exv10w3






EXHIBIT 10.3




ADVISORY AGREEMENT




BETWEEN




INCOME OPPORTUNITY REALTY INVESTORS, INC.




AND




PRIME INCOME ASSET MANAGEMENT, LLC




     THIS ADVISORY AGREEMENT (the “Agreement”) is dated as of October 26, 2009 but is effective as
of July 1, 2009 for tax and accounting purposes (the “Effective Date”) between Income Opportunity
Realty Investors, Inc., a Nevada corporation (the “Company”), and Prime Income Asset Management,
LLC (the “Advisor”), a Nevada limited liability company.



W I T N E S S E T H :




     A. The Company owns a complex, diversified portfolio of real estate, mortgages and
other assets, including certain non-performing or troubled assets.



     B. The Company is an active real estate investment company with funds available
for investment primarily in the acquisition of income-producing real estate and to a lesser extent in
short and medium term mortgages.



     C. The Advisor and its employees have extensive experience in the administration
of real estate
assets and the origination, structuring and evaluation of real estate and mortgage investments.



     NOW, THEREFORE, in consideration of the premises and of the mutual covenants herein contained,
the parties agree as follows:



     1. Duties of the Advisor. Subject to the supervision of the Board of
Directors, the Advisor will be responsible for the day-to-day operations of the Company and, subject to Section 17 hereof,
shall provide such services and activities relating to the assets, operations and business plan of
the Company as may be appropriate, including:




     (a) preparing and submitting an annual budget and business plan for
approval by the Board of the Company (the “Business Plan”);




     (b) using its best lawful efforts to present to the Company a
continuing and suitable investment program consistent with the investment policies and objectives of the Company as set
forth in the Business Plan;




     (c) using its best lawful efforts to present to the Company
investment opportunities consistent with the Business Plan and such investment program as the Directors may adopt from time
to time;




     (d) furnishing or obtaining and supervising the performance of the
ministerial functions
in connection with the administration of the day-to-day operations of the Company including the
investment of reserve funds and surplus cash in short-term money market investments;




     (e) serving as the Company’s investment and financial advisor and
providing research,



 









 






economic, and statistical data in connection with the Company’s investments and investment and
financial policies;




     (f) on behalf of the Company, investigating, selecting and
conducting relations with
borrowers, lenders, mortgagors, brokers, investors, builders, developers and others;
provided, however, that the Advisor shall not retain on the Company’s behalf
any consultants or third party professionals, other than legal counsel, without prior Board
approval;




     (g) consulting with the Directors and furnishing the Directors
with advice and recommendations with respect to the making, acquiring (by purchase, investment, exchange or
otherwise), holding and disposition (through sale, exchange, or otherwise) of investments
consistent with the Business Plan of the Company;




     (h) obtaining for the Directors such services as may be required
in acquiring and disposing of investments, disbursing and collection the funds of the Company, paying the debts and
fulfilling the obligations of the Company, and handling, prosecuting, and settling any claims
of the Company, including foreclosing and otherwise enforcing mortgage and other liens
securing investments;




     (i) obtaining for and at the expense of the Company such services
as may be required for property management, loan disbursements, and other activities relating to the investments of
the Company, provided, however, the compensation for such services shall be
agreed to by the Company and the service provider;




     (j) advising the Company in connection with public or private
sales of shares or other securities of the Company, or loans to the Company, but in no event in such a way that the Advisor
could be deemed to be acting as a broker dealer or underwriter;




     (k) quarterly and at any time requested by the Directors, making
reports to the Directors regarding the Company’s performance to date in relation to the Company’s approved Business Plan and
its various components, as well as the Advisor’s performance of the foregoing services;




     (l) making or providing appraisal reports, where appropriate, on
investments or contemplated investments of the Company;




     (m) assisting in preparation of reports and other documents
necessary to satisfy the reporting and other requirements of any governmental bodies or agencies and to maintain effective
communications with stockholders of the Company; and




     (n) doing all things necessary to ensure its ability to render
the services contemplated herein, including providing office space and office furnishings and personnel necessary for the
performance of the foregoing services as Advisor, all at its own expense, except as otherwise
expressly provided for herein.



     2. No Partnership or Joint Venture. The Company and the Advisor are not
partners or joint venturers with each other, and nothing herein shall be construed so as to make them such partners
or joint venturers or impose any liability as such on either of them.



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     3. Records. At all times, the Advisor shall keep proper books of
account and records of the
Company’s affairs which shall be accessible for inspection by the Company at any time during
ordinary business hours.



     4. Additional Obligations of the Advisor. The Advisor shall refrain
from any action that
would (a) violate any law, rule, regulation, or statement of policy of any governmental body or
agency having jurisdiction over the Company or over its securities, (b) cause the Company to be
required to register as an investment company under the Investment Company Act of 1940, or (c)
otherwise not be permitted by the Articles of Incorporation of the Company.



     5. Bank Accounts. The Advisor may establish and maintain one or more
bank accounts in its
own name, and may collect and deposit into any such account or accounts, any money on behalf of the
Company, under such terms and conditions as the Directors may approve, provided that no funds in
any such account shall be commingled with funds of the Advisor; and the Advisor shall from time to
time render appropriate accounting of such collections and payments to the Directors and to the
auditors of the Company.



     6. Bond. The Advisor shall maintain a fidelity bond with a responsible
surety company in
such amount as may be required by the Directors from time to time, covering all directors,
officers, employees, and agents of the Advisor handling funds of the Company and any investment
documents or records pertaining to investments of the Company. Such bond shall inure to the
benefit of the Company in respect to losses of any such property from acts of such directors,
officers, employees, and agents through theft, embezzlement, fraud, negligence, error, or omission
or otherwise, the premium for said bond to be at the expense of the Company.



     7. Information Furnished Advisor. The Directors shall have the right to
change the Business
Plan at any time, effective upon receipt by the Advisor of notice of such change. The Company
shall furnish the Advisor with a certified copy of all financial statements, a signed copy of each
report prepared by independent certified public accountants, and such other information with regard
to the Company’s affairs as the Advisor may from time to time reasonably request.



     8. Consultation and Advice. In addition to the services described
above, the Advisor shall
consult with the Directors, and shall, at the request of the Directors or the officers of the
Company, furnish advice and recommendations with respect to any aspect of the business and affairs
of the Company, including any factors that in the Advisor’s best judgment should influence the
policies of the Company.



     9. Annual Business Plan and Budget. No later than January 15th of each year, the Advisor
shall submit to the Directors a written Business Plan for the current Fiscal year of the Company.
Such Business Plan shall include a twelve-month forecast of operations and cash flow with explicit
assumptions and a general plan for asset sales or acquisitions, lending, foreclosure and borrowing
activity, other investments or ventures and proposed securities offerings or repurchases or any
proposed restructuring of the Company. To the extent possible, the Business Plan shall set forth
the Advisor’s recommendations and the basis therefor with respect to all material investments of
the Company. Upon approval by the Board of Directors, the Advisor shall be authorized to conduct
the business of the Company in accordance with the explicit provisions of the Business Plan,
specifically including the borrowing, leasing, maintenance, capital improvements, renovations and
sale of investments set forth in the Business Plan. Any transaction or investment not explicitly
provided for in the approved Business Plan shall require the prior approval of the Board of
Directors unless made pursuant to authority expressly delegated to the Advisor. Within sixty (60)
days of the end of each calendar quarter, the Advisor shall provide the Board of Directors with a
report comparing the Company’s actual performance for such quarter against the Business Plan.



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     10. Definitions. As used herein, the following terms shall have the meanings set forth below:




     (a) “Affiliate” shall mean, as to any Person, any other Person who owns beneficially,
directly, or indirectly, 1% or more of the outstanding capital stock, shares or equity interests of
such Person or of any other Person which controls, is controlled by, or is under common
control with such Person or is an officer, retired officer, director, employee, partner, or
trustee (excluding noninterested trustees not otherwise affiliated with the entity) of such
Person or of any other Person which controls, is controlled by, or is under common control
with, such Person.




     (b) “Appraised Value” shall mean the value of a Real Property according to an
appraisal made by an independent qualified appraiser who is a member in good standing of the
American Institute of Real Estate Appraisers and is duly licensed to perform such services in
accordance with the applicable state law, or, when pertaining to Mortgage Loans, the value of
the underlying property as determined by the Advisor.




     (c) “Book Value” of an asset or assets shall mean the value of such asset or assets on
the books of the Company, before provision for amortization, depreciation, depletion of valuation
reserves and before deducting any indebtedness or other liability in respect thereof, except
that no asset shall be valued at more than its fair market value as determined by the
Directors.




     (d) “Book Value of Invested Assets” shall mean the Book Value of the Company’s total
assets (without deduction of any liabilities), but excluding (i) goodwill and other intangible
assets, (ii) cash, and (iii) cash equivalent investments with terms which mature in one year
or less.




     (e) “Business Plan” shall mean the Company’s investment policies and objectives and
the capital and operating budget based thereon, approved by the Board as thereafter modified or amended.




     (f) “Fiscal Year” shall mean any period for which an income tax return is submitted to
the Internal Revenue Service and which is treated by the Internal Revenue Service as a reporting period.




     (g) “Gross Asset Value” shall mean the total assets of the
Company after deduction of
allowance for amortization, depreciation or depletion and valuation reserves.




     (h) “Mortgage Loans” shall mean notes, debentures, bonds, and
other evidences of indebtedness or obligations, whether negotiable or non-negotiable, and which are secured or
collateralized by mortgages, including first, wraparound, construction and development, and
junior mortgages.




     (i) “Net Asset Value” shall mean the Book Value of all the assets
of the Company minus all the liabilities of the Company.




     (j) “Net Income” for any period shall mean the Net Income of the Company for such
period computed in accordance with generally accepted accounting principles after deduction
of the Gross Asset Fee, but before deduction of the Net Income Fee, as set forth in
Sections 11(a) and 11(b), respectively, herein, and inclusive of gain or loss of the sale
of assets.




     (k) “Net Operating Income” shall mean rental income less property operating expenses.



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     (l) “Operating Expenses” shall mean the aggregate annual expenses regarded as
operating expenses in accordance with generally accepted accounting principles as determined by the
independent auditors selected by the Directors and including the Gross Asset Fee payable to
the Advisor and fees and expenses paid to the Directors who are not employees or Affiliates of
the Advisor.




     (m) The operating expenses shall exclude, however, the following:




     (i) the cost of money borrower by the Company;




     (ii) income taxes, taxes and assessments on real
property and all other taxes
applicable to the Company;




     (iii) expenses and taxes incurred in connection
with the issuance, distribution,
transfer, registration and stock exchange listing of the Company’s securities
(including legal, auditing, accounting, underwriting, brokerage, printing,
engraving and other fees);




     (iv) fees and expenses paid to independent
mortgage servicers, contractors,
consultants, managers and other agents retained by or on behalf of the Company;




     (v) expenses directly connected with the
purchase, origination, ownership and
disposition of Real Properties or Mortgage Loans (including the costs of
foreclosure, insurance, legal, protective, brokerage, maintenance, repair and
property improvement services) other than expenses with respect thereto of
employees of the Advisor, except legal, internal auditing, foreclosure and transfer
agent services performed by employees of the Advisor;




     (vi) expenses of maintaining and managing real
estate equity interests and
processing and servicing mortgage and other loans;




     (vii) expenses connected with payments of
dividends, interest or distributions by
the Company to shareholders;




     (viii) expenses connected with communications to shareholders and
bookkeeping
and clerical expenses for maintaining shareholder relations, including the cost of
printing and mailing share certificates, proxy solicitation materials and reports;




     (ix) transfer agent’s, registrar’s and indenture trustee’s fees
and charges; and




     (x) the cost of any accounting, statistical,
bookkeeping or computer equipment
necessary for the maintenance of books and records of the Company.




     Additionally, the following expenses of the Advisor shall be excluded:




     (i) employment expenses of the
Advisor’s personnel (including
Directors, officers and employees of the Company who are directors,
officers or employees of the Advisor or its Affiliates), other than the
expenses of those employee services listed at (v) above;



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     (ii) rent, telephone, utilities
and office furnishings and other office
expenses of the Advisor (except those relating to a separate office, if
any, maintained by the Company); and




     (iii) the Advisor’s overhead
directly related to performance of its
functions under this Agreement.




     (n) “Person” shall mean and include individuals, corporations,
limited partnerships,
general partnerships, joint stock companies or associations, joint ventures, associations,
companies, trusts, banks, trust companies, land trusts, business trusts, or other entities and
governments and agencies and political subdivisions thereof.




     (o) “Real Property” shall mean and include land, rights in land,
leasehold interests (including, but not limited to, interests of a lessor or lessee therein), and any buildings,
structures, improvements, fixtures, and equipment located on or used in connection with land,
leasehold interests, and rights in land or interests therein.



     All calculations made pursuant to this Agreement shall be based on statements (which may be
unaudited, except as provided herein) prepared on an accrual basis consistent with generally
accepted accounting principles, regardless of whether the Company may also prepare statements on a
different basis. All other terms shall have the same meaning as set forth in the Company’s
Articles of Incorporation and Bylaws.



     11. Advisory Compensation.




     (a) Gross Asset Fee. On or before the twenty-eighth day
of each month during the term
hereof, the Company shall pay to the Advisor, as compensation for the basic management and advisory
services rendered to the Company hereunder, a fee at a rate of .0625% per month of the average
of the Gross Asset Value of the Company at the beginning and at the end of the next preceding
calendar month. Without negating the provisions of Sections 18, 19, 22 an 23 hereof, the
annual rate of the Gross Asset Fee shall be .75% per annum.




     (b) Net Income Fee. As an incentive for successful
investment and management of the
Company’s assets, the Advisor will be entitled to receive a fee equal to 7.5% per annum of the
Company’s Net Income for each Fiscal Year or portion thereof for which the Advisor provides
services. To the extent the Company has Net Income in a quarter, the 7.5% Net Income fee is
to be paid quarterly on or after the third business day following the filing of the report on
Form 10-Q with the Securities and Exchange Commission, except for the payment for the fourth
quarter, ended December 31, which is to be paid on or after the third business day following
the filing of the report on Form 10-K with the Securities and Exchange Commission. The 7.5%
Net Income Fee is to be cumulative within any Fiscal Year, such that if the Company has a loss
in any quarter during the Fiscal Year, each subsequent quarter’s payment during such Fiscal
Year shall be adjusted to maintain the 7.5% per annum rate, with final settlement being made
with the fourth quarter payment and in accordance with audited results for the Fiscal Year.
The 7.5% Net Income Fee is not cumulative from year to year.




     (c) Acquisition Commission. For supervising the
acquisition, purchase or long term
lease of Real Property for the Company, the Advisor is to receive an Acquisition Commission equal
to the lesser of (i) up to 1% of the cost of acquisition, inclusive of commissions, if any,
paid to



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nonaffiliated brokers; or (ii) the compensation customarily charged in arm’s-length
transactions by others rendering similar property acquisition services as an ongoing public
activity in the same geographical location and for comparable property (including the
Acquisition Commissions and all real estate brokerage fees) may not exceed such property’s
Appraised Value at acquisition.




     (d) Incentive Sales Compensation. To encourage periodic
sales of appreciated Real
Property at optimum value and to reward the Advisor for improved performance of the Company’s Real
Property, the Company shall pay to the Advisor, on or before the 45th day after the
close of each Fiscal Year, an incentive fee equal to 10% of the amount, if any, by which the
aggregate sales consideration for all Real Property sold by the Company during such Fiscal
Year exceeds the sum of: (i) the cost of each such Real Property as originally recorded in the
Company’s books for tax purposes (without deduction for depreciation, amortization or reserve
for losses), (ii) capital improvements made to such assets during the period owned by the
Company, and (iii) all closing costs (including real estate commissions) incurred in the sale
of such Real Property; provided, however, no incentive fee shall be paid
unless (a) such Real Property sold in such Fiscal year, in the aggregate, has produced an 8%
simple annual return on the Company’s net investment, including capital improvements,
calculated over the Company’s holding period before depreciation and inclusive of operating
income and sales consideration and (b) the aggregate Net Operating Income from all Real
Property owned by the Company for all of the prior Fiscal Year and the current Fiscal Year
shall be at least 5% higher in the current Fiscal Year than in the prior Fiscal Year.




     (e) Mortgage or Loan Acquisition Fees. For the
acquisition or purchase from an
unaffiliated party of any existing mortgage or loan by the Company, the Advisor or an Affiliate is
to receive a Mortgage or Loan Acquisition Fee equal to the lesser of (a) 1% of the amount of
the mortgage or loan purchased by the Company or (b) a brokerage or commitment fee which is
reasonable and fair under the circumstances. Such fee will not be paid in connection with the
origination or funding by the Company of any mortgage loan.




     (f) Mortgage Brokerage and Equity Refinancing Fees. For
obtaining loans to the
Company or refinancing on Company properties, the Advisor or an Affiliate is to receive a Mortgage
Brokerage and Equity Refinancing Fee equal to the lesser of (a) 1% of the amount of the loan
or the amount refinanced or (b) a brokerage or refinancing fee which is reasonable and fair
under the circumstances; provided, however, that no such fee shall be paid on
loans from the Advisor or an Affiliate without the approval of the Board of Directors. No Fee
shall be paid on loan extensions.




     (g) Construction Advisory Fee. For all activities in
connection with or related to
construction for the Company and its subsidiaries, Advisor shall receive a fee equal to 6% of the
so-called “hard costs” only of any costs of construction on a completed basis based upon
amounts set forth as approved on any architect’s certificate issued in connection with such
construction from time to time, which fee shall be payable at such time as the
applicable architect certifies other costs for payment to third parties. For the purposes
of this subpart (g), the phrase “hard costs” shall mean and be all actual costs of
construction paid to all contractors, subcontractors and third parties for materials or
labor performed as a part of the construction, but does not include items generally deemed
to be “soft costs” which are consulting fees, attorneys’ fees, architectural fees, fees of
any other professional or permit fees.



     12. Limitation on Third Party Mortgage Placement Fees. The Advisor or
any of its
Affiliates shall pay to the Company, one-half of any compensation received by the Advisor or any
such Affiliate from third parties with respect to the origination, placement or brokerage of any
loan made by the



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Company, provided, however, the compensation retained by the
Advisor or Affiliated shall not exceed the lesser of (a) 2% of the amount of the loan committed by
the Company or (b) a loan brokerage and commitment fee which is reasonable and fair under the
circumstances.



     13. Statements. The Advisor shall furnish to the Company not later than
the tenth day of each
calendar month, beginning with the second calendar month of the term of this Agreement, a statement
showing the computation of the fees, if any, payable in respect to the next preceding calendar
month (or, in the case of incentive compensation, for the preceding Fiscal Year, as appropriate)
under the Agreement. The final settlement of incentive compensation for each Fiscal year shall be
subject to adjustment in accordance with, and upon completion of, the annual audit of the Company’s
financial statements; any payment by the Company or repayment by the Advisor that shall be
indicated to be necessary in accordance therewith shall be made promptly after the completion of
such audit and shall be reflected in the audited statements to be published by the Company.



     14. Compensation for Additional Services. If and to the extent that the
Company shall request
the Advisor or any director, officer, partner, or employee of the Advisor to render services for
the Company other than those required to be rendered by the Advisor hereunder, such additional
services, if performed, will be compensated separately on terms to be agreed upon between such
party and the Company from time to time. In particular, but without limitation, if the Company
shall request that the Advisor perform property management, leasing, loan disbursement or similar
functions, the Company and the Advisor shall enter into a separate agreement specifying the
obligations of the parties and providing for reasonable additional compensation to the Advisor for
performing such services.



     15. Expenses of the Advisor. Without regard to the amount of
compensation or reimbursement
received hereunder by the Advisor, the Advisor shall bear the following expenses:




     (a) employment expenses of the personnel employed by the Advisor
(including Directors, officers, and employees of the Company who are directors, officers, or employees of the
Advisor or of any company that controls, is controlled by, or is under common control with the
Advisor), including, but not limited to, fees, salaries, wages, payroll taxes, travel
expenses, and the cost of employee benefit plans and temporary help expenses except for those
personnel expenses described in Sections 16(e) and (p);




     (b) advertising and promotional expenses incurred in seeking
investments for the Company;




     (c) rent, telephone, utilities, office furniture and furnishings,
and other office expenses
of the Advisor and the Company, except as any of such expenses relates to an office maintained
by the Company separate from the office of the Advisors; and




     (d) miscellaneous administrative expenses relating to performance
by the Advisor of
its functions hereunder.



     16. Expenses of the Company. The Company shall pay all of its expenses
not assumed by the Advisor and, without limiting the generality of the foregoing, it is specifically agreed that the
following expenses of the Company shall be paid by the Company and shall not be paid by the
advisor:




     (a) the cost of money borrowed by the Company;



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     (b) income taxes, taxes and assessments on real property, and all
other taxes applicable to the Company;




     (c) legal, auditing, accounting, underwriting, brokerage,
listing, registration and other
fees, printing, and engraving and other expenses, and taxes incurred in connection with the
issuance, distribution, transfer, registration, and stock exchange listing of the Company’s
securities;




     (d) fees, salaries, and expenses paid to officers and employees
of the Company who are
not directors, officers or employees of the Advisor, or of any company that controls, is
controlled by, or is under common control with the Advisor;




     (e) expenses directly connected with the origination or purchase
of Mortgage Loans
and with the acquisition, disposition and ownership of real estate equity interests or other
property (including the costs of foreclosure, insurance, legal, protective, brokerage,
maintenance, repair, and property improvement services) and including all compensation,
traveling expenses, and other direct costs associated with the Advisor’s employees or other
personnel engaged in (i) real estate transaction legal services, (ii) internal auditing, (iii)
foreclosure and other mortgage finance services, (iv) sale or solicitation for sale of
mortgages, (v) engineering and appraisal services, and (vi) transfer agent services;




     (f) expenses of maintaining and managing real estate equity
interests;




     (g) insurance, as required by the Directors (including Directors’
liability insurance);




     (h) the expenses of organizing, revising, amending, converting,
modifying, or termination the Company;




     (i) expenses connected with payments of dividends or interest or
distributions in cash
or any other form made or caused to be made by the Directors to holders of securities of the Company;




     (j) all expenses connected with communications to holders of
securities of the
Company and the other bookkeeping and clerical work necessary in maintaining relations with holders
of securities, including the cost of printing and mailing certificates for securities and
proxy solicitation materials and reports to holders of the Company’s securities;




     (k) the cost of any accounting, statistical, bookkeeping or
computer equipment or
computer time necessary for maintaining the books and records of the Company and for preparing and
filing Federal, State and Local tax returns;




     (l) transfer agent’s, registrar’s, and indenture trustee’s fees
and charges;




     (m) legal, accounting, investment banking, and auditing fees and
expenses charged by
independent parties performing these services not otherwise included in clauses (c) and (e)
of this Section 16;




     (n) expenses incurred by the Advisor, arising from the sales of
Company properties,
including those expenses related to carrying out foreclosure proceedings;



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     (o) commercially reasonable fees paid to the Advisor for efforts
to liquidate mortgages
before maturity, such as the solicitation of offers and negotiation of terms of sale;




     (p) costs and expenses connected with computer services,
including, but not limited to,
employee or other personnel compensation, hardware and software costs, and related development and
installation costs associated therewith;




     (q) costs and expenses associated with risk management (i.e.
insurance relating to the Company’s assets);




     (r) loan refinancing compensation; and




     (s) expenses associated with special services requested by the
Directors pursuant to Section 14 hereof.



     17. Other Activities of Advisor. The Advisor, its officers, directors,
or employees or any of
its Affiliates may engage in other business activities related to real estate investments or act as
advisor to any other person or entity (including another real estate investment trust), including
those with investment policies similar to the Company, and the Advisor and its officers, directors,
or employees and any of its Affiliates shall be free from any obligation to present to the Company
any particular investment opportunity that comes to the Advisor or such persons, regardless of
whether such opportunity is in accordance with the Company’s Business Plan. However, to minimize
any possible conflict, the Advisor shall consider the respective investment objectives of, and the
appropriateness of a particular investment to each such entity in determining to which entity a
particular investment opportunity should be presented. If appropriate to more than one entity, the
Advisor shall present the investment opportunity to the entity that has had sufficient uninvested
funds for the longest period of time.



     18. Limitation on Operating Expenses. To the extent that the Operating
Expenses of the
Company for any Fiscal Year exceed the lesser of (a) 1.5% of the average of the Book Values of
Invested Assets of the Company at the end of each calendar month of such Fiscal Year, or (b) the
greater of 1.5% of the average of the Net Asset Value of the Company at the end of each calendar
month of such Fiscal Year or 25% of the Company’s Net Income, the Advisor shall refund to the
Company from the fees paid to the Advisor the amount, if any, by which the Operating Expenses so
exceed the applicable amount, provided, however, that the Advisor shall not be
required to refund to the Company, with respect to any Fiscal Year, any amount which exceeds the
aggregate of the Gross Asset Fees paid to the Advisor under this Agreement with respect to such
Fiscal Year.



     19. Term; Termination of Agreement. This Agreement shall continue in
force until the next
Annual Meeting of Stockholders of the Company, and, thereafter, it may be renewed from year to
year, subject to any required approval of the Stockholders of the Company and, if any Director is
an Affiliate of the Advisor, the approval of a majority of the Directors who are not so affiliated.
Notice of renewal shall be given in writing by the Directors to the Advisor not less than 60 days
before the expiration of this Agreement or of any extension thereof. This Agreement may be
terminated for any reason without penalty upon 60 days written notice by the Company to the Advisor
or 120 days written notice by the Advisor to the Company, in the former case by the vote of a
majority of the Directors who are not Affiliates of the Advisor or by the vote of holders of a
majority of the outstanding shares of the Company. Notwithstanding the foregoing, however, in the
event of any material change in the ownership, control or management of the Advisor, the Company
may terminate this Agreement without penalty and without advance notice to the Advisor.



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     20. Amendments. This Agreement shall not be changed, modified,
terminated or discharged
in whole or in part except by an instrument in writing signed by both parties hereto, or their
respective successors or assigns, or otherwise as provided herein.



     21. Assignment. This Assignment shall not be assigned by the Advisor
without the prior
consent of the Company. The Company may terminate this Agreement in the event of its assignment by
the Advisor without the prior consent of the Company. Such an assignment or any other assignment
of this Agreement shall bind the assignee hereunder in the same manner as the
Advisor is bound hereunder. This Agreement shall not be assignable by the Company without the
consent of the Advisor, except in the case of assignment by the Company to a corporation,
association, trust, or other organization that is a successor to the Company. Such successor shall
be bound hereunder and by the terms of said assignment in the same manner as the Company is bound
hereunder.



     22. Default, Bankruptcy, etc. At the option solely of the Directors,
this Agreement shall be
and become terminated immediately upon written notice of termination from the Directors to the
Advisor if any of the following events shall occur:




     (a) if the Advisor shall violate any provision of this Agreement,
and after notice of such
violation shall not cure such default within 30 days; or




     (b) if the Advisor shall be adjudged bankrupt or insolvent by a
court of competent
jurisdiction, or an order shall be made by a court of competent jurisdiction for the appointment of
a receiver, liquidator, or trustee of the Advisor or of all or substantially all of its
property by reason of the foregoing, or approving any petition filed against the Advisor for
its reorganization, and such adjudication or order shall remain in force or unstayed for a
period of 30 days; or




     (c) if the Advisor shall institute proceedings for voluntary
bankruptcy or shall file a
petition seeking reorganization under the Federal bankruptcy laws, or for relief under any law for
the relief of debtors, or shall consent to the appointment of a receiver of itself or of all
or substantially all its property, or shall make a general assignment for the benefit of its
creditors, or shall admit in writing its inability to pay its debts generally, as they become
due.



     The Advisor agrees that if any of the events specified in subsections (b) and (c) of this
Section 22 shall occur, it will give written notice thereof to the Directors within seven days
after the occurrence of such event.



     23. Action Upon Termination. From and after the effective date of
termination of this
Agreement, pursuant to Sections 19, 21 or 22 hereof, the Advisor shall not be entitled to
compensation for further services hereunder but shall be paid all compensation accruing to the date
of termination. The Advisor shall forthwith upon such termination:




     (a) pay over to the Company all monies collected and held for the
account of the Company pursuant to this Agreement;




     (b) deliver to the Directors a full accounting, including a
statement showing all payments collected by it and a statement of any monies held by it, covering the period following
the date of the last accounting furnished to the Directors; and




     (c) deliver to the Directors all property and documents of the
Company then in the



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     custody of the Advisor.



     24. Miscellaneous. The Advisor shall be deemed to be in a fiduciary relationship to the
stockholders of the Company. The Advisor assumes no responsibility under this Agreement other than
to render the services called for hereunder in good faith, and shall not be responsible for any
action of the Directors in following or declining to follow any advice or recommendations of the
Advisor. Neither the Advisor nor any of its shareholders, directors, officers, or employees shall
be liable to the Company, the Directors, the holders of securities of the Company or to any
successor or assign of the Company for any losses arising from the operation of the Company if the
Advisor had determined, in good faith, that the course of conduct which caused the loss or
liability was in the best interests of the Company and the liability or loss was not the result of
negligence or misconduct by the Advisor. However, in no event will the directors, officers or
employees of the Advisor be personally liable for any act or failure to act unless it was the
result of such person’s willful misfeasance, bad faith, gross negligence or reckless disregard of
duty.



     25. Notices. Any notice, report, or other communication required or permitted to be given
hereunder shall be in writing unless some other method of giving such notice, report, or other
communication is accepted by the party to whom it is given, and shall be given by being delivered
at the following addresses of the parties hereto:



     The Directors and/or the Company:



Income Opportunity Realty Investors, Inc.

1800 Valley View Lane, Suite 300

Dallas, Texas 75234

Attn: President



     The Advisor:



Prime Income Asset Management, LLC

1800 Valley View Lane, Suite 300

Dallas, Texas 75234

Attn: Executive Vice President and Principal Financial Officer



     Either party may at any time give notice in writing to the other party of a change of its
address for the purpose of this Section 25.



     26. Headings. The section headings hereof have been inserted for
convenience of reference
only and shall not be construed to affect the meaning, construction, or effect of this Agreement.



     27. Governing Law. This Agreement has been prepared, negotiated and executed in the State
of Texas. The provisions of this Agreement shall be construed and interpreted in accordance with
the laws of the State of Texas applicable to agreements made and to be performed entirely in the
State of Texas.



     28. Execution. This Agreement is executed and made on behalf of the Company by an officer
of the Company, not individually but solely as an Officer, and the obligations under this Agreement
are not binding upon, nor shall resort be had to the private property of, any of the Directors,
stockholders, officers, employees, or agents of the Company personally, but bind only the Company
property.



     29. Facsimile; Electronic Transmission. This Agreement may be transmitted by facsimile or



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electronic transmission, and it is the intent of the Parties for the facsimile of any autograph
reproduced by a receiving facsimile machine or computer to be an original signature, and for the
facsimile or computer-generated version and any complete photocopy of this Agreement to be deemed
an original counterpart.



     IN WITNESS WHEREOF, INCOME OPPORTUNITY REALTY INVESTORS, INC. and PRIME INCOME ASSET
MANAGEMENT, LLC, by their duly authorized officers, have signed this Agreement as of the day and
year first above written.



	 	 	 	 	 
	 	INCOME OPPORTUNITY REALTY

INVESTORS, INC.

 	 
	 	By:  	/s/ Daniel J. Moos	 
	 	 	Daniel J. Moos, President 	 
	 	 	 	 
	 
	 	PRIME INCOME ASSET MANAGEMENT, LLC

 	 
	 	By:  	/s/ Gene S. Bertcher	 
	 	 	Gene S. Bertcher, Executive Vice President 	 
	 	 	 	 
	 




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