Exhibit 10.5


 


STOCK OPTION AGREEMENT


 


AGREEMENT (this
“Agreement”) made as of January 6, 2017 (the “Grant Date”), between Presidential Realty Corporation, a
Delaware corporation (the “Corporation”), and Alexander Ludwig (the “Grantee”).


 


WHEREAS, on
January 6, 2017 (the “Execution Date”), the Corporation and its newly formed operating partnership, Presidential Realty
Operating Partnership LP (“Presidential OP”), for which it acts as general partner, entered into the Interest Contribution
Agreement (as the same may be amended, the “ICA”) with First Capital Real Estate Trust Incorporated, First Capital
Real Estate Operating Partnership, Township Nine Owner, LLC, Capital Station Holdings, LLC, Capital Station Member, LLC, Capital
Station 65 LLC and Avalon Jubilee LLC (“Avalon”);


 


WHEREAS, in
connection with the closing of the transactions involving Avalon, the Corporation and Grantee cancelled his stock options and warrants
and other obligations owed or to be owed to him by the Corporation (other than obligations arising from the ICA and employment
compensation) in consideration of the issuance of (x) 450,000 Class B Shares (as defined herein) and (y) an option to purchase
550,000 Class B Shares at such time and upon the satisfaction of those conditions set forth herein; and


 


WHEREAS, pursuant
to the terms set forth herein, 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. As of the Execution Date, the Corporation hereby grants to the Grantee the right and option (the “Option”)
to be issued 550,000 shares of the Corporation’s Class B Common Stock (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 of 1986, as amended. 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. The value of the Class B Shares subject to the Option shall be $0.03 per share.


 




     


     


    

 


2.    Exercise
Price. The Option shall have no exercise price.


 


3.    Exercise
of Option. The Option granted hereby shall vest and become immediately exercisable, in whole or in part, subject to satisfaction
of the following conditions:


 


(a)     The Corporation
has consummated an equity offering, capital raise or such other offering such that the issuance of any Class B Shares covered by
the Option would not be deemed “Excess Shares” as that term is defined in the certificate of incorporation of the Corporation,
and Grantee hereby agrees not to exercise or attempt to exercise the Option for a number of shares which, when taken together with
his other ownership of the Corporation’s securities, would result in the issuance of any Excess Shares; and


 


(b)    To the extent
the Corporation deems it necessary in connection with the exercise of the Option, in its reasonable discretion, the Corporation
has obtained, and, if determined to be necessary, shall use its reasonable best efforts to obtain within thirty (30) days of the
date of consummation of the equity offering referenced in Section 3(a) above, an opinion of counsel from a nationally recognized
law firm to the effect that the issuance of Class B Shares subject to the Option will not cause the Corporation to be treated as
“closely held” within the meaning of Section 856(a)(6) of the Internal Revenue Code of 1986, as amended.


 


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. 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 Class B Shares issued 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.


 


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 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.


 




     


     


    

 


(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.


 


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:	1430 Broadway, Suite 503
	 	New York, New York 10013
	 	Facsimile No.: ______________
	 	 
	To the Grantee:	Alexander Ludwig
	 	c/o Presidential Realty Corporation
	 	1430 Broadway, Suite 503
	 	New York, New York 10013
	 	Email: aludwig@presrealty.com


 


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.


 


12.    [Intentionally
Omitted.]


 


13.    Registration.
The Class B Shares issuable upon the exercise of the Option shall have “piggyback” registration rights for the registration
for sale under the Securities Act of 1933, as amended, and the Corporation shall use reasonable efforts at its expense to register
the resale by the Grantee of the Class B Shares issuable 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, S-8 or S-11. 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.


 


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.


 




     


     


    

 


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/ Nickolas W. Jekogian, III
	 	 	Name: Nickolas W. Jekogian, III
	 	 	Title:  Chairman and CEO
	 	 	 
	 	 	/s/ Alexander Ludwig
	 	 	Alexander Ludwig


 




     


     


    

 


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 January 6, 2017, between Presidential Realty Corporation
(“Corporation”) and the Undersigned, the Undersigned hereby elects to exercise options granted to the Undersigned for
________ shares of Class B Common Stock (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,


 


Alexander Ludwig


 


AGREED TO AND ACCEPTED BY:


 


PRESIDENTIAL REALTY CORPORATION


 


	By:	 	 
	Name:	 	 
	Title:	 	 


 


Number of Shares


Exercised:____________


 


Number of Shares


Remaining: ___________