EXHIBIT 10.64
Apple Residential Income Trust, Inc.
Stock Option Agreement
November 9, 1998
Xxxxx X. Xxxxxx
000 Xxxx Xxxx Xxxxxx
Xxxxxxxx, Xxxxxxxx 00000
Dear Xx. Xxxxxx:
You have been designated to receive a nonstatutory stock option to
purchase shares of the common stock of Apple Residential Income Trust, Inc. (the
"Company") on the terms set forth in this letter. A nonstatutory stock option is
an option that does not receive special tax treatment under the Internal Revenue
Code.
This letter constitutes an option agreement (the "Agreement") between you
and the Company. The Compensation Committee of the Company's Board of Directors
shall administer this Agreement. The terms and conditions of the option award
are as follows:
1. Nonstatutory Option. In consideration of your agreement contained in
this letter, the Company hereby grants to you a nonstatutory option (the
"Option") to purchase from the Company up to 355,111 shares of common stock of
the Company ("Company Stock") at a price of $10 per share (the "Option Price").
2. Option Vesting. The Option shall vest and become exercisable with
respect to the number of shares of Company Stock determined in accordance with
the following formula (your "Vested Shares"):
(A (divided by) B) x C = number of Vested Shares
where "A" is the total number of shares of Company Stock sold to the
public (pursuant to the Company's Prospectus dated October 16, 1998, as that
Prospectus may be supplemented from time to time) in the Additional Offering,
"B" is Five Million, and "C" is 355,111 shares of Company Stock; provided,
however, that the Option shall be deemed to vest in five equal parts, if, as and
when there is sold to the public in the Additional Offering one million, two
million, three million, four million and five million shares of Company Stock,
and the Option shall vest with respect to shares not corresponding to one of the
aforementioned break-points only if and when the Additional Offering is
terminated before completion. The value represented by "A" shall include any
Company Stock sold up to nine (9) months following the commencement of the
Additional Offering; any sale of Company Stock occurring after nine months from
such date shall not be used in the above calculation. For example, if 20 million
shares of Company Stock are sold during the Company's Additional Offering,
142,044 shares of Company Stock covered by the Option will become Vested Shares.
The Option may only be exercised with respect to your Vested Shares. The number
of Vested Shares determined pursuant to the foregoing formula shall not exceed
355,111 shares. For purposes of this agreement, "Additional Offering" shall mean
the Company's offering of Company Stock to the general public through a
registration statement filed with the Securities and Exchange Commission and
effective as of October 16, 1998.
3. Expiration of the Option. The Option will expire ten (10) years from
the Date of Grant (the "Expiration Date").
4. Entitlement to Exercise the Option. The grant of the Option is subject
to the following terms and conditions:
(a) Except as otherwise stated in this Agreement, the Option may be
exercised, in whole or in part and to the extent vested, from the Date of
Grant until the earliest of (i) the Expiration Date, (ii) 60 days from
your retirement or termination of your status as an executive officer of
the Company for reasons other than death or disability, or (iii) 180 days
from the date you terminate your status as an executive officer of the
Company by reason of death or disability. The Committee shall, in its sole
discretion, determine whether the executive officer is disabled.
(b) Except as otherwise stated in this paragraph, the Option may be
exercised only while you are an executive officer of the Company.
5. Payment Under Option. You may exercise the Option, in whole or in part
and to the extent vested, but only with respect to whole shares of Company
Stock. You may pay the Option price in cash, in Mature Shares of Company Stock,
or in any combination thereof. For purposes of this Agreement, "Mature Shares"
shall mean shares of Company Stock for which the holder has good title, free and
clear of all liens and encumbrances and which such holder either (i) has held
for at least six months, or (ii) has purchased on the open market. If you
deliver Mature Shares of Company Stock to make any such payment, the shares
shall be valued at the Fair Market Value thereof on the date you exercise the
Option. For purposes of this agreement, "Fair Market Value" shall mean, on any
given date, (i) if the Company Stock is traded on an exchange, the closing
registered sales price of the Company Stock on such day on the exchange on which
it generally has the greatest trading volume, (ii) if the Company Stock is
traded in the over-the-counter market, the average between the closing bid and
asked prices on such day as reported by NASDAQ, or (iii) if the Company Stock is
not traded on any exchange or in the over-the-counter market, the Fair Market
Value shall be determined by the Committee using any reasonable method in good
faith.
6. Transferability of Option. The Option is not transferable by you (other
than by will or by the laws of descent and distribution) and, except as
otherwise stated in this letter, may be exercised during your lifetime only by
you. Notwithstanding the preceding, you shall have the right to transfer the
rights under the Option granted in this Agreement during your lifetime subject
to the following limitations:
(a) transfers may be made only to the following transferees: (i) the
optionee's children, step-children, grandchildren, step-grandchildren or
other lineal descendants (including relationships arising from legal
adoptions) (such individuals are hereinafter referred to as "Immediate
Family Members"); (ii) trust(s) for the exclusive benefit of any one or
more of the optionee's Immediate Family Members (the optionee's spouse may
also be a beneficiary); or (iii) partnership(s), limited liability
compan(ies) or
other entit(ies), the only partners, members or interest holders of which
are among the optionee's Immediate Family Members (the optionee's spouse
may also hold an interest);
(b) there may be no consideration for the transfer;
(c) there may be no subsequent transfer of the transferred Option
except by will or the laws of descent and distribution;
(d) following transfer, the Option shall continue to be subject to
the same terms and conditions as were applicable immediately prior to
transfer (including the conditions under which the Option may terminate
prior to its expiration); except that the transferee rather than the
optionee may deliver the Option exercise notice and payment of the
exercise price;
(e) only the vested portion of the Option is transferable;
(f) written notice of any transfer must be delivered to the Chief
Financial Officer of the Company; and
(g) the optionee's estate may transfer the Option to the
beneficiaries of such estate, subject to the limitations set forth in
items (b) through (f) above.
7. Adjustments. If the number of outstanding shares of Company Stock is
increased or decreased as a result of: (i) a subdivision or consolidation of
shares, (ii) the payment of a stock dividend, (iii) a stock split, or (iv) any
other change in the capitalization that is effective without receipt of
consideration by the Company, the number of shares with respect to which you
have an unexercised Option and the Option price shall be appropriately adjusted
by the Company, whose determination shall be binding.
8. Triggering Events. Notwithstanding any other provision to the contrary,
in the case of the occurrence of a "Triggering Event," as defined below, the
following provisions shall apply:
(a) For purposes of this paragraph 8, a "Triggering Event" shall
mean:
(i) substantially all of the Company's assets, stock or
business is sold or transferred, whether through sale, exchange,
merger, consolidation, lease, share exchange or otherwise; or
(ii) the Advisory Agreement between the Company and Apple
Residential Advisors, Inc. (whether or not subject to a subcontract
arrangement) is terminated or not renewed, and the Company ceases to
use Apple Residential Management Group, Inc. (whether or not subject
to a subcontract arrangement) to provide substantially all of its
property management services.
(b) Upon a Triggering Event, the vested portion of the Option shall
be exercisable at an exercise price of $1.00 per share of Company Stock
and remain exercisable for 180 days following the occurrence of such
event.
(c) If you elect in writing not to exercise the vested portion of
the Option or if you fail to exercise the vested portion of the Option
within the 180 day period as described in subparagraph (b) above, the
Company shall, immediately upon receipt of such written election or
expiration of the 180 day period, pay you, in cash, the difference between
the exercise price ($1.00) and the Fair Market Value of the Company Stock
that could be obtained upon exercise of the vested portion of the Option
(or, as appropriate, the fair market value, as determined in good faith by
the Committee, of securities received in exchange for or receivable in
lieu of such Company Stock in the context of an acquisition transaction
that constitutes a Triggering Event in which Company Stock is to be
exchanged for or replaced by other securities).
(d) If the exercise of the vested portion of the Option or the
receipt of payment in lieu of such exercise (collectively, "Option
Income") would subject you to an excise tax under Internal Revenue Code
Sections 280G or 4999, the Company shall pay to you, in cash, an
additional amount equal to the sum of the excise tax due and the federal,
state and local income taxes due on the additional amount (cumulatively,
the "Gross-Up Payment"), such that the net amount retained by you will
equal the Option Income. The Gross-Up Payment shall be paid to you as soon
as possible following the exercise of the vested portion of the Option or
the receipt of payment in lieu of such exercise, bu in no event later than
ninety (90) calendar days after such date. For purposes of determining the
amount of the Gross-Up Payment, you shall be deemed to pay federal income
taxes at your highest marginal rate in the calendar year in which the
Gross-Up Payment is to be made and the state and local income taxes at
your highest marginal rates in the state and locality of your residence,
net of the maximum reduction in federal income taxes which could be
obtained from deduction of such state and local taxes.
9. Exercise and Notices. To exercise the vested portion of your Option,
you must deliver to the Chief Financial Officer of the Company written notice,
signed by you, stating the number of shares you have elected to purchase, and
payment to the Company as described in paragraph 5. Any notice to be given under
the terms of this letter shall be addressed to the Chief Financial Officer of
the Company at the Company's primary business address, and any notice to be
given to you shall be given to you or your personal representative, legatee or
distributee, and shall be addressed to him or her at the address set forth
above. Either party may hereafter designate in writing any other address for
purposes of notice in a notice duly sent to the other. Notices shall be deemed
to have been duly given if mailed, postage prepaid, addressed as aforesaid.
10. Withholding. By signing this letter, you agree to make arrangement
satisfactory to the Company to comply with any income tax withholding
requirements that may apply upon the exercise of the Option.
11. Continuation as Officer of the Company. Neither the Agreement nor the
Option confers upon you any right to continue as an officer of the Company or
limits in any respect the right of the Company to terminate your status as an
officer.
12. Delivery of Certificate. The Company may delay delivery of the
certificate for shares purchased pursuant to the exercise of an Option until (i)
the admission of such shares to listing on any stock exchange on which the
Company Stock may then be listed, (ii) receipt of any required representation by
you or completion of any registration or other qualification of such shares
under any state or federal law or regulation that the Company's counsel shall
determine as necessary or advisable, and (iii) receipt by the Company of advice
by counsel that all applicable legal requirements have been complied with. As a
condition of exercising the Option, you may be required to execute a customary
written indication of your investment intent and such other agreements as the
Company deems necessary or appropriate to comply with applicable securities
laws.
13. Acceptance of Option. Your acceptance of the Option, which shall be
deemed to take place when you sign where indicated on this letter, places no
obligation or commitment on you to exercise the Option. By signing below, you
indicate your acceptance of the Option and your agreement to the terms and
conditions set forth in this letter, which shall become the Company's Agreement
with you. Unless the Company otherwise agrees in writing, this letter will not
be effective as an Agreement if such copy is not signed and returned.
APPLE RESIDENTIAL INCOME TRUST, INC.
/s/ Xxxxx X. Xxxxxx
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Chairman and Chief Executive Officer
Agreed and Accepted:
/s/ Xxxxx X. Xxxxxx
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Xxxxx X. Xxxxxx
