EXHIBIT 10.50
Cornerstone Realty Income Trust, Inc.
Stock Option Agreement
July 23, 1999
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 Cornerstone Realty 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 348,771 shares of common stock of
the Company ("Company Stock") at a price of $10.1250 per share (the "Option
Price").
2. Option Vesting. The Option shall vest and become exercisable
immediately upon granting (the "Date of Grant").
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, 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, 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
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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) written notice of any transfer must be delivered to the Chief
Financial Officer of the Company; and
(f) the optionee"s estate may transfer the Option to the
beneficiaries of such estate, subject to the limitations set forth in
items (b) through (e) above.
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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
herein, the provisions of this Section 8 shall apply. For purposes of this
Section 8, a "Triggering Event" occurs when (i) a majority of the Board of
Directors of the Company is comprised of persons other than (A) those directors
who are serving at the date of this Agreement and (B) any new directors whose
nomination or election is approved by a majority of the Board of Directors
serving at the date of this Agreement, (ii) the shareholders of the Company
approve a reorganization, merger or consolidation which would result in the
shareholders of the Company immediately prior to such transaction owning less
than a majority of the outstanding shares or voting power of the corporation
resulting from such transaction, (iii) the shareholders of the Company approve
the liquidation or dissolution of the Company, (iv) the shareholders of the
Company approve the sale or other disposition of 50% or more of the Company's
consolidated assets or earnings power, (v) any person, entity or group (within
the meaning of Section 13(d)(3) under the Securities Exchange Act of 1934 and
the regulations interpreting it, or any successor provisions to such statute and
regulations) becomes the beneficial owner of 20% or more of the outstanding
common shares of the Company, or (vi) any two of Xxxxx X. Xxxxxx, Chief
Executive Officer of the Company, Xxxxx X. Xxxxx, Chief Operating Officer of the
Company, or Xxxxxxx X. Xxxxxxx, Xx., Chief Financial Officer of the Company,
cease to serve in such positions for any reason other than death or permanent
disability.
(a) Upon a Triggering Event, the Option shall be exercisable at an
exercise price of $1.00 per share of Company Stock (subject to
adjustments pursuant to Section 7 hereof) and remain exercisable for
180 days following the occurrence of such event.
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(b) If you elect in writing not to exercise the Option or if you
fail to exercise the Option within the 180 day period as described in
subparagraph (a) 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 and the Fair Market
Value of the Company Stock that could be obtained upon exercise 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).
(c) If the exercise of the Option or the receipt of payment in lieu
of such exercise results in income (collectively, "Option Income")
which 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, but 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 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
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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.
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CORNERSTONE REALTY INCOME TRUST, INC.
/s/ Xxxxxxx X. Xxxxxxx, Xx.
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Chief Financial Officer
Agreed and Accepted:
/s/ Xxxxx X. Xxxxxx
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Xxxxx X. Xxxxxx
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