Document:

2005 Independent Director Incentive Stock Plan

  
 Exhibit 10.3

  
 PALADIN REALTY INCOME PROPERTIES, INC. 

 
 2005 INDEPENDENT DIRECTOR INCENTIVE STOCK PLAN 
  

  
 TABLE OF CONTENTS 

 

					
			
	 	  	 	  	Page

			
	 § 1
	  	 BACKGROUND AND PURPOSE
	  	1
			
	 § 2
	  	 DEFINITIONS
	  	1
			
	 2.1
	  	 Affiliate
	  	1
	 2.2
	  	 Board
	  	1
	 2.3
	  	 Change Effective Date
	  	1
	 2.4
	  	 Change in Control
	  	2
	 2.5
	  	 Code
	  	4
	 2.6
	  	 Committee
	  	4
	 2.7
	  	 Company
	  	4
	 2.8
	  	 Fair Market Value
	  	4
	 2.9
	  	 Independent Director
	  	5
	 2.10
	  	 1933 Act
	  	5
	 2.11
	  	 1934 Act
	  	5
	 2.12
	  	 Option
	  	5
	 2.13
	  	 Option Certificate
	  	5
	 2.14
	  	 Option Price
	  	5
	 2.15
	  	 Parent
	  	5
	 2.16
	  	 Plan
	  	5
	 2.17
	  	 Rule 16b-3
	  	5
	 2.18
	  	 SAR Value
	  	5
	 2.19
	  	 Stock
	  	5
	 2.20
	  	 Stock Appreciation Right
	  	6
	 2.21
	  	 Stock Appreciation Right Certificate
	  	6
	 2.22
	  	 Stock Grant
	  	6
	 2.23
	  	 Stock Grant Certificate
	  	6
	 2.24
	  	 Stock Unit Grant
	  	6
	 2.25
	  	 Subsidiary
	  	6
			
	 § 3
	  	 SHARES AND GRANT LIMITS
	  	7
			
	 3.1
	  	 Shares Reserved
	  	7
	 3.2
	  	 Source of Shares
	  	7
	 3.3
	  	 Use of Proceeds
	  	7
			
	 § 4
	  	 EFFECTIVE DATE
	  	8
			
	 § 5
	  	 COMMITTEE
	  	8
			
	 § 6
	  	 ELIGIBILITY
	  	9

  

					
	 § 7
	  	 OPTIONS
	  	9
			
	 7.1
	  	 Committee Action
	  	9
	 7.2
	  	 Option Price
	  	9
	 7.3
	  	 Payment
	  	9
	 7.4
	  	 Exercise
	  	10
	 7.5
	  	 Terms and Conditions
	  	10
			
	 § 8
	  	 STOCK APPRECIATION RIGHTS
	  	11
			
	 8.1
	  	 Committee Action
	  	11
	 8.2
	  	 Terms and Conditions
	  	11
	 8.3
	  	 Exercise
	  	13
			
	 § 9
	  	 STOCK GRANTS AND STOCK UNIT GRANTS
	  	14
			
	 9.1
	  	 Committee Action
	  	14
	 9.2
	  	 Conditions
	  	14
	 9.3
	  	 Dividends, Voting Rights and Creditor Status
	  	16
	 9.4
	  	 Satisfaction of Forfeiture Conditions
	  	18
			
	 § 10
	  	 NON-TRANSFERABILITY
	  	18
			
	 § 11
	  	 SECURITIES REGISTRATION
	  	18
			
	 § 12
	  	 LIFE OF PLAN
	  	19
			
	 § 13
	  	 ADJUSTMENT
	  	20
			
	 13.1
	  	 Capital Structure
	  	20
	 13.2
	  	 Available Shares
	  	21
	 13.3
	  	 Transactions Described in § 424 of the Code
	  	21
	 13.4
	  	 Fractional Shares
	  	22
			
	 § 14
	  	 CHANGE IN CONTROL
	  	22
			
	 § 15
	  	 AMENDMENT OR TERMINATION
	  	23
			
	 § 16
	  	 MISCELLANEOUS
	  	24
			
	 16.1
	  	 Shareholder Rights
	  	24
	 16.2
	  	 No Contract of Employment
	  	24
	 16.3
	  	 Withholding
	  	24
	 16.4
	  	 Construction
	  	25
	 16.5
	  	 Other Conditions
	  	25
	 16.6
	  	 Rule 16b-3
	  	25
	 16.7
	  	 Coordination with Employment Agreements and Other Agreements
	  	26

  

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 § 1. 
  
 BACKGROUND AND PURPOSE 
  
 The purpose of this Plan is to promote the interest of the Company by authorizing the Committee to grant Options and Stock Appreciation Rights and to make
Stock Grants and Stock Unit Grants to Independent Directors in order (1) to attract and retain Independent Directors, (2) to provide an additional incentive to each Independent Director to work to increase the value of Stock and (3) to provide each
Independent Director with a stake in the future of the Company which corresponds to the stake of each of the Company’s shareholders. 
  
 § 2 
  
 DEFINITIONS 
  
 2.1 Affiliate — means any organization (other than a Subsidiary) that would be treated as under common control with the Company under § 414(c) of the Code if “50 percent” were substituted for “80
percent” in the income tax regulations under § 414(c) of the Code. 
  
 2.2 Board — means the Board of Directors of the Company. 
  
 2.3 Change Effective Date — means either the date which includes the “closing” of the transaction which makes a Change in Control
effective if the Change in Control is made effective through a transaction which has a “closing” or the date a Change in Control is reported in accordance with applicable law as effective to the Securities and Exchange Commission if the
Change in Control is made effective other than through a transaction which has a “closing.” 
  

 2.4 Change in Control — means a change in control of the Company of a nature that would be
required to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A promulgated under the 1934 Act as in effect at the time of such “change in control,” provided that such a change in control shall be deemed to have occurred
at such time as 
  

	 	(a)	any “person” (as that term is used in Sections 13(d) and 14(d)(2) of the 1934 Act), is or becomes the beneficial owner (as defined in Rule 13d-3 under the 1934 Act)
directly or indirectly, of securities representing 20% or more of the combined voting power for election of directors of the then outstanding securities of the Company or any successor to the Company; 

  

	 	(b)	during any period of two consecutive years or less, individuals who at the beginning of such period constitute the Board cease, for any reason, to constitute at least a majority of
the Board, unless the election or nomination for election of each new director was approved by a vote of at least two-thirds of the directors then still in office who were directors at the beginning of the period; 

  

	 	(c)	 the shareholders of the Company approve any reorganization, merger, consolidation or share exchange as a result of which the common stock of the Company shall be
changed, converted or exchanged into or for securities of another corporation (other than a merger with a wholly-owned subsidiary of the Company) or any 

  

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dissolution or liquidation of the Company or any sale or the disposition of 50% or more of the assets or business of the Company; or

  

	 	(d)	 shareholders of the Company approve any reorganization, merger, consolidation or share exchange unless (A) the persons who were the beneficial owners of the
outstanding shares of the common stock of the Company immediately before the consummation of such transaction beneficially own more than 60% of the outstanding shares of the common stock of the successor or survivor corporation in such transaction
immediately following the consummation of such transaction and (B) the number of shares of the common stock of such successor or survivor corporation beneficially owned by the persons described in § 2.4(d)(A) immediately following the
consummation of such transaction is beneficially owned by each such person in substantially the same proportion that each such person had beneficially owned shares of the Company common stock immediately before the consummation of such transaction,
provided (C) the percentage described in § 2.4(d)(A) of the beneficially owned shares of the successor or survivor corporation and the number described in § 2.4 (d)(B) of the beneficially owned shares of the successor or survivor
corporation shall be determined exclusively by reference to the shares of the 

  

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successor or survivor corporation which result from the beneficial ownership of shares of common stock of the Company by the persons described in §
2.4(d)(A) immediately before the consummation of such transaction. 

  
 2.5 Code — means the Internal Revenue Code of 1986, as amended. 
  
 2.6 Committee — means either the Board or a committee of the Board which shall have at least 2 members, each of whom shall be appointed by and
shall serve at the pleasure of the Board and shall come within the definition of a “non-employee director” under Rule 16b-3. 
  
 2.7 Company — means Paladin Realty Income Properties, Inc. and any successor to Paladin Realty Income Properties, Inc. 
  
 2.8 Fair Market Value — means (a) the closing price on any date
for a share of Stock if the Stock is traded on any national stock exchange, (b) the average of the high bid and low ask prices of a share of Stock as reflected on National Market of the National Association of Securities Dealers, Inc. Automated
Quotation (“NASDAQ”) System on the date of determination if the Stock is not listed on any national stock exchange but is quoted on NASDAQ, (c) the per share sales price of the Stock if the Stock is not traded or listed and if there is a
current public offering of the Stock, or (d) the price which the Committee acting in good faith determines through any reasonable valuation method that a share of Stock might change hands between a willing buyer and a willing seller, neither being
under any compulsion to buy or to sell and both having reasonable knowledge of the relevant facts. 
  

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 2.9 Independent Director — means any member of the Board who is not an employee of the
Company or a Parent or Subsidiary or affiliate (as such term is defined in Rule 405 of the 1933 Act) of the Company. 
  
 2.10 1933 Act — means the Securities Act of 1933, as amended. 
  
 2.11 1934 Act — means the Securities Exchange Act of 1934, as amended. 
  
 2.12 Option — means an Option granted under this Plan to purchase
Stock which is intended to fail to satisfy the requirements of §422 of the Code. 
  
 2.13 Option Certificate — means the certificate (whether in electronic or written form) which sets forth the terms and conditions of an Option granted under this Plan. 
  
 2.14 Option Price — means the price which shall be paid to
purchase one share of Stock upon the exercise of an Option granted under this Plan. 
  
 2.15 Parent — means any corporation which is a parent corporation (within the meaning of § 424(e) of the Code) of the Company. 
  
 2.16 Plan — means this Paladin Realty Income Properties, Inc. 2005 Independent Director Incentive Stock Plan as
amended from time to time thereafter. 
  
 2.17 Rule 16b-3
— means the exemption under Rule 16b-3 to Section 16(b) of the 1934 Act or any successor to such rule. 
  
 2.18 SAR Value — means the value assigned by the Committee to a share of Stock in connection with the grant of a Stock Appreciation Right
under § 8. 
  
 2.19 Stock — means the $0.01 par
value common stock of the Company. 
  

 -5- 

 2.20 Stock Appreciation Right — means a right which is granted under §8 to receive the
appreciation in a share of Stock. 
  
 2.21 Stock Appreciation
Right Certificate — means the certificate (whether in electronic or written form) which sets forth the terms and conditions of a Stock Appreciation Right which is not granted as part of an Option. 
  
 2.22 Stock Grant — means a grant under § 9 which is designed
to result in the issuance of the number of shares of Stock described in such grant rather than a payment in cash based on the Fair Market Value of such shares of Stock. 
  
 2.23 Stock Grant Certificate — means the certificate (whether in electronic or written form) which sets forth
the terms and conditions of a Stock Grant or a Stock Unit Grant. 
  
 2.24 Stock Unit Grant — means a grant under § 9 which is designed to result in the payment of cash based on the Fair Market Value of the number of shares of Stock described in such grant rather than the issuance of the
number of shares of Stock described in such grant. 
  
 2.25
Subsidiary — means a corporation which is a subsidiary corporation (within the meaning of § 424(f) of the Code) of the Company. 
  

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 § 3 
  
 SHARES AND GRANT LIMITS 
  
 3.1 Shares Reserved. There shall (subject to § 13) be reserved for issuance under this Plan 60,000 shares of Stock. 
  
 3.2 Source of Shares. The shares of Stock described in § 3.1
shall be reserved to the extent that the Company deems appropriate from authorized but unissued shares of Stock and from shares of Stock which have been reacquired by the Company. All shares of Stock described in § 3.1 shall remain available
for issuance under this Plan until issued pursuant to the exercise of an Option or a Stock Appreciation Right or issued pursuant to a Stock Grant, and any such shares of stock which are issued pursuant to an Option, a Stock Appreciation Right or a
Stock Grant which are forfeited thereafter shall again become available for issuance under this Plan. Finally, if the Option Price under an Option is paid in whole or in part in shares of Stock or if shares of Stock are tendered to the Company in
satisfaction of any condition to a Stock Grant, such shares thereafter shall become available for issuance under this Plan and shall be treated the same as any other shares available for issuance under this Plan.  
  
 3.3 Use of Proceeds. The proceeds which the Company receives from the
sale of any shares of Stock under this Plan shall be used for general corporate purposes and shall be added to the general funds of the Company. 
  

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 § 4 
  
 EFFECTIVE DATE 
  
 The effective date of this Plan shall be
                    , 2005. 
  
 § 5 
  
 COMMITTEE 
  
 This Plan shall be administered by the Committee. The Committee acting in its absolute discretion shall exercise such powers and take such action as expressly called for under this Plan and, further, the Committee shall have the power to
interpret this Plan and (subject to § 14 and § 15 and Rule 16b-3) to take such other action in the administration and operation of this Plan as the Committee deems equitable under the circumstances, which action shall be binding on the
Company, on each affected Independent Director and on each other person directly or indirectly affected by such action. 
  

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 § 6 
  

ELIGIBILITY 
  
 Independent Directors shall be eligible for the grant of Options and Stock Appreciation Rights and for Stock Grants and Stock Unit Grants under this Plan.

  
 § 7 
  
 OPTIONS 
  
 7.1 Committee Action. The Committee acting in its absolute discretion shall have the right to grant Options to
Independent Directors under this Plan from time to time to purchase shares of Stock, but the Committee shall not, absent the approval of the Company’s shareholders, take any action, whether through amendment, cancellation, replacement grants,
or any other means, to reduce the Option Price of any outstanding Options. 
  
 7.2 Option Price. The Option Price for each share of Stock subject to an Option shall be no less than the Fair Market Value of a share of Stock on the date the Option is granted. 
  
 7.3 Payment. The Option Price shall be payable in full upon the
exercise of any Option and, at the discretion of the Committee, an Option Certificate can provide for the payment of the Option Price either in cash, by check or in Stock which has been held for at least 6 months and which is acceptable to the
Committee, or through any cashless exercise procedure which is effected by an unrelated broker through a sale of Stock in the open market and which is acceptable to the Committee, or in any combination of such forms of payment. Any payment made in
Stock shall be 

  

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treated as equal to the Fair Market Value of such Stock on the date the certificate for such Stock (or proper evidence of such certificate) is presented to
the Committee or its delegate in such form as acceptable to the Committee. 
  
 7.4 Exercise. 
  

	 	(a)	Exercise Period. Each Option granted under this Plan shall be exercisable in whole or in part at such time or times as set forth in the related Option Certificate, but no
Option Certificate shall make an Option exercisable on or after the date which is the tenth anniversary of the date the Option is granted. 

  

	 	(b)	Termination of Status as Independent Director. Subject to § 7.5(a), an Option Certificate may provide for the exercise of an Option after an Independent Director’s
status as such has terminated for any reason whatsoever, including death or disability. 

  
 7.5 Terms and Conditions. 
  

	 	(a)	Option Certificate. Each grant of an Option to an Independent Director shall be evidenced by an Option Certificate and shall set forth such other terms and conditions of such
grant as the Committee acting in its absolute discretion deems consistent with the terms of this Plan. 

  

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	 	(b)	Minimum Period of Service. If the only condition to exercise of the Option is the completion of a period of service, such period of service shall be no less than the one (1)
year period which starts on the date as of which the Option is granted unless the Committee determines that a shorter period of service (or no period of service) better serves the Company’s interest. 

  
 § 8 
  
 STOCK APPRECIATION RIGHTS 
  
 8.1 Committee Action. The Committee acting in its absolute discretion shall have the right to grant Stock Appreciation Rights to Independent
Directors under this Plan from time to time, and each Stock Appreciation Right grant shall be evidenced by a Stock Appreciation Right Certificate or, if such Stock Appreciation Right is granted as part of an Option, shall be evidenced by the Option
Certificate for the related Option. 
  
 8.2 Terms and
Conditions. 
  

	 	(a)	 Stock Appreciation Right Certificate. If a Stock Appreciation Right is granted independent of an Option, such Stock Appreciation Right shall be evidenced by
a Stock Appreciation Right Certificate, and such certificate shall set forth the number of shares of Stock on which the Independent Director’s right to appreciation shall be based and the SAR Value of each share of Stock. Such SAR 

  

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Value shall be no less than the Fair Market Value of a share of Stock on the date that the Stock Appreciation Right is granted. The Stock Appreciation Right
Certificate shall set forth such other terms and conditions for the exercise of the Stock Appreciation Right as the Committee deems appropriate under the circumstances, but no Stock Appreciation Right Certificate shall make a Stock Appreciation
Right exercisable on or after the date which is the tenth anniversary of the date such Stock Appreciation Right is granted. 

  

	 	(b)	 Option Certificate. If a Stock Appreciation Right is granted together with an Option, such Stock Appreciation Right shall be evidenced by an Option
Certificate, the number of shares of Stock on which the Independent Director’s right to appreciation shall be based shall be the same as the number of shares of Stock subject to the related Option, and the SAR Value for each such share of Stock
shall be no less than the Option Price under the related Option. Each such Option Certificate shall provide that the exercise of the Stock Appreciation Right with respect to any share of Stock shall cancel the Independent Director’s right to
exercise his or her Option with respect to such share and, conversely, that the exercise of the Option with respect to any share of Stock shall cancel the Independent Director’s right to exercise his or her Stock 

  

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Appreciation Right with respect to such share. A Stock Appreciation Right which is granted as part of an Option shall be exercisable only while the related
Option is exercisable. The Option Certificate shall set forth such other terms and conditions for the exercise of the Stock Appreciation Right as the Committee deems appropriate under the circumstances. 

  

	 	(c)	Minimum Period of Service. If the only condition to exercise of a Stock Appreciation Right is the completion of a period of service, such period of service shall be no less
than the one (1) year period which starts on the date as of which the Stock Appreciation Right is granted unless the Committee determines that a shorter period of service (or no period of service) better serves the Company’s interest.

  
 8.3 Exercise. A Stock Appreciation Right
shall be exercisable only when the Fair Market Value of a share of Stock on which the right to appreciation is based exceeds the SAR Value for such share, and the payment due on exercise shall be based on such excess with respect to the number of
shares of Stock to which the exercise relates. An Independent Director upon the exercise of his or her Stock Appreciation Right shall receive a payment from the Company in cash or in Stock issued under this Plan, or in a combination of cash and
Stock, and the number of shares of Stock issued shall be based on the Fair Market Value of a share of Stock on the date the Stock Appreciation Right is exercised. The Committee acting in its 

  

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absolute discretion shall have the right to determine the form and time of any payment under this § 8.3. 
  
 § 9. 
  
 STOCK GRANTS AND STOCK UNIT GRANTS 
  
 9.1 Committee Action. The Committee acting in its absolute discretion shall have the right to make Stock Grants and
Stock Unit Grants to Independent Directors. Each Stock Grant and each Stock Unit Grant shall be evidenced by a Stock Grant Certificate, and each Stock Grant Certificate shall set forth the conditions, if any, under which Stock will be issued under
the Stock Grant or cash will be paid under the Stock Unit Grant and the conditions under which the Independent Director’s interest in any Stock which has been issued will become non-forfeitable. 
  
 9.2 Conditions. 
  

	 	(a)	 Conditions to Issuance of Stock. The Committee acting in its absolute discretion may make the issuance of Stock under a Stock Grant subject to the
satisfaction of one, or more than one, condition which the Committee deems appropriate under the circumstances for Independent Directors generally or for an Independent Director in particular, and the related Stock Grant Certificate shall set forth
each such condition and the deadline for satisfying each such condition. Stock subject to a Stock Grant shall be issued in the name of an Independent Director only after each such condition, if any, has been timely satisfied, and any 

  

 -14- 

	 	 
Stock which is so issued shall be held by the Company pending the satisfaction of the forfeiture conditions, if any, under § 9.2(b) for the related
Stock Grant. 

  

	 	(b)	 Conditions on Forfeiture of Stock or Cash Payment. The Committee acting in its absolute discretion may make any cash payment due under a Stock Unit Grant or
Stock issued in the name of an Independent Director under a Stock Grant non-forfeitable subject to the satisfaction of one, or more than one, objective employment, performance or other condition that the Committee acting in its absolute discretion
deems appropriate under the circumstances for Independent Directors generally or for an Independent Director in particular, and the related Stock Grant Certificate shall set forth each such condition, if any, and the deadline, if any, for satisfying
each such condition. An Independent Director’s non-forfeitable interest in the shares of Stock underlying a Stock Grant or the cash payable under a Stock Unit Grant shall depend on the extent to which he or she timely satisfies each such
condition. Each share of Stock underlying a Stock Grant shall not be available under § 3 after such grant is effective until such time, if any, as such share thereafter is forfeited as a result of a failure to timely satisfy a forfeiture
condition, in which event such share of Stock shall again become available 

  

 -15- 

	 	 
under § 3 as of the date of such forfeiture. Finally, the Company shall have the right to require an Independent Director to sign an irrevocable stock
power in favor of the Company with respect to forfeitable shares of Stock issued under this § 9.2(b) in order for the Company to effect a forfeiture in accordance with this § 9.2(b). 

  

	 	(c)	Minimum Period of Service. If the only condition to the forfeiture of a Stock Grant or a Stock Unit Grant is the completion of a period of service, such period of service
shall be no less than the three (1) year period which starts on the date as of which the Stock Grant or Stock Unit Grant is made unless the Committee determines that a shorter period of service (or no period of service) better serves the
Company’s interest. 

  
 9.3 Dividends,
Voting Rights and Creditor Status. 
  

	 	(a)	Cash Dividends. Except as otherwise set forth in a Stock Grant, if a dividend is paid in cash on a share of Stock after such Stock has been issued under a Stock Grant but
before the first date that an Independent Director’s interest in such Stock (1) is forfeited completely or (2) becomes completely non-forfeitable, the Company shall pay such cash dividend directly to such Independent Director.

  

	 	(b)	 Stock Dividends. If a dividend is paid on a share of Stock in Stock after such Stock has been issued under a Stock Grant but before 

  

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the first date that an Independent Director’s interest in such Stock (1) is forfeited completely or (2) becomes completely non-forfeitable, the Company
shall hold such dividend Stock subject to the same conditions under § 9.2(b) as the related Stock Grant. 

  

	 	(c)	Other. If a dividend (other than a dividend described in § 9.3(a) or § 9.3(b)) is paid with respect to a share of Stock after such Stock has been issued under a
Stock Grant but before the first date that an Independent a Director’s interest in such Stock (1) is forfeited completely or (2) becomes completely non-forfeitable, the Company shall distribute or hold such dividend in accordance with such
rules as the Committee shall adopt with respect to each such dividend. 

  

	 	(d)	Voting. Except as otherwise set forth in a Stock Grant, an Independent Director shall have the right to vote the Stock issued under his or her Stock Grant during the period
which comes after such Stock has been issued under a Stock Grant but before the first date that an Independent Director’s interest in such Stock (1) is forfeited completely or (2) becomes completely non-forfeitable. 

  

	 	(e)	General Creditor Status. An Independent Director to whom a Stock Unit Grant is made shall be no more than a general and unsecured creditor of the Company with respect to any
cash payable under such Stock Unit Grant. 

  

 -17- 

 9.4 Satisfaction of Forfeiture Conditions. A share of Stock shall cease to be subject to a Stock
Grant at such time as an Independent Director’s interest in such Stock becomes non-forfeitable under this Plan, and the certificate or other evidence of ownership representing such share shall be transferred to the Independent Director as soon
as practicable thereafter. 
  
 § 10 
  
 NON-TRANSFERABILITY 
  
 No Option, Stock Grant, Stock Unit Grant or Stock Appreciation Right shall
(absent the Committee’s consent) be transferable by an Independent Director other than by will or by the laws of descent and distribution, and any Option or Stock Appreciation Right shall (absent the Committee’s consent) be exercisable
during an Independent Director’s lifetime only by the Independent Director. The person or persons to whom an Option or Stock Grant or Stock Unit Grant or Stock Appreciation Right is transferred by will or by the laws of descent and distribution
(or with the Committee’s consent) thereafter shall be treated as the Independent Director. 
  
 § 11 
  
 SECURITIES
REGISTRATION 
  
 As a condition to the receipt of shares of
Stock under this Plan, the Independent Director shall, if so requested by the Company, agree to hold such shares of Stock for investment and not with a view of resale or distribution to the public and, if so requested by the Company, shall deliver
to the Company a written statement satisfactory to the Company to that effect. Furthermore, if so requested by the 

  

 -18- 

 
Company, the Independent Director shall make a written representation to the Company that he or she will not sell or offer for sale any of such Stock unless
a registration statement shall be in effect with respect to such Stock under the 1933 Act and any applicable state securities law or he or she shall have furnished to the Company an opinion in form and substance satisfactory to the Company of legal
counsel satisfactory to the Company that such registration is not required. Certificates or other evidence of ownership representing the Stock transferred upon the exercise of an Option or Stock Appreciation Right or upon the lapse of the forfeiture
conditions, if any, on any Stock Grant may at the discretion of the Company bear a legend to the effect that such Stock has not been registered under the 1933 Act or any applicable state securities law and that such Stock cannot be sold or offered
for sale in the absence of an effective registration statement as to such Stock under the 1933 Act and any applicable state securities law or an opinion in form and substance satisfactory to the Company of legal counsel satisfactory to the Company
that such registration is not required. 
  
 § 12 

 
 LIFE OF PLAN 
  
 No Option or Stock Appreciation Right shall be granted or Stock Grant or
Stock Unit Grant made under this Plan on or after the earlier of: 
  

	 	(1)	 the tenth anniversary of the effective date of this Plan (as determined under § 4), in which event this Plan otherwise thereafter shall continue in effect
until all outstanding Options and Stock Appreciation Rights have been exercised 

  

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in full or no longer are exercisable, all Stock issued under any Stock Grants under this Plan have been forfeited or have become non-forfeitable and all cash
payments payable under a Stock Unit Grant have been forfeited or paid, or 

  

	 	(2)	the date on which all of the Stock reserved under § 3 has (as a result of the exercise of Options or Stock Appreciation Rights granted under this Plan or the satisfaction of
the forfeiture conditions, if any, on Stock Grants) been issued or no longer is available for use under this Plan, in which event this Plan also shall terminate on such date. 

  
 § 13 
  
 ADJUSTMENT 
  
 13.1 Capital Structure. The number, kind or class (or any combination thereof) of shares of Stock subject to Options and Stock Appreciation Rights
granted under this Plan and the Option Price of such Options and the SAR Value of such Stock Appreciation Rights as well as the number, kind or class (or any combination thereof) of shares of Stock subject to Stock Grants and Stock Unit Grants made
under this Plan shall be adjusted by the Committee in a reasonable and equitable manner to preserve immediately after 
  

	 	(a)	any equity restructuring or change in the capitalization of the Company, including, but not limited to, spin offs, stock dividends, large non-recurring dividends, rights offerings
or stock splits, or 

  

 -20- 

	 	(b)	any transaction described in § 424(a) of the Code which does not constitute a Change in Control of the Company 

  
 the aggregate intrinsic value of each such Option, Stock Appreciation Right, Stock Grant and
Stock Unit Grant immediately before such restructuring or recapitalization or transaction. 
  
 13.2 Available Shares. If any adjustment is made with respect to any outstanding Option, Stock Appreciation Right, Stock Grant or Stock Unit Grant under § 13.1, then the number, kind or class (or any
combination thereof) of shares of Stock reserved under § 3 automatically shall be adjusted so that there is a sufficient number, kind and class of shares of Stock available for issuance pursuant to each such Option, Stock Appreciation Right,
Stock Grant and Stock Unit Grant as adjusted under § 13.1. Furthermore, the Committee shall have the absolute discretion to further adjust such number, kind or class (or any combination thereof) of shares of Stock reserved under § 3
in light of any of the events described in § 13.1(a) and § 13.1(b) to the extent the Committee acting in good faith determinates that a further adjustment would be appropriate and proper under the circumstances and in keeping with the
purposes of this Plan. 
  
 13.3 Transactions Described in
§ 424 of the Code. The Committee as part of any corporate transaction described in § 424(a) of the Code which does not constitute a Change in Control of the Company shall have the right (without regard to any limitations set forth
under this Plan) to make any Stock Grants, Stock Unit Grants and Option and Stock Appreciation Right grants to effect the assumption of, or the 

  

 -21- 

 
substitution for, stock grants, stock unit grants and option and stock appreciation right grants previously made by any other corporation to the extent that
such corporate transaction calls for such substitution or assumption of such stock grants, stock unit grants and stock option and stock appreciation right grants, and any shares of Stock issued pursuant to such Stock Grants and Option and Stock
Appreciation Right grants shall be treated as additional shares of Stock available under § 3 if the stockholders of the Company approve such corporate transaction. 
  
 13.4 Fractional Shares. If any adjustment under this § 13 would create a fractional share of Stock or a right to
acquire a fractional share of Stock under any Option, Stock Appreciation Right or Stock Grant, such fractional share shall be disregarded and the number of shares of Stock reserved under this Plan and the number subject to any Options or Stock
Appreciation Right grants and Stock Grants shall be the next lower number of shares of Stock, rounding all fractions downward. An adjustment made under this § 13 by the Committee shall be conclusive and binding on all affected persons.

  
 § 14 
  
 CHANGE IN CONTROL 
  
 If there is a Change in Control of the Company, then as of the Change
Effective Date for such Change in Control any and all conditions to the exercise of all outstanding Options and Stock Appreciation Rights on such date and any and all outstanding issuance and forfeiture conditions on any Stock Grants and Stock Unit
Grants on such date automatically shall be deemed 100% satisfied as of such Change 

  

 -22- 

 
Effective Date, and the Board shall have the right (to the extent expressly required as part of such transaction) to cancel such Options, Stock Appreciation
Rights, Stock Grants and Stock Unit Grants after providing each Independent Director a reasonable period to exercise his or her Options and Stock Appreciation Rights and to take such other action as necessary or appropriate to receive the Stock
subject to any Stock Grants and the cash payable under any Stock Unit Grants. 
  
 § 15 
  
 AMENDMENT OR
TERMINATION 
  
 This Plan may be amended by the Board from
time to time to the extent that the Board deems necessary or appropriate; provided, however, (a) no amendment shall be made absent the approval of the shareholders of the Company to the extent such approval is required under applicable law or the
rules of any national securities exchange or Nasdaq Stock Market on which shares of Stock are then-listed and (b) no amendment shall be made to § 14 on or after the date of any Change in Control which might adversely affect any rights which
otherwise would vest on the related Change Effective Date. The Board also may suspend granting Options or Stock Appreciation Rights or making Stock Grants or Stock Unit Grants under this Plan at any time and may terminate this Plan at any time;
provided, however, the Board shall not have the right unilaterally to modify, amend or cancel any Option or Stock Appreciation Right granted or Stock Grant made before such suspension or termination unless (1) the Independent Director consents in
writing to such modification, amendment or 

  

 -23- 

 
cancellation or (2) there is a dissolution or liquidation of the Company or a transaction described in § 13.2 or § 14. 
  
 § 16 
  
 MISCELLANEOUS 
  
 16.1 Shareholder Rights. No Independent Director shall have any rights as a shareholder of the Company as a result of the grant of an Option or a
Stock Appreciation Right pending the actual delivery of the Stock subject to such Option or Stock Appreciation Right to such Independent Director. Subject to § 9.3, an Independent Director’s rights as a shareholder in the shares of Stock
underlying a Stock Grant which is effective shall be set forth in the related Stock Grant Certificate. 
  
 16.2 No Contract of Employment. The grant of an Option or a Stock Appreciation Right or a Stock Grant or Stock Unit Grant to an Independent
Director under this Plan shall not constitute a right to continue to serve on the Board and shall not confer on an Independent Director any rights upon his or her termination of service in addition to those rights, if any, expressly set forth in
this Plan or the related Option Certificate, Stock Appreciation Right Certificate, or Stock Grant Certificate. 
  
 16.3 Withholding. Each Option, Stock Appreciation Right, Stock Grant and Stock Unit Grant shall be made subject to the condition that the
Independent Director consents to whatever action the Committee directs to satisfy the minimum statutory federal and state tax withholding requirements, if any, which the Company determines are applicable to the exercise of such Option or Stock
Appreciation Right or to the satisfaction of any forfeiture conditions with respect to Stock subject to a Stock 

  

 -24- 

 
Grant or Stock Unit Grant issued in the name of the Independent Director. No withholding shall be effected under this Plan which exceeds the minimum
statutory federal and state withholding requirements. 
  
 16.4
Construction. All references to sections (§) are to sections (§) of this Plan unless otherwise indicated. This Plan shall be construed under the laws of the State of California. Each term set forth in § 2 shall, unless
otherwise stated, have the meaning set forth opposite such term for purposes of this Plan and, for purposes of such definitions, the singular shall include the plural and the plural shall include the singular. Finally, if there is any conflict
between the terms of this Plan and the terms of any Option Certificate, Stock Appreciation Right Certificate or Stock Grant Certificate, the terms of this Plan shall control. 
  
 16.5 Other Conditions. Each Option Certificate, Stock Appreciation Right Certificate or Stock Grant Certificate may
require that an Independent Director (as a condition to the exercise of an Option or a Stock Appreciation Right or the issuance of Stock subject to a Stock Grant) enter into any agreement or make such representations prepared by the Company,
including (without limitation) any agreement which restricts the transfer of Stock acquired pursuant to the exercise of an Option or a Stock Appreciation Right or a Stock Grant or provides for the repurchase of such Stock by the Company. 

 
 16.6 Rule 16b-3. The Committee shall have the right to amend any
Option, Stock Grant or Stock Appreciation Right to withhold or otherwise restrict the transfer of any Stock or cash under this Plan to an Independent Director as the 

  

 -25- 

 
Committee deems appropriate in order to satisfy any condition or requirement under Rule 16b-3 to the extent Rule 16 of the 1934 Act might be applicable to
such grant or transfer. 
  
 16.7 Coordination with Other
Agreements. If the Company enters into agreement with an Independent Director which expressly provides for the acceleration in vesting of an outstanding Option, Stock Appreciation Right, Stock Grant or Stock Unit Grant or for the extension of
the deadline to exercise any rights under an outstanding Option, Stock Appreciation Right, Stock Grant or Stock Unit Grant, any such acceleration or extension shall be deemed effected pursuant to, and in accordance with, the terms of such
outstanding Option, Stock Appreciation Right, Stock Grant or Stock Unit Grant and this Plan even if such agreement is first effective after the date the outstanding Option or Stock Appreciation Right was granted or the Stock Grant or Stock Unit
Grant was made. 
  

 -26- 

 IN WITNESS WHEREOF, the Company has caused its duly authorized officer to execute this Plan to evidence its adoption of
this Plan. 
  

			
	 Paladin Realty Income Properties, Inc.

		
	By:	 	 
		
	 Date:
	 	 

  

 -27-Form of Subscription Escrow Agreement

  
 Exhibit 10.5

  
 SUBSCRIPTION ESCROW AGREEMENT 
  
 ESCROW AGREEMENT, dated as of
                    , 2005, (the “Agreement”) by and among Paladin Realty Income Properties, Inc., a Maryland corporation (the
“Company”), Prospect Financial Advisors, LLC (the “Dealer Manager”) and Deutsche Bank Trust Company Americas, a New York banking corporation, a wholly-owned subsidiary of Deutsche Bank AG, as escrow agent (the “Escrow
Agent”). 
  
 WHEREAS, the Company has filed a Registration
Statement on Form S-11 (Registration No. 333-113863) with the Securities and Exchange Commission (the “SEC”) to commence an initial public offering (the “Offering”) of up to 35,000,000 shares of common stock (“Shares”),
at $10.00 per share for sale to the public with a minimum offering of $1,000,000 in Shares, exclusive of subscriptions received from residents of the State of Pennsylvania (such amount, the “Minimum Amount” and such offering, the
“Minimum Offering”) on a best-efforts basis through the “Dealer Manager,” and the broker-dealers participating in the offering (the “Participating Dealers”); 
  
 WHEREAS, the Company and the Dealer Manager desire to establish an Escrow Account (as defined below) for the deposit of the
subscriber’s subscription funds raised in the Offering together with any earnings thereon (the “Escrow Property”) in accordance with the terms of this Agreement; 
  
 WHEREAS, the Escrow Agent agrees to maintain such an Escrow Account; and 
  
 NOW, THEREFORE, for good and valuable consideration, the receipt and adequacy
of which are hereby acknowledged by each of the parties hereto, the parties hereto, intending to be legally bound, do hereby agree as follows: 
  
 Section 1. Appointment of the Escrow Agent. The Company and the Dealer Manager hereby appoints Deutsche Bank Trust Company Americas as escrow agent
in accordance with the terms and conditions set forth herein, and the Escrow Agent hereby accepts such appointment. 
  
 Section 2. Proceeds to be Escrowed; Subscription Documents to be Escrowed. 
  
 (a) A sample copy of the subscription agreement to be executed by each subscriber for Shares in the Offering is attached as
Exhibit A (the “Subscription Agreement”). Each person desiring to purchase Shares in the Offering will be required to complete and execute a Subscription Agreement and to deliver to the Dealer Manager or Participating Dealer, as the
case may be, such completed Subscription Agreement, together with a check, draft, wire or money order (hereinafter referred to as an “Instrument of Payment”) in the amount of $10 per share, or such discounted purchase price per Share that
may apply based upon the volume of Shares purchased pursuant to the Dealer Manager or Participating Dealer Agreement. The Dealer Manager or any Participating Dealer receiving a Subscription Agreement and Instrument of 

  

 
Payment not conforming to the foregoing instructions shall return such Subscription Agreement and Instrument of Payment directly to such subscriber not later
than the end of the second business day following receipt by the Dealer Manager or Participating Dealer of such materials. Subscription Agreements and Instruments of Payment received by the Dealer Manager or Participating Dealer which conform to the
foregoing instructions shall be transmitted for deposit pursuant to one of the following methods: 
  
 (i) where, pursuant to the internal supervisory procedures of the Dealer Manager or Participating Dealer, internal supervisory review is
conducted at the same location at which Subscription Agreements and Instruments of Payment are received from subscribers, then, by the end of the next business day following receipt by the Dealer Manager or Participating Dealer, the Dealer Manager
or Participating Dealer will transmit the Subscription Agreements to the Escrow Agent and shall effect a wire transfer in immediately available federal funds from the Dealer Manager or the Participating Dealer to the Escrow Agent using the wire
transfer instructions attached hereto as Exhibit B (the “Wire Transfer Instructions”) of the subscribers’ subscription funds represented by the instructions of payment received by the Dealer Manager or Participating Dealer (it
being understood that the Dealer Manager or Participating Dealer will transmit all subscription funds to the Escrow Agent by wire transfer regardless of the form of the instruction of payment received by the Dealer Manager Participating Dealer and
that such wire transfer shall specify the subscriber(s) that it benefits); and 
  
 (ii) where, pursuant to the internal supervisory procedures of the Dealer Manager or Participating Dealer, final internal supervisory
review is conducted at a different location (the “Final Review Office”), Subscription Agreements and Instruments of Payment will be transmitted by the Dealer Manager or Participating Dealer to the Final Review Office by the end of the next
business day following receipt by the Dealer Manager or Participating Dealer. The Final Review Office will in turn by the end of the next business day following receipt by the Final Review Office, transmit such Subscription Agreements to the Escrow
Agent and shall effect a wire transfer in immediately available federal funds from the Dealer Manager or Participating Dealer to the Escrow Agent using the Wire Transfer Instructions of the subscribers’ subscription funds represented by the
instructions of payment received by the Dealer Manager or Participating Dealer (it being understood that the Dealer Manager or Participating Dealer will transmit all subscription funds to the Escrow Agent by wire transfer regardless of the form of
the instruction of payment received by the Dealer Manager or Participating Dealer and that such wire transfer shall specify the subscriber(s) that it benefits). 
  

(b) Notwithstanding the foregoing, with respect to any Shares to be purchased by a custodial account, the Dealer Manager or the Participating Dealer,
as the case may be, shall cause the custodian of such account to deliver a completed Subscription Agreement for such account directly to the Escrow Agent and to effect a wire transfer of such account’s subscription funds in immediately
available federal funds to the Escrow Agent using the Wire Transfer Instructions. The Dealer Manager or the Participating Dealer shall furnish to the Escrow Agent with each delivery of Instruments of Payment a list of the subscribers described in
Section 3 of this Agreement. 
  

 2 

 (c) All such funds received from subscribers in payment for the Shares so delivered to the Escrow Agent
by the Dealer Manager or the Participating Dealers shall be retained in escrow by the Escrow Agent in a separate deposit account (the “Escrow Account”) upon the terms and conditions hereinafter set forth and invested as stated below. Such
Instruments of Payment received from residents of the State of Pennsylvania shall be placed in a separate deposit sub-account of the Escrow Account entitled “Deutsche Bank Trust Company Americas, as Escrow Agent for Pennsylvania residents
(Paladin Realty Income Properties, Inc.)” (the “Pennsylvania Account”). The Escrow Agent shall have no duty to solicit the Investor Funds from subscribers. 
  
 (d) The Escrow Property shall be held by the Escrow Agent in the Escrow Account until such funds are either disbursed to the
Company in accordance with Section 4(a) hereof or returned to the subscribers in accordance with Section 4(b) hereof. 
  
 (e) The Escrow Agent shall deliver to Phoenix American Financial Services, Inc. on a daily basis a report listing the Instruments of Payment received from
the Dealer Manager and Participating Dealers on that date. Within one (1) day of receipt of Subscription Documents for any subscriber, the Escrow Agent shall cause such Subscription Documents to be delivered to Phoenix American Financial Services,
Inc. 
  
 Section 3. Identity of Subscribers. The Dealer
Manager and the Participating Dealers shall furnish to the Escrow Agent with each delivery of funds, as provided in Section 2 hereof, a list of the persons who have paid money for the purchase of Shares showing the name, address, tax identification
number, state of residence, amount of Shares subscribed for, and the amount of money paid. The information comprising the identity of investors shall be provided to the Escrow Agent in the format set forth in the List of Investors attached as
Exhibit C. All proceeds so deposited shall remain the property of the subscriber and shall not be subject to any liens or charges by the Company, or the Escrow Agent, until released to the Company as hereinafter provided. 
  
 The Company hereby acknowledges the Escrow Agent’s right to reject any
subscriber based on the results of the Escrow Agent’s internal due diligence policies and procedures, it being understood that the Escrow Agent shall be entitled to exercise such right in its sole discretion and shall not be held liable or
accountable therefor. The Escrow Agent may reject any subscriber by giving written notice to the Company. 
  
 Section 4. Disbursement of Escrow Property. The Escrow Agent shall notify the Company on a weekly basis (and more frequently if requested by the
Company) of the amount of funds in the Escrow Account as well as the activity in the Escrow Account since the last report. The Escrow Property shall be disbursed as follows: 
  
 (a) If payments of the Minimum Amount or more for Shares are obtained on or prior to the date that is one year after the
effective date of the Registration Statement (the “Minimum Offering Expiration Date”) and the Company has delivered a written notice (the “Minimum Offering Notice”) attached as Exhibit D, signed jointly by two Authorized
Persons (as defined in Section 12(r)) of the Company, stating that it has received and accepted 

  

 3 

 
Subscription Agreements for the Minimum Amount of Shares, thereafter the Escrow Agent shall pay out the Escrow Property when and as directed by any
Authorized Person of the Company. Regardless of any payout of Escrow Account, funds in the Pennsylvania Account shall not be paid to the Company until such time as the Company notifies the Escrow Agent in writing that it has received and accepted
total subscription proceeds equal to or exceeding $19,250,000. 
  
 (i) Notwithstanding the foregoing, if the Escrow Agent is not in receipt of evidence of subscriptions accepted and Instruments of Payment totaling or exceeding $19,250,000 on or before the close of business on such
date that is 120 days after commencement of the Offering (the “Initial Pennsylvania Escrow Period”), then the Company will notify the Pennsylvania investors within 10 calendar days after the end of the Initial Pennsylvania Escrow Period
that they have a right to have their investment returned to them. If a Pennsylvania investor requests a return of such funds within 10 days of receipt of the notification, the Company shall deliver to the Escrow Agent a letter (a form of which is
attached hereto as Exhibit E) instructing the Escrow Agent to remit the funds to the Pennsylvania investor and the funds will be returned to such investor within 15 calendar days after receipt by the Company of the Pennsylvania
investor’s request so long as the Company gives written notice to the Escrow Agent within 5 days of its receipt of such Pennsylvania investor’s request. 
  
 (ii) The subscription proceeds of Pennsylvania Investors who do not request the return of their investment
within the Initial Pennsylvania Escrow Period shall remain in the Pennsylvania Account for successive 120 day escrow periods (each a “Successive Escrow Period”), each commencing automatically upon the termination of the prior Successive
Escrow Period, and the Company and the Escrow Agent shall follow the notification and payment procedure set forth in Section 4(a)(i) above with respect to the Initial Escrow Period for each Successive Escrow Period until the occurrence of the
earlier of (i) the termination of this Agreement or (ii) the Company has notified the Escrow Agent in writing that it has received and accepted subscriptions and Instruments of Payment totaling $19,250,000 and the Escrow Agent has disbursed the
Pennsylvania Account on the terms specified herein. 
  
 (iii) Interest will not accrue nor be payable to Pennsylvania Investors for the Initial Pennsylvania Escrow Period. Interest will accrue commencing with the start of the first Successive Escrow Period after the Initial Pennsylvania Escrow
Period and will be payable with the return if any of Pennsylvania investor funds at the end each Successive Escrow Period. In the event that a Pennsylvania subscriber fails to remit an executed Form W-9 to the Escrow Agent prior to the date the
Escrow Agent returns the Pennsylvania subscriber’s funds, the Escrow Agent will be required to withhold a portion of the earnings attributable to those Pennsylvania subscribers at the applicable rate in accordance with Section 3406 of the
Internal Revenue Code of 1986, as amended. 
  
 (iv) If the Minimum Offering has not been achieved by the Minimum Offering Expiration Date, Pennsylvania investors’ funds will be distributed with all other funds as provided in (b) below. 
  

 4 

 (b) If the Escrow Agent does not receive the Minimum Offering notice within one (1) business day of the
Minimum Offering Expiration Date, the Escrow Agent shall promptly, in any event within ten business days following the Minimum Offering Expiration Date by check refund to each investor at the address appearing on the List of Investors, or at such
other address as shall be furnished to the Escrow Agent by the Company in writing, all sums paid by the investor pursuant to his Subscription Agreement for Shares, together with the interest accrued on such funds in the Escrow Account, and shall
then notify the Company in writing of such refunds. The Company agrees to use its best efforts to obtain an executed IRS Form W-9 from each subscriber prior to the Minimum Offering Expiration Date if the Escrow Agent is not in receipt of evidence
that subscriptions for the Minimum Amount have been accepted at the close of business on the date which is one month before the Minimum Offering Expiration Date. In the event that a subscriber fails to remit an executed Form W-9 to the Escrow Agent
prior to the date the Escrow Agent returns the subscriber’s funds, the Escrow Agent will be required to withhold a portion of the earnings attributable to those subscribers at the applicable rate in accordance with Section 3406 of the Internal
Revenue Code of 1986, as amended. 
  
 (c) Upon the termination of
the Escrow Agreement any remaining Escrow Property shall be forwarded to the Company in accordance with the Company’s written directions. 
  
 Section 5. Investment of the Escrow Property. Prior to the disbursement of Escrow Property in accordance with the provisions of Section 4 hereof,
all Escrow Property shall be deposited with Deutsche Bank and earn interest at an agreed upon interest rate based upon the daily federal funds rate pursuant to the requirements of Rule 15c2-4, while the escrow is handled by Deutsche Bank Trust
Company Americas. All investments attributable to Escrow Property shall be made by the Escrow Agent in the name of “Deutsche Bank Trust Company Americas, as Escrow Agent.” 
  
 Section 6. Term of Escrow. This Agreement shall be effective as of the date the Registration Statement is declared
effective by the SEC as such date is promptly notified to the Escrow Agent by the Company in writing. Unless otherwise provided in this Agreement, final termination of this Agreement shall occur on (1) the date that the Company and the Escrow Agent
shall mutually agree in writing to terminate this Agreement or (2) after termination of this Offering, the date on which all funds held in the Escrow Account have been distributed in accordance with the terms hereof in each case. 
  
 The provisions of Sections 8, 10 and 11 shall survive the termination of this
Escrow Agreement and the earlier resignation or removal of the Escrow Agent. 
  
 Section 7. Issuance of Certificates. Until the terms of the Escrow Agreement with respect to Shares have been met and the funds hereunder received from subscriptions for Shares have been released to the
Company, the Company may not issue any certificates or other evidence of Shares, except Subscription Agreements. 
  

 5 

 Section 8. Compensation of the Escrow Agent. As compensation for serving as the Escrow Agent
hereunder, the Escrow Agent shall receive from the Company the fees, charges and reimbursement of expenses as agreed to between the Company and Escrow Agent on Schedule A attached hereto. The Company shall reimburse the Escrow Agent on demand for
all loss, liability, damage, disbursements, advances or expenses paid or incurred by it which the Company is obligated to pay or indemnify the Escrow Agent for pursuant to the terms hereof in the administration of its duties hereunder, including,
but not limited to, all counsel, advisors’ and agents’ fees and disbursements and all taxes or other governmental charges. The obligations contained in this Section 8 shall survive the termination of this Escrow Agreement and the
resignation or removal of the Escrow Agent. 
  
 Section 9.
Resignation of the Escrow Agent. The Escrow Agent may resign and be discharged from its duties hereunder at any time by giving thirty (30) calendar days’ prior written notice of such resignation to the Company. The Company may remove the
Escrow Agent at any time by giving thirty (30) calendar days’ prior written notice to the Escrow Agent. Upon such notice, a successor escrow agent shall be appointed by the Company who shall provide written notice of such to the resigning the
Escrow Agent. Such successor escrow agent shall become the escrow agent hereunder upon the resignation or removal date specified in such notice. If the Company is unable to agree upon a successor escrow agent within thirty (30) days after such
notice, the Escrow Agent may, in its sole discretion, deliver the Escrow Property to the Company at the address provided herein or may apply to a court of competent jurisdiction for the appointment of a successor escrow agent or for other
appropriate relief. The costs and expenses (including its attorneys’ fees and expenses) incurred by the Escrow Agent in connection with such proceeding shall be paid by the Company. Upon receipt of the identity of the successor escrow agent,
the Escrow Agent shall deliver the Escrow Property then held hereunder to the successor Escrow Agent, less the Escrow Agent’s fees, costs and expenses or other obligations owed to the Escrow Agent to be paid from any interest earned in respect
of the Escrow Property, or hold any interest earned in respect of the Escrow Property (or any portion thereof), pending distribution, until all such fees, costs and expenses or other obligations are paid. Upon its resignation and delivery of the
Escrow Property as set forth in this Section 9, the Escrow Agent shall be discharged of and from any and all further obligations arising in connection with the Escrow Property or this Agreement. 
  
 Section 10. Indemnification of the Escrow Agent. The Company shall
indemnify, defend and hold harmless the Escrow Agent and its officers, directors, employees, representatives and agents, from and against and reimburse the Escrow Agent for any and all claims, expenses, obligations, liabilities, losses, damages,
injuries (to person, property, or natural resources), penalties, stamp or other similar taxes, actions, suits, judgments, reasonable costs and expenses (including reasonable attorney’s fees and expenses) of whatever kind or nature regardless of
their merit, demanded, asserted or claimed against the Escrow Agent directly or indirectly relating to, or arising from, claims against the Escrow Agent by reason of its 

  

 6 

 
participation in the transactions contemplated hereby, including without limitation all reasonable costs required to be associated with claims for damages to
persons or property, and reasonable attorneys’ and consultants’ fees and expenses and court costs except to the extent caused by the Escrow Agent’s gross negligence or willful misconduct. The provisions of this Section 10 shall
survive the termination of this Agreement or the earlier resignation or removal of the Escrow Agent. 
  
 Section 11. The Escrow Agent. 
  
 (a) The duties, responsibilities and obligations of the Escrow Agent shall be limited to those expressly set forth herein and no duties, responsibilities
or obligations shall be inferred or implied against the Escrow Agent. The Escrow Agent shall not be subject to, nor required to comply with, any other agreement to which the Company is a party, even though reference thereto may be made herein, or to
comply with any direction or instruction (other than those contained herein or delivered in accordance with this Escrow Agreement) from the Company or an entity acting on its behalf. The Escrow Agent shall not be required to expend or risk any of
its own funds or otherwise incur any liability, financial or otherwise, in the performance of any of its duties hereunder. 
  
 (b) The Escrow Property shall be held by the Escrow Agent either directly or through the Federal Reserve/Treasury Book-Entry System for United States and
federal agency securities (the “Book-Entry System”), The Depository Trust Company, a clearing agency registered with the Securities and Exchange Commission (“DTC”), or through any other clearing agency or similar system (a
“Clearing Agency”). The Escrow Agent shall have no responsibility and shall not be liable for ascertaining or acting upon any calls, conversions, exchange offers, tenders, interest rates changes, or similar matters relating to securities
held at DTC or with any Clearing Agency unless the Escrow Agent shall have received actual and timely notice of the same, nor shall the Escrow Agent have any responsibility or liability for the actions or omissions to act of the Book-Entry System,
DTC or any Clearing Agency. 
  
 (c) If at any time the Escrow
Agent is served with any judicial or administrative order, judgment, decree, writ or other form of judicial or administrative process which in any way affects the Escrow Property (including but not limited to orders of attachment or garnishment or
other forms of levies or injunctions or stays relating to the transfer of the Escrow Property), the Escrow Agent is authorized to comply therewith in any manner it or legal counsel of its own choosing deems appropriate; and if the Escrow Agent
complies with any such judicial or administrative order, judgment, decree, writ or other form of judicial or administrative process, the Escrow Agent shall not be liable to any of the parties hereto or to any other person or entity even though such
order, judgment, decree, writ or process may be subsequently modified or vacated or otherwise determined to have been without legal force or effect. 
  
 (d) The Escrow Agent shall not be liable for any action taken or omitted or for any loss or injury resulting from its actions or its performance or lack
of performance of its duties hereunder in the absence of gross negligence or willful misconduct on its part. In no event shall the Escrow Agent be liable (i) for acting in accordance with or conclusively relying 

  

 7 

 
upon any instruction, notice, demand, certificate or document from the Company or any entity acting on behalf of the Company, (ii) for any indirect,
consequential, punitive or special damages, regardless of the form of action and whether or not any such damages were foreseeable or contemplated, (iii) for the acts or omissions of its nominees, correspondents, designees, agents, subagents or
subcustodians, (iv) for the investment or reinvestment of any cash held by it hereunder, in each case in good faith, in accordance with the terms hereof, including without limitation any liability for any delays (not resulting from its gross
negligence or willful misconduct) in the investment or reinvestment of the Escrow Property, or any loss of interest or income incident to any such delays, or (v) for an amount in excess of the value of the Escrow Property, valued as of the date of
deposit, but only to the extent of direct money damages. 
  
 (e)
The Escrow Agent may consult with legal counsel of its own choosing at the expense of the Company as to any matter relating to this Escrow Agreement, and the Escrow Agent shall not incur any liability in acting in good faith in accordance with any
advice from such counsel. If such expenses are to be billed to the Company, the Company will be informed of such expenses before they are incurred; provided, however, that failure to provide such notice will not affect the Company’s payment
obligations hereunder. 
  
 (f) The Escrow Agent shall not incur
any liability for not performing any act or fulfilling any duty, obligation or responsibility hereunder by reason of any occurrence beyond the control of the Escrow Agent (including but not limited to any act or provision of any present or future
law or regulation or governmental authority, any act of God or war, civil unrest, local or national disturbance or disaster, any act of terrorism or the unavailability of the Federal Reserve Bank wire or facsimile or other wire or communication
facility). 
  
 (g) The Escrow Agent shall be entitled to
conclusively rely upon any order, judgment, certification, demand, notice, instrument or other writing delivered to it hereunder without being required to determine the authenticity or the correctness of any fact stated therein or the propriety or
validity or the service thereof. The Escrow Agent may act in conclusive reliance upon any instrument or signature believed by it to be genuine and may assume that any person purporting to give receipt or advice to make any statement or execute any
document in connection with the provisions hereof has been duly authorized to do so. 
  
 (h) The Escrow Agent shall not be responsible in any respect for the form, execution, validity, value or genuineness of documents or securities deposited hereunder, or for any description therein, or for the identity,
authority or rights of persons executing or delivering or purporting to execute or deliver any such document, security or endorsement. The Escrow Agent shall not be called upon to advise any party as to the wisdom in selling or retaining or taking
or refraining from any action with respect to any securities or other property deposited hereunder. 
  
 (i) The Escrow Agent shall not be under any duty to give the Escrow Property held by it hereunder any greater degree of care than it gives its own similar
property and shall not be required to invest any funds held hereunder except as directed in this Escrow Agreement. Uninvested funds held hereunder shall not earn or accrue interest. 
  

 8 

 (j) At any time the Escrow Agent may request an instruction in writing in English from the Company and
may, at its own option, include in such request the course of action it proposes to take and the date on which it proposes to act, regarding any matter arising in connection with its duties and obligations hereunder. The Escrow Agent shall not be
liable for acting in accordance with such a proposal on or after the date specified therein, provided that the specified date shall be at least three (3) business days after the Company receives the Escrow Agent’s request for instructions and
its proposed course of action, and provided further that, prior to so acting, the Escrow Agent has not received the written instructions requested. 
  
 (k) When the Escrow Agent acts on any information, instructions, communications, (including, but not limited to, communications with respect to the
delivery of securities or the wire transfer of funds) sent by telex, facsimile, email or other form of electronic or data transmission, the Escrow Agent, absent gross negligence, shall not be responsible or liable in the event such communication is
not an authorized or authentic communication of the Company or is not in the form the Company sent or intended to send (whether due to fraud, distortion or otherwise). The Company shall indemnify the Escrow Agent against any loss, liability, claim
or expense (including legal fees and expenses) it may incur with its acting in accordance with any such communication. 
  
 (l) In the event of any ambiguity or uncertainty hereunder or in any notice, instruction or other communication received by the Escrow Agent hereunder,
the Escrow Agent may, in its sole discretion, refrain from taking any action other than to retain possession of the Escrow Property, unless the Escrow Agent receives written instructions, signed by the Company which eliminates such ambiguity or
uncertainty. 
  
 (m) In the event of any dispute between or
conflicting claims among the Company and any other person or entity with respect to any Escrow Property, the Escrow Agent shall be entitled, in its sole discretion, to refuse to comply with any and all claims, demands or instructions with respect to
such Escrow Property so long as such dispute or conflict shall continue, and the Escrow Agent shall not be or become liable in any way to the Company or any other person for failure or refusal to comply with such conflicting claims, demands or
instructions. The Escrow Agent shall be entitled to refuse to act until, in its sole discretion, either (i) such conflicting or adverse claims or demands shall have been determined by a final order, judgment or decree of a court of competent
jurisdiction, which order, judgment or decree is not subject to appeal, or settled by agreement between the conflicting parties as evidenced in a writing satisfactory to the Escrow Agent or (ii) the Escrow Agent shall have received security or an
indemnity satisfactory to it sufficient to hold it harmless from and against any and all losses which it may incur by reason of so acting. Any court order, judgment or decree shall be accompanied by a legal opinion by counsel for the presenting
party, satisfactory to the Escrow Agent, to the effect that said order, judgment or decree represents a final adjudication of the rights of the parties by a court of competent jurisdiction, and that the time for appeal from such order, judgment or
decree has expired without an appeal having been filed with such court. The Escrow Agent shall act on such court order and legal opinions without further question. The Escrow Agent may, in addition, elect, in its sole discretion, to commence an
interpleader action or seek other judicial relief or orders as it may deem, in its sole discretion, necessary. The costs 

  

 9 

 
and expenses (including reasonable attorneys’ fees and expenses) incurred in connection with such proceeding shall be paid by, and shall be deemed an
obligation of, the Company. 
  
 (n) The Escrow Agent shall have no
responsibility for the contents of any writing of the arbitrators or any third party contemplated herein as a means to resolve disputes and may conclusively rely without any liability upon the contents thereof. 
  
 (o) The Escrow Agent does not have any interest in the Escrow Property
deposited hereunder but is serving as escrow holder only and having only possession thereof. The Company shall pay or reimburse the Escrow Agent upon request for any transfer taxes or other taxes relating to the Escrow Property incurred in
connection herewith and shall indemnify and hold harmless the Escrow Agent from any amounts that it is obligated to pay in the way of such taxes. Any payments of income from this Escrow Account shall be subject to withholding regulations then in
force with respect to United States taxes. The Company will provide the Escrow Agent with appropriate W-9 forms for tax identification number certifications, or W-8 forms for non resident alien certifications. This paragraph shall survive
notwithstanding any termination of this Escrow Agreement or the resignation or removal of the Escrow Agent. 
  
 (p) The Escrow Agent shall provide to the Company weekly statements identifying transactions, transfers or holdings of Escrow Property and each such
statement shall be deemed to be correct and final upon receipt thereof by the Company unless the Escrow Agent is notified in writing, by the Company, to the contrary within thirty (30) business days of the date of such statement. 
  
 Section 12. Miscellaneous. 
  
 (a) This Agreement embodies the entire agreement and understanding among the
parties relating to the subject matter hereof. 
  
 (b) This
Agreement shall be governed by and construed in accordance with the laws of the State of New York without reference to the principles of conflict of laws. 
  
 (c) Each of the parties hereto hereby irrevocably consents to the jurisdiction of the courts of the State of New York and of any Federal Court located in
the Borough of Manhattan in such State in connection with any action, suit or other proceeding arising out of or relating to this Agreement or any action taken or omitted hereunder, and waives any claim of forum non conveniens and any objections as
to laying of venue. Each party further waives personal service of any summons, complaint or other process and agrees that service thereof may be made by certified or registered mail directed to such person at such person’s address for purposes
of notices hereunder. 
  
 (d) All notices and other communications
under this Agreement shall be in writing in English and shall be deemed given when delivered personally, on the next Business Day after delivery to a recognized overnight courier or mailed first class (postage prepaid) or when sent by facsimile to
the parties (which facsimile copy shall be followed, in the case of notices or other communications sent to the Escrow Agent, by delivery of the original) at the 

  

 10 

 
following addresses (or to such other address as a party may have specified by notice given to the other parties pursuant to this provision): 
  
 If to the Company, to: 
  
 Paladin Realty Income Properties, Inc. 
 10880 Wilshire Boulevard, Suite 1400 
 Los
Angeles, California 90024 
 Facsimile: (310) 575-3258 
 Attention: Michael B. Lenard 
  
 with a copy to: 
  
 King & Spalding LLP 

191 Peachtree Street 
 Atlanta, Georgia
30303 
 Facsimile: 404-572-5148 
 Attention: Scott J. Arnold 
  
 If to the Escrow Agent,
to: 
  
 Deutsche Bank Trust Company Americas 
 60 Wall Street, 27th
Floor 
 Mail Stop: NYC60-2710 
 New York, New York 10005 
 Facsimile: (212) 797-8623 
 Attention: Manager, Escrow Team 
  
 If the Dealer Manager, to: 
  
 Prospect Financial
Advisors, LLC 
 11355 West Olympic Boulevard 
 Suite 220 
 Los Angeles, CA 90064 
 Facsimile: (310) 479-7736 
 Attention: Brooke
Buckley 
  
 If to Phoenix American Financial Services, Inc., to:

  
 Phoenix American Financial Services, Inc. 
 2401 Kerner Boulevard 
 San Rafael, California
94901 
 Facsimile: (415) 485-4553 
 Attention: Anne Rabbitt 
  

 11 

 (e) The headings of the Sections of this Agreement have been inserted for convenience and shall not
modify, define, limit or expand the express provisions of this Agreement. 
  
 (f) This Agreement and the rights and obligations hereunder of parties hereto may not be assigned except with the prior written consent of the other parties hereto. This Agreement shall be binding upon and inure to
the benefit of each party’s respective successors and permitted assigns. Except as expressly provided herein, no other person shall acquire or have any rights under or by virtue of this Agreement. This Agreement is intended to be for the sole
benefit of the parties hereto, and (subject to the provisions of this Section 10(f)) their respective successors and assigns, and none of the provisions of this Agreement are intended to be, nor shall they be construed to be, for the benefit of any
third person. 
  
 (g) This Agreement may not be amended,
supplemented or otherwise modified without the prior written consent of the parties hereto. 
  
 (h) The Escrow Agent makes no representation as to the validity, value, genuineness or the collectability of any security or other document or instrument held by or delivered to it. 
  
 (i) The Escrow Agent shall not be called upon to advise any party as to the
wisdom in selling or retaining or taking or refraining from any action with respect to any securities or other property deposited hereunder. 
  
 (j) Any payments of income from the Escrow Property shall be subject to withholding regulations then in force with respect to United States taxes. The
Company will provide the Escrow Agent with its Employer Identification Number for use by the Escrow Agent if necessary. It is understood that the Escrow Agent shall be responsible for income reporting only with respect to income earned on the Escrow
Property and will not be responsible for any other reporting. 
  
 (k) This Agreement may be executed in two or more counterparts, each of which shall be an original, but all of which together shall constitute one and the same instrument. 
  
 (l) The rights and remedies conferred upon the parties hereto shall be cumulative, and the exercise or waiver of any such
right or remedy shall not preclude or inhibit the exercise of any additional rights or remedies. The waiver of any right or remedy hereunder shall not preclude the subsequent exercise of such right or remedy. 
  
 (m) The Company hereby represents and warrants (i) that this Escrow Agreement
has been duly authorized, executed and delivered on its behalf and constitutes its legal, valid and binding obligation and (ii) that the execution, delivery and performance of this Escrow Agreement by the Company does not and will not violate any
applicable law or regulation. 
  

 12 

 (n) The Dealer Manager hereby represents and warrants (i) that this Escrow Agreement has been duly
authorized, executed and delivered on its behalf and constitutes its legal, valid and binding obligation and (ii) that the execution, delivery and performance of this Escrow Agreement by the Dealer Manager does not and will not violate any
applicable law or regulation. 
  
 (o) The invalidity, illegality
or unenforceability of any provision of this Escrow Agreement shall in no way affect the validity, legality or enforceability of any other provision; and if any provision is held to be unenforceable as a matter of law, the other provisions shall not
be affected thereby and shall remain in full force and effect. 
  
 (p) No printed or other material in any language, including prospectuses, notices, reports, and promotional material which mentions “Bankers Trust Company”, “Deutsche Bank Trust Company Americas” or “Deutsche Bank
AG” or any of their respective affiliates by name or the rights, powers, or duties of the Escrow Agent under this Escrow Agreement shall be issued by any other parties hereto, or on such party’s behalf, without the prior written consent of
the Escrow Agent. 
  
 (q) For purposes of this Agreement,
“Business Day” shall mean any day that is not a Saturday or Sunday or a day on which banks are required or permitted by law or executive order to be closed in the City of New York. 
  
 (r) For purposes of sending and receiving instructions or directions
hereunder, all such instructions or directions shall be, and the Escrow Agent may conclusively rely upon such instructions or directions, delivered, and executed by representatives of the Company designated on Scheduled I attached hereto and made a
part hereof (each such representative, an “Authorized Person”) which such designation shall include specimen signatures of such representatives, as such Schedule B may be updated from time to time. 
  

 13 

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

			
	PALADIN REALTY INCOME PROPERTIES, INC.
		
	By:	 	 
	 	 	 Name:

	 	 	 Title:

  

			
	PROSPECT FINANCIAL ADVISORS, LLC
		
	By:	 	 
	 	 	 Name:

	 	 	 Title:

  

			
	 DEUTSCHE BANK TRUST COMPANY AMERICAS,
 as Escrow Agent

		
	By:	 	 
	 	 	 Name:

	 	 	 Title:

  

 14 

  
 Schedule A 

 
 Description of Subscription Escrow Agent services: 
  
 Deutsche Bank Trust Company Americas (“DBTCA”) will be appointed Escrow Agent for
Paladin Realty Income Properties, Inc. (the “Company”) in connection with a public offering of the Company’s stock. The Company will offer up to 35,000,000 shares of common stock at $10.00 per share to the public through a network of
broker/dealers. The escrow funds will be invested as provided in the Subscription Escrow Agreement between DBTCA and the Company (the “Agreement”). Paladin and DBTCA agree that the balances for the above-referenced escrow agreement will
earn interest on the basis of the Federal Funds Rate less 50 basis points. 
  
 Capitalized terms used but not defined herein have the meanings ascribed to those terms in the Agreement. 
  
 Escrow Agent Fees: 
  

			
	Acceptance fee:	  	$10,000.00 one time

 This fee includes administrative review of closing documents and account set-up, establishing required operating
procedures, etc. (payable at time of the execution of the Fee Schedule) 
  

			
	Annual Administration fee:	  	$60,000.00

 Includes day-to-day administration services for the Escrow Account including collection of income, disbursements,
reporting and tax payments and filing etc. (One-half of this annual administration fee will be due on the date the Minimum Amount is reached. The remaining portion of the fee will be due on the six-month anniversary of such date. The fee will be
payable semi-annually in advance thereafter.) 
  

			
	Initial Break of Escrow fee:	  	$10,000.00 one time

 Includes all services related to the disbursement of Escrow Property once the Minimum Amount has been reached.

  

			
	Interest Payment fee:	  	$50.00 per order form

 Includes all services related to issuing checks for recipients of interest leading up to the break of escrow.

  

			
	Legal counsel expenses:	  	At cost

 If the escrow agreement utilized is sent to outside counsel for review, the fees and expenses of outside counsel
will be billed back to the client at cost. 
  

			
	Background Searches as per the requirements of the Patriot Act	  	At cost

  

				
	 Transaction Charges:
	  	 	 
	 Investment Transactions:
	  	$	100.00 per trade
	 Wire Transfers:
	  	$	25.00 per wire
	 Check Transfers:
	  	$	25.00 per check
	 Check’s delivered for deposit with subscription agreements:
	  	$	5.00 per check

  
 Caveats: 
  

	 	•	All documentation will be subject to New York law. 

  

	 	•	DBTCA reserves the right to take separate legal advice during documentation review and in the event legal charges are incurred, these charges are the Company’s sole
responsibility. If such expenses are to be billed to the Company, the Company will be informed of such expenses before they are incurred; provided, however, that failure to provide such notice will not affect the Company’s payment obligations
hereunder. 

  

	 	•	If the aforementioned transaction should fail to close for reasons beyond our control, DBTCA reserve the right to charge our acceptance fee plus reimbursement for legal fees and
costs associated with due diligence on the transaction. 

  

	 	•	The Company is responsible for extraordinary expenses and fees for the performance of services not contemplated at the time of the execution of the documents or not specifically
covered in this proposal. Such extraordinary fees and expenses include, but are not limited to those arising from amendments and releases. 

  

	 	•	DBTCA reserves the right to review its fee arrangement should circumstances warrant; provided however, that there can be no change to the fee structure without the written consent
of both parties. 

  
 IMPORTANT
INFORMATION ABOUT PROCEDURES FOR OPENING A NEW ACCOUNT 
  
 To help the government
fight the funding of terrorism and money laundering activities, effective October 1, 2003, Section 326 of the USA Patriot Act requires all financial institutions to obtain, verify, and record information that identifies each person or legal entity
that opens an account. 
  
 What this means for you: When you open
an account, we will ask for your name, address, and other information that will allow us to identify you. We may also ask you to provide other identifying documents, such as articles of incorporations. 
  

  
 Schedule B 

 
 Authorized Representatives of Paladin Realty Income Properties, Inc.

  

					
	 Name

	  	 Title

	 	 Specimen Signature

	James R. Worms	  	 President, Chief Executive
 Officer and
Director
	 	 
			
	Michael B. Lenard	  	 Executive Vice President,
 Secretary, Counselor
and
 Director
	 	 
			
	John A. Gerson	  	 Executive Vice President,
 Chief Financial Officer
and
 Director
	 	 
			
	Scot E. Hadley	  	Controller	 	 

  

  
 Exhibit A 

 
 Subscription Agreement 
  

  
 Exhibit B 

 
 Wire Transfer Instructions 
  

  
 Exhibit C 

 
 List of Investors 
  
 Pursuant to the Escrow Agreement dated
                     by and between
                    , (the “Company”), and Deutsche Bank Trust Company Americas (the “Escrow Agent”), the Company hereby
certifies that the following Investors have paid the following amounts of money for the purchase of
                                 (the “Shares”), and the money has been
deposited with the Escrow Agent: 
  

	1.	Name of Subscriber 

 Mailing Address 
 State of Residence 
 Tax Identification Number

 Amount of Shares subscribed for 
 Amount of money paid and deposited with Escrow Agent 
  

	2.	Name of Subscriber 

 Mailing Address 
 State of Residence 
 Tax Identification Number

 Amount of Shares subscribed for 
 Amount of money paid and deposited with Escrow Agent 
  

  
 Exhibit D 

 
 Minimum Offering Notice 
  
 [Company Letterhead] 
  
 [DATE] 
  
 Deutsche Bank Trust Company Americas 
 60 Wall
St. 27th Floor 
 Mail
Stop: NYC60-2710 
 New York, New York 10005 
 Attention: Escrow
Team 
 Telecopy: (212) 797-8623 
  
 You are hereby notified that the Company has received and accepted Subscription Agreements for the Minimum Amount of Shares. You are further notified that all conditions
precedent to the issuance by the Company of this Minimum Offering Notice, under the Escrow Agreement or any other agreement, have been met. We therefore direct Deutsche Bank Trust Company Americas, as Escrow Agent, to distribute the Escrow Property
in the following manner: 
  
 [Insert Wire Instructions] 
  
 Sincerely, 
  

	
	 Authorized Person

	
	  
	 Print Name

	
	 Authorized Person

	
	 
	 Print Name

  

  
 Exhibit E 

 
 Pennsylvania Escrow Return Notice 
  
 [Company Letterhead] 
  
 [DATE] 
  
 Deutsche Bank Trust Company Americas 
 60 Wall
St. 27th Floor 
 Mail
Stop: NYC60-2710 
 New York, New York 10005 
 Attention: Escrow
Team 
 Telecopy: (212) 797-8623 
  
 You are hereby notified that the Company has received a request by the Pennsylvania investor listed below to return any funds and interest attributable thereon to the
investor pursuant to Section 4(a)(iii) of the Escrow Agreement included in the “Deutsche Bank Trust Company Americas, as Escrow Agent for Pennsylvania residents (Paladin Realty income Properties, Inc.)” escrow account (the “Individual
Pennsylvania Investor Funds”). We therefore direct Deutsche Bank Trust Company Americas, as Escrow Agent, to return to the Pennsylvania investor listed below the Individual Pennsylvania Investor Funds in the following manner within 15 days
after                         , the date on which the Pennsylvania investor requested return of such funds: 
  
 Name of Pennsylvania Subscriber 
 Mailing Address 
 Tax Identification Number 
  
 [Insert Wire Instructions] 
  

					
	 Sincerely,
	 	 	 	 
			
	 Authorized Person
	 	 	 	 Authorized Person

			
	  	 	 	 	  
	Print Name	 	 	 	Print Name

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