EXHIBIT 10.18
COMMON SHARE PURCHASE OPTION AGREEMENT
THIS COMMON SHARE PURCHASE OPTION AGREEMENT ("Share Purchase Option
Agreement") is made and entered as of this 10th day of February, 1997, by and
between CORNERSTONE REALTY INCOME TRUST, INC. ("Cornerstone"), a Virginia
corporation, and APPLE RESIDENTIAL TRUST, INC. ("Apple"), a Virginia
corporation.
RECITALS
WHEREAS, Cornerstone has stated an intention to own, and has tendered to
Apple an offer to purchase common shares of Apple ("Common Shares"), on the
terms and conditions set forth herein. Apple is willing to give Cornerstone a
right and option to purchase Common Shares on the terms and conditions and for
the purchase price set forth in this Share Purchase Option Agreement.
NOW, THEREFORE, FOR AND IN CONSIDERATION of the mutual promises and
covenants contained herein, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties do hereby
agree as follows:
1. Terms of Subscription -- Agreement to Purchase and Sell Common Shares.
(a) Option to Purchase Common Shares. Apple does hereby grant to
Cornerstone a right to purchase at any time during the term of this Share
Purchase Option Agreement and from time to time Common Shares subject to
the aggregate subscription limitation set forth below.
(b) Aggregate Subscription Limit. Cornerstone's aggregate holdings of
Common Shares shall not at any time exceed 9.8% of the total number of
Common Shares then outstanding (the "Aggregate Subscription Limit").
2. Purchase Price. The number of Common Shares received by Cornerstone at
each closing of any purchase of Common Shares hereunder shall be equal to
the gross purchase price paid by Cornerstone at such closing divided by,
the then current public offering price of Common Shares set forth on the
Prospectus dated November 19, 1996, as supplemented and amended from time
to time (the "Prospectus"), less all selling commissions and marketing
expense allowances payable in accordance with the Prospectus, (such net
price per Common Share, the "Purchase Price").
3. Purchase Closings. At each closing of the acquisition of Common Shares
hereunder,
(a) Cornerstone shall pay to Apple, by wire transfer or by certified
or bank cashier's check, an amount determined under section 2 above,
subject to the aggregate amount not exceeding the Aggregate Subscription
Limit; and
(b) Apple shall issue to Cornerstone one or more certificates
representing the whole number of issued and outstanding Common Shares equal
to the quotient of (i) the gross amount paid by Cornerstone to Apple under
Section 2 above divided by (ii) the Purchase Price determined under Section
2 above. Apple shall not be required to issue fractional Common Shares in
connection with any purchase by Cornerstone and, in lieu thereof, Apple
shall refund to Cornerstone the cash amount represented by the fractional
share of Common Shares based upon the Purchase Price. In addition to the
legends required by Apple's Articles of Incorporation, each certificate or
instrument representing the Common Shares shall bear a legend in
substantially the following form:
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, OR ANY APPLICABLE STATE SECURITIES LAW, AND MAY NOT BE SOLD OR
OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION AND QUALIFICATION
WITHOUT AN OPINION OF COUNSEL FOR THE HOLDER THAT SUCH REGISTRATION AND
QUALIFICATION ARE NOT REQUIRED, WHICH OPINION OF COUNSEL SHALL BE
REASONABLY SATISFACTORY TO APPLE.
Such legend shall be removed by Apple upon (i) the U.S. Securities and
Exchange Commission ("SEC") declaring effective a Registration Statement
(as defined in Section 7 below) covering such Common Shares or (ii)
delivery to it of an opinion of counsel reasonably satisfactory to Apple
and its counsel that a registration statement under the Securities Act of
1933, as amended (the "Securities Act"), other than a Registration
Statement, is at the time effective with respect to the transfer of the
legended security or that such security can be transferred without such
registration statement being in effect and without the requirements of a
legend on the certificate in the hands of the transferee.
4. Term. Apple's obligations in connection with this Share Purchase
Option Agreement shall terminate upon the termination of the public
offering of Common Shares pursuant to the Registration Statement No.
333-10135 filed with the SEC, as it may be amended from time to time.
5. Representations and Warranties of Cornerstone. Cornerstone hereby
represents and warrants to Apple as follows:
(a) The execution, delivery and performance of this Agreement by
Cornerstone have been duly authorized by all necessary corporate action.
This Agreement constitutes a valid and binding obligation of Cornerstone,
enforceable in accordance with its terms.
(b) Neither the execution, delivery and performance of this Agreement
nor the consummation of the transactions contemplated hereby by Cornerstone
will conflict with or result in a breach or violation of any of the terms
and provisions of, or (with or without the giving of notice or passage of
time or both) constitute a default under, any agreement to which
Cornerstone is a party, the certificate of incorporation or bylaws of
Cornerstone, any indenture, mortgage, deed of trust, loan agreement, note,
lease or other agreement or instrument to which Cornerstone is a party or
to which any of its properties or other assets is subject, or any
applicable statute, judgment, decree, rule or regulation of any court or
governmental agency or body applicable to Cornerstone or its assets, or
result in the creation or imposition of any lien, charge, claim or
encumbrance upon any property or asset of Cornerstone.
(c) No consent, license, permit or filing of or with any governmental
authority or any person is required in connection with Cornerstone'
execution, delivery and performance of this Share Purchase Option Agreement
except as has been obtained by Cornerstone.
(d) No finder, broker, agent, financial advisor or other intermediary
has acted on behalf of Cornerstone in connection with the purchase of the
Common Shares pursuant to this Share Purchase Option Agreement or the
negotiation or consummation hereof.
(e) It is familiar with the business and financial condition of Apple
and is not relying upon any representations made to it by Apple or any of
its officers, directors, employees, partners or agents that are not
contained herein.
(f) It is aware of the risks involved in making an investment in the
Common Shares. It has had an opportunity to ask questions of, and to
receive answers from, Apple, or a person or persons authorized to act on
its behalf, concerning the terms and conditions of any investment in Apple.
Cornerstone confirms that all documents, records and books pertaining to
any investment in Apple that have been requested by it have been made
available or delivered to it prior to the date hereof.
(g) It understands that the Common Shares have not been registered
under the Securities Act, or any state securities acts, and are being
offered and sold to Cornerstone in reliance on an exemption from such
registration requirements. The Common Shares for which Cornerstone hereby
subscribes are being acquired solely for its own account, for investment,
and are not being purchased with a view to, or for resale in connection
with, any distribution, subdivision or fractionalization thereof in
violation of such laws, and Cornerstone has no present intention to enter
into any contract, undertaking, agreement or arrangement with respect to
any such resale.
(h) It is an "accredited investor" as that term is defined in Rule 501
and Regulation D promulgated under the Securities Act.
The foregoing representations and warranties are true and accurate as
of the date hereof and shall be true and accurate as of the date of each
purchase of Common Shares pursuant to the terms of this Share Purchase
Option Agreement, and shall survive such dates.
6. Representations and Warranties of Apple. Apple hereby represents and
warrants to Cornerstone as follows:
(a) Apple has full legal right, power and authority to enter into this
Share Purchase Option Agreement and the Registration Rights Agreement
referred to in Section 7 hereof, and to consummate the transactions
contemplated herein and therein. This Share Purchase Option Agreement has
been, and the Registration Rights Agreement referred to in Section 7 hereof
will be, duly authorized by all necessary corporate action, and each will
constitute the valid and binding obligation of Apple, enforceable in
accordance with their respective terms.
(b) The Common Shares have been validly authorized and, when issued to
Cornerstone, will be duly and validly issued, fully paid, nonassessable and
free of preemptive or similar rights. Authorized and unissued Common Shares
sufficient to satisfy Apple's obligation to issue such shares to
Cornerstone shall at all times be reserved by Apple.
(c) Assuming the accuracy of the representations of Cornerstone set
forth in Section 5 hereof, (i) the Common Shares will have been issued,
offered and sold to Cornerstone in compliance with all applicable laws
(including, without limitation, federal and state securities laws) and (ii)
each consent, approval, authorization, order, license, certificate, permit,
registration, designation or filing by or with any governmental agency or
body necessary for the valid authorization, issuance, sale and delivery of
any Common Shares to Cornerstone, the execution, delivery and performance
of this Agreement and the Registration Rights Agreement referred to in
Section 7 hereof and the consummation by Apple of the transactions
contemplated hereby and thereby has been made or obtained and is in full
force and effect.
(d) Neither the issuance, sale and delivery to Cornerstone by Apple of
the Common Shares, nor the execution, delivery and performance of this
Agreement and the Registration Rights Agreement referred to in Section 7
hereof, nor the consummation of the transactions contemplated hereby or
thereby by Apple will conflict with or result in a breach or violation of
any of the terms and provisions of, or (with or without the giving of
notice or passage of time or both) constitute a default under, any
agreement to which Apple is a party, the certificate of incorporation,
bylaws of Apple, any indenture, mortgage, deed of trust, loan agreement,
note, lease or other agreement or instrument to which Apple is a party or
to which any of its properties or other assets is subject, or any
applicable statute, judgment, decree, rule or regulation of any court or
governmental agency or body applicable to Apple or its assets, or result in
the creation or imposition of any lien, charge, claim or encumbrance upon
any property or asset of Apple.
(e) No consent, license, permit or filing of or with any governmental
authority or any person is required in connection with Apple's execution,
delivery and performance of this Share Purchase Option Agreement except as
has been obtained by Apple.
(f) No finder, broker, agent, financial advisor or other intermediary
has acted on behalf of Apple in connection with the purchase of the Common
Shares pursuant to this Share Purchase Option Agreement or the negotiation
or consummation hereof.
The foregoing representations and warranties are true and accurate as
of the date hereof, or such other date as of which they are deemed to be
made, and shall be true and accurate as of the date of each purchase of
Common Shares made hereunder, and shall survive such dates.
7. Registration Rights. Prior to June 1, 1997, Apple shall enter into
with Cornerstone a registration rights agreement ("Registration Rights
Agreement") in form and substance agreeable to Cornerstone and Apple,
providing, among other things, for the following with respect to Common
Shares acquired by Cornerstone pursuant to this Share Purchase Option
Agreement:
(a) In the time periods and with the frequency described in Section
7(b) below, Apple shall file and use its best efforts to cause to become
effective, registration statements under the Securities Act, and all
necessary qualifications or registrations under the securities laws
covering the resale by Cornerstone of Common Shares issued to Cornerstone
hereunder (each, a "Registration Statement").
(b) A Registration Statement shall be filed within 60 days after (i)
the first anniversary of the first purchase of Common Shares of Cornerstone
and (ii) each subsequent anniversary if Cornerstone has acquired Common
Shares which are not covered by a Registration Statement.
(c) Apple shall use its best efforts to maintain the effectiveness of
each Registration Statement until the earlier of (i) such time as all of
the Common Shares covered thereby have been issued to and sold by
Cornerstone and (ii) such time as all of the Common Shares covered thereby
may be resold by Cornerstone without restriction under the Securities Act.
(d) During any consecutive three month period, Cornerstone shall be
prohibited, unless Apple shall otherwise consent thereto in writing, from
selling more than 25% of the outstanding Common Shares, whether pursuant to
a Registration Statement or otherwise, except in an underwritten public
offering in which the managing underwriter is one reasonably acceptable to
Apple.
(e) All expenses of such Registration Statement shall be borne by
Apple, other than (i) any underwriting discounts or commissions or transfer
taxes and (ii) the fees and expenses of all separate counsel for
Cornerstone in excess of the reasonable fees and expenses of one separate
counsel retained by Cornerstone to (A) review the Registration Statement as
requested by Apple, (B) review or prepare information to be provided at
Apple's request and (C) review documents and instruments to be executed by
Cornerstone at the request of Apple.
(f) (i) Cornerstone shall refrain from the sale of any Common Shares
for one or more periods of not more than sixty (60) days following
written notice from Apple that the relevant Registration Statement is
not then current, due to the existence of material non-public
information disclosure of which would materially adversely affect the
business interests of Apple, and prior to Cornerstone' receipt from
Apple of written notice that such Registration Statement is again
current, provided that Cornerstone shall not be precluded from
effecting sales pursuant to this clause (i) for more than ninety (90)
days during any 360-day period.
(ii) Following written notice from Apple that it has filed and
caused to become effective a registration statement including an
offering of Common Shares for sale by Apple to the public in an
underwritten public offering, Cornerstone shall enter into agreements
with the underwriters of such public offering, substantially in the
same form and for the same time period as agreements entered into by
the officers and directors of Apple, precluding the sale of Common
Shares by Cornerstone for a period not to exceed one hundred eighty
(180) days following such notice, provided that Cornerstone was given
the opportunity to include its shares for sale in such public
offering.
(g) With respect to a Registration Statement, the following procedures
shall apply:
(i) Apple will, prior to filing a Registration Statement or
prospectus or any amendment or supplement thereto, furnish to
Cornerstone and counsel designated by Cornerstone, copies of such
registration statement or prospectus as proposed to be filed, together
with exhibits thereto, which documents will be subject to review by
the foregoing, and thereafter furnish to Cornerstone, such number of
copies of such Registration Statement, each amendment and supplement
thereto, the prospectus included in such Registration Statement
(including each preliminary prospectus) and such other documents as
Cornerstone may reasonably request in order to facilitate the
disposition of the Common Shares covered by the Registration
Statement.
(ii) Apple will use its best efforts to register or qualify the
Common Shares under such other securities or blue sky laws of such
jurisdictions in the United States as Cornerstone reasonably requests;
provided, that Apple will not be required to (A) qualify generally to
do business in any jurisdiction where it would not otherwise be
required to qualify, (B) subject itself to taxation in any such
jurisdiction or (C) consent to general service of process in any such
jurisdiction.
(iii) Apple will immediately notify Cornerstone at any time when
a prospectus included in a Registration Statement is required to be
delivered under the Securities Act, of the occurrence of an event
requiring the preparation of a supplement or amendment to such
prospectus so that, as thereafter delivered to the purchasers of such
Common Shares, such prospectus will not contain an untrue statement of
a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not
misleading, and will promptly make available to Cornerstone any such
supplement or amendment.
(iv) Apple will otherwise use its best efforts to comply with all
applicable rules and regulations of the SEC.
(v) Apple shall promptly notify Cornerstone (A) when the
prospectus or any prospectus supplement has been filed, and, with
respect to the Registration Statement or any post-effective amendment,
when the same has been declared effective, (B) of any request by the
SEC for amendments or supplements to the Registration Statement or the
prospectus or for additional information, (C) of the issuance by the
SEC of any stop order suspending the effectiveness of the Registration
Statement or the initiation of any proceedings for that purpose, and
(D) of the receipt by Apple of any notification with respect to the
suspension of the qualification of the Common Shares for sale in any
jurisdiction or the initiation or threatening of any proceeding for
such purpose.
(vi) Cornerstone and each officer, director and controlling
person of Cornerstone shall be indemnified by Apple for all losses,
claims, damages, liabilities and expenses (including reasonable costs
of investigation) caused by any untrue or alleged untrue statement or
any omission or alleged omission in the then-current prospectus
included in a Registration Statement, unless based upon information
(if any) furnished to Apple by Cornerstone expressly for use in a
Registration Statement in a writing signed by or on behalf of
Cornerstone.
(f) Apple and each officer, director and controlling person of Apple
shall be indemnified by Cornerstone for all losses, claims, damages,
liabilities and expenses (including reasonable costs of investigation)
caused by any untrue or alleged untrue statement or any omission or alleged
omission in the then-current prospectus included in a Registration
Statement, if based upon information (if any) furnished to Apple by
Cornerstone expressly for use in a Registration Statement in a writing
signed by or on behalf of Cornerstone.
(g) Cornerstone agrees to promptly provide information or execute and
deliver documents reasonably determined by Apple to be necessary to
facilitate the preparation or filing of a Registration Statement.
8. Miscellaneous.
(a) All notices or other communications given or made hereunder shall
be in writing and shall be delivered in person or mailed by registered or
certified mail, return receipt requested, postage prepaid, or by Federal
Express overnight mail, (A) to Cornerstone at 000 Xxxx Xxxx Xxxxxx,
Xxxxxxxx, Xxxxxxxx 00000, Attention: Chief Financial Officer, and (B) to
Apple at 000 Xxxx Xxxx Xxxxxx, Xxxxxxxx, Xxxxxxxx 00000, Attention:
President.
(b) NOTWITHSTANDING THE PLACE WHERE THIS AGREEMENT MAY BE EXECUTED BY
ANY OF THE PARTIES HERETO, THE PARTIES EXPRESSLY AGREE THAT ALL OF THE
TERMS AND PROVISIONS HEREOF SHALL BE CONSTRUED IN ACCORDANCE WITH AND
GOVERNED BY THE LAWS OF THE COMMONWEALTH OF VIRGINIA (WITHOUT REGARD TO
CONFLICTS OF LAW PRINCIPLES), APPLICABLE TO AGREEMENTS MADE AND TO BE
WHOLLY PERFORMED THEREIN.
(c) This Agreement (i) supersedes all other agreements or
understandings, by and between Cornerstone and Apple, and (ii) constitutes
the entire agreement between the parties hereto, in each case with respect
to the subscription by Cornerstone for Common Shares of Apple. This
Agreement
may be amended only by an instrument in writing executed by all parties.
Cornerstone may assign and transfer its rights and obligations hereunder,
and the Common Shares it acquires, to any direct or indirect subsidiary
thereof.
(d) This Agreement shall inure to the benefit of and be binding upon
the successors and assigns of the parties hereto.
(e) All terms used herein shall be deemed to include the masculine and
the feminine and the singular and the plural as the context requires.
Captions herein are for convenience of reference only and shall not alter
or affect the meaning or construction of the paragraphs hereof to which
they relate.
(f) The parties hereto agree to take all actions, including the
entering into of any documents, agreements or instruments, or amendments
thereof, as may be necessary or appropriate to effectuate the intents and
purposes hereof and consummate and make effective the transactions
contemplated hereby.
(g) This Agreement may be executed in two or more counterparts, any
one of which need not contain the signatures of more than one party, but
all such counterparts taken together will constitute one and the same
Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Share Purchase
Option Agreement on and as of the date first above written.
CORNERSTONE REALTY INCOME TRUST, INC.,
a Virginia corporation
By:/s/ Xxxxx X. Xxxxxx
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Name: Xxxxx X. Xxxxxx
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Title: Chairman
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APPLE RESIDENTIAL INCOME TRUST, INC.,
a Virginia corporation
By:/s/ Xxxxx X. Xxxxxx
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Name: Xxxxx X. Xxxxxx
----------------------------------
Title: Chairman
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