Document:

Promissory Note

 EXHIBIT 10.4 
 PROMISSORY NOTE 
 Date: December 1, 2006 
 BORROWER 

			
	Name:	  	Paladin Realty Income Properties, Inc.
		
	Address:	  	 10880 Wilshire Blvd
 Suite 1400
 Los Angeles, CA 90024

 LENDER 
  

			
		  	Paladin Realty Partners, LLC
		
	Address:	  	 10880 Wilshire Blvd
 Suite 1440
 Los Angeles, CA 90024

 Borrower promises to pay to the order of Lender, in lawful money of the United States of America, at its office
indicated above or wherever else Lender may specify, the sum of $1,100,000 or such sum as may be advanced and outstanding from time to time, with interest on the unpaid principal balance at the rate and on the terms provided in this Promissory Note
(including all renewals, extensions or modifications hereof, this “Note”). 
 LIBOR MARKET INDEX RATE. Interest shall accrue on the unpaid
principal balance of this Note from the date hereof at the LIBOR Market Index Rate plus 2.5% as that rate may change from day to day in accordance with changes in the LIBOR Market Index Rate (“Interest Rate”). “LIBOR Market Index
Rate”, for any day, means the rate for 1 month U.S. dollar deposits as reported on Telerate page 3750 as of 11:00 a.m., London time, on such day, or if such day is not a London business day, then the immediately preceding London business day
(or if not so reported, then as determined by Lender from another recognized source or interbank quotation). 
 INTEREST ONLY, PRINCIPAL AT MATURITY.
This Note shall be due and payable in consecutive monthly payments of accrued interest only, commencing on January 1, 2007, and continuing on the same day of each month thereafter until fully paid; provided that if the first day of
any month in which payment is due is not a business day, payment shall be due on the next succeeding business day of that month. In any event, all principal and accrued interest shall be due and payable on the one hundred eightieth (180th) day following execution of this Note. 
 DEFAULT RATE. In addition to all other rights contained in this Note, if a default in the payment of Obligations occurs, all outstanding Obligations shall bear interest at the Interest Rate plus 3%
(“Default Rate”), except if the Note is governed by the laws of the State of North Carolina and the original principal amount is less than or equal to $300,000.00. The Default Rate shall apply from demand until the Obligations or any
judgment thereon is paid in full. 

 INTEREST AND FEE(S) COMPUTATION (ACTUAL/360). Interest and fees, if any, shall be computed on the basis of a
360-day year for the actual number of days in the applicable period (“Actual/360 Computation”). The Actual/360 Computation determines the annual effective interest yield by taking the stated (nominal) rate for a year’s period and
dividing said rate by 360 to determine the daily periodic rate to be applied for each day in the applicable period. Application of the Actual/360 Computation produces an annualized effective rate exceeding the nominal rate. 
 APPLICATION OF PAYMENTS. Monies received by Lender from any source for application toward payment of the Obligations shall be applied to accrued interest and then
to principal. Upon the occurrence of a default in the payment of the Obligations or a Default (as defined in the other Loan Documents) under any other Loan Document, monies may be applied to the Obligations in any manner or order deemed appropriate
by Lender. 
 If any payment received by Lender under this Note or other Loan Documents is rescinded, avoided or for any reason returned by Lender because of
any adverse claim or threatened action, the returned payment shall remain payable as an obligation of all persons liable under this Note or other Loan Documents as though such payment had not been made. 
 USE OF PROCEEDS. Borrower shall use the proceeds of the loan(s) evidenced by this Note for the commercial purposes of Borrower. 
 DEFINITIONS. Loan Documents. The term “Loan Documents”, as used in this Note and the other Loan Documents, refers to all documents executed in
connection with or related to the loan evidenced by this Note and any prior notes which evidence all or any portion of the loan evidenced by this Note, and any guaranty agreements, security agreements, security instruments, financing statements,
mortgage instruments, any renewals or modifications, whenever any of the foregoing are executed, but does not include swap agreements (as defined in 11 U.S.C. § 101, as in effect from time to time). Obligations. The term
“Obligations”, as used in this Note and the other Loan Documents, refers to any and all indebtedness and other obligations under this Note, all other obligations under any other Loan Document(s), and all obligations under any swap
agreements (as defined in 11 U.S.C. § 101) between Borrower and Lender whenever executed. Certain Other Terms. All terms that are used but not otherwise defined in any of the Loan Documents shall have the definitions provided
in the Uniform Commercial Code. 
 LATE CHARGE. If any payments are not timely made, Borrower shall also pay to Lender a late charge equal to 4% of
each payment past due for 15 or more days. 
 Acceptance by Lender of any late payment without an accompanying late charge shall not be deemed a waiver of
Lender’s right to collect such late charge or to collect a late charge for any subsequent late payment received. 
 ATTORNEYS’ FEES AND OTHER
COLLECTION COSTS. Borrower shall pay all of Lender’s reasonable expenses incurred to enforce or collect any of the Obligations including, without limitation, reasonable arbitration, paralegals’, attorneys’ and experts’ fees
and expenses, whether incurred without the commencement of a suit, in any trial, arbitration, or administrative proceeding, or in any appellate or bankruptcy proceeding. 
  

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 USURY. If at any time the effective interest rate under this Note would, but for this paragraph, exceed the
maximum lawful rate, the effective interest rate under this Note shall be the maximum lawful rate, and any amount received by Lender in excess of such rate shall be applied to principal and then to fees and expenses, or, if no such amounts are
owing, returned to Borrower. 
 CURE PERIOD. Except as provided below, any Default, other than non-payment, may be cured within 10 days after
written notice thereof is mailed to Borrower by Lender (“Cure Period”). Borrower’s right to cure shall be applicable only to curable defaults and shall not apply, without limitation, to Defaults based upon False Warranty, Cessation,
Bankruptcy, Guaranty, any and all payments due and payable on the Maturity Date or Material Capital Structure of Business Alteration. 
 DEFAULT. If
any of the following occurs and is not cured within the applicable Cure Period, a default (“Default”) under this Note shall exist: Nonpayment; Nonperformance. The failure of timely payment or performance of the Obligations or
Default under any other Loan Documents. False Warranty. A warranty or representation made or deemed made in the Loan Documents or furnished Lender in connection with the loan evidenced by this Note proves materially false, or if of a
continuing nature, becomes materially false. Cross Default. At Lender’s option, any default in payment or performance of any obligation under any other loans, contracts or agreements of Borrower, any Subsidiary or Affiliate of Borrower,
any general partner of or the holder(s) of the majority ownership interests of Borrower with Lender or its affiliates (“Affiliate” shall have the meaning as defined in 11 U.S.C. § 101, except that the term “Borrower” shall
be substituted for the term “Debtor” therein; “Subsidiary” shall mean any business in which Borrower holds, directly or indirectly, a controlling interest). Cessation; Bankruptcy. The death of, appointment of a guardian
for, dissolution of, termination of existence of, loss of good standing status by, appointment of a receiver for, assignment for the benefit of creditors of, or commencement of any bankruptcy or insolvency proceeding by or against Borrower, its
Subsidiaries or Affiliates, if any, or any general partner of or the holder(s) of the majority ownership interests of Borrower, or any party to the Loan Documents. Material Capital Structure or Business Alteration. Without prior written
consent of Lender, (i) a material alteration in the kind or type of Borrower’s business or that of Borrower’s Subsidiaries or Affiliates, if any; (ii) the sale of substantially all of the business or assets of Borrower, any of
Borrower’s Subsidiaries or Affiliates or any guarantor, or a material portion (10% or more) of such business or assets if such a sale is outside the ordinary course of business of Borrower, or any of Borrower’s Subsidiaries or Affiliates
or any guarantor, or more than 50% of the outstanding stock or voting power of or in any such entity in a single transaction or a series of transactions; (iii) the acquisition of substantially all of the business or assets or more than 50% of
the outstanding stock or voting power of any other entity; or (iv) should any Borrower, or any of Borrower’s Subsidiaries or Affiliates or any guarantor enter into any merger or consolidation. Material Adverse Change. Bank
determines in good faith, in its sole discretion, that the prospects for payment or performance of the Obligations are impaired or there has occurred a material adverse change in the business or prospects of Borrower, financial or otherwise.

  

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 REMEDIES UPON DEFAULT. If a Default occurs under this Note or any Loan Documents, Lender may at any time
thereafter, take the following actions: Acceleration Upon Default. Accelerate the maturity of this Note and, at Lender’s option, any or all other Obligations, other than Obligations under any swap agreements (as defined in 11 U.S.C.
§ 101, as in effect from time to time) between Borrower and Lender, which shall be due in accordance with and governed by the provisions of said swap agreements; whereupon this Note and the accelerated Obligations shall be immediately due and
payable; provided, however, if the Default is based upon a bankruptcy or insolvency proceeding commenced by or against Borrower or any guarantor or endorser of this Note, all Obligations (other than Obligations under any swap agreement as referenced
above) shall automatically and immediately be due and payable. Cumulative. Exercise any rights and remedies as provided under the Note and other Loan Documents, or as provided by law or equity. 
 FINANCIAL AND OTHER INFORMATION. Borrower shall deliver to Lender such information as Lender may reasonably request from time to time, including without
limitation, financial statements and information pertaining to Borrower’s financial condition. Such information shall be true, complete, and accurate. 
 WAIVERS AND AMENDMENTS. No waivers, amendments or modifications of this Note and other Loan Documents shall be valid unless in writing and signed by an officer of Lender. No waiver by Lender of any Default shall operate as a waiver
of any other Default or the same Default on a future occasion. Neither the failure nor any delay on the part of Lender in exercising any right, power, or remedy under this Note and other Loan Documents shall operate as a waiver thereof, nor shall a
single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or remedy. 
 Except to the
extent prohibited by law, each Borrower and each other person liable under this Note waives presentment, protest, notice of dishonor, demand fro payment, notice of intention to accelerate maturity, notice of acceleration of maturity, notice of sale
and all other notices of any kind. Further, each agrees that Lender (i) may extend, modify or renew this Note or make a novation of the loan evidenced by this Note for any period, and / or (ii) grant any releases, compromises or
indulgences with respect to any collateral securing this Note, or with respect to any other Borrower or any other person liable under this Note or other Loan Documents, all without notice to or consent of each Borrower or each person who may be
liable under this Note or any other Loan Document and without affecting the liability of Borrower or any person who may be liable under this Note or any other Loan Document. 
 MISCELLANEOUS PROVISIONS. Assignment. This Note and the other Loan Documents shall inure to the benefit of and be binding upon the parties and their respective heirs, legal representatives, successors
and assigns. Lender’s interests in and rights under this Note and the other Loan Documents are freely assignable, in whole or in part, by Lender. In addition, nothing in this Note or any of the other Loan Documents shall prohibit Lender from
pledging or assigning this Note or any of the other Loan Documents or any interest therein to any Federal Reserve Bank. Borrower shall not assign its rights and interest hereunder without the prior written consent of Lender, and any attempt by
Borrower to assign without Lender’s prior written consent is null and void. Any assignment shall not release Borrower from the Obligations. Organization; Powers. Borrower represents that Borrower (i) is (a) an adult individual
and is sui juris, or (b) a corporation, general partnership, limited partnership, limited liability company or other legal entity, duly organized, validly existing and in good standing under the laws of its state of organization, and is
authorized to do business in each other jurisdiction wherein its ownership of property or conduct of business legally requires such organization; (ii) has the power 

  

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and authority to own its properties and assets and to carry on its business as now being conducted and as now contemplated; and (iii) has the power and
authority to execute, deliver and perform, and by all necessary action has authorized the execution, delivery and performance of, all of its obligations under this Note and any other Loan Document to which it is a party. Applicable Law; Conflict
Between Documents. This Note and, unless otherwise provided in any other Loan Document, the other Loan Documents shall be governed by and construed under law of the State of New York without regard to that state’s conflict of laws
principles (other than Section 5-1402 of the General Obligations Law of the State of New York). If the terms of this Note should conflict with the terms of the Loan Agreement or any commitment letter that survives closing, the terms of this
Note shall control. Jurisdiction. Borrower irrevocably agrees to non-exclusive personal jurisdiction in the State of New York. Severability. If any provision of this Note or of the other Loan Documents shall be prohibited or invalid
under applicable law, such provision shall be ineffective but only to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Note or other such document. Notices.
Any notices to Borrower shall be sufficiently given, if in writing and mailed or delivered to the Borrower’s address shown above or such other address as provided hereunder, and to Lender, if in writing and mailed or delivered to Paladin Realty
Partners, LLC, 10880 Wilshire Boulevard, Suite 1400, Los Angeles, California 90024 or such other address as Lender may specify in writing from time to time. Notices to Lender must include the mail code. In the event that Borrower changes
Borrower’s address at any time prior to the date the Obligations are paid in full, Borrower agrees to promptly give written notice of said change of address by registered or certified mail, return receipt requested, all charges prepaid.
Plural; Captions. All references in the Loan Documents to Borrower, guarantor, person, document or other nouns of reference mean both the singular and plural form, as the case may be, and the term “person” shall mean any individual,
person or entity. The captions contained in the Loan Documents are inserted for convenience only and shall not affect the meaning or interpretation of the Loan Documents. Advances. Lender may, in its sole discretion, make other advances which
shall be deemed to be advances under this Note, even though the stated principal amount of this Note may be exceeded as a result thereof. Posting of Payments. All payments received during normal banking hours after 2:00 p.m. local time at the
office of Lender first shown above shall be deemed received at the opening of the next banking day. Joint and Several Obligations. Each person who signs this Note is a Borrower and is jointly and severally obligated. Fees and Taxes.
Borrower shall promptly pay all documentary, intangible recordation and/or similar taxes on this transaction whether assessed at closing or arising from time to time. LIMITATION ON LIABILITY; WAIVER OF PUNITIVE DAMAGES. EACH OF THE PARTIES
HERETO, INCLUDING BANK BY ACCEPTANCE HEREOF, AGREES THAT IN ANY JUDICIAL, MEDIATION OR ARBITRATION PROCEEDING OR ANY CLAIM OR CONTROVERSY BETWEEN OR AMONG THEM THAT MAY ARISE OUT OF OR BE IN ANY WAY CONNECTED WITH THIS AGREEMENT, THE LOAN DOCUMENTS
OR ANY OTHER AGREEMENT OR DOCUMENT BETWEEN OR AMONG THEM OR THE OBLIGATIONS EVIDENCED HEREBY OR RELATED HERETO, IN NO EVENT SHALL ANY PARTY HAVE A REMEDY OF, OR BE LIABLE TO THE OTHER FOR, (1) INDIRECT, SPECIAL OR CONSEQUENTIAL DAMAGES OR
(2) PUNITIVE OR EXEMPLARY DAMAGES. EACH OF THE PARTIES HEREBY EXPRESSLY WAIVES ANY RIGHT OR CLAIM TO PUNITIVE OR EXEMPLARY DAMAGES THEY MAY HAVE OR WHICH MAY ARISE IN THE FUTURE IN CONNECTION WITH ANY SUCH PROCEEDING, CLAIM OR 

  

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CONTROVERSY, WHETHER THE SAME IS RESOLVED BY ARBITRATION, MEDIATION, JUDICIALLY OR OTHERWISE. Patriot Act Notice. To help fight the funding of
terrorism and money laundering activities, Federal law requires all financial institutions to obtain, verify, and record information that identifies each person who opens an account. For purposes of this section, account shall be understood to
include loan accounts. FINAL AGREEMENT. This Note and the other Loan Documents represent the final agreement between the parties and may not be contradicted by evidence of prior, contemporaneous or subsequent oral agreements of the parties.
There are no unwritten oral agreements between the parties. 
 ARBITRATION. Upon demand of any party hereto, whether made before or after institution
of any judicial proceeding, any claim or controversy arising out of or relating to the Loan Documents between the parties hereto (a “Dispute”) shall be resolved by binding arbitration conducted under and governed by the Commercial
Financial Disputes Arbitration Rules (the “Arbitration Rules”) of the American Arbitration Association (the “AAA”) and the Federal Arbitration Act. Disputes may include, without limitation, tort claims, counterclaims, a dispute
as to whether a matter is subject to arbitration, claims brought as class actions, or claims arising from documents executed in the future. A judgment upon the award may be entered in any court having jurisdiction. Notwithstanding the foregoing,
this arbitration provision does not apply to disputes under or related to swap agreements. Special Rules. All arbitration hearings shall be conducted in the city named in the address of Lender first stated above. A hearing shall begin within
90 days of demand for arbitration and all hearings shall conclude within 120 days of demand for arbitration. These time limitations may not be extended unless a party shows cause for extension and then for no more than a total of 60 days. The
expedited procedures set forth in Rule 51 et seq. of the Arbitration Rules shall be applicable to claims of less than $1,000,000.00. Arbitrators shall be licensed attorneys selected from the Commercial Financial Dispute Arbitration Panel of
the AAA. The parties do not waive applicable Federal or state substantive law except as provided herein. Preservation and Limitation of Remedies. Notwithstanding the preceding binding arbitration provisions, the parties agree to preserve,
without diminution, certain remedies that any party may exercise before or after an arbitration proceeding is brought. The parties shall have the right to proceed in any court of proper jurisdiction or by self-help to exercise or prosecute the
following remedies, as applicable: (i) all rights to foreclose against any real or personal property or other security by exercising a power of sale or under applicable law by judicial foreclosure including a proceeding to confirm the sale;
(ii) all rights of self-help including peaceful occupation of real property and collection of rents, set-off, and peaceful possession of personal property; (iii) obtaining provisional or ancillary remedies including injunctive relief,
sequestration, garnishment, attachment, appointment of receiver and filing an involuntary bankruptcy proceeding; and (iv) when applicable, a judgment by confession of judgment. Any claim or controversy with regard to any party’s
entitlement to such remedies is a Dispute. Waiver of Exemplary Damages. The parties agree that they shall not have a remedy of punitive or exemplary damages against other parties in any Dispute and hereby waive any right or claim to punitive
or exemplary damages they have now or which may arise in the future in connection with any Dispute whether the Dispute is resolved by arbitration or judicially. Waiver of Jury Trial. THE PARTIES ACKNOWLEDGE THAT BY AGREEING TO BINDING
ARBITRATION THEY HAVE IRREVOCABLY WAIVED ANY RIGHT THEY MAY HAVE TO JURY TRIAL WITH REGARD TO A DISPUTE. 
 [Signature page follows.]

  

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 IN WITNESS WHEREOF, Borrower, on the day and year first above written, has caused this Note to be executed under
seal. 
 Place of Execution and Delivery. Borrower hereby certifies that this note was executed in the state of New Jersey and delivered to the Lender
in the state of California. 
  

			
	BORROWER:
	
	Paladin Realty Income Properties, Inc.
		
	By:	 	/s/ John A. Gerson
	Name:	 	John A. Gerson
	Title:	 	 Executive Vice President,
 Chief Financial
Officer

  

 Page 7Phase II Option Agreement

 EXHIBIT 10.5 
 PHASE II OPTION AGREEMENT 
 THIS PHASE II OPTION AGREEMENT (herein called the
“Agreement”), made and entered this 1st day of December, 2006, by and between GLENWOOD HOUSING PARTNERS II, LLC, an Indiana limited liability company (the “Seller”); and PRIP 10637, LLC, a Delaware limited liability
company (the “Purchaser”); 
 W I T N E S S E T H:
That, 
 WHEREAS, pursuant to that certain Membership Purchase and Sale Agreement (the “Purchase Agreement”), dated
December 1, 2006 between Shiloh Crossing Partners II, LLC, Purchaser, and Glenwood Housing Partners I, LLC, Purchaser has acquired a sixty-five percent (65%) membership interest in Glenwood Housing Partners I, LLC, a Delaware limited
liability company (“Phase I Owner”), which is the owner of certain improved real property consisting of an approximately 266 unit apartment complex and related amenities and improvements located thereto located at 10637 Springfield
Pike in Woodlawn, Ohio (the “Phase I Property”); and 
 WHEREAS, Seller owns a certain tract or parcel of land adjacent to
the Phase I Property and more particularly described in Exhibit A attached hereto and incorporated herein by reference (the “Phase II Land”) and on which Seller currently contemplates will be developed and constructed
approximately 88 apartment units that will be leased, managed and operated as phase II of the Phase I Property; and 
 WHEREAS, Seller has
agreed to grant to Purchaser an option to acquire certain membership interests in Seller upon the completion of any such development on the Phase II Land undertaken by Seller or any affiliate of Seller on the terms and conditions hereinafter set
forth; 
 NOW, THEREFORE, for and in consideration of the acquisition of the interests of Purchaser in the Phase I Owner and the mutual
covenants and agreements contained herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Seller and Purchaser agree as follows: 
 1. DEFINITIONS. In addition to capitalized terms defined elsewhere in this Agreement, the following capitalized terms used herein have the
following meanings: 
 1.1 “Debt Service” means the Loan Amount multiplied by the Interest Rate. 
 1.2 “Gross Asset Value” means the greater of (i) Total Costs plus 10% or (ii) Stabilized Cash Flow after Debt Service divided
by .09, divided by .7, plus the Loan Amount. 

 1.3 “Interest Rate” means the greater of (i) the actual fixed rate (quoted at the
time of rate lock) for a first priority, non-recourse mortgage loan with Federal Home Loan Mortgage Corporation payable interest-only with a 10-year term; or (ii) six percent (6%). 
 1.4 “Leveraged Equity” means the Gross Asset Value less the Loan Amount. 
 1.5 “Loan Amount” means the amount of the permanent loan for the Phase II Property, not to exceed a loan to value ratio of seventy
percent (70%) loan to Gross Asset Value. 
 1.6 “Option Interests” means at least seventy percent (70%) and not
more than ninety percent (90%) beneficial ownership interests in Seller or any person or entity affiliated with Seller that owns the Phase II Property. 
 1.7 “Option Price” means an amount equal to the Leveraged Equity multiplied by the percentage of beneficial ownership interests in Seller (or person or entity affiliated with Seller that owns the
Phase II Property) contained in the Option Interests. 
 1.8 “Phase I Owner Operating Agreement” means that certain Amended
and Restated Operating Agreement of Glenwood Partners I, LLC, dated as of December 1, 2006, as thereafter amended. 
 1.9 “Phase
II Development” means the development and construction on the Phase II Land of approximately eighty-eight (88) apartment units to be leased, managed and operated as Phase II of the Fieldstone Apartments. The total square footage for
the Phase II Development will be approximately 97,640, and the unit mix and average unit sizes will be generally as follows: 
  

							
	No. of Units	  	 	  	 Square
 Footage
	 	 
	14	  	One-bedroom, one bath	  	660 SF	 	
	38	  	Two-bedroom, two bath	  	1,000 SF	 	
	36	  	Two-bedroom, two bath, den	  	1,400 SF	 	
	88	  		  	1,110 SF	 	Average

 1.10 “Phase II Property” means the Phase II Land and the Phase II Development.

 1.11 “Prorata Share” means the percentage the total number of apartment units in the Phase II Property bears to the total
number of apartment units in the Phase I Property and in the Phase II Property. 
 1.12 “Stabilized Cash Flow After Debt
Service” means Total Revenues, less Total Expenses, less Debt Service during the first twelve (12) consecutive month period during which the Phase II Property maintains occupancy of at least eighty percent (80%). 

 1.13 “Total Costs” means the total costs to complete construction of the Phase II
Development (as certified by Seller), plus operating deficits until the first calendar month in which Total Revenues equal or exceed Total Expenses plus Debt Service. Total Costs shall generally equate to the outstanding balance under the
construction loan for the Phase II Development, plus the contributed value of the land included in the Phase II Land, plus any necessary equity funded by the owner of the Phase II Property or its members or partners. Total Costs shall not include
any return of capital or return on capital to the owner of the Phase II Property or its members or partners. 
 1.14 “Total
Expenses” means the sum of the following: (i) the Prorata Share of the total payroll expenses for both the Phase I Property and the Phase II Property; (ii) Prorata Share of the total repair and maintenance expenses for both the
Phase I Property and the Phase II Property; (iii) the Prorata Share of the total advertising, leasing and marketing expenses for both the Phase I Property and the Phase II Property; (iv) the Prorata Share of the total administrative
expense for both the Phase I Property and the Phase II Property; (v) the Prorata Share of the total turnover expenses for both the Phase I Property and the Phase II Property; (vi) the Prorata Share of the total landscaping expenses for
both the Phase I Property and the Phase II Property; (vii) the Prorata Share of the total utility expenses for both the Phase I Property and the Phase II Property; (viii) the actual insurance expenses for the Phase II Property;
(ix) the actual management fee for the Phase II Property calculated to be four percent (4%) of collected Total Revenues; (x) actual real estate property taxes and personal property taxes for the Phase II Property, adjusted to reflect
stabilized value (if necessary); and (xi) an allowance for a capital replacement reserve equal to $200 per apartment unit in the Phase II Property per year. 
 1.15 “Total Revenues” means the gross collected income earned in the normal course of operating the Phase II Property as a luxury rental apartment property, including, (i) rents for apartment
units, garages, carports, and storage spaces, and (ii) fees, charges and reimbursements for customary tenant services, collected from tenants, at market rents (net of concessions) and pursuant to leases with an average term that is not
materially different than those of tenants in the Phase I Property, but excluding insurance proceeds, condemnation awards, or monies from other non-operational sources. Any lump-sum payments for exclusive-use rights or the like shall be pro-rated
over the appropriate term. “Total Revenues” shall be adjusted to reflect an occupancy factor equal to the combined weighted average occupancy of the Phase I Property and the Phase II Property during the immediately preceding
three-month period, not to exceed ninety-five percent (95%). 
 2. GRANT AND EXERCISE OF OPTION. 
 2.1 Grant of Option. On the terms and conditions hereinafter set forth, Seller has granted and extended and does hereby grant and extend to
Purchaser the exclusive and continuing right and option (the “Option”) to purchase the Option Interests for the Option Price on the terms and conditions hereinafter set forth. 

 2.2 Term of Option. The term of the Option shall be for a period commencing on the date of this
Agreement and expiring on earlier of (i) the date of dissolution of the Phase I Owner pursuant to the Phase I Owner Operating Agreement, (ii) the date on which the Phase I Property is sold in accordance with the Phase I Owner Operating
Agreement, or (iii) the date on which the Phase II Land is sold to any person or entity not affiliated with Seller, or (iv) the date of the closing of any buy-sell under the provisions of Article 7 of the Phase I Owner Operating Agreement.
During the term of the Option, neither Seller nor any person or entity affiliated with Seller shall enter a joint venture, partnership, limited liability company or other similar arrangement with any person or entity with respect to the Phase II
Land. 
 2.3 Exercise of Option. 
 2.3.1 Purchaser may exercise the Option at any time after the date on which the Phase II Property achieves Stabilized Cash Flow After Debt Service, and prior to the expiration of the term of the Option, by the
delivery of a written notice to Seller of Purchaser’s intent to so exercise the Option (the “Exercise Notice”). 
 2.3.2 Upon request by Purchaser at any time prior to or after Purchaser’s exercise of the Option, Seller shall provide to Purchaser such financial and other information regarding the Phase II Property as
Purchaser shall reasonably request, including (without limitation) information to enable Purchaser to determine and verify Total Costs, Total Expenses, Total Revenues and Debt Service. 
 3. PURCHASE AND SALE AGREEMENT 
 3.1
Purchase and Sale Agreement. Within thirty (30) days after delivery by Purchaser to Seller of the Exercise Notice, Seller and Purchaser shall enter into a written purchase and sale contract for the sale and purchase of the Option
Interests (the “Purchase Contract”), which shall be substantially in the form attached as Exhibit B. Within five (5) business days after the delivery by Purchaser to Seller of the Exercise Notice, Purchaser shall prepare
and deliver to Seller the completed draft form of the Purchase Contract, and in connection therewith, upon request by Purchaser, Seller shall provide to Purchaser any information for schedules and other uncompleted items that are required from
Purchaser to complete the form of the Purchase Contract. Upon Seller’s receipt of completed form of the Purchase Contract, Seller shall notify Purchaser of any objections to the completed items in the Purchase Contract within five
(5) business days after receipt from Purchaser. If Seller does not so object within such five (5) day period, then such completed form will be the Purchase Contract for the Option Interests. The parties shall act reasonably, diligently,
and in good faith to resolve any issues relating to the Purchase Contract. 
 4. BROKERAGE. Seller and Purchaser each represent and
warrant to the other party that the party making such representation and warranty has not employed, retained or consulted with any broker, agent or other finder, with respect to the transactions contemplated by this Agreement. Purchaser and Seller
each indemnifies the other party against, and agrees to hold, save, and defend the other party harmless from, any and all claims (and all expenses, including reasonable attorneys’ fees, incurred in defending any 

 
such claims or in enforcing this indemnity) for any real estate commission or similar fee arising out of or in any way connected with any claimed agency
relationship with the indemnifying party and relating to the transactions contemplated by this Agreement. The indemnities contained in this Section 6 shall survive the rescission, cancellation, termination or consummation of this Agreement.

 5. TIME OF ESSENCE. Time is of the essence of this Agreement. 
 6. NOTICES. Any notices, requests, or other communications required or permitted to be given hereunder shall be in writing and shall be considered
given: (i) on the date delivered personally by courier or otherwise, or if delivery is refused, the date presented; (ii) on the business day after sent or mailed by Federal Express, Express Mail, or other nationally recognized overnight
mail service which maintains evidence of delivery and receipt to the party at its address set forth below; (iii) on the third business day after the date sent or mailed by certified U.S. Mail, return receipt requested to the party at its
address set forth below; or (iv) either (A) as of the date on which the appropriate electronic confirmation of receipt is received by the sending party at or before 5:00 p.m. (receiver’s time) on any business day when sent by
facsimile to the facsimile number of the party set forth below, or (B) as of the next business day if the time of the appropriate electronic confirmation of receipt is received by the sending party after 5:00 p.m. (receiver’s time)
when sent by facsimile to the facsimile number of the party set forth below. The time period, if any, provided herein to respond thereto shall begin to run only upon the date of actual receipt. 
 7. ENTIRE AGREEMENT; MODIFICATION. This Agreement supersedes all prior discussions and agreements between Seller and Purchaser with respect to the
Phase II Property and contains the sole and entire understanding between Seller and Purchaser with respect to the Phase II Property. All promises, inducements, offers, solicitations, agreements, commitments, representations, and warranties
heretofore made between such parties are merged into this Agreement. This Agreement shall not be modified or amended in any respect except by a written instrument executed by or on behalf of each of the parties to this Agreement. 
 8. COUNTERPARTS. This Agreement may be executed in several counterparts, each of which shall constitute an original and all of which together
shall constitute one and the same instrument. 
 9. WAIVER. Any condition, right, election, or option of termination, cancellation, or
rescission granted by this Agreement to Purchaser or Seller may be waived by such party. 
 10. DATE FOR PERFORMANCE. If the time
period by which any right, option or election provided under this Agreement must be exercised, or by which any act required hereunder must be performed, expires on a Saturday, Sunday or legal holiday, then such time period shall be automatically
extended through the close of business on the second (2nd) following regularly scheduled business day. 

 11. SUCCESSORS AND ASSIGNS. Subject to following provisions of this Section, this Agreement shall
be binding upon and inure of the benefit of the parties hereto and their respective legal representatives, successors and assigns. Purchaser may not assign this Agreement without the prior written consent of Seller; provided, however, that Purchaser
shall have the right to assign this Agreement without the consent of Seller to any affiliate of Purchaser. In addition, in the event of any conveyance of any portion of the Phase II Property by Seller to any person or entity affiliated with Seller,
any successor-in-title to Seller of such portion of the Phase II Property, and such portion of the Phase II Property, shall remain subject to the terms and provisions of this Agreement, and the terms and provisions of this Agreement shall be deemed
to be covenants running with the land 
 12. SHORT FORM OPTION. Upon the request by Purchaser, Seller shall execute and record in the
appropriate county records a short form of this Agreement to provide to third parties constructive notice of the existence of Purchaser’s rights hereunder. 

 IN WITNESS WHEREOF, the parties hereto have duly signed and delivered this Agreement as of the date set
forth above. 
  

							
	SELLER:
	
	 GLENWOOD HOUSING PARTNERS II, LLC,
 an
Indiana limited liability company

		
	By:	 	 Shiloh Crossing Partners II, LLC, an Indiana
 limited liability company, its Manager

			
		 	By:	 	Buckingham Investment Corporation, an Indiana corporation, its Manager
				
		 		 	By:	 	/s/ Brad B. Chambers
		 		 		 	Brad B. Chambers, President
	
	 Address:
  
 333 N. Pennsylvania Street, 10th
Floor
 Indianapolis, Indiana 46204
 Attention: Bradley B.
Chambers
 Telephone: (317) 974-1234
 Facsimile:
(317) 974-1238

 [Signatures Continued on Next Page] 
  

							
	PURCHASER:
	
	 PRIP 10637, LLC,
 a Delaware limited
liability company

		
	By:	 	 Paladin Realty Income Properties, L.P.,
 Delaware limited partnership

			
		 	By:	 	 Paladin Realty Income Properties, Inc., a
 Maryland corporation, its general partner

				
		 		 	By:	 	/s/ Michael Lenard
		 		 		 	 Michael Lenard, Executive Vice
 President, Secretary
and Counselor

	
	 Address:
  
 c/o Paladin Realty Partners, LLC
 10880 Wilshire Boulevard, Suite
1400
 Los Angeles, California 90024
 Attention: William K.
Dunbar
 Telephone: (310) 996-8754
 Facsimile:
(310) 996-8708

		
		 	 Address:
  
 333 N. Pennsylvania Street, 10th
Floor
 Indianapolis, Indiana 46204
 Attention: Bradley B.
Chambers
 Telephone: (317) 974-1234
 Facsimile:
(317) 974-1238

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