower declare any or all of the Indebtedness to be immediately due and payable, and shall have and may exercise any right or remedy available to it including, without limitation, any one or more of the following rights and remedies:

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(a) Exercise all the rights and remedies upon default, in foreclosure and otherwise, available to secured parties under the provisions of the Uniform Commercial Code and other applicable law;

(b) Institute legal proceedings to foreclose upon the lien and security interest granted by this Agreement, to recover judgment for all amounts then due and owing as Indebtedness, and to collect the same out of any Collateral or the proceeds of any sale of it;

(c) Institute legal proceedings for the sale, under the judgment or decree of any court of competent jurisdiction, of any or all Collateral; and/or

(d) Personally or by agents, attorneys, or appointment of a receiver, enter upon any premises where Collateral may then be located, and take possession of all or any of it and/or render it unusable; and without being responsible for loss or damage to such Collateral, hold, operate, sell, ship, reclaim, recover, store, finish, maintain, repair, lease, or dispose of all or any Collateral at one or more public or private sales, leasings or other dispositions, at places (including, without limit, Borrower’s premises) and times and on terms and conditions as Agent may deem fit, without any previous demand or advertisement; and except as provided in this Agreement, all notice of sale, lease or other disposition, and advertisement, and other notice or demand, any right or equity of redemption, and any obligation of a prospective purchaser or lessee to inquire as to the power and authority of Agent to sell, lease, or otherwise dispose of the Collateral or as to the application by Agent or Lenders of the proceeds of sale or otherwise, which would otherwise be required by, or available to Borrower under, applicable law are expressly waived by Borrower to the fullest extent permitted.

At any sale pursuant to this Section 4.2, whether under the power of sale, by virtue of judicial proceedings or otherwise, it shall not be necessary for Agent, or a public officer under order of a court to have present physical or constructive possession of Collateral to be sold. The recitals contained in any conveyances and receipts made and given by Agent or the public officer to any purchaser at any sale made pursuant to this Agreement shall, to the extent permitted by applicable law, conclusively establish the truth and accuracy of the matters stated (including, without limit, as to the amounts of the principal of and interest on the Indebtedness, the accrual and nonpayment of it and advertisement and conduct of the sale); and all prerequisites to the sale shall be presumed to have been satisfied and performed. Upon any sale of any Collateral, the receipt of the officer making the sale under judicial proceedings or of Agent shall be sufficient discharge to the purchaser for the purchase money, and the purchaser shall not be obligated to see to the application of the money. Any sale of any Collateral under this Agreement shall be a perpetual bar against Borrower with respect to that Collateral. At any sale or other disposition of the Collateral pursuant to this Section 4.2, Agent and Lenders disclaim all warranties which would otherwise be given under the Uniform Commercial Code, including, without limit, a disclaimer of any warranty relating to title, possession, quiet enjoyment or the like, and Agent may communicate these disclaimers to a purchaser at such disposition. This disclaimer of warranties will not render the sale commercially unreasonable. Agent may, in its discretion, bid and purchase any of the Collateral at any sale pursuant to this Section 4.2.

4.3 Borrower shall at the request of Agent, notify the account debtors or obligors of Agent’s security interest in the Collateral and direct payment of it to Agent. Agent may, itself, upon the occurrence and at any time during the continuance or existence of any Event of Default, so notify the account debtors or obligors of Agent’s security interest in the Collateral and direct such account debtors or obligors to make payments directly to Agent. At the request of Agent, whether or not an Event of Default shall have occurred, Borrower shall immediately take such actions as the Agent shall request to establish exclusive control (as defined in the Uniform Commercial Code) by Agent over any Collateral which is of such a nature that perfection of a security interest may be accomplished by control.

4.4 The proceeds of any sale or other disposition of Collateral authorized by this Agreement shall be applied by Agent first upon all expenses authorized by the Uniform Commercial Code and all reasonable attorney fees and legal expenses incurred by Agent or Lenders; the balance of the proceeds of the sale or other disposition shall be applied in the payment of the Indebtedness, first to interest, then to principal, then to remaining Indebtedness and the surplus, if any, shall be paid over to Borrower or to such other person(s) as may be entitled to it under applicable law. Borrower shall remain liable for any deficiency, which it shall pay to Agent immediately upon demand. Borrower agrees that Agent shall be under no obligation to accept any noncash proceeds in connection with any sale or disposition of Collateral unless failure to do so would be commercially unreasonable. If Agent agrees in its sole discretion to accept noncash proceeds (unless the failure to do so would be commercially unreasonable), Agent may ascribe any commercially reasonable value to such proceeds. Without limiting the foregoing, Agent may apply any discount factor in determining the present value of proceeds to be received in the future or may elect to apply proceeds to be received in the future only as and when such proceeds are actually received in cash by Agent.

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4.5 Nothing in this Agreement is intended, nor shall it be construed, to preclude Agent or Lenders from pursuing any other right or remedy provided by law or in equity for the collection of the Indebtedness or for the recovery of any other sum to which Agent or Lenders may be entitled for the breach of this Agreement by Borrower. Nothing in this Agreement shall reduce or release in any way any rights or security interests of Agent contained in any existing agreement between Borrower or any Guarantor and Agent.

4.6 No waiver of default or consent to any act by Borrower shall be effective unless in writing and signed by an authorized officer of Agent. No waiver of any default or forbearance on the part of Agent or any Lender in enforcing any of its rights under this Agreement shall operate as a waiver of any other default or of the same default on a future occasion or of any rights.

4.7 Borrower (a) irrevocably appoints Agent or any agent of Agent (which appointment is coupled with an interest) the true and lawful attorney-in-fact of Borrower (with full power of substitution) in the name, place and stead of, and at the expense of, Borrower and (b) authorizes Agent or any agent of Agent, in its own name, at Borrower's expense, to do any of the following, as Agent, in its sole discretion, deems appropriate:

(i) to demand, receive, sue for, and give receipts or acquittances for any moneys due or to become due on any Collateral and to endorse any item representing any payment on or proceeds of the Collateral;

(ii) to execute and/or file in the name of and on behalf of Borrower all financing statements or other filings deemed necessary or desirable by Agent to evidence, perfect, or continue the security interests granted in this Agreement; and

(iii) to do and perform any act on behalf of Borrower permitted or required under this Agreement.

4.8 Upon the occurrence and at any time during the continuance or existence of an Event of Default, Borrower also agrees, upon request of Agent, to assemble the Collateral and make it available to Agent at any place designated by Agent which is reasonably convenient to Agent and Borrower. Agent may take any and all actions that it deems necessary or appropriate to protect the Collateral and its security interest in the Collateral, and all costs and expenses for the same shall be added to the Indebtedness and shall be payable upon demand. All risks of loss, damage or destruction to the Collateral shall be borne by Borrower.

4.9 The following shall be the basis for any finder of fact's determination of the value of any Collateral which is the subject matter of a disposition giving rise to a calculation of any surplus or deficiency underSection 9.615(f) of the Uniform Commercial Code (as in effect on or after July 1, 2001): (a) the Collateral which is the subject matter of the disposition shall be valued in an "as is" condition as of the date of the disposition, without any assumption or expectation that such Collateral will be repaired or improved in any manner; (b) the valuation shall be based upon an assumption that the transferee of such Collateral desires a resale of the Collateral for cash promptly (but no later than 30 days) following the disposition; (c) all reasonable closing costs customarily borne by the seller in commercial sales transactions relating to property similar to such Collateral shall be deducted, including, without limitation, brokerage commissions, tax prorations, attorney's fees, whether inside or outside counsel is used, and marketing costs; (d) the value of the Collateral which is the subject matter of the disposition shall be further discounted to account for any estimated holding costs associated with maintaining such Collateral pending sale (to the extent not accounted for in (c) above), and other maintenance, operational and ownership expenses; and (e) any expert opinion testimony given or considered in connection with a determination of the value of such Collateral must be given by persons having at least 5 years experience in appraising property similar to the Collateral and who have conducted and prepared a complete written appraisal of such Collateral taking into consideration the factors set forth above. The "value" of any such Collateral shall be a factor in determining the amount of proceeds which would have been realized in a disposition to a transferee other than a secured party, a person related to a secured party or a secondary obligor under Section 9.615(f) of the Uniform Commercial Code.

5. Miscellaneous.

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5.1 Until Agent is advised in writing by Borrower to the contrary, all notices, requests and demands required under this Agreement or by law shall be given to, or made upon, Borrower at the following address:  2221 Olympic Boulevard, Walnut Creek, California 94595.

5.2 Borrower will give Agent not less than ninety (90) days’ prior written notice of all contemplated changes in Borrower's name, location, chief executive office, principal place of business, and/or location of any Collateral, but the giving of this notice shall not cure any Event of Default caused by this change.

5.3 Agent assumes no duty of performance or other responsibility under any contracts contained within the Collateral.

5.4 Agent has the right to sell, assign, transfer, negotiate or grant participations or any interest in, any or all of the Indebtedness and any related obligations, including without limit this Agreement. In connection with the above, but without limiting its ability to make other disclosures to the full extent allowable, Agent may disclose all documents and information which Agent now or later has relating to Borrower, the Indebtedness or this Agreement, however obtained. Borrower further agrees that Agent and Lenders may provide information relating to this Agreement or relating to Borrower or the Indebtedness to Agent’s and each Lender’s parent, affiliates, subsidiaries, and service providers.

5.5 In addition to Agent’s and Lender’s other rights, any indebtedness owing from Agent or any Lender to Borrower (including, without limitation, amounts maintained by Borrower as deposit accounts (as such term is defined in the Uniform Commercial Code) with Agent or a Lender) can be set off and applied by Agent or such Lender (subject to the terms of the Credit Agreement and approval of Agent) on any Indebtedness at any time(s) either before or after maturity or demand without notice to anyone. Any such action shall not constitute (a) acceptance of collateral in discharge of any portion of the Indebtedness, (b) a retention of collateral in satisfaction of an obligation within the meaning of the Uniform Commercial Code, or (c) if the Indebtedness is secured by California real estate, an action under California Code of Civil Procedure 726.

5.6 Borrower, to the extent not expressly prohibited by applicable law, waives any right to require the Agent or any Lender to: (a) proceed against any person or property; (b) give notice of the terms, time and place of any public or private sale of personal property security held fromBorrower or any other person, or otherwise comply with the provisions of Section 9.504 of the Uniform Commercial Code in effect prior to July 1, 2001 or its successor provisions thereafter; or (c) pursue any other remedy in the Agent’s or any Lender’s power. Borrower waives notice of acceptance of this Agreement and presentment, demand, protest, notice of protest, dishonor, notice of dishonor, notice of default, notice of intent to accelerate or demand payment of any Indebtedness, any and all other notices to which the Borrower might otherwise be entitled, and diligence in collecting any Indebtedness, and agrees that the Agent and Lenders may, once or any number of times, modify the terms of any Indebtedness, compromise, extend, increase, accelerate, renew or forbear to enforce payment of any or all Indebtedness, or permit Borrower to incur additional Indebtedness, all without notice to Borrower and without affecting in any manner the unconditional obligation of Borrower under this Agreement. Borrower unconditionally and irrevocably waives each and every defense and setoff of any nature which, under principles of guaranty or otherwise, would operate to impair or diminish in any way the obligation of Borrower under this Agreement, and acknowledges that such waiver is by this reference incorporated into each security agreement, collateral assignment, pledge and/or other document from Borrower now or later securing the Indebtedness, and acknowledges that as of the date of this Agreement no such defense or setoff exists. Borrower ratifies and approves all acts of Agent acting in its capacity as Borrower’s attorney-in-fact under this Agreement.  Neither Agent nor its attorney-in-fact will be liable for any acts or omissions or for any error of judgment or mistake of fact or law.

5.7 Borrower hereby absolutely, unconditionally, knowingly, and expressly waives any and all rights (whether by subrogation, indemnity, reimbursement, or otherwise) to recover from Borrower or any other person any amounts paid or the value of any Collateral given by Borrower pursuant to this Agreement until such time as all of the Indebtedness has been fully paid.

5.8 In the event that applicable law shall obligate Agent to give prior notice to Borrower of any action to be taken under this Agreement, Borrower agrees that a written notice given to Borrower at least ten (10) days before the date of the act shall be reasonable notice of the act and, specifically, reasonable notification of the time and place of any public sale or of the time after which any private sale, lease, or other disposition is to be made, unless a shorter notice period is reasonable under the circumstances (including, without limitation, if the Collateral, or any portion thereof, is perishable or threatens to decline speedily in value). A notice shall be deemed to be given under this Agreement when delivered to Borrower or when placed in an envelope addressed to Borrower and deposited, with postage prepaid, in a post office or official depository under the exclusive care and custody of the United States Postal Service or delivered to an overnight courier. The mailing shall be by overnight courier, certified, or first class mail.

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5.9 Notwithstanding any prior revocation, termination, surrender, or discharge of this Agreement in whole or in part, the effectiveness of this Agreement shall automatically continue or be reinstated, as the case may be, in the event that any payment received or credit given by Agent or any Lender in respect of the Indebtedness is returned, disgorged, or rescinded under any applicable law, including, without limitation, bankruptcy or insolvency laws, in which case this Agreement, shall be enforceable against Borrower as if the returned, disgorged, or rescinded payment or credit had not been received or given by Agent or such Lender, and whether or not Agent or such Lender relied upon this payment or credit or changed its position as a consequence of it.  In the event of continuation or reinstatement of this Agreement, Borrower agrees upon demand by Agent to execute and deliver to Agent those documents which Agent determines are appropriate to further evidence (in the public records or otherwise) this continuation or reinstatement, although the failure of Borrower to do so shall not affect in any way the reinstatement or continuation.

5.10 This Agreement and all the rights and remedies of Agent under this Agreement shall inure to the benefit of Agent’s successors and assigns and to any other holder who derives from Agent title to or an interest in the Indebtedness or any portion of it, and shall bind Borrower and the heirs, legal representatives, successors, and assigns of Borrower. Nothing in this Section 5.10 is deemed a consent by Agent to any assignment by Borrower.

5.11 If there is more than one Borrower, each Borrower agrees that all undertakings, warranties and covenants made by Borrower and all rights, powers and authorities given to or conferred upon Agent are made or given jointly and severally, and each reference to the term Borrower shall mean each and every Borrower a party hereto, individually and collectively, jointly and severally.

5.12 Except as otherwise provided in this Agreement, all terms in this Agreement have the meanings assigned to them in Division 9 (or, absent definition in Division 9, in any other Division) of the Uniform Commercial Code, as those meanings may be amended, supplemented, revised or replaced from time to time. "Uniform Commercial Code" means the California Uniform Commercial Code, as amended, supplemented, revised or replaced from time to time. Notwithstanding the foregoing, the parties intend that the terms used herein which are defined in the Uniform Commercial Code have, at all times, the broadest and most inclusive meanings possible. Accordingly, if the Uniform Commercial Code shall in the future be amended or held by a court to define any term used herein more broadly or inclusively than the Uniform Commercial Code in effect on the date of this Agreement, then such term, as used herein, shall be given such broadened meaning. If the Uniform Commercial Code shall in the future be amended or held by a court to define any term used herein more narrowly, or less inclusively, than the Uniform Commercial Code in effect on the date of this Agreement, such amendment or holding shall be disregarded in defining terms used in this Agreement.

5.13 No single or partial exercise, or delay in the exercise, of any right or power under this Agreement, shall preclude other or further exercise of the rights and powers under this Agreement. The unenforceability of any provision of this Agreement shall not affect the enforceability of the remainder of this Agreement. This Agreement constitutes the entire agreement of Borrower and Agent with respect to the subject matter of this Agreement. No amendment or modification of this Agreement shall be effective unless the same shall be in writing and signed by Borrower and an authorized officer of Agent. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF CALIFORNIA, WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES.

5.14 To the extent that any of the Indebtedness is payable upon demand, nothing contained in this Agreement shall modify the terms and conditions of that Indebtedness nor shall anything contained in this Agreement prevent Agent or Lenders from making demand, without notice and with or without reason, for immediate payment of any or all of that Indebtedness at any time(s), whether or not an Event of Default has occurred.

5.15 Borrower represents and warrants that Borrower's exact name is the name set forth in this Agreement and that it is a corporation organized and existing under the laws of the State of Maryland.  Borrower further represents and warrants the following and agrees that Borrower is, and at all times shall be, located in the following place:   2221 Olympic Boulevard, Walnut Creek, California 94595.

5.16 A carbon, photographic or other reproduction of this Agreement shall be sufficient as a financing statement under the Uniform Commercial Code and may be filed by Agent in any filing office.

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5.17 This Agreement shall be terminated only by the filing of a termination statement in accordance with the applicable provisions of the Uniform Commercial Code.

5.18 Borrower agrees to reimburse the Agent upon demand for any and all costs and expenses (including, without limit, court costs, legal expenses and reasonable attorneys' fees, whether inside or outside counsel is used, whether or not suit is instituted and, if suit is instituted, whether at the trial court level, appellate level, in a bankruptcy, probate or administrative proceeding or otherwise) incurred in enforcing or attempting to enforce this Agreement or any of the duties or obligations of Borrower under this Agreement or in establishing, determining, continuing or defending the validity or priority of Agent’s security interest under this Agreement or in exercising or attempting to exercise any right or remedy under this Agreement or incurred in any other matter or proceeding relating to this Agreement.

5.19 All payments to be made hereunder by Borrower shall be made in lawful money of the United States of America at the time of payment, shall be made in immediately available funds, and shall be made without deduction (whether for taxes or otherwise) or offset.

        5.20 No right or remedy under this Agreement is intended to be exclusive of any other remedy, but each and every right and remedy shall be cumulative and in addition to any and every other right or remedy given under this Agreement, under any other agreement(s) and those provided by law or in equity. No exercise by Agent or any Lender of one right or remedy shall be deemed to be an election. No delay or omission by Agent or Lenders to exercise any right under this Agreement shall impair any such right nor be construed to be a waiver thereof.  No failure on the part of Agent or Lenders to exercise, and no delay in exercising, any right hereunder, shall operate as a waiver thereof; nor shall any single or partial exercise of any right hereunder preclude any other or further exercise thereof or the exercise of any other right.

6. BORROWER AND AGENT ACKNOWLEDGE THAT THE RIGHT TO TRIAL BY JURY IS A CONSTITUTIONAL ONE, BUT THAT IT MAY BE WAIVED UNDER CERTAIN CIRCUMSTANCES. TO THE EXTENT PERMITTED BY LAW, EACH PARTY, AFTER CONSULTING (OR HAVING HAD THE OPPORTUNITY TO CONSULT) WITH COUNSEL OF THEIR CHOICE, KNOWINGLY AND VOLUNTARILY, AND FOR THEIR MUTUAL BENEFIT WAIVES ANY RIGHT TO TRIAL BY JURY IN THE EVENT OF LITIGATION REGARDING THE PERFORMANCE OR ENFORCEMENT OF, OR IN ANY WAY RELATED TO, THIS AGREEMENT OR THE INDEBTEDNESS.

This Agreement amends and restates in its entirety, that certain Security Agreement dated February 5, 2014, made by Borrower in favor of California Bank & Trust.

[Signatures on following page(s)]

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IN WITNESS WHEREOF, Borrower and Agent have executed this Agreement as of the day and year first above written.

BORROWER:

OWENS REALTY MORTGAGE, INC.,

a Maryland corporation

By: ______________________________________

         William C. Owens

         President

CALIFORNIA BANK & TRUST, as Agent

By: ______________________________________

         Thomas C. Paton, Jr.

         Senior Vice President and Manager

ACKNOWLEDGED AND AGREED:

CALIFORNIA BANK & TRUST

By: _______________________________

          Thomas C. Paton, Jr.,

    Senior Vice President and Manager

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EX-10.6

ADDENDUM TO CREDIT AGREEMENT

(Agency Provisions)

THIS ADDENDUM TO CREDIT AGREEMENT (Agency Provisions) (this “Addendum”) is entered into as of April 16, 2015 by and among California Bank & Trust (“Agent”), each lender identified on Schedule 1 attached hereto and made a part hereof (individually, a “Lender” and, collectively, “Lenders”), and Owens Realty Mortgage, Inc., a Maryland corporation (“Borrower”).   The Lenders are California Bank & Trust and First Bank and the terms “Lender” and “Lenders” includes Agent in its capacity as provider of Swing Line Loans.

A.           This Addendum is an addendum to that certain Amended and Restated Credit Agreement, dated as of April 16, 2015 (as amended from time to time, the “Credit Agreement”), among Agent, Lenders, and Borrowerwith respect to a Loan (the “Loan”) in the amount of Thirty Million and No/100 Dollars ($30,000,000) (the “Total Commitment”).  Agent, Lenders and Borrower have also executed other Loan Documents related thereto.

B.           The Pro Rata Share of each Lender in the Loan and the Total Commitment is shown on Schedule 1 attached hereto.

C.           Agent and Lenders desire to set forth their respective interests in the Loan and Loan Documents and their relationship to each other and their agreements regarding the administration, servicing and enforcement of the Loan and the Loan Documents.

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Agent, Lenders and Borrower hereby agree as follows:

1.Definitions.  Capitalized terms used, but not defined, herein shall have the meanings ascribed thereto in the Credit Agreement.  As used in this Addendum, the following terms shall have the designated meanings:

“Advance” shall mean a disbursement under the Loan.

“Agent” is defined in the preamble of this Addendum.

“Borrower” is defined in the preamble of this Addendum.

“Business Day” shall mean any day that Agent is open for the acceptance of bank deposits and other banking business.

“Commitment” means, (a) as to each Lender, the commitment of such Lender to make its Pro Rata Share of the Loan and all Advances with respect thereto in the aggregate amount equal to such Lender’s Commitment, (b) as to all Lenders, the aggregate commitment of all Lenders to make the Loan and all Advances with respect thereto, which aggregate commitment shall be the Total Commitment.

“Lender” and “Lenders” is defined in the preamble of this Addendum.

“Loan” is defined in Recital A.

“Credit Agreement” is defined in Recital A.

“Required Lenders” means Lenders having an aggregate Pro Rata Share in excess of seventy percent (70.00%), subject to the following provisions:  (1) a Lender and its Affiliates are considered a single Lender for purposes of determining whether the Required Lenders have consented to any action; (2) if there is more than one Lender, “Required Lenders” must consist of at least two Lenders; and (3) the commitments of, and portion of the Indebtedness attributable to, any Defaulting Lender (as defined below) shall be excluded for purposes of making a determination of “Required Lenders”.

“Swing Line Loan” means any Advance funded with Agent’s funds, which Advance automatically converts to an Advance of the Loan payable under the Master Revolving Notes to be settled among Lenders as set forth in Section 2 below and repaid by Borrower.

Addendum to Credit Agreement

BN 17891868v4

Page 1

2.Commitment.

(a)Lenders’ Interest in Loan and Total Commitment Subject to the terms of the Credit Agreement, the Master Revolving Notes, this Addendum, and the other Loan Documents, each Lender severally agrees to make the Loan to Borrower during the period from the date of this Agreement until (but excluding) the Maturity Date, not to exceed the amount of the Commitment of such Lender indicated on Schedule 1; provided, however, that such Commitments shall not in the aggregate exceed the Total Commitment.

(b)Swing Line Loans; Settlement.

(i)To fulfill any request for a Loan hereunder, Agent may in its sole and absolute discretion advance Swing Line Loans to Borrowers through one (1) day prior to the Maturity Date, up to an aggregate outstanding amount of $5,000,000.  Swing Line Loans shall convert to an Advance under the Loan on the following business day and will constitute an Advance under the Loan for all purposes, except that payments thereon shall be made to Agent for its own account until Lenders have funded their Pro Rata Share therein as provided in (ii) below.

(ii)Settlement of Swing Line Loans, among Lenders and Agent shall take place on a date determined from time to time by Agent (but at least weekly, unless the settlement amount is de minimis), based on each Lender’s Pro Rata Share.  Between settlement dates, Agent may in its discretion apply payments on the Loan to Swing Line Loans, regardless of any designation by Borrowers or any provision herein to the contrary.  Each Lender is hereby bound to fund and reimburse agent, without recourse or warranty, its undivided Pro Rata Share in all Swing Line Loans outstanding from time to time until settled.  If a Swing Line Loan cannot be settled among Lenders, whether due to an insolvency proceeding involving Borrower or for any other reason, each Lender shall pay the amount of such Swing Line Loan based on its Pro Rata Share to Agent, in immediately available funds, within one Business Day after Agent's request therefor.  Each Lender's obligations to make settlements are absolute, irrevocable and unconditional, without offset, counterclaim or other defense, and whether or not the Commitments have terminated or the conditions to advance set forth in the Credit Agreement or Advance Formula Agreement are satisfied.

3.Agent.

(a)Appointment.  Each Lender hereby designates and appoints Agent as agent and servicer of such Lender to act as specified herein, and hereby authorizes Agent, as the agent and servicer for such Lender, to take such action on its behalf under the provisions of the Credit Agreement, this Addendum and the other Loan Documents, and to exercise such powers and perform such duties as are expressly delegated by the terms hereof and thereof, together with such other powers as are reasonably incidental thereto.  In connection with the foregoing, but subject to Section 3(c) hereof, Agent is authorized and empowered and is afforded with a general power of attorney to execute and deliver, on behalf of itself and each Lender or any of them, any and all instruments of satisfaction, cancellation, or partial or full release or discharge, and all other notices, demands, claims, complaints, responses, affidavits or other documents or instruments in connection with any proceedings concerning the Loan or the Loan Documents.  Except as expressly provided in Section 3(c) below, or other Sections of the Credit Agreement or this Addendum, Agent shall have no obligation in performing its duties under the Credit Agreement, this Addendum and the other Loan Documents to obtain the consent or approval of, or to consult with, the other Lenders.  Agent shall not have any duties or responsibilities except those expressly set forth in the Credit Agreement, this Addendum and the other Loan Documents, or any fiduciary relationship with any Lender, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into the Credit Agreement, this Addendum or any of the other Loan Documents, or shall otherwise exist against Agent.  In performing its functions and duties under the Credit Agreement, this Addendum and the other Loan Documents, Agent shall act solely as agent of each Lender and does not assume and shall not be deemed to have assumed any obligation or relationship of agency or trust with or for Borrower or any Guarantor.

(b)Sole Administration by Agent.  Subject to the provisions of Section 3(c) of this Addendum, Agent shall solely be responsible for and will administer, service and manage the Loan in accordance with the Credit Agreement, this Addendum and the other Loan Documents, all in such manner as it determines in its sole discretion, provided its actions are in the ordinary course of business and in accordance with Agent’s usual practices, and Agent shall exercise the same degree of care and discretion in continuing to service the Loan (including, without limitation, in reviewing and approving construction draw requests and inspection reports submitted by Borrower) and in collecting payments thereunder as it would ordinarily take in servicing the Loan and in collecting payments thereunder solely for its own account (“Servicing Standard”).

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(c)Consents and Approvals.

(i)Each of the following shall require the written approval or consent of the Required Lenders:

(A)The exercise of any rights and remedies under the Loan Documents following an Event of Default, provided that, absent any direction from or approval/consent by the Required Lenders as to a course of action following consultation by Agent with all Lenders as required by Section 15 of this Addendum, Agent may exercise such rights or remedies following an Event of Default as it may determine in good faith to be necessary or appropriate to protect the Lenders or the collateral securing the Loan (provided, however, that this clause does not authorize the Agent to take action contrary to Section 3(c)(i)(B), (C), (D) or (E) or Section 3(c)(ii), below);

(B)Appointment of a Successor Agent, as more fully described in Section 17(b), below;

(C)Approval of any Post-Default Plan (as defined in Section 6(d) below);

(D)Acceptance of any new Eligible Loan Note or Eligible Owned Real Property as collateral for the Loan; and

(E)Approval of any material amendment or modification of the Credit Agreement or any other Loan Documents, issuance of any material waiver of any material provision of the Credit Agreement or any of the other Loan Documents (including waiver of the conditions specified in the Loan Documents for any Advance or disbursement to the Borrower), or agreement with Borrower to forbear from exercising any material rights or remedies under the Credit Agreement or other Loan Documents.

(ii)Each of the following shall require the written approval or consent of all of the Lenders:

(A)Change in the terms of this Addendum;

(B)Extension of the Maturity Date (beyond any extension required under the Loan Documents), any fixed payment date or amortization period or forgiveness of all or any portion of the principal amount of the Loan or any accrued interest thereon, or any other amendment of the Credit Agreement or other Loan Documents that would reduce the interest rate options or the rate at which fees are calculated or forgive any loan fee, or extend the time of payment of any principal, interest or fees;

(C)Increase in the amount of the Loan or any non-consenting Lender’s Commitment;

(D)Release or forgiveness of any Guarantor; and

(E)Release or subordination of any lien on any material collateral, including any change in the “release price” for which portions of the collateral will be released (except in any circumstance as required under the Loan Documents).

Nothing herein shall prohibit Agent from increasing the amount of the Loan with the consent of less than all of the Lenders if Agent and the Lenders that are willing to fund the increase in the amount of the Loan (the “Additional Advances”) document and structure such increase as follows: (i) all other amounts owing on the Loan shall be repaid in full before any payment is made on the principal amount of the Additional Advances, (ii) all payments related to such Additional Advances will not otherwise diminish, delay or interfere with repayment of the Loan when due and (iii) each Lender’s Pro Rata Share of the Loan as initially documented shall remain unchanged.  If the increase in the amount of the Loan is documented and structured in the foregoing manner, the non-consenting Lender shall have no right to share in any rights or income relating to the Additional Advances.

(iii)In addition to the required consents or approvals referred to in subsections (i) and (ii) above, Agent may at any time request instructions from the Required Lenders with respect to any actions or approvals that, by the terms of this Agreement and the Loan Documents, Agent is permitted or required to take or to grant without instructions or consent from any Lenders, and if such instructions are promptly requested, Agent shall be absolutely entitled to refrain from taking any action or to withhold any approval and shall not be under any liability whatsoever for refraining from taking any action or withholding any approval under any of the Loan Documents until it shall have received such instructions from the Required Lenders.

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(iv)All communications from Agent to the Lenders requesting Lenders’ determination, consent, approval or disapproval (i) shall be given in the form of a written notice to each Lender, (ii) shall be accompanied by a description of the matter or item as to which such determination, approval, consent or disapproval is requested, or shall advise each Lender where such matter or item may be inspected, or shall otherwise describe the matter or issue to be resolved, (iii) shall include, if reasonably requested by a Lender and to the extent not previously provided to such Lender, written materials and a summary of all oral information provided to Agent by Borrower in respect of the matter or issue to be resolved, and (iv) shall include Agent’s recommended course of action or determination in respect thereof.  Each Lender shall reply promptly after receipt of the request therefor from Agent; and, notwithstanding any other provision hereof, if a Lender fails to respond to a written request for approval or consent by Agent (which response may be a reasonable request for additional information) not later than ten (10) Business Days following Agent’s initial request and five (5) Business Days following a second written request, which second request shall clearly specify that failure to respond within five (5) Business Days shall be deemed to constitute approval, Lender shall be irrevocably deemed to have consented to and approved the requested course of action.

(v)Except as otherwise expressly provided under the Credit Agreement, this Addendum or in the other Loan Documents and subject to the terms hereof and thereof, Agent will take such action, assert such rights and pursue such remedies under the Credit Agreement, this Addendum and the other Loan Documents as the Required Lenders or all of the Lenders, as the case may be (as provided for hereunder), shall direct in writing; provided, however, that the Agent shall not be required to act or refrain from acting if, in the reasonable judgment of the Agent, such action or inaction may expose the Agent to personal liability for which the Agent has not been satisfactorily indemnified hereunder or is contrary to the Credit Agreement, this Addendum, the other Loan Documents or applicable law.  Agent shall promptly notify each Lender at any time that the Required Lenders or all of the Lenders, as the case may be (as provided for hereunder), have instructed Agent to act or refrain from acting pursuant hereto.

(vi)Agent shall in all cases be fully protected in acting, or in refraining from action, hereunder and under the Loan Documents in accordance with written instructions signed by all the Lenders (or the Required Lenders, if such action may be directed hereunder by the Required Lenders), and such instructions and any action taken or failure to act pursuant thereto shall be binding on all the Lenders.  Each Lender, severally to the extent of its Pro Rata Share, hereby agrees to indemnify Agent against and hold it harmless from any and all liability, cost and expense that it may incur by reason of taking or continuing to take such action, provided that the foregoing shall not release Agent from liability for its negligence or willful misconduct.

(d)Agent to Hold Documents/Make Reports. Agent shall hold in its possession, at its principal office, a set of original Loan Documents, but shall deliver to each Lender one complete copy of the original Loan Documents and copies of any of the following received from the Borrower in connection with the closing and/or any subsequent modification of the Loan Documents, organizational documents of Borrower and Guarantors, legal opinions, due diligence materials, title policies, insurance policies, environmental reports, land use and zoning approvals and financial statements.  Agent shall provide to each Lender (i) on a monthly basis a report showing the payment history and status of the Loan and (ii) copies of all financial statements and other reports of material importance that Agent obtains pursuant to the Loan Documents or regarding Borrower, any Guarantor or in respect of the collateral for the Loan.  Any Lender shall have the right upon five (5) Business Days’ prior written request to examine the originals of all Loan Documents and other materials pertaining to the Loan at all reasonable times during normal business hours, at the office of Agent where such documentation is maintained, and to make copies at its expense of such documents and materials.  Furthermore, Agent shall upon fifteen (15) Business Days’ prior written request from a Lender, make and deliver copies of such documents to such Lender, with such Lender paying the reasonable cost of making and delivering such copies.

(e)Insurance.  Agent shall cause each Lender to be an additional insured or loss payee, as applicable, on any title insurance policy obtained with respect to the Loan and on any insurance policy obtained for which, under the Loan Documents, the Agent is to be an additional insured or loss payee; provided, however, that if the applicable insurer refuses to include such Lender as an additional insured or loss payee on such policy, Agent shall immediately notify each Lender of such refusal and take such action as such Lender reasonably requests with respect thereto to protect such Lender’s interest.

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(f)Relationship with Borrower.  Lenders acknowledge that, with respect to the Loan and the Loan Documents, Agent shall have the sole and exclusive authority to deal and communicate with Borrower and Guarantor  on behalf of Lenders, subject to the following:  any Lender may communicate directly with Borrower and/or Guarantor with respect to the Loan and the Loan Documents provided that such Lender gives prior written notice to Agent of its intention to do so and gives Agent a reasonable opportunity to participate in that communication.  Each non-Agent Lender agrees that it will not take any legal action, nor institute any actions or proceedings, against Borrower, Guarantor or any other person or entity (excluding Agent or any other Lender) with respect to the Loan, without the prior written consent of Agent, which consent may be withheld by Agent in its sole and absolute discretion.

4.Disbursements.

(a)Installments.  The Loan shall be disbursed to Borrower in more than one Advance as provided in the Credit Agreement.  Each Lender’s obligations hereunder shall include the obligation to fund such Lender’s Pro Rata Share of each Advance (including Swing Line Loans) which Agent has made or committed to make under the Credit Agreement, in accordance with and subject to the terms and conditions thereof.

(b)Funding Disbursements.  At least one (1) Business Day (by 11:00 a.m. Pacific time) prior to each date an Advance (except Swing Line Loans which are governed by Section 2) is to be made, Agent shall notify each Lender of the proposed Advance in writing by facsimile or email, and shall provide each Lender with copies of all documents submitted by or on behalf of Borrower in support of the proposed Advance. Each Lender shall make available to Agent the amount of such Lender’s Pro Rata Share of such Advance in immediately available funds to such account as Agent may designate not later than 11:00 a.m. Pacific time on the date such Advance is to be made (such date being referred to herein as a “Funding Date”).  Agent shall not make an Advance to the Borrower if the conditions specified in the Loan Documents to such Advance were not satisfied, unless all Lenders authorize the Advance in writing.  If Agent fails to fund an Advance to Borrower because Agent determines that the conditions to such Advance were not satisfied, Agent may retain the funds to be advanced pending satisfaction of such conditions, or return each Lender’s Pro Rata Share of the Advance to such Lender.  Upon Agent’s approval of any requested Advance and notification of Lenders in accordance with this Section, each Lender shall be bound to fund its Pro Rata Share of such Advance.  Notwithstanding the foregoing, to the extent that an Advance is to pay accrued interest owing by Borrower, Agent may make such an Advance without collecting the funds from the Lenders; Agent will notify each  Lender of the Advance and the amount each Lender should debit its records for the Loan to account for it and the amount that each Lender should calculate as having been received as interest.

(c)Lender’s Failure to Fund.  If a Lender (a “Defaulting Lender”) defaults in making any Advance it was obligated to make under this Agreement or paying any other sum payable by it hereunder, any Lender, by written notice to Agent at such Lender’s sole option, may (but shall not be obligated to) fund such amounts on behalf of such Defaulting Lender.  If more than one Lender elects to fund a Defaulting Lender’s share then each such Lender shall fund on a pro rata basis, based on their respective Pro Rata Shares.  The amount that the Defaulting Lender failed to advance or pay, together with interest thereon at the default rate under the Master Revolving Notes from the date such amount was due until repaid (such sum and interest thereon as aforesaid referred to, collectively, as the “Lender Default Obligation”) shall be payable by the Defaulting Lender (i) to any Lender(s) that fund the amount which the Defaulting Lender failed to fund or (ii) to Agent or any other Lender that under the terms of this Agreement is entitled to reimbursement from the Defaulting Lender for the amounts advanced or expended.  Notwithstanding any provision hereof to the contrary, until such time as a Defaulting Lender has repaid the Lender Default Obligation in full, all amounts that would otherwise be distributed to the Defaulting Lender shall instead be applied first to repay the Lender Default Obligation (to be applied first to interest at the default rate under the Master Revolving Notes and then to principal, first to Agent with respect to Swing Line Loans) until the Lender Default Obligation has been repaid in full (whether by such application or by cure by the Defaulting Lender), whereupon such Lender shall no longer be a Defaulting Lender.  If Borrower pays interest to Agent on account of principal advanced by a Lender(s) on behalf of a Defaulting Lender, that interest shall be remitted to the Lender(s) who made such advance, and shall reduce the amount of interest Defaulting Lender is obligated to pay to such Lender(s) on account of such advance.  The provisions of this Section shall apply and be effective regardless of whether an Event of Default occurs and is then continuing, and notwithstanding (i) any other provision of this Agreement to the contrary or (ii) any instruction of Borrower as to its desired application of payments.  No Defaulting Lender shall have the right to vote on matters that are subject to the consent or approval of Required Lenders or all Lenders and while any Lender is a Defaulting Lender the requisite percentage of Lenders that constitutes the Required Lenders shall be calculated exclusive of the Percentage of the Defaulting Lender and such Defaulting Lender shall not be considered a “Lender” in determining the Required Lenders.  Agent shall be entitled to (i) withhold or set off, and to apply to the payment of the Lender Default Obligation any amounts to be paid to such Defaulting Lender under this Agreement, and (ii) bring an action or suit against such Defaulting Lender in a court of competent jurisdiction to recover the Lender Default Obligation and, to the extent such recovery would not fully compensate the Lenders for the Defaulting Lender’s breach of this Agreement, to collect damages.  In addition, the Defaulting Lender shall indemnify, defend and hold Agent and each of the other Lenders harmless from and against any and all claims, actions, liabilities, damages, costs and expenses (including attorneys’ fees and expenses), plus interest thereon at the Default rate under the Master Revolving Notes, for funds advanced by Agent or any other Lender on account of the Defaulting Lender or any other damages such persons may sustain or incur by reason of or as a direct consequence of the Defaulting Lender’s failure or refusal to abide by its obligations under this Agreement.  The foregoing indemnity agreement shall survive termination of this Agreement.

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5.Collections and Distributions.

(a)Collections of Payments by Agent.  Each Lender’s interest under the Loan shall be payable solely from payments, collections and proceeds actually received by Agent under the Loan Documents; and Agent’s only liability to a Lender with respect to any such payments, collections or proceeds shall be to account for such Lender’s Pro Rata Share thereof in accordance with the Credit Agreement and this Addendum.  Agent shall have the exclusive right to collect sums on account of the Loan, including, without limitation, protective advances, fees, prepayment premiums (if any), and repayment of advances in excess of the face amount of the Loan, whether such sums are received directly from Borrower or any other persons or entities, or as amounts payable by exercise of the right of offset by Agent of any kind against the deposits, accounts, moneys or other property of Borrower deposited at or held by Agent, or by reason of total or partial condemnation or taking by governmental authority, proceeds or recoveries under insurance policies collected and not applied to repair and restore the Project, payment and performance bonds (if any), title insurance policies, amounts realized by reason of any sale or operation of the collateral for the Loan or enforcement of the Loan Documents (all collectively, the “Loan Recoveries”).  Agent will hold the Loan Documents and perform all of its obligations under each provision of the Credit Agreement and this Addendum in accordance with the Servicing Standard.  Agent will receive and hold all receipts and collections with respect to the Loan for the benefit of Lenders in accordance with their respective Pro Rata Share.  If any Lender shall in any manner receive any payments or any other funds or property in connection with the Loan (whether or not voluntary), other than payments from Agent in accordance with the Credit Agreement and this Addendum, such Lender shall transfer to Agent all such payments or other funds or property within two (2) Business Days of learning it received such funds.  The provisions of the immediately-preceding sentence shall survive termination of this Agreement.

(b)Distributions and Apportionment of Payments.  Payments actually received by Agent for the account of the Lenders shall be held by Agent in trust for the account of the respective Lenders and be paid to them promptly after receipt thereof by Agent, but in any event (i) on the next Business Day if such payments are received by Agent by 4:00 p.m. (Pacific time) or (ii) within two (2) Business Days if such payments are received by Agent after 4:00 p.m. (Pacific time), and (ii) to the extent that the applicable payment represents repayment of a portion of the principal of the Loan, the rate of interest applicable to such portion of the Loan, from the date of receipt of such funds by Agent until such funds are paid in immediately available funds to such Lenders.  All payments of principal and interest in respect of the Loan, all payments of the fees described in this Agreement and all payments in respect of any other obligations of Borrower under the Loan Documents shall be allocated among such of Lenders as are entitled thereto, in proportion of their respective Pro Rata Shares.  Agent shall distribute to each Lender in accordance with the wire instructions attached hereto as Schedule 2, or at such other address as a Lender may request in writing, such funds as it may be entitled to receive, provided that Agent shall in any event not be bound to inquire into or determine the validity, scope or priority of any interest or entitlement of any Lender and may suspend all payments and seek appropriate relief (including without limitation instructions from the Required Lenders, or all Lenders, as applicable, or an action in the nature of interpleader) in the event of any doubt or dispute as to any apportionment or distribution contemplated hereby.  The order of priority herein is set forth solely to determine the rights and priorities of the Lenders as among themselves and may at any time or from time to time be changed by the Lenders as they may elect, in writing, without necessity of notice to or consent of or approval by Borrower.

(c)Rescission of Payments.  If all or part of any payment of principal, interest or any Loan Recoveries received by Agent is rescinded or must otherwise be returned for any reason and if Agent has paid any portion thereof to any Lender, then Agent shall notify each Lender of the reason such payment must be returned and each Lender shall, upon written notice from Agent, pay to Agent the portion of the rescinded payment received by such Lender.  If notice is received by Lenders before 1:00 p.m. Pacific time, then each Lender shall pay its share of the rescinded payment to Agent on the next Business Day.  If notice is received by Lenders after 1:00 p.m. Pacific time, then each Lender shall pay its share of the rescinded payment to Agent before the end of the second Business Day following receipt of notice.  The provisions of this subsection (c) shall survive any termination of this Agreement.

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(d)Application of Proceeds Following Event of Default to Payment of Agent Fees and Expenses.  To the extent that the foregoing or other provisions in the Addendum are inconsistent with Paragraph 8 of the Credit Agreement, the provisions of that Paragraph 8 control.

6.Provisions Relating to Collateral.

(a)Agent’s Authority.  Agent is hereby authorized on behalf of all Lenders, without the necessity of further consent from any Lender, at any time and from time to time, to take any action with respect to any collateral for the Loan or any Loan Document that may be necessary to preserve and maintain such collateral or to perfect and maintain perfected the liens upon such collateral granted pursuant to the Credit Agreement and the other Loan Documents and shall take such actions as may be necessary to properly create and perfect Lenders’ security interest in the collateral from the Loan.

(b)Disclaimer.  Except as provided in this Agreement, Agent shall have no obligation whatsoever to any Lender or to any other person or entity to assure that any collateral exists or is owned by Borrower or is cared for, protected or insured or has been encumbered or that the liens granted in the Credit Agreement or in any of the other Loan Documents or pursuant thereto have been properly or sufficiently or lawfully created, perfected, protected or enforced or are entitled to any particular priority.

(c)Enforcement Involving Collateral.  Should Agent commence any proceeding or in any way seek to enforce Agent’s or Lenders’ rights or remedies under the Loan Documents in accordance with the provisions of the Credit Agreement, this Addendum or any of the other Loan Documents, irrespective of whether as a result thereof Agent shall acquire title to any collateral, each Lender, upon demand therefor from time to time, shall contribute its Pro Rata Share of the reasonable costs and/or expenses of any such enforcement or acquisition, including, but not limited to, fees of receivers or trustees, court costs, title company charges, filing and recording fees, appraisers’ fees and fees and expenses of attorneys to the extent not otherwise reimbursed by Borrower.  Without limiting the generality of the foregoing, each Lender shall contribute its Pro Rata Share of all reasonable costs and expenses incurred by Agent (including reasonable attorneys’ fees and expenses) if Agent employs counsel for advice or other representation (whether or not any suit has been or shall be filed) with respect to any collateral for the Loan or any part thereof, or any of the Loan Documents, or the attempt to enforce any security interest or lien on any collateral, or to enforce any rights of Agent or the Lenders or any of Borrower’s or any other party’s obligations under any of the Loan Documents, but not with respect to any dispute between Agent and any other Lender(s).  It is understood and agreed that, in the event Agent determines it is necessary to engage counsel for Lenders from and after the occurrence of a default or an Event of Default, said counsel shall be selected by Agent, and Agent shall notify the other Lenders of the identity of counsel so selected.

(d)Acquisition of Collateral.  In the event that all or any portion of the collateral for the Loan is acquired by Agent as the result of the exercise of any remedies under the Credit Agreement or under any other Loan Document, or is retained in satisfaction of all or any part of Borrower’s obligations under the Loan Documents, title to any such collateral or any portion thereof shall be held in the name of Agent or a nominee or subsidiary of Agent, as agent, for the ratable benefit of Lenders.  Agent shall prepare a recommended course of action for such collateral (the “Post-Default Plan”), which shall be subject to the written approval of the Required Lenders.  Agent shall administer the collateral in accordance with the Post-Default Plan and, upon demand therefor from time to time, each Lender will contribute its Pro Rata Share of all reasonable costs and expenses incurred by Agent pursuant to the Post-Default Plan, including without limitation, any operating losses and all necessary operating reserves.  To the extent there is net operating income from such collateral, Agent shall, in accordance with the Post-Default Plan, determine the amount and timing of distributions to Lenders.  All such distributions shall be made to Lenders in accordance with their respective Pro Rata Shares.  In no event shall the provisions of this subsection or the Post-Default Plan require Agent or any Lender to take an action that would cause such Lender to be in violation of any applicable regulatory requirements.

7.Ratable Sharing.  Subject to Sections 4 and 5, Lenders agree among themselves that (i) with respect to all amounts received by them that are applicable to the payment of the Loan, equitable adjustment will be made so that, in effect, all such amounts will be shared among them ratably in accordance with their Pro Rata Shares, whether received by voluntary payment, by the exercise of the right of set-off or bankers’ lien, by counterclaim or cross action or by the enforcement of any or all of the Loan Documents or any collateral and (ii) if any of them shall by voluntary payment or by the exercise of any right of counterclaim, set-off, bankers’ lien or otherwise, receive payment of a proportion of the aggregate amount of the Loan held by it that is greater than its Pro Rata Share of the payments on account of the Loan, the one receiving such excess payment shall purchase, without recourse or warranty, an undivided interest and participation (which it shall be deemed to have done simultaneously upon the receipt of such payment) in such obligations owed to the others so that all such recoveries with respect to such obligations shall be applied ratably in accordance with their Pro Rata Share; provided, that if all or part of such excess payment received by the purchasing party is thereafter recovered from it, those purchases shall be rescinded and the purchase prices paid for such participations shall be returned to that party to the extent necessary to adjust for such recovery, but without interest except to the extent the purchasing party is required to pay interest in connection with such recovery.

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8.Limitation on Liability.  Neither Agent nor any of its directors, officers, agents or employees shall be liable to any Lender for any action taken or omitted to be taken by it or them hereunder or under any Loan Document or in connection herewith or therewith, except for its or their own negligence or willful misconduct, or, with respect to Agent, for action taken by Agent in breach of this Agreement, including Section 3(c) above, or failure to satisfy the Servicing Standard.  In the absence of negligence, Agent shall not be liable for any apportionment or distribution of payments made by it in good faith pursuant to Section 5, and if any such apportionment or distribution is subsequently determined to have been made in error the sole recourse of any Lender to whom payment was due, but not made, shall be to recover from the recipients of such payments any payment in excess of the amount to which they are determined to have been entitled.  The provisions of this Section 8 shall survive any termination of this Agreement

9.No Responsibility for Loan, Recitals, etc.  Subject to compliance with the Servicing Standard, neither Agent nor any of its directors, officers, agents or employees shall be responsible for or have any duty to ascertain, inquire into, or verify (i) any statement, warranty or representation made in connection with any Loan Document or any use of the Loan; (ii) the performance or observance of any of the covenants or agreements of any party to any Loan Document; (iii) the satisfaction of any condition specified in the Credit Agreement, except receipt of items purporting to be the items required to be delivered to Agent; or (iv) the validity, effectiveness or genuineness of any Loan Document or any other instrument or writing furnished in connection therewith, provided that the foregoing shall not release Agent from liability for its negligence or willful misconduct.  Agent (I) except as expressly stated herein, makes no warranty or representation of any kind or character relating to Borrower, any collateral, or any guarantor, and shall not be responsible for any warranty or representation made in or in connection with the Loan, the Credit Agreement or the Loan Documents, (II) makes no warranty or representation as to, and shall not be responsible for the correctness as to form, the due execution, legality, validity, enforceability, genuineness, sufficiency, or collectability of the, Loan, the Credit Agreement, the Loan Documents, any collateral, any guarantees or any other document relating thereto, or for any failure by Borrower or any Guarantor to perform its obligations thereunder, for Borrower’s use of the proceeds therefrom, or for the preservation of any collateral or the loss, depreciation, or release thereof, subject to the Servicing Standard and the consent rights of Lenders under this Addendum, (III) makes no warranty or representation as to, and assumes no responsibility for, the authenticity, validity, accuracy, or completeness of any notice, financial statement, or other document or information received by Agent in connection with, or otherwise referred to in, the Credit Agreement, and (IV) shall not be responsible for the observance or performance of any agreements contained in, or conditions of, the Credit Agreement, or to inspect the property, books or records of Borrower or any Guarantor.  Agent makes no representations or warranties, whether expressed or implied, to Lenders as to the validity or enforceability of the Loan Documents.

10.Employment of Agents and Counsel.  Agent may undertake any of its duties as agent and servicer hereunder and under any Loan Document by or through employees, agents, and attorneys-in-fact and shall not be liable to Lenders, except as to money or securities received by them or their authorized agents, for the default or misconduct of any such agents or attorneys-in-fact selected by it with reasonable care.  Agent shall be entitled to advice of counsel concerning all matters pertaining to the agency hereby created and its duties hereunder and under any Loan Document.

11.Reliance on Documents; Counsel.  Agent shall be entitled to rely upon any notice, consent, certificate, affidavit, letter, telegram, statement, paper or document believed by it to be genuine and correct and to have been signed or sent by the proper person or persons, and, in respect to legal matters, upon the opinion of counsel selected by Agent, which counsel may be an employee of Agent, provided that the foregoing shall not release Agent from liability for its negligence or willful misconduct.

12.Agent Reimbursement and Indemnification.  Lenders agree to reimburse and indemnify Agent ratably (i) for any amounts (excluding principal and interest on the Loan and loan fees) not reimbursed by Borrower for which Agent is entitled to reimbursement under the Loan Documents, (ii) for any other expenses incurred by Agent on behalf of Lenders, in connection with the preparation, execution, delivery, administration and enforcement of the Loan Documents, if not paid by Borrower, (iii) for any expenses incurred by Agent on behalf of Lenders that may be necessary or desirable to preserve and maintain collateral or to perfect and maintain perfected the liens upon the collateral granted pursuant to the Credit Agreement and the other Loan Documents, if not paid by Borrower, (iv) for any amounts and other expenses incurred by Agent on behalf of Lenders in connection with any default by any Lender hereunder or under the Loan Documents, if not paid by such Lender, and (v) for any liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind and nature whatsoever that may be imposed on, incurred by or asserted against Agent in any way relating to or arising out of the Loan Documents or any other document delivered in connection therewith or the transactions contemplated thereby, or the enforcement of any of the terms thereof or of any such other documents, provided that no Lender shall be liable for any of the foregoing to the extent that they (i) are unreasonable, (ii) not customarily incurred, (iii) arise from the negligence or willful misconduct of Agent, or (iv) are incurred in violation of the provisions of this Agreement.  The provisions of this Section 12 shall survive any termination of this Agreement.

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13.Rights as a Lender.  With respect to its Commitment, if any, Agent shall have the same rights, powers and obligations hereunder and under any Loan Document as any Lender and may exercise such rights and powers as though it were not the agent and servicer, and the term “Lender” or “Lenders” shall, unless the context otherwise indicates, include Agent in its individual capacity as lender.  Each Lender acknowledges and agrees that Agent and/or its affiliates may accept deposits from, lend money to, hold other investments in, and generally engage in any kind of trust, debt, equity or other transaction or have other relationships, in addition to those contemplated by the Credit Agreement, this Addendum or any Loan Document, with Borrower or any of its affiliates in which Borrower or such affiliate is not restricted hereby from engaging with any other person.

14.Lenders’ Credit Decisions.  Each Lender acknowledges that it has, independently and without reliance upon Agent or any other Lender and based on the financial statements and other information prepared by Borrower and such other documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement and the other Loan Documents.  Each Lender also acknowledges that it will, independently and without reliance upon Agent or any other Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Credit Agreement, this Addendum and the other Loan Documents,

15.Notice of Events of Default.  Agent shall promptly give other Lenders notice of an Event of Default of which Agent has actual knowledge.  Should Agent receive any written notice of the occurrence of a default or Event of Default, or should Agent send Borrower a notice of Default or Event of Default, Agent shall promptly furnish a copy thereof to each Lender.  Upon the occurrence of an Event of Default, Agent and other Lenders shall consult with each other in good faith as to the course of action to be taken as a result thereof.

16.Sales, Assignments, Pledges, Participations.  No sale, assignment, pledge, or participation of any interest in the Loan may be made by any Lender hereto without advance notice to all other parties hereto.  No non-Agent Lender may sell, assign, or pledge any portion of its interest in the Loan without the prior written consent of the Agent and the other Lenders, which consent the Agent and such other Lenders may withhold in their sole and absolute discretion.  The Agent Lender may not sell, assign, pledge, or participate all or any portion of its interest in the Loan without the prior written consent of each Lender, which consent each Lender may withhold in its sole and absolute discretion.   In any event, the initial Agent shall not sell, assign, pledge, or participate a portion of its interest in the Loan to more than two (2) persons or entities in addition to those identified in Schedule 1 to this Agreement or which would, in the aggregate, reduce the initial Agent’s unencumbered Pro Rata Share to less than thirty five percent (35%) of the Total Commitment.  Any sale, assignment, pledge, or participation shall be subject to the terms of this Addendum.

17.Agent Termination Events/Successor Agent.

(a)The occurrence of any of the following shall constitute an “Agent Termination Event” under this Addendum:  (i) Agent fails to perform or observe any material term or condition of this Addendum or the Loan Documents, such failure continues for more than twenty (20) Business Days after written notice from any Lender regarding the existence and character of such breach, and any Lender thereafter sends written notice to Borrower, Agent, and all other Lenders that an Agent Termination Event has occurred as a result thereof, (ii) Agent becomes insolvent or is subject to the appointment by any governmental authority of any person to take charge of Agent or Agent’s assets, and any Lender sends written notice to Borrower, Agent, and all other Lenders that an Agent Termination Event has occurred as a result thereof, (iii) any governmental authority, including Agent’s state or federal bank regulator, takes or institutes any action which would have a material adverse effect on Agent’s operations or ability to perform under this Agreement, and any Lender sends written notice to Borrower, Agent, and all other Lenders that an Agent Termination Event has occurred as a result thereof, or (iv) Agent has given written notice to Borrower and each of the Lenders of its intention to resign as Agent effective on a specified date at least thirty (30) days after the delivery of such notice, and such date has occurred; provided, however, that the resignation of the Agent shall be subject to the prior written consent of the Required Lenders, which consent may be withheld in the sole and absolute discretion of the Required Lenders.  Such Agent, upon the occurrence of an Agent Termination Event, is referred to herein as the “Retiring Agent.”

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(b)If an Agent Termination Event occurs or if the office of Agent shall become vacant for any other reason, Required Lenders shall, by written instrument, appoint successor agent(s) (“Successor Agent”) satisfactory to such Required Lenders and, so long as no Default or Event of Default has occurred and is continuing, to Borrower (which approval shall not be unreasonably withheld or delayed); provided, however, that any such Successor Agent shall be a bank or a trust company or other financial institution of the United States or any state thereof, or any Affiliate of such bank or trust company or other financial institution which is engaged in the banking business and has an office in Northern California.  Such Successor Agent shall thereupon become Agent hereunder, and Retiring Agent shall deliver or cause to be delivered to any Successor Agent such documents of transfer and assignment as such Successor Agent may reasonably request.  If a Successor Agent is not so appointed, or does not accept such appointment before the Retiring Agent’s resignation or termination becomes effective, the Lender with the largest Pro Rata Share (excluding the Lender who is the Retiring Agent) may appoint a temporary successor to act until such appointment by the Required Lenders and, if applicable, Borrower, is made and accepted or, if no temporary successor is appointed as provided above, the Required Lenders shall thereafter perform all of the duties of the Retiring Agent hereunder until such appointment by the Required Lenders and, if applicable, Borrower, is made and accepted.  Such Successor Agent (including any temporary successor or the Required Lenders, if applicable, during the period it or they are acting as temporary successor or performing the duties of the Retiring Agent as provided hereunder) shall succeed to all of the rights and obligations of the Retiring Agent (including compensation) as if originally named.  The Retiring Agent shall duly assign, transfer and deliver to such Successor Agent (or any temporary successor or the Required Lenders performing the duties of the Retiring Agent, if applicable hereunder) all moneys at the time held by the Retiring Agent hereunder after deducting therefrom its expenses for which it is entitled to be reimbursed hereunder.  Upon such succession of any such Successor Agent, the Retiring Agent shall be discharged from duties and obligations subsequently arising and shall cease to receive compensation as Agent.  Retiring Agent’s liability, if any, for actions taken or omitted prior to such time shall be determined in accordance with the provisions of this Addendum.  With respect to the matters described in this Section 17(b), a Lender who is the Retiring Agent shall not have the right to vote, the requisite percentage of Lenders that constitutes the Required Lenders shall be calculated exclusive of the percentage of such Lender, and such Lender shall not be considered a “Lender” in determining the Required Lenders.

18.Termination.  This Addendum shall terminate upon the occurrence of any of the following events, provided all obligations under the Credit Agreement, this Addendum and the other Loan Documents have been performed or waived in writing by the party entitled to the benefit of such performance: (a) when the entire indebtedness represented by the Master Revolving Notes shall have been paid (unless such payment has resulted from acquisition of title to the Property by Lenders through foreclosure, the acceptance of a deed in lieu of foreclosure, assignment in lieu of foreclosure or otherwise), or (b) when both legal and beneficial ownership of said indebtedness and Loan Documents shall be held by one person, firm or corporation (including subsidiaries and Affiliates of such person, firm or corporation), rather than by the Lenders, or (c) when one person, firm or corporation (including subsidiaries and Affiliates of such person, firm or corporation), rather than the Lenders, through foreclosure, deed in lieu of foreclosure, assignment in lieu of foreclosure or otherwise, shall have acquired title to the entire Property.  After termination, each Lender will execute and deliver all instruments as may be necessary and appropriate to reflect the satisfaction of their respective interests and/or the termination of this Agreement.  Upon such termination, no Lender shall have any further obligation to the other under this Agreement or respecting the Loan or their participation therein, except for provisions of this Agreement that expressly survive termination of this Agreement.

19.Notices.  All notices, consents, approvals and requests required or permitted hereunder (a “notice”) shall be given in writing and shall be effective for all purposes if hand delivered or sent (a) by certified or registered United States mail, postage prepaid, return receipt requested, (b) by recognized overnight delivery service providing for overnight delivery, or (c) by telefacsimile (with answer back acknowledged) or email transmission (as long as no transmission failure is received by the recipient), in any case addressed as follows (or to such other address as a party shall designate from time to time by notice to the other party in the manner provided for herein):

If to Agent:

California Bank & Trust

456 Montgomery Street, 23rd Floor

San Francisco, CA  94104

Attn:  Thomas C. Paton, Jr.

If to Lenders:

to the respective addresses set forth on Schedule 1 attached hereto.

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A notice shall be deemed to have been given: in the case of hand delivery, at the time of delivery; in the case of registered or certified mail, when delivered or the first attempted delivery on a Business Day; or in the case of expedited prepaid delivery and telecopy, upon the first attempted delivery on a Business Day.

20.Wire Transfers.  Funds to be paid by Agent to any Lender, or by any Lender to Agent, pursuant to the Credit Agreement or this Addendum, shall be paid by wire transfer as set forth in Schedule 2 attached hereto and made a part hereof, unless the Person that is to receive the funds has previously provided written notice to the Person that is remitting the funds designating another method of payment.

21.Controlling Document.  This Addendum is subject to the terms and provisions of the Credit Agreement and the other Loan Documents.  Notwithstanding the foregoing, as between Agent and any Lender, or between Lenders, in the event of any conflict between the terms of the Loan Documents and the terms of this Addendum, the terms of this Addendum shall control.

22.Further Assurances.  Each of the parties hereto, upon request of any of the other parties hereto, shall duly execute and deliver, or cause to be duly executed and delivered, to all other parties hereto such further instruments and take and cause to be taken such further actions as may be necessary or proper in the reasonable opinion of the requesting party to carry out more effectually the provisions and purposes of this Addendum.

23.Entire Agreement; Amendments and Waivers.  This Addendum supersedes all prior agreements between the parties with respect to its subject matter hereof and constitutes (along with the documents referred to in this Addendum) a complete and exclusive statement of the terms of the agreement between the parties with respect to its subject matter hereof.  No amendment or waiver of any provision of this Addendum shall in any event be effective unless the same shall be in writing and signed by the party against whom enforcement of such amendment or waiver is sought.  The rights and remedies of the parties to this Addendum are cumulative and not alternative.  Neither the failure nor any delay by any party in exercising any right, power, or privilege under this Addendum or the documents referred to in this Agreement will operate as a waiver of such right, power, or privilege, and no single or partial exercise of any such right, power, or privilege will preclude any other or further exercise of such right, power, or privilege or the exercise of any other right, power, or privilege.  To the maximum extent permitted by applicable law, (a) no claim or right arising out of this Addendum or the documents referred to in this Addendum can be discharged by one party, in whole or in part, by a waiver or renunciation of the claim or right unless in writing signed by the other party; (b) no waiver that may be given by a party will be applicable except in the specific instance for which it is given; and (c) no notice to or demand on one party will be deemed to be a waiver of any obligation of such party or of the right of the party giving such notice or demand to take further action without notice or demand as provided in this Addendum or the documents referred to in this Addendum.

24.Governing Law.  This Agreement shall be governed by and construed in accordance with the laws of California (without giving effect to the conflict of laws principles thereof).

25.JURY TRIAL WAIVER.  THE UNDERSIGNED ACKNOWLEDGE THAT THE RIGHT TO TRIAL BY JURY IS A CONSTITUTIONAL ONE, BUT THAT IT MAY BE WAIVED UNDER CERTAIN CIRCUMSTANCES.  TO THE EXTENT PERMITTED BY LAW, EACH PARTY, AFTER CONSULTING (OR HAVING HAD THE OPPORTUNITY TO CONSULT) WITH COUNSEL OF ITS, HIS OR HER CHOICE, KNOWINGLY AND VOLUNTARILY, AND FOR THE MUTUAL BENEFIT OF ALL PARTIES, WAIVES ANY RIGHT TO TRIAL BY JURY IN THE EVENT OF LITIGATION ARISING OUT OF OR RELATED TO THIS ADDENDUM OR ANY OTHER DOCUMENT, INSTRUMENT OR AGREEMENT BETWEEN THE UNDERSIGNED PARTIES.

26.Successors; Benefit of Addendum.  This Addendum shall be binding upon and inure to the benefit of each of the parties hereto and their respective successors and permitted assigns.  Except as provided herein, this Addendum and all of its provisions and conditions are for the sole and exclusive benefit of the parties to this Addendum and their successors and assigns.  Notwithstanding the foregoing, the provisions in this Addendum concerning the rights, duties and obligations between and among the Agent and the Lenders is only for the benefit of the Agent and the Lenders, and Borrower and Guarantor have no rights or remedies as a third party beneficiary, or otherwise, with respect thereto.  Agent and Lenders may amend those provisions without the consent of Borrower or Guarantor.

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27.Severability.  The invalidity or unenforceability of any particular provision of this Addendum shall not affect any other provision herein and this Addendum shall be construed as if the invalid or unenforceable provision had been omitted.

28.Currency.  All monetary amounts referred to in this Addendum are expressed in United States Dollars, unless expressly provided otherwise with respect to a specific amount.

29.Counterparts.  This Addendum may be executed in any number of counterparts and by the different parties hereto on separate counterparts, each of which when so executed and delivered shall be an original and all of which shall together constitute one and the same agreement.  Delivery of an executed counterpart of this Addendum by telefacsimile shall be equally as effective as delivery of an original executed counterpart of this Addendum.  Any party delivering an executed counterpart of this Addendum by telefacsimile also shall deliver an original executed counterpart of this Addendum but the failure to deliver an original executed counterpart shall not affect the validity, enforceability, and binding effect of this Addendum.

30.Section Headings: Construction.  The headings of Sections in this Addendum are provided for convenience only and will not affect its construction or interpretation.  All references to “Section” or “Sections” refer to the corresponding Section or Sections of this Addendum.  All words used in this Addendum will be construed to be of such gender or number as the circumstances require.  Unless otherwise expressly provided, the word “including” does not limit the preceding words or terms.

[Signatures on following page(s)]

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IN WITNESS WHEREOF, the parties hereto have caused this Addendum to be duly executed by their respective officers duly authorized as of the day and year first above written.

AGENT:	CALIFORNIA BANK & TRUST
	By: ________________________________                                                                Thomas C. Paton, Jr. Senior Vice President and Manager
LENDERS:	CALIFORNIA BANK & TRUST
	By: ________________________________                                                                Thomas C. Paton, Jr. Senior Vice President and Manager
	FIRST BANK By: ________________________________            William G. Nelle, Jr.            Senior Vice President
BORROWER:	OWENS REALTY MORTGAGE, INC., a Maryland corporation By: ________________________________             William C. Owens
	President

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Schedule 1

Lenders; Total Commitment – Pro Rata Share

Total Commitment:  $30,000,000.00

Commitment	Lender	Pro Rata Share of Total Commitment	Address/Tel/Fax/E-Mail
$20,000,000.00	California Bank & Trust	66.667%	California Bank & Trust 456 Montgomery Street, 23rd Floor San Francisco, CA  94104 Attn:  Thomas C. Paton, Jr. Senior Vice President Tel:  415-875-1447 Fax:  415-875-1456 E-Mail:  tom.paton@calbt.com
$10,000,000.00	First Bank	33.333%	First Bank 456 Montgomery Street, Suite 400 San Francisco, CA  94104 Attn:  William G. Nelle, Jr. Senior Vice President Tel: 415-273-2009 Fax:  415-398-7190 E-Mail: bill.nelle@fbol.com

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Schedule 2

Wire Transfer Instructions

Funds to be wired to California Bank & Trust are to be wired as follows, or in accordance with other written instructions that California Bank & Trust shall provide to the Person wiring the funds:

California Bank & Trust

La Habra, CA

Routing No.: 121002042

Account No.: 0180030770

Beneficiary Name: WIP-LACBO

Borrower’s Name: Owens Realty Mortgage, Inc.

Attention:  Estrella Valdez/Albert Henson

Funds to be wired to First Bank are to be wired as follows, or in accordance with other written instructions that First Bank shall provide to the Person wiring the funds:

First Bank

Hazelwood, Missouri

Routing No.: 081009428

Account No.: 461151275923

Borrower’s Name: Owens Realty Mortgage, Inc.

Attention:  Commercial Special Services GL 11085 DB 09

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EX-99.1

For Immediate Release

Contact:                 William C. Owens

President and Chief Executive Officer

Owens Realty Mortgage, Inc.

(925) 239-7001

Owens Realty Mortgage, Inc. Announces Amendment and Restatement of Secured Revolving Facility with California Bank & Trust Increasing Maximum to $30,000,000

WALNUT CREEK, CA. – April 24, 2015 – Owens Realty Mortgage, Inc. (NYSE MKT: ORM) announced today that it has signed an amendment and restatement of its secured revolving facility with California Bank & Trust to increase the maximum potential borrowings from $20,000,000 to $30,000,000 and to add First Bank as an additional lender.  The line of credit will be secured by certain assets of ORM, including first-priority deeds of trust on certain real property assets and trust deeds and all personal property of the Company.

About Owens Realty Mortgage, Inc.

Owens Realty Mortgage, Inc., a Maryland corporation, is a specialty finance mortgage company structured to qualify as a real estate investment trust (“REIT”) that focuses on the origination, investment, and management of commercial real estate mortgage loans primarily in the Western U.S. We provide customized, short-term capital to small and middle-market investors that require speed and flexibility. Our primary objective is to provide investors with attractive current income and long-term shareholder value. Owens Realty Mortgage, Inc., is headquartered in Walnut Creek, California, and is externally managed and advised by Owens Financial Group, Inc.

Additional information can be found on the Company’s website at www.owensmortgage.com.

Forward-Looking Statements

This press release includes “forward-looking statements” within the meaning of the safe harbor provisions of the United States Private Securities Litigation Reform Act of 1995.  Forward-looking statements about Owens Realty Mortgage Inc.’s plans, strategies, and prospects, including the maximum borrowings available under the new revolving line of credit, are based on current information, estimates, and projections; they are subject to risks and uncertainties, as well as known and unknown risks, which could cause actual results to differ from expectations, estimates and projections and, consequently, readers should not rely on these forward-looking statements as predictions of future events.  Words such as “expect,” “target,” “assume,” “estimate,” “project,” “budget,” “forecast,” “anticipate,” “intend,” “plan,” “may,” “will,” “could,” “should,” “believe,” “predicts,” “potential,” “continue,” and similar expressions are intended to identify such forward-looking statements.

Readers are cautioned not to place undue reliance upon any forward-looking statements, which speak only as of the date made.  The company does not undertake or accept any obligation to release publicly any updates or revisions to any forward-looking statement to reflect any change in its expectations or any change in events, conditions or circumstances on which any such statement is based.  Additional information concerning these and other risk factors is contained in the company’s most recent filings with the Securities and Exchange Commission.  All subsequent written and oral forward-looking statements concerning the company or matters attributable to the company or any person acting on its behalf are expressly qualified in their entirety by the cautionary statements above.

SOURCE: Owens Realty Mortgage, Inc.