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EXHIBIT 10.3
STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT (this "Option Agreement") is made and
entered into on and as of the 17th day of December, 1998, but effective for all
purposes at the "Effective Date" (defined below) between TARRAGON REALTY
INVESTORS, INC., a Nevada corporation ("TRII"), which has its principal
executive offices located at 0000 Xxxxxxxxxx Xxxxxx, Xxxxx 000, Xxxxxx, Xxxxx
00000 and XXXX X. XXXXXXXX, an individual (herein called "LNFriedman") whose
office address is 000 Xxxx Xxxxxx, Xxxx Xxxxxxxx, 00xx Xxxxx, Xxx Xxxx, Xxx Xxxx
00000.
W I T N E S S E T H:
WHEREAS TRII and National Income Realty Trust are parties to that
certain Agreement and Plan of Merger dated June 5, 1998 (the "Merger Agreement")
which provides, subject to shareholder approval of each entity, for the
incorporation of NIRT, as a California corporation and the merger of that
California corporation, with and into TRII with TRII as the surviving entity;
WHEREAS, TRII, Tarragon Realty Advisors, Inc., a New York corporation
("TRA"), LNFriedman and Xxxxxxx X. Xxxxxxxx are parties to that certain Stock
Purchase Agreement dated June 5, 1998 (the "Advisor Acquisition Agreement")
pursuant to which, at the closing thereof, TRII is to acquire from Xxxxxxx X.
Xxxxxxxx and LNFriedman all of the Common Stock of TRA to the end that TRA will
become a wholly-owned subsidiary of TRII;
WHEREAS, the Merger Agreement has been approved by the respective
shareholders of TRII and NIRT, all conditions precedent in the Merger Agreement
have been satisfied, NIRT has been incorporated in the State of California under
the name National Income Realty Corporation and the Articles of Merger to
evidence the completion of the merger of NIRT have been filed with the Secretary
of State of Nevada, all of which is a condition precedent to the consummation of
the Advisor Acquisition Agreement;
WHEREAS, pursuant to the Advisor Acquisition Agreement, part of the
consideration is the issuance by TRII to Xxxxxxx X. Xxxxxxxx and LNFriedman in
proportion to their relative ownership in TRA options to purchase a total of
350,000 shares of TRII Common Stock pursuant to Stock Option Agreements dated
the Closing Date in a form mutually acceptable to TRII and Xxxxxxx X. Xxxxxxxx
and LNFriedman;
WHEREAS, TRII and LNFriedman desire to enter into this Option Agreement
as part of the consideration under the Advisor Acquisition Agreement, all under
the terms and subject to the conditions hereafter set forth.
NOW, THEREFORE, in consideration of the foregoing premises, the mutual
promises and covenants contained herein, and other good and valuable
consideration, the receipt, sufficiency and adequacy of which is hereby
acknowledged, including the
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consummation and closing of the Advisor Acquisition Agreement, the parties
hereto do hereby agree as follows:
1. Adoption of Recitals. The parties hereto do hereby adopt and confirm
the foregoing recitals in the same manner as if fully re-copied herein for all
purposes.
2. Effective Date. The "Effective Date" of this Option Agreement is
November 24, 1998, which is the date of closing of the Advisor Acquisition
Agreement.
3. Grant of Stock Options. Subject to the terms and conditions
contained herein, TRII hereby grants to LNFriedman separate options to purchase,
a total of 175,000 shares of TRII Common Stock, par value $0.01 per share (all
collectively the "Option Shares" and each an "Option Share") at an exercise
price of (i) $13.00 per share covering 75,000 shares, (ii) $15.00 per share
covering 50,000 shares, and (iii) $16.00 per share covering 50,000 shares (each
such price per share the "Applicable Purchase Price"). There shall not be any
requirement of this Option Agreement that LNFriedman purchase any Option Share
in any order and LNFriedman shall be free to select and exercise this Option
Agreement in portions in such manner as LNFriedman deems appropriate which may
consist of the lowest Applicable Purchase Price first or last or in any
combination desired by LNFriedman.
4. Period of Option. The "Option Period" shall be and mean the period
commencing on the date hereof and ending at 3:00 o'clock p.m. local Dallas,
Texas time on December 31, 2008 (the "Termination Time") and any portion of the
Option Shares unexercised after such Termination Time shall expire.
5. Exercise and Payment of Applicable Purchase Price. LNFriedman
(together with her successors and assigns hereunder called the "Holder") may
exercise her rights hereunder to purchase Option Shares as to the whole or any
part of the Option Shares (but not as to a fractional share of TRII Common
Stock) (a) by completing the Subscription Form, a copy of which is attached
hereto and made a part hereof (which written notice and subscription shall [i]
state the election to exercise the right and option to purchase and the number
of Option Shares and Applicable Purchase Price to which it is being exercised
and [ii] be signed by the person so exercising) and delivering such Subscription
Form to the Secretary of TRII; (b) by delivery to TRII of an investment letter
satisfactory to counsel for TRII which will restate the representations set
forth in paragraph 6 hereof; and (c) upon payment to TRII of the Applicable
Purchase Price for such portion of the Option Shares so purchased in cash or by
personal check or, at the option of the Holder, in TRII Common Stock theretofore
owned by the Holder (or by a combination of any of the foregoing). For purposes
of determining the amount if any, of the Applicable Purchase Price satisfied by
payment in shares of TRII Common Stock, such TRII Common Stock theretofore owned
shall be valued at its "Fair Market Value" on the date of exercise. For purposes
of this Option Agreement, the term "Fair Market Value" of a share of TRII Common
Stock on a particular date shall be the closing
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price of TRII Common Stock on the business day immediately preceding such date,
which closing price all be (i) if the TRII Common Stock is listed or admitted
for trading on any United States National Securities Exchange, the last reported
sale price of TRII Common Stock on such exchange as reported in any newspaper of
general circulation, (ii) if the TRII Common Stock is quoted on the National
Association of Securities Dealers, Inc. automated quotation system ("NASDAQ") or
any similar system of automated assimilation of quotations of securities prices
and common use, the mean between the closing high bid and low asked quotations
for such day of the TRII Common Stock on such system or (iii) if neither clause
(i) nor (ii) is applicable, a value determined by any fair and reasonable means
prescribed by the Board of Directors of the Company. Any TRII Common Stock
delivered in satisfaction of all or a portion of the exercise price shall be
appropriately endorsed for transfer and assignment to TRII.
6. Securities Laws. At the time of any exercise of this Option
Agreement and purchase of any Option Shares, the Board of Directors of TRII
shall, as a condition precedent to the exercise hereof, require from the Holder
(or in the event of the Holder's death, the Holder's legal representatives,
legatees or distributees) such written representations concerning the Holder's
(or their) intentions concerning retention or disposition of the shares of TRII
Common Stock being acquired by exercise under this Option Agreement and/or such
written covenants and agreements as to the manner of disposal of such shares as,
in the opinion of the Board of Directors of TRII, shall be necessary to ensure
that any disposition by such Holder, legal representatives, legatees or
distributees will not involve a violation of the Securities Act of 1933, as
amended or any similar or superseding statute of statutes, or any other
applicable statute or regulation, as then in effect and TRII shall not be
obligated to issue any shares subject to this Option Agreement if such issuance
would be in violation of any statute, law, rule or regulation whether federal or
state. In addition, as a condition of any issuance of any stock certificate for
Option Shares upon exercise, the Board of Directors may obtain such agreements
or undertakings, if any, as it may deem reasonably necessary or advisable to
assure compliance with any provisions of this Option Agreement or any law or
regulation including, but not limited to, any of the following:
(a) a representation and warranty by the Holder to TRII at the
time of exercise, that the Holder is acquiring the Option Shares to be
issued to him for investment and not with a view to , or for sale in
connection with the distribution of any such shares;
(b) a representation, warranty or agreement to be bound by any
legends that are, in the opinion of the Board of Directors, necessary
or appropriate to comply with the provisions of any securities law
deemed by the Board of Directors to be applicable to the issuance of
Option Shares and are endorsed upon the certificates representing such
shares.
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7. Adjustment of Number of Shares. The Option Shares covered by this
Option Agreement are shares of the Common Stock of TRII, par value $0.01 per
share as presently constituted but, if, and whenever, prior to delivery by TRII
of any of the certificates representing Option Shares which are covered by this
Option Agreement, TRII shall effect a subdivision of consolidation of shares or
any other capital readjustment, the payment of a stock dividend or other
increase or reduction of the number of shares of TRII Common Stock outstanding
without receiving compensation therefore in money, services or property, the
number of shares of TRII Common Stock then remaining subject to this Option
Agreement as Option Shares hereunder shall (a) in the event of an increase of
the number of outstanding shares, be proportionately increased and the cash
consideration payable as the Applicable Purchase Price per Option Share shall be
proportionately reduced if appropriate, and (b) in the event of a reduction in
the number of outstanding shares, be proportionately reduced and the Applicable
Purchase Price consideration payable per Option Share shall be proportionately
increased, if appropriate.
8. Merger and/or Consolidation. Upon the merger of one or more entities
into TRII or upon a consolidation of TRII and one or more entities in which TRII
shall be the surviving entity, thereafter, upon any exercise under this Option
Agreement to purchase Option Shares, the Holder shall, at no additional cost, be
entitled to receive in lieu of the number of shares of TRII Common Stock as to
which this Option Agreement shall then be so exercisable, the number and class
of shares of stock or other securities to which the Holder would have been
entitled pursuant to the terms of any such agreement of merger or consolidation
if, immediately prior to such merger or consolidation, the Holder had been the
Holder of record of a number of shares of TRII Common Stock equal to the number
of Option Shares as to which this Option Agreement remains to be so exercise
provided, that anything contained herein to the contrary notwithstanding,
(i) upon the dissolution or liquidation of TRII, or
(ii) upon any merger or consolidation where TRII is not
the surviving entity, or
(iii) if a sale of all or substantially all of the assets of TRII
occurs and it is contemplated that within a reasonable
period of time thereafter TRII will either be liquidated or
converted into a nonoperating entity or an extraordinary
dividend will be declared resulting in partial liquidation
of TRII, or
(iv) a merger or consolidation (other than a merger
effecting only a reincorporation of the entity in
another state or any other merger or consolidation in
which the equity owners of the surviving entity and
their proportionate interests therein immediately
thereafter the merger or consolidation are
substantially identical to the stockholders of TRII
and their proportionate interest therein immediately
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prior to the merger or consolidation) in which TRII is not
the surviving entity (or survives only as a subsidiary of
another entity in a transaction in which the stockholders of
the parent of TRII and their proportionate interest therein
immediate after the transaction not substantially identical
to the stockholders of TRII and their proportionate interest
therein immediately prior to the transaction), or
(v) if a transaction occurs in which another entity becomes the
owner of 50% or more of the total combined voting power of
all classes of equity securities of TRII,
then, in any of such events, the Holder shall be entitled to receive, upon
notice of exercise, in lieu of the number of Option Shares as to which this
Option Agreement remains unexercised, the number and class of shares of stock or
other securities, or the amount of cash, property or assets of the surviving or
resulting entity to which the Holder would have been entitled pursuant to the
terms of the agreement of merger or consolidation or dissolution or liquidation
or other transaction if immediately prior to such event the Holder had been the
Holder of record of the number of Option Shares then unexercised and there shall
be no further requirement that the Holder upon exercise pay any sums of money
above the Applicable Purchase Price then in effect, if any, under this Option
Agreement.
9. No Affect on Capital Structure. The Option Shares covered by this
Option Agreement shall not affect the right of TRII or any of its subsidiaries
to reclassify, recapitalize or otherwise change their respective capital or debt
structure or to merge, consolidate, convey any or all of their respective
assets, dissolve, liquidate, windup, or otherwise reorganize.
10. Further Adjustments. Except as expressly provided in this Option
Agreement, the issuance by TRII of shares of stock of any class or any
securities convertible into shares of any class for cash or property, or for
labor or services, either upon direct sale or upon the exercise of rights,
warrants to subscribe therefore or upon conversion of shares or obligations of
TRII convertible into such shares or other securities, shall not affect, and no
adjustment by reason thereof shall be made with respect to, the number of Option
Shares subject to this Option Agreement.
11. Rights of Holder. The Holder shall not be deemed for any purpose to
be a stockholder of TRII with respect to any of the Option Shares, except to the
extent that an exercise shall have occurred under this Option Agreement with
respect to Option Shares. Except as provided in this Option Agreement, no
adjustment shall be made for dividends or other rights for which the record date
is prior to the date a stock certificate is issued to the Holder pursuant to an
exercise for Option Shares. The existence of this Option Agreement shall not
affect in any way the right or power of TRII or its stockholders to make or
authorize any or all adjustments, recapitalizations,
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reorganizations or other changes in TRII's capital structure or its business or
any merger or consolidation of TRII or any issue of bonds, debentures, preferred
or prior preference securities ahead of or affecting the Option Shares or the
rights thereof or the dissolution or liquidation of TRII or any sale or transfer
of all or any part of its assets or business, or any other act or proceeding,
whether of a similar character or otherwise.
12. Transferability. This Option Agreement is transferable by the
Holder and all rights granted hereunder may be assigned, pledged or hypothecated
in any way (whether by operation of law or otherwise) and shall be subject to
execution, attachment or similar process. Holder agrees not to sell, transfer or
otherwise dispose of this Option Agreement in violation of the Securities Act of
1933, as amended (the "Securities Act"), and the rules and regulations
thereunder and any applicable state securities laws, and this Option Agreement
may be transferred only upon compliance by the Holder hereof with the Securities
Act, the rules and regulations thereunder and any applicable state securities
laws. At such time as TRII shall be satisfied that all of the conditions
relating to the transfer of this Option Agreement shall have been satisfied,
TRII shall promptly recognize the transfer of this Option Agreement, issue a new
instrument to the transferee or transferees of this Option Agreement and
register such transferee or transferees on the books and records of TRII as the
Holder of the instrument issued in exchange hereof. Notwithstanding any other
provision of this Option Agreement or the occurrence of any other event,
including the death of The Holder, the Option Period shall continue until the
Termination Time and shall not be subject to earlier termination by reason of
any particular event. If the Holder dies during the Option Period, the person or
persons to whom his rights under this Option Agreement shall pass, whether by
will or by the applicable laws of descent and distribution, may have and possess
and exercise all rights under this Option Agreement to the extent the Holder was
entitled to so exercise it on the date of this death, for the balance of the
Option Period.
13. Notices. Any notice or other communication required or permitted to
be given by this Option Agreement or any other document or instrument referred
to herein or executed in connection herewith must be given in writing (which may
be by telecopy, followed by mail or personal delivery) and must be personally
delivered or mail by prepaid, certified or registered mail, to the party to whom
such notice or communication is directed, at the address of such party set forth
opposite her or its name on the signature page to this Option Agreement. Subject
to the other provisions of this Option Agreement, any party may change its
address (or redesignate the person to whom such notice shall be delivered) for
purposes of this Option Agreement by giving notice of such change to the other
party pursuant to this provision. In all instances, any notice or other
communication required or permitted to be given by this Option Agreement shall
only be effective upon actual receipt thereof by the person intended to receive
same.
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14. Modification or Waiver. This Option Agreement may be amended,
modified or superseded and any of the terms, covenants, representations,
warranties or conditions herein may be waived, but only by a written instrument
executed by the parties hereto. No waiver of any nature, in any one or more
instances, shall be deemed to be or be construed as a further or continued
waiver of any condition or any breach of any other term, covenant,
representation or warranty in this Option Agreement. This Option Agreement and
each provision hereof may not waived, altered, amended or modified, except in
writing, duly executed by the parties hereto. Failure to exercise and no delay
in exercising any right or power hereunder shall operate as a waiver thereof.
15. Benefits. This Option Agreement shall inure to the benefit of and
be binding upon the Holder, her successors and assigns and TRII and its
successors and assigns.
16. Further Cooperation. To the extent that either TRII's or the
Holder's further approval or other action is deemed necessary or desirable by
the other party in order to effectuate the terms and conditions of this Option
Agreement and the matters set forth herein, the parties hereby agree to execute
all reasonable documents and take all action reasonably requested by the other
party to effectuate the terms and conditions of this Option Agreement.
17. Governing Law and Enforcement. This Option Agreement shall be
construed, enforced in accordance with and governed by the laws of the State of
Texas, the state in which it was negotiated, executed and delivered, without
regard to any principles of law involving conflicts of laws. Should any clause,
sentence, section or paragraph of this Option Agreement be judicially or
administratively declared to be invalid, unenforceable or void under the laws of
the State of Texas or the United States of America, or any agency or subdivision
thereof, such decision shall not have the effect of invalidating or voiding the
remainder of this Option Agreement and the parties hereto agree that the part or
parts of this Option Agreement so held to be invalid, unenforceable or void
shall be deemed to have been deleted herefrom and the remainder shall have the
same force and effect as if such part or parts had never been included herein.
In the event any party hereto shall fail or perform any of its obligations under
this Option Agreement, such party hereby agrees to pay all reasonable expenses,
including reasonable attorneys' fees, which may be incurred by any party hereto
which is successful in enforcing this Option Agreement.
18. Captions. The headings or captions of this Option Agreement have
been included for ease of reference only and are not to be considered in the
construction or interpretation of this Option Agreement or any clause contained
herein.
19. Entire Agreement; Counterparts. This Option Agreement and the
agreements and documents referred to herein constitute the entire agreement
between the parties hereto concerning the subject matter hereof, and supersedes
all prior
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memoranda, correspondence, conversations and agreements. This Option Agreement
may be executed in several identical counterparts, and together shall constitute
but one and the same instrument.
IN WITNESS WHEREOF, the undersigned have executed this Option Agreement
as of the date and year first above written.
Address for Notices
0000 Xxxxxxxxxx Xxxxxx XXXXXXXX REALTY INVESTORS,
Suite 200 INC.
Xxxxxx, Xxxxx 00000
(000) 000-0000
(000) 000-0000 (fax) By: /s/XXXXXXX XXXXXXXXX
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Name: Xxxxxxx Xxxxxxxxx
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Title: Executive Vice President
000 Xxxx Xxxxxx
Xxxx Xxxxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
(000) 000-0000
(000) 000-0000 (fax) /s/XXXX X. XXXXXXXX
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Xxxx X. Xxxxxxxx
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SUBSCRIPTION FORM
TO: , Secretary Dated:
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Tarragon Realty Investors, Inc.
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The undersigned hereby irrevocably elects to exercise the right to
purchase __________ shares of Common Stock, par value $0.01 per share, of
Tarragon Realty Investors, Inc., or its successors evidenced by that certain
Stock Option Agreement dated__________ _____, 1998 between Tarragon Realty
Investors, Inc. and Xxxx X. Xxxxxxxx (the "Option Agreement") and hereby makes
payment of $______________ in payment of the "Applicable Purchase Price" for
such number of "Option Shares" designated above, calculated on the basis of
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INSTRUCTIONS FOR REGISTRATION OF STOCK
Name:
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(Please typewrite or print in block letters)
Address:
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Signature:
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