Document:

exv10w3

EXHIBIT 10.3

ADVISORY AGREEMENT

BETWEEN

INCOME OPPORTUNITY REALTY INVESTORS, INC.

AND

PILLAR INCOME ASSET MANAGEMENT, INC.

     THIS ADVISORY AGREEMENT (the “Agreement”) is dated as of April 26, 2011, but is effective as
of April 30, 2011, for tax and accounting purposes (the “Effective Date”) between Income
Opportunity Realty Investors, Inc., a Nevada corporation (the “Company”), and Pillar Income Asset
Management, Inc. (the “Advisor”), a Nevada corporation.

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

11

 

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

Pillar Income Asset Management, Inc.

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.

12

 

     29. Facsimile; Electronic Transmission. This Agreement may be transmitted by facsimile or
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 PILLAR INCOME ASSET
MANAGEMENT, INC., 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      	 
	 	 	 	 
	 
	 	PILLAR INCOME ASSET MANAGEMENT, INC.

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

13exv10w1

Exhibit 10.1

DANIEL WOLLSCHLAGER

Supplemental Executive Retirement Agreement

AMENDED AND RESTATED

FENTURA FINANCIAL, INC.

INCENTIVE SUPPLEMENTAL EXECUTIVE RETIREMENT

FOR DANIEL WOLLSCHLAGER

     This AMENDED AND RESTATED SUPPLEMENTAL EXECUTIVE RETIREMENT AGREEMENT (the “Agreement”)
is adopted this December __, 2010, (the “Effective Date”), by and between FENTURA FINANCIAL, INC.,
a Michigan corporation (the “Company”), and DANIEL WOLLSCHLAGER (the “Executive”).

INTRODUCTION

     The purpose of this Agreement is to provide specified benefits to the Executive, a member of a
select group of management or highly compensated employees who contribute materially to the
continued growth, development, and future business success of the Company and its Affiliates. This
Agreement supersedes the Agreement entered into between the parties dated October 24, 2008 (the
“Prior Agreement”). This Agreement shall be unfunded for tax purposes and for purposes of Title I
of the Employee Retirement Income Security Act of 1974 (“ERISA”), as amended from time to time.

Article 1

Definitions

     Whenever used in this Agreement, the following words and phrases shall have the meanings
specified:

	1.1	 	“Affiliate” means any company which is a member of the Controlled Group.
	 
	1.2	 	“Beneficiary” means each designated person, or the estate of the deceased Executive,
entitled to benefits, if any, upon the death of the Executive determined pursuant to Article
4.
	 
	1.3	 	Beneficiary Designation Form” means the form established from time to time by the
Plan Administrator that the Executive completes, signs, and returns to the Plan Administrator
to designate one or more Beneficiaries.
	 
	1.4	 	“Board” means the Board of Directors of the Company as from time to time constituted.
	 
	1.5	 	“Code” means the Internal Revenue Code of 1986, as amended.
	 
	1.6	 	“Company” means Fentura Financial, Inc., a registered bank holding company under the
Bank Holding Company Act of 1956, as amended.

 

 

DANIEL WOLLSCHLAGER

Supplemental Executive Retirement Agreement

	1.7	 	“Disability” means Executive (i) is unable to engage in any substantial gainful
activity by reason of any medically determinable physical or mental impairment which can be
expected to result in death or can be expected to last for a continuous period of not less
than 12 months, or (ii) is, by reason of any medically determinable physical or mental
impairment which can be expected to result in death or can be expected to last for a
continuous period of not less than 12 months, receiving income replacement benefits for a
period of not less than 3 months under an accident and health plan covering employees of the
Company and its Affiliates. Medical determination of Disability may be made by either the
Social Security Administration or by the provider of an accident or health plan covering
employees of the Company and its Affiliates. Upon the request of the Plan Administrator, the
Executive must submit proof to the Plan Administrator of Social Security Administration’s or
the provider’s determination.
	 
	1.8	 	“Effective Date” means December __, 2010.
	 
	1.9	 	“Good Reason” means the occurrence of any of the following: (i) a material
diminution of the Executive’s duties, responsibilities, or authority with the Company or its
Affiliates or a change adverse to Executive in Executive’s reporting responsibilities, titles,
terms of employment (including bonus, compensation, fringe benefits and vacation entitlement)
or (ii) the Company or its Affiliates requiring Executive to be based anywhere other than
within fifty (50) miles of his present office location, or (iii) a material breach of this
Agreement including the failure by the Company to obtain the assumption of this Agreement as
contemplated in Section 9.7 hereof. Upon the occurrence of any event referenced above,
Executive shall, within ninety (90) of any occurrence, provide the Company notice of the
existence of the condition. Upon receiving notice, the Company shall have no more than thirty
(30) days to remedy the condition. Executive shall have two years from the date of the
initial existence of a violation of one of the above events to terminate his employment under
this section.
	 
	1.10	 	“Plan Administrator” means the plan administrator described in Article 6.
	 
	1.11	 	“Plan Year” means the calendar year.
	 
	1.12	 	“Separation from Service” means the termination of the Executive’s employment with
the Company and its Affiliates for reasons other than death or Disability. Whether
a Separation from Service takes place is determined by the Plan Administrator based on the
facts and circumstances surrounding the termination of the Executive’s employment and whether
the Company and its Affiliates and the Executive intended for the Executive to provide
significant services for the Company or its Affiliates following such termination. A
termination of employment will be presumed to constitute a Separation from Service if the
Executive continues to provide services as an employee of the Company or its Affiliates in an
annualized amount that is less than twenty percent (20%) of the services rendered,
on average, during the immediately preceding three full calendar years of employment (or, if
employed less than three years, such lesser period).
	 
	 	 	The Executive will be presumed to have not incurred a Separation from Service if the

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DANIEL WOLLSCHLAGER

Supplemental Executive Retirement Agreement

	 	 	Executive continues to provide services to the Company or its Affiliates in an annualized
amount that is fifty percent (50%) or more of the services rendered, on average, during the
immediately preceding three full calendar years of employment (or if employed less than
three years, such lesser period) and the annual remuneration for such services is fifty
percent (50%).
	 
	 	 	A Separation from Service will not have occurred if immediately following the Executive’s
termination of employment, the Executive becomes an employee of (i) the Company, or (ii) any
member of the Controlled Group.
	 
	1.13	 	“Specified Employee” means a key employee (as defined in Section 416(i) of the Code
without regard to paragraph 5 thereof) of the Company or its Affiliates if any stock of the
Company is publicly traded on an established securities market or otherwise.
	 
	1.14	 	“Termination for Cause” has that meaning set forth in Article 5.
	 
	1.15	 	“Controlled Group” means the group consisting of each corporation that is a member of
a controlled group of corporations, as defined in Code Section 414(b), of which the Company is
a member; each trade or business, whether or not incorporated, under common control, as
defined in Code Section 414(c), of or with the Company; each member of an affiliated service
group, as defined in Code Section 414(m), of which the Company is a member; and any other
entity that is considered pursuant to Code Section 414(o) to be a member of a controlled group
of corporations of which the Company is a member.

Article 2

Distributions During Lifetime

	2.1	 	Benefit. Provided that the Executive remains employed by the Company or an
Affiliate, until the Executive attains age 65, on each of the first six anniversaries of the
Executive’s date of hire and upon the Executive’s attainment of age 65, Executive shall earn a
benefit equal to $35,000.00, so that on the Executive’s attainment of age 65, Executive shall
be entitled to a benefit equal to $245,000.00. Except as otherwise provided in Section 2.2 of
this Agreement, the portion of the $245,000.00 benefit that exceeds the amount of the benefit
the Executive has earned under this Section 2.1 shall be subject to a substantial risk of
forfeiture, as defined in Treas. Reg. 1.409A-1(d). The following chart summarizes the
Executive’s benefit as of his Separation from Service after the first six anniversaries of his
date of hire and upon the Executive’s attainment of age 65:

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DANIEL WOLLSCHLAGER

Supplemental Executive Retirement Agreement

	 	 	 
	Date of Separation from Service	 	Amount of Benefit
	Prior to 10/20/2009
	 	$         0
	After 10/20/2009 and prior to 10/20/2010
	 	$35,000
	After 10/20/2010 and prior to 10/20/2011
	 	$70,000
	After 10/20/2011 and prior to 10/20/2012
	 	$105,000
	After 10/20/2012 and prior to 10/20/2013
	 	$140,000
	After 10/20/2013 and prior to 10/20/2014
	 	$175,000
	After 10/20/2014 and prior to 8/21/2015
	 	$210,000
	After 8/21/2015
	 	$245,000

	 	2.1.1	 	Distribution of Benefit. The Company shall distribute the benefit to
the Executive in accordance with the following schedule. The first payment shall occur
within 60 days following the earlier of (i) the date of the Executive’s Separation from
Service; or (ii) the 5th anniversary of Executive’s date of hire, October
20, 2013. The amount of the first payment shall be the as of the date of the event
triggering the first payment, as set forth in the above schedule. If the Executive
remains employed until at least October 20, 2014, the executive shall be entitled to a
second payment which shall occur within 60 days following the earlier of (i) the date
of the Executive’s Separation from Service; or (ii) August 21 20, 2015. The amount of
the second payment shall be: (i) $35,000 if the payment trigger occurs after October
20, 2013 and prior to October 20, 2014; or (ii) $70,000 if the Executive’s Separation
from Service occurs on or after August 21, 2015.

	2.2.	 	Early Termination Benefit. If the Company terminates Executive’s employment without
Cause or the Executive terminates his employment for Good Reason, in either case resulting in
the Executive’s Separation from Service, then the Company shall be deemed to have waived the
requirement contained in Section 2.1 that Executive continue to remain employed and Executive
shall be entitled to a benefit equal to $245,000 in lieu of any other benefit under this
Article. In the event the Executive’s Separation from Service occurs after the Executive
receives the first payment described in Section 2.1.1 of the Agreement, then the benefit
described above in Section 2.2 shall be reduced by the amount of such payment. Such benefit
shall be paid at the same time and in the same form as specified in Section 2.1.1 of this
Agreement.
	 
	2.3	 	Disability Benefit. If the Executive’s Disability results in Separation from Service
prior to the Executive’s attainment of age 65, the Company shall distribute to the Executive
the benefit earned as of the date of Executive’s Separation from Service as described in this
Section 2.3.1 in lieu of any other benefit under this Article.
	 
	2.3.1	 	Amount of Benefit. The following chart summarizes the Executive’s benefit as of his
Separation from Service after the first five anniversaries of his date of hire:

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DANIEL WOLLSCHLAGER

Supplemental Executive Retirement Agreement

	 	 	 
	Date of Separation from Service	 	Amount of Benefit
	Prior to 10/20/2009
	 	$         0
	After 10/20/2009 and prior to 10/20/2010
	 	$35,000
	After 10/20/2010 and prior to 10/20/2011
	 	$70,000
	After 10/20/2011 and prior to 10/20/2012
	 	$105,000
	After 10/20/2012 and prior to 10/20/2013
	 	$140,000
	After 10/20/2013 and prior to 10/20/2014
	 	$175,000
	After 10/20/2014 and prior to 8/21/2015
	 	$210,000
	After 10/20/2015
	 	$245,000

	 	2.3.2	 	Distribution of Benefit. The Company shall distribute the benefit to
the Executive in a lump sum payment within 60 days following Separation from Service.
In the event the Executive’s Separation from Service due to Disability occurs after the
Executive receives the first payment described in Section 2.1.1 of the Agreement, then
the benefit described above in Section 2.3.1 shall be reduced by the amount of such
payment.

	2.4	 	Restriction on Timing of Distribution. Notwithstanding any provision of this
Agreement to the contrary, if the Executive is considered a Specified Employee at Separation
from Service under such procedures as established by the Company in accordance with Section
409A of the Code, benefit distributions that are made upon Separation from Service may not, to
the extent required by Section 409A of the Code, commence earlier than six (6) months after
the date of such Separation from Service. Therefore, in the event this Section 2.5 is
applicable to the Executive, any distribution or series of distributions to be made due to a
Separation from Service shall commence no earlier than the first day of the seventh month
following the Separation from Service, provided that to the extent permitted by Section 409A
of the Code, only payments scheduled to be paid during the first six (6) months after the date
of such Separation from Service shall be delayed and such delayed payments shall be paid in a
single sum on the first day of the seventh month following the date of such Separation from
Service.
	 
	2.5	 	Distributions Upon Income Inclusion Under Section 409A of the Code. Upon the
inclusion of any portion of the Accrued Benefit into the Executive’s income as a result of the
failure of this Agreement to comply with the requirements of Section 409A of the Code, the
Company shall distribute such portion of the vested Accrued Benefit to the Executive in a
single lump sum as soon as is administratively practicable following the discovery of such
failure.

Article 3

Distribution at Death

	3.1	 	Death During Active Service. If the Executive dies while in the active service of
the Company, prior to the Executive’s attainment of age 65, the Company shall distribute to
the Beneficiary the benefit described in this Section 3.1. This benefit shall be distributed
in lieu of the benefits under Article 2.

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DANIEL WOLLSCHLAGER

Supplemental Executive Retirement Agreement

	 	3.1.1	 	Amount of Benefit. The benefit under this Section 3.1 is $245,000.00.
In the event the Executive’s Death occurs after the Executive receives the first
payment described in Section 2.1.1 of the Agreement, then the benefit described above
in this Section 3.1.1 shall be reduced by the amount of such payment.
	 
	 	3.1.2	 	Distribution of Benefit. The Company shall distribute the benefit to
the Beneficiary in a lump sum payment within 60 days of the Executive’s death.

	3.2	 	Death During Distribution of a Benefit. If the Executive dies after any benefit
distributions have commenced under this Agreement but before receiving all such distributions,
the Company shall distribute to the Beneficiary the remaining benefits at the same time and in
the same amounts they would have been distributed to the Executive had the Executive survived.
	 
	3.3	 	Death After Separation from Service But Before Benefit Distributions Commence. If
the Executive is entitled to benefit distributions under this Agreement, but dies prior to the
commencement of said benefit distributions, the Company shall distribute to the Beneficiary
the same benefits that the Executive was entitled to prior to death except that the benefit
distributions shall commence within thirty (30) days following receipt by the Company of the
Executive’s death certificate.

Article 4

Beneficiaries

	4.1	 	Beneficiary. The Executive shall have the right, at any time, to designate a
Beneficiary(ies) to receive any benefit distributions under this Agreement to a Beneficiary
upon the death of the Executive. The Beneficiary designated under this Agreement may be the
same as or different from the beneficiary designation under any other plan of the Company in
which the Executive participates.
	 
	4.2	 	Beneficiary Designation: Change. The Executive shall designate a Beneficiary by
completing and signing the Beneficiary Designation Form, and delivering it to the Plan
Administrator or its designated agent. The Executive’s beneficiary designation shall be
deemed automatically revoked if the Beneficiary predeceases the Executive or if the Executive
names a spouse as Beneficiary and the marriage is subsequently dissolved. The Executive shall
have the right to change a Beneficiary by completing, signing and otherwise complying with the
terms of the Beneficiary Designation Form and the Plan Administrator’s rules and procedures,
as in effect from time to time. Upon the acceptance by the Plan Administrator of a new
Beneficiary Designation Form, all Beneficiary designations previously filed shall be
cancelled. The Plan Administrator shall be entitled to rely on the last Beneficiary
Designation Form filed by the Executive and accepted by the Plan Administrator prior to the
Executive’s death.
	 
	4.3	 	Acknowledgment. No designation or change in designation of a Beneficiary shall be
effective until received, accepted and acknowledged in writing by the Plan Administrator

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DANIEL WOLLSCHLAGER

Supplemental Executive Retirement Agreement

	 	 	or its designated agent.
	 
	4.4	 	No Beneficiary Designation. If the Executive dies without a valid beneficiary
designation, or if all designated Beneficiaries predecease the Executive, then the Executive’s
spouse shall be the designated Beneficiary. If the Executive has no surviving spouse, the
benefits shall be made to the personal representative of the Executive’s estate.
	 
	4.5	 	Facility of Distribution. If the Plan Administrator determines in its discretion
that a benefit is to be distributed to a minor, to a person declared incompetent, or to a
person incapable of handling the disposition of that person’s property, the Plan Administrator
may direct distribution of such benefit to the guardian, legal representative or person having
the care or custody of such minor, incompetent person or incapable person. The Plan
Administrator may require proof of incompetence, minority or guardianship as it may deem
appropriate prior to distribution of the benefit. Any distribution of a benefit shall be a
distribution for the account of the Executive and the Executive’s Beneficiary, as the case may
be, and shall be a complete discharge of any liability under the Agreement for such
distribution amount.

Article 5

General Limitations

	5.1	 	Termination for Cause. Notwithstanding any provision of this Agreement to the
contrary, the Company shall not distribute any benefit under this Agreement if Executive’s
service is terminated by the Board for:

	 	(a)	 	Gross negligence or gross neglect of duties to the Company or its Affiliates;
or
	 
	 	(b)	 	Conviction of a felony or of a gross misdemeanor involving moral turpitude in
connection with the Executive’s employment with the Company or its Affiliates; or
	 
	 	(c)	 	Fraud, disloyalty, dishonesty or willful violation of any law or significant
policy committed in connection with the Executive’s employment and resulting in a
material adverse effect on the Company or its Affiliates.

	5.2	 	Suicide or Misstatement. No benefits shall be distributed if the Executive commits
suicide within two years after the Effective Date of this Agreement, or if an insurance
company which issued a life insurance policy covering the Executive and owned by the Company
denies coverage (i) for material misstatements of fact made by the Executive on an application
for such life insurance, or (ii) for any other reason.
	 
	5.3	 	Removal. Notwithstanding any provision of this Agreement to the contrary, the
Company shall not distribute any benefit under this Agreement if the Executive is subject to a
final removal or prohibition order issued by an appropriate federal banking agency pursuant to
Section 8(e) of the Federal Deposit Insurance Act.
	 
	5.4	 	Forfeiture. In the event the Plan Administrator determines that the Executive has
violated the Shareholder Protection Agreement, a copy of which is attached, the Executive
shall

6

 

DANIEL WOLLSCHLAGER

Supplemental Executive Retirement Agreement

	 	 	forfeit the right to any benefits that have not yet been paid to Executive under this
Agreement.

Article 6

Administration of Agreement

	6.1	 	Plan Administrator Duties. This Agreement shall be administered by a Plan
Administrator which shall consist of the Board, or such committee or person(s) as the Board
shall appoint. The Plan Administrator shall also have the discretion and authority to (i)
make, amend, interpret and enforce all appropriate rules and regulations for the
administration of this Agreement and (ii) decide or resolve any and all questions including
interpretations of this Agreement, as may arise in connection with the Agreement.
	 
	6.2	 	Agents. In the administration of this Agreement, the Plan Administrator may employ
agents and delegate to them such administrative duties as it sees fit, (including acting
through a duly appointed representative), and may from time to time consult with counsel who
may be counsel to the Company.
	 
	6.3	 	Binding Effect of Decisions. The decision or action of the Plan Administrator with
respect to any question arising out of or in connection with the administration,
interpretation and application of the Agreement and the rules and regulations promulgated
hereunder shall be final and conclusive and binding upon all persons having any interest in
the Agreement.
	 
	6.4	 	Indemnity of Plan Administrator. The Company shall indemnify and hold harmless the
members of the Plan Administrator against any and all claims, losses, damages, expenses or
liabilities arising from any action or failure to act with respect to this Agreement, except
in the case of willful misconduct by the Plan Administrator or any of its members.
	 
	6.5	 	Bank Information. To enable the Plan Administrator to perform its functions, the
Company shall supply full and timely information to the Plan Administrator on all matters
relating to the date and circumstances of the retirement, Disability, death, or Separation
from Service of the Executive, and such other pertinent information as the Plan Administrator
may reasonably require.
	 
	6.6	 	Annual Statement. The Plan Administrator shall provide to the Executive, within one
hundred twenty (120) days after the end of each Plan Year, a statement setting forth the
benefits to be distributed under this Agreement.

Article 7

Claims And Review Procedures

	7.1	 	Claims Procedure. An Executive or Beneficiary (“claimant”) who has not received
benefits under the Agreement that he or she believes should be distributed shall make a claim
for such benefits as follows:

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DANIEL WOLLSCHLAGER

Supplemental Executive Retirement Agreement

	 	7.1.1	 	Initiation — Written Claim. The claimant initiates a claim by
submitting to the Plan Administrator a written claim for the benefits.
	 
	 	7.1.2	 	Timing of Plan Administrator Response. The Plan Administrator shall
respond to such claimant within 90 days after receiving the claim. If the Plan
Administrator determines that special circumstances require additional time for
processing the claim, the Plan Administrator can extend the response period by an
additional 90 days by notifying the claimant in writing, prior to the end of the
initial 90-day period, that an additional period is required. The notice of extension
must set forth the special circumstances and the date by which the Plan Administrator
expects to render its decision.
	 
	 	7.1.3	 	Notice of Decision. If the Plan Administrator denies part or all of
the claim, the Plan Administrator shall notify the claimant in writing of such denial.
The Plan Administrator shall write the notification in a manner calculated to be
understood by the claimant. The notification shall set forth:

	 	(a)	 	The specific reasons for the denial;
	 
	 	(b)	 	A reference to the specific provisions of the Agreement on
which the denial is based;
	 
	 	(c)	 	A description of any additional information or material
necessary for the claimant to perfect the claim and an explanation of why it is
needed;
	 
	 	(d)	 	An explanation of the Agreement’s review procedures and the
time limits applicable to such procedures; and
	 
	 	(e)	 	A statement of the claimant’s right to bring a civil action
under ERISA Section 502(a) following an adverse benefit determination on
review.

	7.2	 	Review Procedure. If the Plan Administrator denies part or all of the claim, the
claimant shall have the opportunity for a full and fair review by the Board of the denial, as
follows:

	 	7.2.1	 	Initiation — Written Request. To initiate the review, the claimant,
within 60 days after receiving the Plan Administrator’s notice of denial, must file
with the Plan Administrator a written request for review.
	 
	 	7.2.2	 	Additional Submissions — Information Access. The claimant shall then
have the opportunity to submit written comments, documents, records and other
information relating to the claim. The Plan Administrator shall also provide the
claimant, upon request and free of charge, reasonable access to, and copies of, all
documents, records and other information relevant (as defined in applicable ERISA
regulations) to the claimant’s claim for benefits.
	 
	 	7.2.3	 	Considerations on Review. In considering the review, the Plan
Administrator shall take into account all materials and information the claimant
submits relating to the claim, without regard to whether such information was submitted
or considered in the initial benefit determination.

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DANIEL WOLLSCHLAGER

Supplemental Executive Retirement Agreement

	 	7.2.4	 	Timing of Plan Administrator Response. The Plan Administrator shall
respond in writing to such claimant within 60 days after receiving the request for
review. If the Plan Administrator determines that special circumstances require
additional time for processing the claim, the Plan Administrator can extend the
response period by an additional 60 days by notifying the claimant in writing, prior to
the end of the initial 60-day period, that an additional period is required. The
notice of extension must set forth the special circumstances and the date by which the
Plan Administrator expects to render its decision.
	 
	 	7.2.5	 	Notice of Decision. The Plan Administrator shall notify the claimant
in writing of its decision on review. The Plan Administrator shall write the
notification in a manner calculated to be understood by the claimant. The notification
shall set forth:

	 	(a)	 	The specific reasons for the denial;
	 
	 	(b)	 	A reference to the specific provisions of the Agreement on
which the denial is based;
	 
	 	(c)	 	A statement that the claimant is entitled to receive, upon
request and free of charge, reasonable access to, and copies of, all documents,
records and other information relevant (as defined in applicable ERISA
regulations) to the claimant’s claim for benefits; and
	 
	 	(d)	 	A statement of the claimant’s right to bring a civil action
under ERISA Section 502(a).

Article 8

Amendments and Termination

	8.1	 	Amendments. This Agreement may be amended only by a written agreement signed by the
Company and the Executive. However, the Company may unilaterally amend this Agreement to
conform with written directives to the Company from its auditors or banking regulators, in
either case, to comply with applicable law, including, without limitation, Section 409A of the
Code and any and all regulations and guidance promulgated thereunder.
	 
	8.2	 	Plan Termination Generally. The Company may unilaterally terminate this Agreement at
any time. In the event of such termination, the Company shall be deemed to have waived the
requirement contained in Section 2.1 that Executive continue to remain employed with the
Company or an Affiliate and Executive shall be entitled to a benefit equal to $175,000.
Except as provided in Section 8.3, the termination of this Agreement shall not cause a
distribution of benefits under this Agreement. Rather, upon such termination benefit
distributions will be made at the earliest distribution event permitted under Article 2 or
Article 3.
	 
	8.3	 	Plan Terminations Under Section 409A. Notwithstanding anything to the contrary in
Section 8.2, distributions following termination of the Agreement shall be made in the same
time and manner specified in the Agreement except to the extent provided by Code

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Supplemental Executive Retirement Agreement

	 	 	Section 409A and the final regulations thereunder, including, not by way of limitation,
Treas. Reg. §1.409A-3(j)(4)(ix)(A)-(D).

Article 9

Miscellaneous

	9.1	 	Binding Effect. This Agreement shall bind the Executive and the Company, and their
beneficiaries, survivors, executors, administrators and transferees.
	 
	9.2	 	No Guarantee of Employment. This Agreement is not a contract for employment. It
does not give the Executive the right to remain as an employee of the Company, nor does it
interfere with the Company’s right to discharge the Executive. It also does not require the
Executive to remain an employee nor interfere with the Executive’s right to terminate
employment at any time.
	 
	9.3	 	Non-Transferability. Benefits under this Agreement cannot be sold, transferred,
assigned, pledged, attached or encumbered in any manner.
	 
	9.4	 	Tax Withholding and Reporting. The Company shall withhold any taxes that are
required to be withheld, including but not limited to taxes owed under Section 409A of the
Code and regulations thereunder, from the benefits provided under this Agreement. Executive
acknowledges that the Company’s sole liability regarding taxes is to forward any amounts
withheld to the appropriate taxing authority(ies). Further, the Company shall satisfy all
applicable reporting requirements, including those under Section 409A of the Code and
regulations thereunder.
	 
	9.5	 	Applicable Law. The Agreement and all rights hereunder shall be governed by the laws
of the State of Michigan, except to the extent preempted by the laws of the United States of
America.
	 
	9.6	 	Unfunded Arrangement. The Executive and Beneficiary are general unsecured creditors
of the Company for the distribution of benefits under this Agreement. The benefits represent
the mere promise by the Company to distribute such benefits. The rights to benefits are not
subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge,
encumbrance, attachment, or garnishment by creditors. Any insurance on the Executive’s life
or other informal funding asset is a general asset of the Company to which the Executive and
Beneficiary have no preferred or secured claim.
	 
	9.7	 	Reorganization. The Company shall not merge or consolidate into or with another
corporation, or reorganize, or sell substantially all of its assets to another bank, firm, or
person unless such succeeding or continuing bank, firm, or person agrees to assume and
discharge the obligations of the Company under this Agreement. Upon the occurrence of such
event, the term “Company” as used in this Agreement shall be deemed to refer to the successor
or survivor corporation.
	 
	9.8	 	Entire Agreement. This Agreement constitutes the entire agreement between the

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DANIEL WOLLSCHLAGER

Supplemental Executive Retirement Agreement

	 	 	Company and the Executive as to the subject matter hereof. This Agreement rescinds and
replaces the Prior Agreement. No rights are granted to the Executive by virtue of this
Agreement other than those specifically set forth herein.
	 
	9.9	 	Interpretation. Wherever the fulfillment of the intent and purpose of this Agreement
requires, and the context will permit, the use of the masculine gender includes the feminine
and use of the singular includes the plural.
	 
	9.10	 	Alternative Action. In the event it shall become impossible for the Company or the
Plan Administrator to perform any act required by this Agreement, the Company or Plan
Administrator may in its discretion perform such alternative act as most nearly carries out
the intent and purpose of this Agreement and is in the best interests of the Company.
	 
	9.11	 	Headings. Article and section headings are for convenient reference only and shall
not control or affect the meaning or construction of any of its provisions.
	 
	9.12	 	Validity. In case any provision of this Agreement shall be illegal or invalid for
any reason, said illegality or invalidity shall not affect the remaining parts hereof, but
this Agreement shall be construed and enforced as if such illegal and invalid provision has
never been inserted herein.
	 
	9.13	 	Notice. Any notice or filing required or permitted to be given to the Company or
Plan Administrator under this Agreement shall be sufficient if in writing and hand-delivered,
or sent by registered or certified mail, to the address below:

Fentura Financial, Inc.

175 North Leroy Street

Fenton, MI 48430

	 	 	Such notice shall be deemed given as of the date of delivery or, if delivery is made by
mail, as of the date shown on the postmark on the receipt for registration or certification.
	 
	 	 	Any notice or filing required or permitted to be given to the Executive under this Agreement
shall be sufficient if in writing and hand-delivered, or sent by mail, to the last known
address of the Executive.
	 
	9.14	 	Compliance with Section 409A. This Agreement shall at all times be administered and
the provisions of this Agreement shall be interpreted consistent with the requirements of
Section 409A of the Code and any and all regulations thereunder, including such regulations as
may be promulgated after the Effective Date of this Agreement.
	 
	9.15	 	Rescissions. Any modification to the terms of this Agreement that would
inadvertently result in an additional tax liability on the part of the Executive, shall have
no effect to the extent the change in the terms of the plan is rescinded by the earlier of a
date before the right is exercised (if the change grants a discretionary right) and the last
day of the calendar year during which such change occurred.

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Supplemental Executive Retirement Agreement

	9.16	 	Transfer of Employment. Executive shall not transfer employment to the Company or
another member of the Controlled Group unless such successor employer of the Executive agrees
to assume and discharge the obligations of the Company under this Agreement. Upon the
occurrence of such a transfer, the term “Company” as used in this Agreement shall be deemed to
refer to the successor employer of the Executive.

     IN WITNESS WHEREOF, the Executive and a duly authorized representative of the Company have
signed this Agreement.

	 	 	 	 	 	 	 

	EXECUTIVE:	 	COMPANY:	 	 
	 
	 	 	 	 	 	 
	 	 	FENTURA FINANCIAL, INC.	 	 
	 
	 	 	 	 	 	 
	/s/ Daniel Wollschlager
 

Daniel Wollschlager

	 	By

Title
	 	/s/ Forrest Shook
 

Chairman
	 	 

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DANIEL WOLLSCHLAGER

Supplemental Executive Retirement Agreement

	þ	 	New Designation
	 
	o	 	Change in Designation

I, Daniel J. Wollschlager, designate the following as Beneficiary under the Agreement:

	 	 	 	 	 

	Primary:
	 	 	 	 
	Connie J. Wollschlager
	 	 	100	%
	 
	 	 	                    	%
	Contingent:
	 	 	 	 
	Jeffrey A. Wollschlager
	 	 	50	%
	Mark D. Wollschlager
	 	 	50	%

Notes:

	 	•	 	Please PRINT CLEARLY or TYPE the names of the beneficiaries.
	 
	 	•	 	To name a trust as Beneficiary, please provide the name of the trustee(s) and the
exact name and date of the trust agreement.
	 
	 	•	 	To name your estate as Beneficiary, please write “Estate of _[your name]_”.
	 
	 	•	 	Be aware that none of the contingent beneficiaries will receive anything unless ALL of
the primary beneficiaries predecease you.

I understand that I may change these beneficiary designations by delivering a new written
designation to the Plan Administrator, which shall be effective only upon receipt and
acknowledgment by the Plan Administrator prior to my death. I further understand that the
designations will be automatically revoked if the Beneficiary predeceases me, or, if I have named
my spouse as Beneficiary and our marriage is subsequently dissolved.

	 	 	 	 	 	 	 

	Name:

	 	Daniel J. Wollschlager	 	 	 	 
	 
	Signature:

	 	/s/ Daniel Wollschlager
 

	 	Date: 
	 	4/26/11

Received by the Plan Administrator this 26th day of April, 2011

	 	 	 	 	 

	By:

	 	/s/ Kristina M. Premo
 

	 	 
	Title:

	 	Sr. Vice President

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