Exhibit 10.5

STOCK OPTION AGREEMENT

 
AGREEMENT made as of November 8, 2011 (the “Grant Date”), between Presidential
Realty Corporation, a Delaware corporation (the “Corporation”), and Nickolas W.
Jekogian, III (the “Grantee”).
 
WHEREAS, the Corporation has entered into an Employment Agreement (the
“Employment Agreement”) of even date herewith with the Grantee; and
 
WHEREAS, pursuant to the terms of the Employment Agreement, the Corporation has
undertaken to grant to the Grantee the option granted hereunder and the Grantee
has agreed to accept such grant.
 
NOW, THEREFORE, in consideration of the mutual covenants hereinafter set forth
and for other good and valuable consideration, the parties hereto agree as
follows:
 
1.           Grant of Option.  The Corporation hereby grants to the Grantee the
right and option (the “Option”) to purchase 370,000 shares of the Corporation’s
Class B Common Stock, par value $.10 per share (the “Class B Shares”), 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 stock dividends, 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.
 
2.           Purchase Price.  The purchase price of the Shares covered by the
Option shall be $1.25 per Class B Share (the “Purchase Price”), which exceeds
the closing price of a Class B Share on the date hereof.
 
3.           Exercise of Option.  The Option granted hereby shall vest and
become immediately exercisable based on the following vesting schedule:
 
(a)           74,000 of the Class B Shares covered by the Option may be
purchased at any time after the expiration of six months from the Grant Date;
 
 
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(b)           148,000 of the Class B Shares covered by the Option may be
purchased from and after the occurrence of a Capital Event.  For purposes of
this Agreement, a Capital Event means the receipt by the Corporation of at least
$20,000,000 in cash or property from a capital raising activity including the
following:  (a) the sale for cash of shares of the Corporation’s Class A or
Class B Common Stock or securities convertible into shares of the Corporation’s
Class A or Class B Common Stock; (b) the exchange of shares of Class A or Class
B Common Stock for real estate assets consistent with the Corporation’s status
as a REIT; (c) the sale of unsecured subordinated debt instruments of the
Corporation, the proceeds of which may be used to acquire real estate assets
which are consistent with the Corporation’s status as a REIT.  For the avoidance
of doubt, the proceeds of any refinancing of any of the Corporation’s properties
or any working capital line of credit shall not be included in a Capital
Event.  The valuation of any property shall be supported by independent
appraisals of such property.
 
(c)           148,000 of the Class B Shares covered by the Option may be
purchased from and after the consummation of an underwritten registered public
offering of equity securities of the Corporation with gross proceeds of not less
than $40,000,000.
 
(d)           Notwithstanding the foregoing the Option shall automatically
become fully vested and exercisable upon a Change of Control (as such term is
defined in the Employment Agreement).
 
The date on which any of the events set forth in sub clauses (a), (b), (c) or
(d) above occurs is hereinafter referred to as a “Vesting Date”.
 
 
4.           Term of Option.  The Option shall terminate at 11:59 P.M. on the
day before the tenth anniversary of the Grant Date.
 
5.           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 5, 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.
 
6.           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, together with the tender of the
purchase price of the Class B Shares with respect to which the Option is being
exercised, payable by certified or bank check.  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 8 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 Shares purchased pursuant hereto and the Corporation shall
pay all other fees and expenses necessarily incurred by the Corporation in
connection herewith.  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.
 
 
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7.           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 and
payment of the Purchase Price will be duly authorized and validly issued, fully
paid and nonassessable and, subject to the representations and warranties of the
Grantee in Section 8 herein being true and correct, will have been issued in
compliance with federal and state securities Laws.
 
8.           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. Except as provided in Section 13 herein,
the Corporation is under no obligation to register the Shares or to comply with
any exemption available for sale of the Shares without registration.
 
 
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(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.
 
 
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(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.
 
9.           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.
 
10.           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:   
180 South Broadway
 
 
White Plains, New York 10605
 
 
Facsimile No.: 914-948-1327
           
To the Grantee:
 
Nickolas W. Jekogian, III
   
c/o Signature Community Investment Group
   
9 West 42nd Street
   
New York, New York 10016
   
njekogian@scig.co
     

 
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.

11.           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.
 
 
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12.           No Effect on Employment. Nothing herein shall modify the Grantee’s
status as an employee, officer and/or director of the Corporation or any of its
affiliates.  This Option shall terminate automatically if the Corporation
terminates the Grantee's employment for cause, as defined in the Employment
Agreement or Grantee terminates his employment without good reason as defined in
the Employment Agreement.  If Grantee terminates his employment for good reason,
as defined in the Employment Agreement, this Option shall be exercisable for a
period equal to the lesser of two years from the date of termination or the
expiration date.  Further, nothing herein guarantees the Grantee’s employment
for any specified period of time.  In no event may this Option be exercised
after the expiration date set in Section 4.
 
13.           Registration. The Corporation shall use reasonable efforts at its
expense to register the resale by the Grantee of the Class B Shares purchased
upon the exercise of the Option.  The timing of such registration shall be
coordinated with the Corporation’s certified financial statements so as not to
create an undo financial hardship on the Corporation and the Corporation shall
only be required to register such shares on a short form registration statement
such as a Form S-3 or S-8.  The Corporation shall not be required to register
the resale of such Class B Shares on a Form S-1.
 
14.           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.
 
 
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15.           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.
 
16.           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.
 
17.            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.
 

 
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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:
/s/ Jeffery F. Joseph
     
Name: Jeffery F. Joseph
     
Title:  President
                     
/s/ Nickolas W. Jekogian, III
     
Nickolas W. Jekogian, III
 

 
 
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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 ____________, 2011, 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”).
 
Enclosed is a certified check (or bank cashier's check) for $________________
for the full purchase price, payable to the order of the Corporation.
 
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,
     
__________________________
 

 
 
 

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AGREED TO AND ACCEPTED BY:
             
PRESIDENTIAL REALTY CORPORATION
             
By:____________________________
             
Name: _________________________
             
Title:___________________________
             
Number of Shares
     
Exercised:____________
             
Number of Shares
     
Remaining: ___________
     

 
 
 

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