Exhibit 10.4

 

STOCK OPTION AGREEMENT

 

AGREEMENT made as of  _______, 2015 (the “Grant Date”), between Presidential
Realty Corporation, a Delaware corporation (the “Corporation”), and
________________ (the “Grantee”).

  

1.   Grant of Option. The Corporation hereby grants to the Grantee the right and
option (the “Option”) to acquire such number of shares of the Corporation’s
Class B Common Stock, par value $.00001 per share (the “Class B Shares”), as is
equal to (a) $102,600.00 divided by (b) the per share offering price established
pursuant to a Secondary Offering (as defined in Section 2 below), on the terms
and conditions and subject to all the limitations set forth herein. The Option
is intended to qualify as a non-qualified stock option and not as an Incentive
Stock Option as defined in Section 422 of the Internal Revenue Code.
Notwithstanding any other provision of this Agreement, the Corporation shall
make or provide for such adjustments to the number and class of shares issuable
hereunder as shall be appropriate to prevent dilution or enlargement of rights,
including adjustments in the event of changes in the outstanding capital stock
of the Corporation by reason of split-ups, recapitalizations, mergers,
consolidations, combinations or exchanges of shares, separations,
reorganizations, liquidations and the like. In the event of any offer to holders
of the capital stock of the Corporation generally relating to the acquisition of
their shares, the Corporation shall make such adjustment as shall be equitable
in respect of the outstanding Option and rights hereunder, including revision of
the outstanding Option and rights so that the holder of the Option may exercise
the Option and participate in the acquisition transaction on the same terms as
other stockholders. This Option is granted to Grantee pursuant to the Fifth
amendment to the employment agreement dated              , 2015 between the
Company and the Grantee.

 

  2.   Exercise of Option. The Option granted hereby shall vest and become
immediately exercisable from and after the consummation of an underwritten
registered public offering of equity securities of the Corporation with gross
proceeds of not less than twenty million dollars ($20,000,000) (a “Secondary
Offering”). The date on which a Secondary Offering occurs (excluding any over
allotment option) is hereinafter referred to as a “Vesting Date.”

 

3.   Term of Option. The Option shall terminate at 11:59 P.M. on the day before
the fifth (5th) anniversary of the Grant Date.

 

4.   Transferability. Any attempted transfer, assignment, pledge, hypothecation
or other disposition of the Option or of any rights granted hereunder contrary
to the provisions of this Section 4, or the levy of any attachment or similar
process upon the Option or any such right, shall be null and void. The Grantee
shall comply with any policies adopted by the Corporation’s Board of Directors
with respect to timing of sales of its capital stock.

 

5.   Exercise of Option and Issuance of Shares. The Option may be exercised in
whole or in part (to the extent that it is exercisable in accordance with its
terms) by giving written Notice of Exercise (in the form of Exhibit A annexed
hereto) to the Corporation. Such written notice shall be signed by the Grantee,
shall state the number of Class B Shares with respect to which the Option is
being exercised, shall contain any warranty required by Section 7 below and
shall otherwise comply with the terms and conditions of this Agreement. The
Grantee shall pay all original issue taxes, if any, with respect to the issue of
the Class B Shares issued pursuant hereto and the Corporation shall pay all
other fees and expenses necessarily incurred by the Corporation in connection
herewith. Notwithstanding the foregoing, Grantee shall be deemed to have
received compensation on the Vesting Date equal to the value of the shares
subject to the Option. The number of shares subject to the Option shall be
reduced as of the Vesting Date by such number of Class B Shares issuable upon
exercise of the Option as equals the amount of any taxes which the Corporation
reasonably determines are required to be withheld under federal, state or local
law in connection with the vesting of the Option. For such purpose, the
Corporation shall value the Class B Shares withheld at the per share price
established in the Secondary Offering. The Corporation shall pay to the
appropriate taxing authorities for the account of the Grantee in cash an amount
equal to the amount to be withheld. The issuance of the Class B Shares is
conditional upon the submission by the Grantee to the Board of Directors of the
Corporation a duly executed and acknowledged counterpart of this Agreement,
together with such other instrument or instruments reasonably requested by the
Corporation.

 

 

 

 

6.   Representations and Warranties of the Corporation. The Corporation
represents, warrants and agrees as follows:

 

(a)   The Corporation has the authority to enter into this Agreement. All action
on the part of the Corporation necessary for the authorization, execution and
delivery of this Agreement and the performance of all obligations of the
Corporation hereunder and thereunder has been taken on or prior to the date
hereof. This Agreement has been duly executed and delivered by the Corporation
and constitutes the valid and binding agreement of the Corporation, enforceable
against the Corporation in accordance with their terms, except that (i) such
enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium
or other similar laws now or hereafter in effect relating to creditors’ rights
generally, and (ii) the remedy of specific performance and injunctive and other
forms of equitable relief may be subject to equitable defenses and to the
discretion of the court before which any proceeding therefor may be brought.

 

(b)   The Class B Shares, when issued upon exercise of the Option will be duly
authorized and validly issued, fully paid and nonassessable and, subject to the
representations and warranties of the Grantee in Section 7 herein being true and
correct, will have been issued in compliance with federal and state securities
laws.

 

7.   Representations and Warranties of the Grantee. The Grantee represents,
warrants and agrees as follows:

 

(a)   The Grantee (i) has such knowledge and experience in business and
financial matters as to be capable of evaluating the merits and risks of the
investment in the Class B Shares; (ii) is capable of bearing the economic risks
associated with the investment in the Class B Shares; (ii) has been provided the
opportunity to ask questions and receive answers concerning the Corporation and
to obtain any additional information which the Corporation possesses or can
acquire without unreasonable effort or expense that is necessary to verify the
accuracy of information furnished to it; and (iv) will acquire the Class B Stock
for its own account and not with a view toward, or for resale in connection
with, the sale or distribution thereof.

 

(b)   The Grantee understands that the Option and the Class B Shares issuable
upon exercise thereof are being offered and sold to it in reliance on specific
exemptions from the registration requirements of the U.S. federal and state
securities laws and that the Corporation is relying in part upon the truth and
accuracy of, and the Grantee’s compliance with, the representations, warranties,
agreements, acknowledgments and understandings of the Grantee set forth herein
in order to determine the availability of such exemptions and the eligibility of
the Grantee to be granted the Options and acquire the Class B Shares.

 

(c)   The Grantee understands that neither the Option nor the Class B Shares
have been or are being registered under the Securities Act of 1933, as amended
(the “Securities Act”) or any state securities laws, and may not be offered for
sale, sold, assigned or transferred unless subsequently registered thereunder or
sold, assigned or transferred pursuant to an exemption from registration under
the Securities Act. The Corporation is under no obligation to register the
Shares or to comply with any exemption available for sale of the Shares without
registration.

 

 

 

 

(d)   The certificate or certificates representing the Class B Shares to be
acquired upon exercise of the Option shall contain the following legend in
addition to any other legends required by the Corporation’s Certificate of
Incorporation:

 

“THESE SHARES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED. THEY MAY NOT BE OFFERED OR TRANSFERRED BY SALE, ASSIGNMENT, PLEDGE OR
OTHERWISE UNLESS (I) A REGISTRATION STATEMENT FOR THE SHARES UNDER THE
SECURITIES ACT OF 1933 IS IN EFFECT OR (II) THE CORPORATION HAS RECEIVED AN
OPINION OF COUNSEL, WHICH OPINION IS SATISFACTORY TO THE CORPORATION, TO THE
EFFECT THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933.

 

THE ACCUMULATION OF SHARES OF COMMON STOCK BY ANY PERSON, AS DEFINED IN THE
COMPANY’S CERTIFICATE OF INCORPORATION, IS RESTRICTED TO 9.2% OF THE NUMBER OF
OUTSTANDING SHARES OF COMMON STOCK WITHOUT REGARD TO CLASS. ANY TRANSFER WHICH
CREATES AN ACCUMULATION IN EXCESS OF THAT AMOUNT VIOLATES THE CERTIFICATE OF
INCORPORATION AND IS VOID. IF, NOTWITHSTANDING THE ABOVE, SUCH ACCUMULATION
RESULTS, THE SHARES IN EXCESS OF 9.2% ARE SUBJECT TO CERTAIN RESTRICTIONS ON
VOTING POWER AND RECEIPT OF DIVIDENDS, AND MAY BE MADE SUBJECT TO PURCHASE BY
THE COMPANY. FURTHER, SUCH PERSON MAY BE REQUIRED TO INDEMNIFY THE COMPANY
AGAINST TAXES INCURRED AND OTHER LOSSES RESULTING FROM (1) LOSS OF ITS TAX
QUALIFICATION AS A REAL ESTATE INVESTMENT TRUST OR (2) BECOMING A PERSONAL
HOLDING COMPANY”

 

(e)   The Grantee has reviewed with his own tax advisors the federal, state,
local and foreign tax consequences of this investment and the transactions
contemplated by this Agreement and is relying solely on such advisors and not on
any statements or representations of the Corporation or any of its employees or
agents.

 

(f)   The Grantee understands that the Grantee (and not the Corporation) shall
be responsible for his own tax liability that may arise as a result of this
investment or the transactions contemplated by this Agreement.

 

(g) The Grantee agrees not to sell the Class B Shares issued pursuant to
exercise of the Option for a period of one hundred and eighty (180) days from
the Vesting Date.

 

8.   Liquidation; Change in Control. In the event of a liquidation or proposed
liquidation of the Corporation, including (but not limited to) a transfer of
assets followed by a liquidation of the Corporation, or in the event of a Change
in Control or proposed Change in Control, the Corporation shall have the right
to require the Grantee to exercise the Option upon 30 days prior written notice
to the Grantee to the extent it is then exercisable. In the event the Option is
not exercised by the Grantee within the 30-day period set forth in such written
notice, the Option shall terminate on the last day of such 30-day period,
notwithstanding anything to the contrary contained in the Option. For purposes
of this Section 8, “Change of Control” shall mean any person or group of persons
within the meaning of § 13(d)(3) of the Securities Exchange Act of 1934 becomes
the beneficial owner, directly or indirectly, of 50% or more of the outstanding
equity interests of the Corporation.

 

 

 

 

9.   Notices. Any notices required or permitted by the terms of this Agreement
shall be given by personal delivery, registered or certified mail, postage
prepaid, return receipt requested, overnight courier of national reputation,
facsimile or other electronic means as follows:

 

To the Corporation: 1430 Broadway, Suite 503   New York, NY  10018     To the
Grantee: As set forth on the signature page hereto.

 

or to such other address or addresses of which notice in the same manner has
previously been given. Any such notice shall be deemed to have been duly given
or made as of the date delivered if delivered personally, or on the next
business day if sent by overnight courier or when received if mailed by
registered or certified mail, postage prepaid, return receipt requested, or on
confirmation if by facsimile or other electronic means, in accordance with the
foregoing provisions. Either party hereto may change the address to which
notices hereunder may be given by providing the other party hereto with written
notice of such change.

 

10.   Section 409A. To the extent applicable, this Agreement shall be
interpreted in accordance with Section 409A of the Internal Revenue Code (the
“Code”) and Department of Treasury regulations and other interpretive guidance
issued thereunder. Notwithstanding any provision of this Agreement to the
contrary, in the event that the Corporation determines that this Option may be
subject to Section 409A of the Code, the Corporation may adopt such amendments
to this Agreement or adopt other policies and procedures (including amendments,
policies and procedures with retroactive effect), or take any other actions that
the Corporation determines are necessary or appropriate to (a) exempt the Option
from Section 409A of the Code and/or preserve the intended tax treatment of the
benefits provided with respect to the Option, or (b) comply with the
requirements of Section 409A of the Code and related Department of Treasury
guidance and thereby avoid the application of penalty taxes under such Section
409A.

 

11.   Governing Law; Arbitration.

 

(a)   This Agreement shall be construed in accordance with and governed by the
Laws of the State of Delaware, without regard to the conflicts of Laws and rules
thereof.

 

(b)   Any dispute or disagreement between the Grantee and the Corporation with
respect to any portion of this Agreement (excluding Exhibit A hereto) or its
validity, construction, meaning, and the performance of the Grantee’s rights
hereunder shall, unless the Corporation in its sole discretion determines
otherwise, be settled by arbitration, at a location designated by the
Corporation, in accordance with the Commercial Arbitration Rules of the American
Arbitration Association or its successor, as amended from time to time. However,
prior to submission to arbitration the parties will attempt to resolve any
disputes or disagreements with the Corporation over this Agreement amicably and
informally, in good faith, for a period not to exceed two weeks. Thereafter, the
dispute or disagreement will be submitted to arbitration. At any time prior to a
decision from the arbitrator(s) being rendered, the Grantee and the Corporation
may resolve the dispute by settlement. The Grantee and the Corporation shall
equally share the costs charged by the American Arbitration Association or its
successor, but the Grantee and the Corporation shall otherwise be solely
responsible for their own respective counsel fees and expenses. The decision of
the arbitrator(s) shall be made in writing, setting forth the award, the reasons
for the decision and award and shall be binding and conclusive on the Grantee
and the Corporation. Further, neither the Grantee nor the Corporation shall
appeal any such award. Judgment of a court of competent jurisdiction may be
entered upon the award and may be enforced as such in accordance with the
provisions of the award.

 

 

 

 

12.   Integration and Severability. This Agreement embodies the entire agreement
and understanding among the parties hereto, and supersedes all prior agreements
and understandings, relating to the subject matter hereof. In case any one or
more of the provisions contained in this Agreement or in any instrument
contemplated hereby, or any application thereof, shall be invalid, illegal or
unenforceable in any respect, under the laws of any jurisdiction, the validity,
legality and enforceability of the remaining provisions contained herein and
therein, and any other application thereof, shall not in any way be affected or
impaired thereby or under the Laws of any other jurisdiction.

 

13.   Headings. The headings of the articles, sections and subsections of this
Agreement are inserted for convenience only and shall not be deemed to
constitute a part of this Agreement.

 

14.    Benefit of Agreement. This Agreement shall be for the benefit of and
shall be binding upon the heirs, executors, administrators and successors and
permitted assigns of the parties hereto.

 

[signature page follows]

 

 

 

 

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

 

  PRESIDENTIAL REALTY CORPORATION         By:     Name:     Title:        
GRANTEE:         By:         Name:   Address:     

 

 

 

 

EXHIBIT A

 

NOTICE OF EXERCISE OF STOCK OPTION

TO PURCHASE SHARES OF CLASS B COMMON STOCK OF

PRESIDENTIAL REALTY CORPORATION

 

Name     Address           Attn:     Date    

 

Presidential Realty Corporation

180 South Broadway

White Plains, New York 10605

Attention: Chairman of the Board

 

Re:           Exercise of Stock Option

 

Gentlemen:

 

Pursuant to the provisions of the Stock Option Agreement (“Option Agreement”)
dated as of ____________, 2015, between Presidential Realty Corporation
(“Corporation”) and the Undersigned, the Undersigned hereby elects to exercise
options granted to the Undersigned to purchase ________ shares of Class B Common
Stock, par value $0.10 per shares of the Corporation (the “Class B Stock”).

 

As soon as the Stock Certificate is registered in the name of the Undersigned,
please deliver it to the Undersigned at the above address.

 

  Very truly yours,        

 

AGREED TO AND ACCEPTED BY:

 

PRESIDENTIAL REALTY CORPORATION

 

By:____________________________

 

Name: _________________________

 

Title:___________________________

 

Number of Shares Exercised: ____________

 

Number of Shares Remaining: ___________