SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1997
--------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 1-8594
-------
PRESIDENTIAL REALTY CORPORATION
-------------------------------
(Exact name of registrant as specified in its charter)
Delaware 13-1954619
--------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
180 South Broadway, White Plains, New York 10605
------------------------------------------ ------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, indicating area code 914-948-1300
------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes x No
------ ------
The number of shares outstanding of each of the issuer's classes of common
stock as of the close of business on May 7, 1997 was 478,940 shares of
Class A common and 3,080,921 shares of Class B common.
PRESIDENTIAL REALTY CORPORATION AND SUBSIDIARIES
Index to 10-Q
For the Three Months Ended
March 31, 1997
Part I - Financial Information (Unaudited)
Consolidated Balance Sheets
Consolidated Statements of Operations
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Part II - Other Information
Item 6. Exhibits and Reports on Form 8-K
<TABLE>
PRESIDENTIAL REALTY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (Unaudited)
<CAPTION>
Assets March 31, December 31
<S> 1997 1996
------------ ------------
Mortgage portfolio (Note 2): <C> <C>
Sold properties, accrual $45,752,244 $46,522,752
Related parties, accrual 966,763 976,141
Sold properties, impaired 14,624,344 14,659,841
Related parties, impaired 1,561,587 1,567,400
------------ ------------
Total mortgage portfolio 62,904,938 63,726,134
------------ ------------
Less discounts:
Sold properties, accrual 5,717,277 6,322,402
Related parties, accrual 142,681 145,915
Sold properties, impaired 7,747,160 7,765,964
------------ ------------
Total discounts 13,607,118 14,234,281
------------ ------------
Less deferred gains:
Sold properties, accrual 13,573,927 14,046,423
Sold properties, impaired 5,472,420 5,489,113
Related parties, impaired 1,561,587 1,567,400
------------ ------------
Total deferred gains 20,607,934 21,102,936
------------ ------------
Net mortgage portfolio (of which $593,354 in 1997
and $587,839 in 1996 are due within one year) 28,689,886 28,388,917
------------ ------------
Real estate (Note 3) 26,556,955 25,369,405
Less: accumulated depreciation 5,853,139 5,680,108
------------ ------------
Net real estate 20,703,816 19,689,297
------------ ------------
Foreclosed properties (Note 4) 588,683
Minority partners' interest (Note 5) 3,757,735 3,830,024
Prepaid expenses and deposits in escrow 1,280,999 1,123,697
Other receivables (net of valuation allowance of
$158,917 in 1997 and $184,790 in 1996) 638,784 635,848
Other receivables (related party) 9,939 10,109
Securities available for sale (Note 6) 987,983 975,208
Cash and cash equivalents 2,038,026 1,392,135
Other assets 1,159,582 1,166,115
------------ ------------
Total Assets $59,266,750 $57,800,033
============ ============
<FN>
See notes to consolidated financial statements.
</TABLE>
<TABLE>
PRESIDENTIAL REALTY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (Unaudited)
<CAPTION>
Liabilities and Stockholders' Equity
March 31, December 31,
1997 1996
<S> ------------- -------------
Liabilities: <C> <C>
Mortgage debt :
Properties owned $26,370,362 $26,513,465
Wrap mortgage debt on sold properties 5,498,639 5,613,041
------------- -------------
Total (of which $1,072,773 in 1997 and $1,053,553
in 1996 are due within one year) 31,869,001 32,126,506
Note payable to bank (of which $95,553 in 1997
and $93,377 in 1996 are due within one year) (Note 7) 9,106,475 8,642,600
Executive pension plan liability (Note 10) 1,687,742 1,716,112
Accrued liabilities 2,130,904 2,092,876
Accrued postretirement costs (Note 11) 586,857 592,453
Deferred income 455,718 395,677
Accounts payable 585,899 271,126
Other liabilities 560,658 524,526
------------- -------------
Total Liabilities 46,983,254 46,361,876
------------- -------------
Stockholders' Equity:
Common stock; par value $.10 a share (Note 1-C)
Class A, authorized 700,000 shares, issued and
outstanding 478,940 shares 47,894 47,894
Class B March 31, 1997 December 31, 1996 309,356 308,675
----------- --------------- ---------------
Authorized: 10,000,000 10,000,000
Issued: 3,093,559 3,086,750
Treasury: 14,221 14,221
Additional paid-in capital 1,915,291 1,874,341
Retained earnings 10,170,309 9,350,801
Net unrealized gain on securities available for sale (Note 6) 33,214 49,014
Class B, treasury stock (at cost) (192,568) (192,568)
------------- -------------
Total Stockholders' Equity 12,283,496 11,438,157
------------- -------------
Total Liabilities and Stockholders' Equity $59,266,750 $57,800,033
============= =============
<FN>
See notes to consolidated financial statements.
</TABLE>
<TABLE>
PRESIDENTIAL REALTY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
<CAPTION>
THREE MONTHS ENDED MARCH 31,
---------------------------------
1997 1996
Income: ------------ ------------
<S> <C> <C>
Rental $2,022,304 $2,229,857
Interest on mortgages - sold properties 1,289,629 536,791
Interest on wrap mortgages 345,525 350,677
Interest on mortgages - related parties 57,786 68,110
Investment income 44,682 69,362
Other 24,416 15,083
------------ ------------
Total 3,784,342 3,269,880
------------ ------------
Costs and Expenses:
General and administrative 589,554 637,876
Interest on note payable and other 228,801 35,426
Interest on wrap mortgage debt 58,711 63,862
Amortization of loan acquisition costs 6,822
Depreciation on non-rental property 6,739 6,009
Rental property:
Operating expenses 987,343 889,207
Interest on mortgages 538,649 551,857
Real estate taxes 151,598 199,122
Depreciation on real estate 173,031 159,019
Amortization of mortgage costs 33,738 36,043
Minority interest share of partnership income 146,134 271,770
Loss from operations of foreclosed properties (Note 4) 9,729
------------ ------------
Total 2,921,120 2,859,920
------------ ------------
Income before net gain from sales of properties and securities 863,222 409,960
Net gain from sales of properties and securities 489,376 25,126
------------ ------------
Net Income $1,352,598 $435,086
============ ============
Earnings per Common Share (Note 1-C):
Income before net gain from sales of properties and securities $0.24 $0.12
Net gain from sales of properties and securities 0.14 0.00
------------ ------------
Net Income per Common Share $0.38 $0.12
============ ============
Cash Distributions per Common Share $0.15 $0.15
============ ============
Weighted Average Number of Shares Outstanding 3,554,080 3,530,047
============ ============
<FN>
See notes to consolidated financial statements.
</TABLE>
<TABLE>
PRESIDENTIAL REALTY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
<CAPTION>
THREE MONTHS ENDED MARCH 31,
---------------------------------
1997 1996
Cash Flows from Operating Activities: ------------ ------------
<S> <C> <C>
Cash received from rental properties $2,049,835 $2,210,270
Interest received 1,141,485 833,309
Miscellaneous income (disbursements) 23,791 (22,525)
Interest paid on rental property mortgages (511,339) (557,658)
Interest paid on wrap mortgage debt (58,711) (63,862)
Interest paid on loan (179,578)
Cash disbursed for rental and foreclosed property operations (989,464) (963,230)
Cash disbursed for general and administrative costs (628,482) (654,190)
------------ ------------
Net cash provided by operating activities 847,537 782,114
------------ ------------
Cash Flows from Investing Activities:
Payments received on notes receivable 1,378,953 195,447
Payments disbursed for investments in notes receivable (603,522) (9,928)
Payments disbursed for additions and improvements (445,115) (197,374)
Proceeds from sales of securities 45,000 100,496
Purchases of securities (79,202)
Purchase of 1% interest in partnership (60,000)
Net cash receipts from operations of foreclosed properties 1,508
------------ ------------
Net cash provided by investing activities 236,114 90,149
------------ ------------
Cash Flows from Financing Activities:
Principal payments on mortgage debt:
Properties owned (143,103) (134,482)
Wrap mortgage debt on sold properties (114,402) (110,375)
Note proceeds 600,018
Principal payments on note payable (136,143)
Mortgage costs (25,000) (1,250)
Cash distributions on common stock (533,090) (529,400)
Proceeds from dividend reinvestment and share purchase plan 41,631 33,476
Distributions to minority partners (127,671) (92,754)
------------ ------------
Net cash used in financing activities (437,760) (834,785)
------------ ------------
Net Increase in Cash and Cash Equivalents 645,891 37,478
Cash and Cash Equivalents, Beginning of Period 1,392,135 1,306,505
------------ ------------
Cash and Cash Equivalents, End of Period $2,038,026 $1,343,983
============ ============
<FN>
See notes to consolidated financial statements.
</TABLE>
<TABLE>
PRESIDENTIAL REALTY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
<CAPTION>
THREE MONTHS ENDED MARCH 31,
---------------------------------
1997 1996
------------ ------------
<S> <C> <C>
Reconciliation of Net Income to Net Cash
Provided by Operating Activities
Net Income $1,352,598 $435,086
------------ ------------
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 220,330 201,071
Gain from sales of properties and securities (489,376) (25,126)
Amortization of discounts on notes and fees (627,163) (183,386)
Increase in accounts receivable (2,766) (123,536)
Increase in accounts payable and accrued liabilities 318,835 32,547
Increase in deferred income 60,041 52,526
Decrease (increase) in prepaid expenses, deposits in escrow
and deferred charges (157,302) 115,591
Increase in security deposit liabilities 26,827 6,195
Miscellaneous (621) (624)
Minority share of partnership income 146,134 271,770
------------ ------------
Total adjustments (505,061) 347,028
------------ ------------
Net cash provided by operating activities $847,537 $782,114
============ ============
Supplemental noncash disclosures:
Property received in satisfaction of debt $45,765
============
<FN>
See notes to consolidated financial statements.
</TABLE>
PRESIDENTIAL REALTY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 1997
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. General - Presidential Realty Corporation ("Presidential" or the "Company"),
a Real Estate Investment Trust ("REIT"), is engaged principally in the holding
of notes and mortgages secured by real estate and in the ownership of income
producing real estate.
B. Principles of Consolidation - The consolidated financial statements include
the accounts of Presidential Realty Corporation and its wholly owned
subsidiaries. Additionally, the accompanying consolidated financial statements
include 100% of the account balances of UTB Associates and PDL, Inc. and
Associates Limited Co-Partnership ("Metmor Plaza Associates"), partnerships in
which Presidential is the General Partner. Presidential owns a 66-2/3%
interest in UTB Associates. In January, 1997, Presidential acquired an
additional 1% interest in Metmor Plaza Associates increasing its interest in
this partnership from 25% at December 31, 1996 to 26% at March 31, 1997. See
Note 5.
All significant intercompany balances and transactions have been eliminated.
C. Earnings Per Common Share - Per share data is based on the weighted average
number of shares of Class A and Class B common stock outstanding and common
stock equivalents during each period.
The Company will adopt the provisions of Statement of Financial Accounting
Standards ("SFAS") No. 128 "Earnings per Share" in the fourth quarter of 1997.
The standard specifies the computation, presentation and disclosure
requirements for earnings per share. As required by the standard, the Company
will restate all prior period earnings per share data presented. The adoption
of the new standard is not expected to have a material effect on the Company's
consolidated financial statements.
D. Cash and Cash Equivalents - Cash and cash equivalents includes cash on hand,
cash in banks and money market funds.
E. Basis of Presentation - The accompanying unaudited consolidated financial
statements have been prepared in accordance with generally accepted accounting
principles for interim financial information. In the opinion of management,
all adjustments (consisting of only normal recurring accruals) considered
necessary for a fair presentation of the results for the respective periods
have been reflected. These financial statements and accompanying notes should
be read in conjunction with the Company's Form 10-K for the year ended December
31, 1996.
F. Management Estimates - In preparing the consolidated financial statements,
management is required to make estimates and assumptions that affect the
reported amounts of assets and liabilities as of the date of the consolidated
balance sheets and income and expense for the period. Actual results could
differ from those estimates.
2. MORTGAGE PORTFOLIO
The Company's mortgage portfolio includes notes receivable - sold properties
and notes receivable - related parties and includes both accrual and impaired
loans.
The Company complies with the provisions of SFAS No. 114, "Accounting by
Creditors for Impairment of a Loan" and, accordingly, has classified loans that
are within the scope of this statement as impaired loans.
Notes receivable - sold properties consist of:
(1) Long-term purchase money notes from sales of properties previously owned by
the Company. These purchase money notes have varying interest rates with
balloon payments due at maturity. Also included in this category is the
Fairfield Towers First Mortgage which the Company purchased in the fourth
quarter of 1996.
(2) Notes receivable from sales of cooperative apartment units. Substantially
all of these notes were either received from Ivy Properties, Ltd. or its
affiliates (collectively "Ivy") in connection with a settlement agreement
between the Company and Ivy executed in November, 1991 (the "Settlement
Agreement") or from sales of foreclosed cooperative apartments received from
Ivy pursuant to the Settlement Agreement (see Note 4). These notes generally
have market interest rates and the majority of these notes amortize monthly
with balloon payments due at maturity.
Notes receivable - related parties are all due from Ivy and consist of:
(1) Purchase money notes resulting from sales of property or partnership
interests to Ivy.
(2) Notes receivable relating to loans made by the Company to Ivy in connection
with Ivy's cooperative conversion business.
In January, 1997, the Company modified its Woodland notes receivable, extending
the maturity date from 2000 to 2005, with interest rates increasing in 2002
from 9% to 9.25%. In March, 1997, the Company received prepayment of its
$1,074,200 Cedarbrooke note receivable resulting in the recognition of income
from the amortization of discount of $382,796 and a gain on sale of $472,497.
In addition, in March, 1997, the Company advanced an additional $600,018 on the
Fairfield Towers First Mortgage to the owners of the unsold condominium units
to be used for payment of a portion of the unpaid real estate taxes (and
interest accrued thereon) on these condominium units.
At March 31, 1997, all of the notes in the Company's mortgage portfolio are
current with the exception of the Fairfield Towers Second Mortgage (sold
properties) and the Overlook loan (related parties), which are classified as
impaired loans in accordance with SFAS No. 114. These two loans are in the
aggregate amount of $16,185,931 and have a net carrying value of $1,404,764
after deducting discounts of $7,747,160 and deferred gains of $7,034,007. In
accordance with SFAS No. 114, the Company has determined that no allowances for
credit losses are required for these loans because the net carrying value of
these loans is less than the fair value of the underlying collateral.
The Company recognizes income on the impaired loans only to the extent that
such income is actually received. The average recorded investment in impaired
loans during the three months ended March 31, 1997 and March 31, 1996 was
$16,208,405 and $17,047,560, respectively.
There have been no significant changes in the status of the impaired loans
since December 31, 1996. Condominium sales at the Fairfield Towers property
have continued and an additional 6 units were sold during the three months
ended March 31, 1997.
The following table reflects the activity in impaired loans:
<TABLE>
IMPAIRED LOANS
----------------------------
<CAPTION>
Impaired Impaired
Loan Additions Loan
Balance (Payments) Balance
Loan Description 12/31/96 1997 3/31/97
--------------------------------- ------------- ------------- ------------
<S> <C> <C> <C>
Notes receivable-sold properties:
Properties previously owned-
Fairfield Towers Second Mortgage $14,659,841 ($35,497) $14,624,344
Notes receivable-related parties:
Sold properties-
Overlook 1,567,400 (5,813) 1,561,587
------------- ------------- ------------
Total $16,227,241 ($41,310) $16,185,931
============= ============= ============
Discount Deferred Net
on Gain on Carrying
Loans Loans Value
Loan Description 3/31/97 3/31/97 3/31/97
--------------------------------- ------------- ------------- ------------
Notes receivable-sold properties:
Properties previously owned-
Fairfield Towers Second Mortgage ($7,747,160) ($5,472,420) $1,404,764
Notes receivable-related parties:
Sold properties-
Overlook (1,561,587)
------------- ------------- ------------
Total ($7,747,160) ($7,034,007) $1,404,764
============= ============= ============
Three months ended March 31,
-----------------------------
1997 1996
------------- ------------
Reported Interest Income and
Amortization of Discount (Cash Basis)
------------------------------------------------------
Fairfield Towers Second Mortgage - interest income $54,746 $25,768
Fairfield Towers Second Mortgage - amortization of discount 18,804 21,758
Overlook - interest income 23,453 24,811
Overlook - additional interest income 6,145 12,036
------------- ------------
Total $103,148 $84,373
============= ============
Recognized Gain from Sale of Property
--------------------------------------------------------
Fairfield Towers Second Mortgage $16,693 $19,314
Overlook 5,813 5,316
------------- ------------
Total $22,506 $24,630
============= ============
Nonreported Interest Income and Amortization of Discount
---------------------------------------------------------
The following additional amounts would have been reported
if these loans had been fully performing:
Fairfield Towers Second Mortgage - interest income $192,412 $216,089
Fairfield Towers Second Mortgage - additional interest income 21,645 84,696
Fairfield Towers Second Mortgage - amortization of discount 266,677 220,648
Overlook - interest income
Overlook - additional interest income
------------- ------------
Total $480,734 $521,433
============= ============
</TABLE>
3. REAL ESTATE
Real estate is comprised of the following:
March 31, December 31,
1997 1996
----------- ------------
Land $ 3,773,404 $ 3,664,548
Buildings and leaseholds 22,650,998 21,580,207
Furniture and equipment 132,553 124,650
----------- -----------
Total real estate $26,556,955 $25,369,405
=========== ===========
From 1991 through 1994, the Company acquired ownership of cooperative apartment
units in satisfaction of loans due Presidential. Such cooperative apartment
units had been classified as foreclosed properties on the Company's
consolidated balance sheet (see Note 4). Presidential now intends to hold
the remaining 53 cooperative apartment units as rental property and,
accordingly, has reclassified these units from foreclosed properties to real
estate effective January 1, 1997.
4. FORECLOSED PROPERTIES
At December 31, 1996, Presidential owned 53 cooperative apartment units which
it had received in satisfaction of certain loans due Presidential. These
cooperative apartment units are located at four locations: Towne House, New
Rochelle, N.Y. (39 units); 6300 Riverdale Avenue, Bronx, N.Y. (8 units);
Sherwood House, Long Beach, N.Y. (3 units) and 330 W. 72nd St., New York, N.Y.
(3 units).
Cooperative apartment units at three of the above properties were received from
Ivy in 1991 and 1992 in connection with the Settlement Agreement. The
cooperative apartment units at Long Beach were received from Ivy in 1994 in
payment of the outstanding loan on that property and other amounts due to
Presidential pursuant to the Settlement Agreement.
At December 31, 1996, these cooperative apartment units were reported as
foreclosed properties on Presidential's consolidated balance sheet and were
carried at the lower of cost or estimated fair value (net of estimated costs to
sell). Net loss from operations of foreclosed properties prior to 1997 was
reported as a separate line item on the statement of operations, while net cash
receipts from operations of foreclosed properties reduced the Company's
carrying value of the foreclosed property. The Company now intends to hold
these cooperative apartment units as rental property and, accordingly,
reclassified them from foreclosed properties to real estate effective January
1, 1997.
The net carrying value of the foreclosed properties reclassified to real estate
on January 1, 1997 was as follows:
Towne House $404,337
6300 Riverdale Avenue 76,196
Sherwood House 59,246
330 W. 72nd Street 48,904
--------
Total net carrying value $588,683
========
Loss from operations of foreclosed properties for the three months ended March
31, 1996 consisted of the following:
6300 Riverdale Avenue $4,668
Sherwood House 1,657
Hastings Gardens (1) 3,404
------
Total loss $9,729
======
(1) The remaining cooperative apartments at Hastings Gardens, Hastings, N.Y.
were sold in September, 1996.
5. MINORITY PARTNERS' INTEREST
Presidential is the General Partner of UTB Associates and Metmor Plaza
Associates, partnerships in which in 1996 Presidential had a 66-2/3% interest
and a 25% interest, respectively. In January, 1997, Presidential acquired an
additional 1% interest in Metmor Plaza Associates for a purchase price of
$60,000, which increased its interest in this partnership from 25% at December
31, 1996 to 26% at March 31, 1997. As the General Partner of these
partnerships, Presidential exercises effective control over the business of
these partnerships, and, accordingly, has included 100% of the account balances
of these partnerships in the accompanying financial statements (see Note 1-B).
The minority partners' interest reflects the minority partners' equity in the
partnerships.
Included in the Company's mortgage debt is a mortgage note payable by the
Metmor Plaza Associates partnership which is substantially in excess of the
historical cost of the property. This was due to a refinancing of the original
mortgage note on the building and subsequent distribution of these proceeds to
the partners. This event resulted in a negative partnership interest for each
partner and a negative minority partners' interest on the Company's books. The
estimated fair value of the building is significantly greater than the mortgage
debt and the minority partners' interest is expected to be recovered when the
building is sold and the partnership is liquidated.
Minority partners' interest is comprised of the following:
March 31, December 31,
1997 1996
------------- ------------
Metmor Plaza Associates $3,966,701 $4,036,858
UTB Associates (208,966) (206,834)
---------- ----------
Total minority partners' interest $3,757,735 $3,830,024
========== ==========
6. SECURITIES AVAILABLE FOR SALE
The Company's investments are in marketable equity securities consisting of
stocks of listed corporations. The Company does not acquire securities for
purposes of engaging in trading activities and, as a result, the Company's
investments are classified as securities available for sale in accordance with
SFAS No. 115, "Accounting for Certain Investments in Debt and Equity
Securities". Disposition of such securities may be appropriate for either
liquidity management or in response to changing economic conditions.
The cost and fair value of securities available for sale are as follows:
March 31, December 31,
1997 1996
--------- ------------
Cost $954,769 $926,194
Gross unrealized gains 69,504 71,033
Gross unrealized losses (36,290) (22,019)
-------- --------
Fair value $987,983 $975,208
======== ========
Net unrealized gain on securities available for sale, which is a separate
component of stockholders' equity on the Company's consolidated balance sheets,
decreased by $15,800 from $49,014 at December 31, 1996 to $33,214 at March 31,
1997.
During the three months ended March 31, 1997, the Company sold securities
available for sale for gross proceeds of $45,000 and a gross (and net) loss of
$5,627. During the three months ended March 31, 1996, the Company sold
securities available for sale for gross proceeds of $101,500 and a gross (and
net) gain of $496. Gains and losses on sales of securities are determined
using the specific identification method.
7. NOTE PAYABLE TO BANK
The Company obtained an $8,650,000 bank loan in the fourth quarter of 1996 from
Fleet Bank, N.A. ("Fleet") in connection with the purchase of the Fairfield
Towers First Mortgage. The note, which matures on October 30, 2001, is secured
by a collateral assignment of the Fairfield Towers First Mortgage and, except
for a guarantee by Presidential of $1,000,000 of the indebtedness, is
nonrecourse to Presidential. The Company has the option of selecting each
month among three interest rates: 1% over Fleet's prime rate; 3% in excess of
a cost of funds rate set by the bank for a period of 90 days and 3% in excess
of the LIBOR rate for a one, two or three month period. The note amortizes
monthly based on a 9.25% interest rate for a 25 year term. In addition, upon
the sale of condominium units, the Company is required to make principal
payments to Fleet in an amount equal to the amount of principal payments
received by the Company on the Fairfield Towers First Mortgage. In March,
1997, the Company received an additional $600,018 advance on this loan from
Fleet. This advance was obtained to reimburse the Company for its $600,018
advance on the Fairfield Towers First Mortgage (see Note 2). At March 31, 1997
payments on this loan were current. The outstanding note balance at March 31,
1997 and December 31, 1996 was $9,106,475 and $8,642,600, respectively.
In January, 1997, the Company obtained a $250,000 line of credit from Citibank,
N.A. The interest rate is 1% above the prime rate and the line of credit
expires in January, 1998. Presidential paid a 1% annual fee for the line of
credit. At March 31, 1997, no advances have been made on this line of credit.
8. INCOME TAXES
Presidential elected to qualify as a Real Estate Investment Trust effective
January 1, 1982 under Sections 856-860 of the Internal Revenue Code. Under
those sections, a REIT which distributes at least 95% of its real estate
investment trust taxable income to its shareholders each year by the end of
the following year and which meets certain other conditions will not be taxed
on that portion of its taxable income which is distributed to its shareholders.
For the year ended December 31, 1996, the Company had taxable income (before
distributions to stockholders) of approximately $2,316,000 ($.65 per share),
which included approximately $1,441,000 ($.41 per share) of capital gains.
This amount will be reduced by approximately $735,000 ($.20 per share) of the
1996 distributions that were not utilized in reducing the Company's 1995
taxable income and by any eligible 1997 distributions that the Company may
elect (under Section 858 of the Internal Revenue Code) to utilize as a
reduction of its 1996 taxable income.
As previously stated, in order to retain REIT status, Presidential is required
to distribute 95% of its REIT taxable income (exclusive of capital gains). As
of March 31, 1997, Presidential has distributed the required 95% of its 1996
REIT taxable income. In addition, although no assurances can be given, it is
the Company's present intention to distribute all of its 1996 taxable income
and therefore, no provision for income taxes was made at December 31, 1996.
Furthermore, the Company had taxable income (before distributions to
stockholders) for the three months ended March 31, 1997 of approximately
$1,472,000 ($.41 per share), which included approximately $1,155,000 ($.32 per
share) of capital gains. This amount will be reduced by 1997 distributions
that were not utilized in reducing the Company's 1996 taxable income and by any
eligible 1998 distributions that the Company may elect to utilize as a
reduction of its 1997 taxable income.
Presidential has, for tax purposes, reported the gain from the sale of certain
of its properties using the installment method.
9. COMMITMENTS AND CONTINGENCIES
The Company has incurred environmental costs for environmental site
investigations and the related response action outcome for potentially
hazardous drums found at one site on its Mapletree Industrial Center
property in Palmer, Massachusetts. In 1996, the site investigation at this
disposal site had been completed and as a result, in the third quarter of 1996,
the Company accrued $120,500 of environmental costs to complete further site
investigations and cleanup costs at this site. This work, which started in
February, 1997, is scheduled to be accomplished over the next four years. At
March 31, 1997, there have been no changes to the 1996 estimated costs. Actual
costs incurred may vary from these estimates due to the inherent uncertainties
involved.
10. PENSION PLANS
Defined Benefit Plan
Effective January 1, 1994, the Company adopted a noncontributory defined
benefit pension plan, which covers substantially all of its employees. The
plan provides monthly retirement benefits commencing at age 65. The monthly
benefit is equal to the sum of (1) 6.5% of average monthly compensation
multiplied by the total number of plan years of service (up to a maximum of 10
years), plus (2) .62% of such average monthly compensation in excess of one-
twelfth of covered compensation multiplied by the total number of plan years of
service (up to a maximum of 10 years). The Company makes annual contributions
that meet the minimum funding requirements and the maximum contribution
limitations under the Internal Revenue Code.
Periodic pension costs are reflected in general and administrative expenses in
the Company's consolidated statements of operations.
Net periodic pension cost for the three months ended March 31, 1997, included
the following components:
Service cost-benefits earned during the period $74,477
Interest cost on projected benefit obligation 13,871
Return on plan assets (16,552)
-------
Net periodic pension cost $71,796
=======
The assumptions used in determining net periodic pension cost were 7% for the
discount rate, 7% for the expected long-term rate of return on assets, and 5%
for the average increase in compensation.
Executive Pension Plan
Presidential has employment contracts with several active and retired key
officers and employees. Such contracts are being accounted for as constituting
pension agreements. The contracts generally provide for annual benefits in
specified amounts for each participant for life, commencing upon retirement,
with an annual adjustment for an increase in the consumer price index.
Presidential complies with the provisions of SFAS No. 87, "Employers'
Accounting for Pensions". The principal assumption used in the accounting was
a discount rate of 7%. Periodic pension costs are reflected in general and
administrative expenses in the Company's consolidated statements of operations.
Net periodic pension cost for the three months ended March 31, 1997, included
the following components:
Service cost-benefits earned during the period $ 3,535
Interest cost on projected benefit obligation 46,955
Net amortization 20,805
-------
Net periodic pension cost $71,295
=======
Presidential has elected not to fund expenses accrued under these contracts.
11. POSTRETIREMENT BENEFITS
Presidential has employment contracts with several active and retired key
officers and employees which provide for postretirement benefits other than
pensions (such as health care benefits). The Company complies with the
provisions of SFAS No. 106, "Employers' Accounting for Postretirement Benefits
Other Than Pensions". SFAS No. 106 requires the Company to accrue the
estimated cost of retiree benefit payments during the years the employee
provides services.
The components of postretirement benefit cost for the three months ended
March 31, 1997, were as follows:
Service cost - benefits earned $1,568
Interest cost on accumulated postretirement
benefit obligation 8,871
Net amortization (2,017)
------
Postretirement benefit cost $8,422
======
PRESIDENTIAL REALTY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1996
Results of Operations
Financial Information for the three months ended March 31, 1997 and 1996:
Income increased by $514,462 from $3,269,880 in 1996 to $3,784,342 in 1997
primarily as a result of an increase in interest on mortgages-sold properties,
partially offset by decreases in rental income and investment income.
Rental income decreased by $207,553 from $2,229,857 in 1996 to $2,022,304 in
1997 primarily as a result of decreases of $181,546 at the Metmor Plaza
property, of which $120,700 is the result of a lease cancellation fee received
in 1996 and $63,730 is the result of increased vacancy loss in 1997, and
decreases of $54,737 at the Kent Terrace property resulting from vacancy losses
in 1997 at that property which will continue until the upgrading and rerenting
of the property is completed. In addition, rental income decreased by $61,022
at the Cambridge Green and Crown Court properties. These decreases were
partially offset by an increase of $93,341 as a result of the reclassification
of the operations of foreclosed properties into rental property operations in
1997.
Interest on mortgages-sold properties increased by $752,838 from $536,791 in
1996 to $1,289,629 in 1997 primarily due to an increase of $446,015 from
amortization of discounts on notes, of which $382,796 pertains to the
Cedarbrooke note which was prepaid in March, 1997. In addition, the 1997
period had interest income of $341,808 from the Fairfield Towers First
Mortgage, which the Company purchased in the fourth quarter of 1996, and a
$28,978 increase of interest received on the Fairfield Towers Second Mortgage.
These increases were partially offset by decreases in interest income of
$55,752 as a result of the prepayments in 1997 and 1996 on the Cedarbrooke,
Town House and Hoboken notes.
Investment income decreased by $24,680 from $69,362 in 1996 to $44,682 in
1997 primarily as a result of decreased dividend income on securities
available for sale.
Costs and expenses increased by $61,200 from $2,859,920 in 1996 to $2,921,120
in 1997 primarily due to increases in interest on note payable and rental
property operating expenses. These increases were offset by decreases in
general and administrative expenses, real estate taxes and a decrease in
minority interest share of partnership income.
General and administrative expenses decreased by $48,322 from $637,876 in
1996 to $589,554 in 1997 primarily due to decreases in professional fees of
$63,141, offset by an increase of $22,808 in salary expense.
Interest on note payable and other increased by $193,375 from $35,426 in 1996
to $228,801 primarily as a result of the note payable to Fleet bank obtained in
the fourth quarter of 1996.
Rental property operating expenses increased by $98,136 from $889,207 in
1996 to $987,343 in 1997 primarily as a result of the reclassification of
foreclosed properties operations to rental property operations which resulted
in an increase in rental property operating expenses of $91,503.
Real estate tax expense decreased by $47,524 from $199,122 in 1996 to $151,598
in 1997 as a result of decreased real estate taxes of $49,439 at the Crown
Court property, as a result of refunds of prior years' taxes.
Minority interest share of partnership income decreased by $125,636 from
$271,770 in 1996 to $146,134 in 1997 as a result of a decrease in
partnership income on the Metmor Plaza property.
Loss from operations of foreclosed properties was $9,729 in 1996. In 1997,
foreclosed properties were reclassified to real estate and their operations are
now included in rental property operations.
Net gain from sales of properties and securities are sporadic (as they depend
on the timing of sales or the receipt of installments or prepayments on
purchase money notes). In 1997, the net gain from sales of properties and
securities was $489,376 compared with $25,126 in 1996. In the 1997 period, the
Company recognized $472,497 of deferred gain from the sale of the Cedarbrooke
property as a result of a $1,074,200 principal prepayment received on that
note. In addition, the Company recognized deferred gains of $5,813 and
$16,693, respectively, from principal payments received on the Overlook loan
and the Fairfield Towers Second Mortgage.
Balance Sheet
Net mortgage portfolio increased by $300,969 from $28,388,917 at December 31,
1996 to $28,689,886 at March 31, 1997. This increase was primarily the result
of an advance to the owners of the Fairfield Towers property of $600,018, which
was added to the indebtedness secured by the Fairfield Towers First Mortgage.
This increase was offset by a net decrease of $218,907 resulting from the
prepayment in March, 1997 of the $1,074,200 principal balance of the
Cedarbrooke note receivable, which also resulted in the amortization of
discount of $382,796 and the recognition of deferred gain of $472,497.
Real estate increased by $1,187,550 from $25,369,405 at December 31, 1996 to
$26,556,955 at March 31, 1997. This increase was primarily the result of the
reclassification of foreclosed properties having a net carrying value of
$588,683 to real estate. The Company also recorded additions and improvements
of $290,175 to the Kent Terrace property and $308,692 to other properties.
Foreclosed properties which had a balance of $588,683 at December 31, 1996,
were reclassified to real estate as of January 1, 1997. These properties have
been owned by the Company for a number of years and they are fully rented.
Management has therefore made the decision to transfer these properties from
foreclosed properties to real estate and include their operations in rental
property operations.
Note payable to bank increased by $463,875 from $8,642,600 at December 31, 1996
to $9,106,475 at March 31, 1997. This increase was primarily the result of an
additional $600,018 advanced by Fleet bank.
Accounts payable increased by $314,773 from $271,126 at December 31, 1996 to
$585,899 at March 31, 1997. This increase was primarily the result of an
increase of $294,812 in rental property accounts payable and is due to the
timing of the receipt of invoices as well as the scheduling of payments.
Net unrealized gain on securities available for sale decreased by $15,800 from
$49,014 at December 31, 1996 to $33,214 at March 31, 1997. This decrease in
unrealized gain is a result of the decrease in the fair value of the securities
available for sale for the period.
Liquidity and Capital Resources
Management believes that the Company has sufficient liquidity and capital
resources to carry on its existing business and, barring any unforeseen
circumstances, to pay the dividends required to maintain REIT status in the
foreseeable future.
Presidential obtains funds for working capital and investment from its
available cash and cash equivalents, from operating activities and from
repayments of its mortgage portfolio. The Company also has at its disposal a
$250,000 line of credit from Citibank, N.A., which it obtained in January,
1997.
At March 31, 1997, Presidential had $2,038,026 in available cash and cash
equivalents and $987,983 in securities available for sale. The March 31,
1997 total of $3,026,009 represents an increase of $658,666 from the
$2,367,343 total at December 31, 1996. This increase is primarily the result
of the receipt of the $1,074,200 prepayment on the Cedarbrooke purchase
money note. This increase was offset by the $290,175 paid for improvement
costs for the Kent Terrace property, the payment of $80,177 in accrued bonuses,
the net payment of $34,202 for the purchase and sale of securities, and the
$15,800 decrease in the fair value of securities available for sale.
Operating Activities
Presidential's principal source of cash from operating activities is from
interest on its mortgage portfolio, which was $1,082,774 in 1997, net of
interest payments on wrap mortgage debt. In 1997, net cash received from
rental property operations was $421,361, which is net of distributions to
minority partners but before additions and improvements and mortgage
amortization.
Investing Activities
Presidential holds a portfolio of mortgage notes receivable which consist
primarily of notes arising from sales of real properties previously owned by
the Company. Some of these notes wrap around underlying mortgage debt (the
"Underlying Debt") which is paid by Presidential only out of funds received on
its mortgage portfolio relating to the Underlying Debt. During 1997, the
Company received principal payments of $1,264,551 on its mortgage portfolio
(net of any principal payments attributable to the Underlying Debt), of which
$1,214,829 represented prepayments, which are sporadic and cannot be relied
upon as a regular source of liquidity.
During 1997, the Company advanced an additional $600,018 under the Fairfield
Towers First Mortgage which was used by the owners of the property to pay a
portion of unpaid real estate taxes (and interest accrued thereon) on the
unsold Fairfield Towers condominium units which secure the mortgage
indebtedness.
During 1997, the Company invested $445,115 in additions and improvements to
its properties.
Financing Activities
The Company's indebtedness at March 31, 1997, consisted of $31,869,001 of
mortgages (including $5,498,639 of underlying indebtedness on properties not
owned by the Company but on which the Company holds wraparound mortgages).
The mortgage debt, which is secured by individual properties, is nonrecourse
to the Company with the exception of the Mapletree Industrial Center mortgage,
which is secured by the property and a guarantee of repayment by Presidential.
Generally, mortgage debt repayment is serviced with cash flow from the
operations of the individual properties. During 1997, the Company made
$143,103 of principal payments on mortgage debt on properties which it owns.
The mortgages on the Company's properties are self-liquidating at fixed rates
of interest with the exception of the mortgages on Metmor Plaza, Building
Industries Center and Continental Gardens.
In addition, the Company's indebtedness at March 31, 1997 includes a $9,106,475
bank loan payable to Fleet Bank, N.A. ("Fleet"). This loan was obtained in the
fourth quarter of 1996 in connection with the acquisition of the Fairfield
Towers First Mortgage. The note is nonrecourse to Presidential except for a
guarantee limited to $1,000,000 of the principal amount and matures on October
30, 2001. The interest rate is variable and is based at the Company's election
on either the bank's prime rate plus 1%, a cost of funds rate plus 3%, or
various LIBOR rates plus 3%. The note amortizes monthly based on a 9.25%
interest rate for a 25 year term with additional principal payments due upon
the sale of condominium units. During 1997, the Company has made principal
payments of $136,143 and received an additional $600,018 advance from Fleet
which was added to the bank loan. This advance was obtained in order to
reimburse Presidential for its $600,018 advance on the Fairfield Towers First
Mortgage.
During 1997, Presidential declared and paid cash distributions of $533,090
to its shareholders and received proceeds from dividend reinvestments of
$41,631.
Fairfield Towers
The Company's financial performance and liquidity in 1997 and subsequent years
will be affected by the results of the condominium conversion of Fairfield
Towers Apartments in Brooklyn, New York by the owner of that property and the
rental operations of the unsold condominium units. At March 31, 1997, the
outstanding principal balances on the Fairfield Towers First Mortgage and the
Fairfield Towers Second Mortgage were $15,137,285 and $14,624,344,
respectively. The Fairfield Towers First Mortgage provides for monthly
interest payments of 1% above Fleet's prime rate and principal repayments prior
to maturity upon the sale of individual condominium units. Until the Fairfield
Towers First Mortgage is repaid, Presidential will receive basic interest on
the Fairfield Towers Second Mortgage only out of net cash flow from operations
of the property and release payments upon the sale of each condominium unit in
the amount of $3,000 per unit. All unpaid basic interest and additional
interest (which is based on percentages of gross sales proceeds) will be
deferred until after repayment of the Fairfield Towers First Mortgage.
In June of 1994, the owners of the Fairfield Towers property closed the first
sales of the condominium units pursuant to the conversion of the property to
condominium status. At March 31, 1997, a total of 141 units were sold.
The success of the condominium conversion could be adversely affected by the
existence of unpaid real estate taxes and interest accrued thereon in the
approximate amount, as of December 31, 1996, of $4,800,000 owed by the owners
of the property. Approximately $3,000,000 of this amount arose prior to the
condominium conversion of the property and was covered by a deferred payment
agreement with the City of New York which required payments as condominium
units were sold. However, as a result of the slower than projected pace of
sales, the term of the deferred payment agreement expired. In March of 1997,
the Company advanced $600,018 to the owners of the property to be used to pay
a portion of the unpaid real estate taxes and interest, which amount was added
to the indebtedness secured by the Fairfield Towers First Mortgage, and Fleet
bank advanced $600,018 to Presidential to reimburse it for its $600,018
advance. The owner is in the process of negotiating a new deferment agreement
with the City of New York. However, no assurances can be given that the owner
will be successful in negotiating a satisfactory deferment agreement with the
City of New York, and if a satisfactory agreement is not obtained, a continuing
default in the payment of real estate taxes could adversely affect the success
of the condominium conversion at Fairfield Towers and the value of
Presidential's First and Second Mortgages.
Environmental Matters
At March 31, 1997, the Company is still involved in an environmental project
for the investigation and removal of potentially hazardous drums found at one
site on its Mapletree Industrial Center property in Palmer, Massachusetts.
Accrued liabilities for environmental matters have been recorded in operating
expenses when it is probable that a liability has been incurred and the amount
of the liability can be reasonably estimated. These estimates are exclusive of
claims against third parties and have not been discounted. Actual costs
incurred may vary from these estimates due to the inherent uncertainties
involved. The Company believes that any additional liability in excess of
amounts provided which may result from the resolution of this matter will not
have a material adverse effect on the financial condition, liquidity or the
cash flow of the Company. In 1996, the site investigation at this site had
been completed and, as a result, during the third quarter of 1996, the Company
accrued an additional $120,500 of environmental costs in order to complete
further site investigations and cleanup costs at this disposal site. This
work, which started in February, 1997, is scheduled to be accomplished over the
next four years. For the three months ended March 31, 1997, there were no
environmental costs charged to operations.
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits:
10.10 Employment Agreement dated January 1, 1997 between the Company and
Jeffrey F. Joseph.
10.11 Employment Agreement dated January 1, 1997 between the Company and Steven
Baruch.
10.12 Employment Agreement dated January 1, 1997 between the Company and Thomas
Viertel.
10.13 First Amendment dated August 1, 1996 to Settlement Agreement dated
November 14, 1991 between the Company and Steven Baruch, Jeffrey F.
Joseph and Thomas Viertel.
27. Financial Data Schedule.
(b) No reports on form 8-K have been filed during the quarter ended
March 31, 1997.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PRESIDENTIAL REALTY CORPORATION
(Registrant)
DATE: May 12, 1997 By: /s/ Jeffrey F. Joseph
---------------------
Jeffrey F. Joseph
President
DATE: May 12, 1997 By: /s/ Elizabeth Delgado
---------------------
Elizabeth Delgado
Treasurer
EMPLOYMENT AGREEMENT
This Employment Agreement, made as of January 1, 1997, by and
between Jeffrey F. Joseph, residing at 19 Stillman Lane,
Pleasantville, New York 10570 ("Executive") and PRESIDENTIAL REALTY
CORPORATION, a Delaware corporation having offices at 180 South
Broadway, White Plains, New York 10605 ("Employer" or the
"Company");
W I T N E S S E T H:
WHEREAS, Employer is desirous of employing Executive as its
President; and
WHEREAS, Executive desires to render such services to
Employer.
NOW, THEREFORE, in consideration of the premises and the
mutual covenants herein set forth, the parties hereto agree as
follows:
1. Employment. Employer hereby employs Executive as its
President, and Executive hereby accepts such employment, upon the
terms and conditions hereinafter set forth.
2. Duties.
(a) In his capacity as President of Employer, Executive shall
perform for Employer the executive, administrative and technical
duties customarily associated with such position, as well as such
other duties reasonably consistent therewith as may be reasonably
assigned to Executive from time to time by the Board of Directors
of Employer; provided, however, that the duties assigned shall be
of a character and dignity appropriate to a senior executive of a
corporation and consistent with Executive's experience, education
and background.
(b) Except as otherwise set forth in this paragraph, (i)
Executive shall devote his full time and efforts during normal
business days and hours to the performance of this Employment
Agreement and (ii) Executive shall not engage in the real estate
business or in any other business which conflicts with or competes
in any material way with the business of Employer. Notwithstanding
the foregoing, Executive may devote such time and efforts to
winding up the business of Ivy Properties Ltd. and its affiliates
(collectively, "Ivy") as Executive deems reasonably necessary; so
long as the devotion of such time and effort does not conflict
(without independent committee review) or interfere with
Executive's performance of his duties as President of Presidential
and in fact Executive does diligently perform his duties as
President of Presidential to the satisfaction of the Board of
Directors of Employer.
3. Term.
(a) This Employment Agreement shall commence on the date
hereof and shall continue until December 31, 1999, unless
terminated earlier in accordance with this Employment Agreement.
(b) This Employment Agreement may be terminated at any time
by Employer for "cause," as defined herein. For the purpose of
this Employment Agreement, termination of Executive's employment
shall be deemed to have been for "cause" only if termination of
his employment shall have been the result of (i) the conviction of
Executive of any crime constituting a felony or any other crime
involving moral turpitude, (ii) Executive's willful refusal to
follow a direction of the Board of Directors of Employer after
written notice that such continued refusal shall result in
termination of his employment for cause, or (iii) Executive's
failure to fulfill his duties hereunder as is required by Section
2(b) above after written notice that such continued failure shall
result in termination of his employment for cause.
(c) This Employment Agreement may also be terminated by
Employer as set forth in Section 11 below.
4. Compensation. Employer shall pay to Executive in
consideration of the services to be rendered hereunder
compensation in the form of a salary:
(a) for the period beginning on the date hereof and
ending on December 31, 1997, at the annual rate of Two Hundred
Fifty Three Thousand Eight Hundred Seventy-nine and no/100
($253,879.00) Dollars;
(b) for the calendar year beginning on January 1, 1998 and
ending on December 31, 1998, in an amount equal to the lesser of
(i) $266,573 and (ii) $253,879 times the Cost of Living Adjustment
Factor (as hereinafter defined); and
(c) for the calendar year beginning on January 1, 1999 and
ending on December 31, 1999, in an amount equal to the salary paid
for the calendar year beginning on January 1, 1998 and ending on
December 31, 1998 times the lesser of (i) 1.05 and (ii) the Cost
of Living Adjustment Factor.
The salary for all such periods shall be paid less
appropriate deductions, if any, for federal, state and city income
taxes, FICA contributions, N.Y.S. disability and any other
deductions required by law.
The Cost of Living Adjustment Factor as it is applied in
calculating compensation payable to Executive for any period
referred to above (and retirement compensation payable to Executive
for any period described in Section 12 below) shall be the sum of
(x) one (1) plus (y) a fraction (A) which has as its numerator the
amount, if any, by which the Revised Consumer Price Index for Urban
Wage Earners and Clerical Workers for the New York-Northern New
Jersey area, published by the U.S. Department of Labor Statistics
(the "Index") for the last calendar month preceding the commence-
ment of such period (which will be December in each case of annual
salary described in this Section 4) (the "Increase Index Month")
exceeds the Index for the calendar month occurring one year prior
to the Increase Index Month (the "Base Index Month"), and (B) which
has as its denominator the Index for the Base Index Month.
In the event that the Index is converted to a different
standard reference base or otherwise revised, the determination of
increased compensation under this Section 4 and/or retirement
compensation under Section 12 shall be made with the use of such
conversion factor, formula or table for converting the Index as
may be published by the Bureau of Labor Statistics or, if said
Bureau shall not publish the same, then with the use of such
conversion factor, formula or table as may be published by
Prentice-Hall, Inc., or any other nationally recognized publisher
of similar statistical information. If the Index ceases to be
published, and there is no successor thereto, such other index as
Executive and Employer shall agree upon in writing shall be
substituted for the Index. If Executive and Employer are unable
to agree as to such substituted index, such substituted index shall
be that determined by arbitration in accordance with the procedures
of the American Arbitration Association.
In the event that the Index is not available for any month
provided for above, the next available Index shall be used instead,
and if the next available Index is available following a payment
for which an adjustment should have been, then a retroactive
adjustment shall also be made.
(b) Executive's compensation shall be payable in equal
installments in arrears, in the same frequency as other senior
officers of Employer are paid, but in any event not less frequent
than twenty-six (26) bi-weekly installments.
5. Indemnification. The Indemnification Agreements previously
executed by Executive and Employer shall remain in full force and
effect during the term of this Employment Agreement.
6. Vacations. Executive shall be entitled, during the term
of this Employment Agreement to four weeks' vacation annually at
full compensation.
7. Fringe Benefits. Executive shall be entitled, at
Employer's expense, during the term of this Employment Agreement
to participate in (a) the following benefit programs which Employer
now maintains for its employees: (i) its Defined Benefit Pension
Plan, (ii) its Section 125 cafeteria plan, (iii) its Section 401(k)
plan if any, (iv) its health insurance plan for employees only,
(v) its disability insurance plan and (vi) its group life insurance
plan; and (b) all benefit programs that Employer hereafter
establishes and makes available to either employees in general or
to other senior executive management (without intending to provide
duplicate coverage to Executive if Employer makes such available
to both employees in general and to senior executive management).
If obtainable, at Executive's option and, if exercised, at
Executive's sole cost and expense, Employer shall include
Executive's spouse and children under the health insurance plan
maintained by Employer for Executive. In addition, during the term
of this Employment Agreement, (i) Employer shall also pay for the
premiums on Executive's existing life insurance policy up to a
maximum of $12,750 per annum and (ii) Employer shall pay and be
responsible for all costs of ownership attributable to the
automobile which Employer currently owns and provides Executive for
its use, and for any replacement automobile leased or purchased by
Employer pursuant to Section 9 below. In addition, subject to
Executive providing proper documentation, Employer shall reimburse
Executive for reasonable travel, entertainment and other expenses
incurred by Executive in providing services hereunder on behalf of
Employer. Following any termination of Executive's employment by
Employer, to the extent permitted by law and the party providing
such benefits, Executive may, at his sole cost and expense,
continue any fringe benefits, if obtainable, then being provided
to Executive.
8. Bonus. (a) Subject to paragraph (b) of this Section 8, in
addition to the compensation set forth above, Executive shall be
entitled to a bonus payable with respect to each of calendar years
1997, 1998 and 1999 (each a "Bonus Year") in an amount equal to
10% of the product of (i) the amount by which the Per Share Net
Cash From Operations (as hereinafter defined) for such Bonus Year
exceeds $.50 per share and (ii) the number of shares outstanding
at the end of such Bonus Year. Notwithstanding the foregoing, the
bonus in any Bonus Year shall not exceed 33-1/3% of the salary
compensation set forth in Section 4 for such year (prorated if any
partial year is involved). The term Per Share Net Cash from
operations shall mean the Net Income for such Bonus Year (as shown
on the Company's Audited Financial Statements) with the following
adjustments:
(i) the addition back of any extraordinary deductions to
income;
(ii) the addition back of depreciation of non-rental property,
depreciation on rental real estate and amortization of mortgage and
organization costs;
(iii) with respect to the sales of property and investments,
including foreclosed property, recognized in any Bonus Year (x)
there shall be deducted from net gain any discount or deferred
gain, and (y) any depreciation taken on the sold property during
the period that it was owned by Employer shall be added back before
calculating the amount of the net loss or net gain.
(iv) the subtraction of all "amortization of discounts on
notes and fees" which are included in Net Income.
The Compensation Committee of Employer shall calculate the
Per Share Net Cash from Operations in accordance with the formula
set forth above, subject to such adjustments for extraordinary or
unforeseen transactions, including but not limited to capital gains
transactions, as in the reasonable judgment of the Compensation
Committee are fair and equitable to Employer and Executive. Said
calculations shall be made with respect to any Bonus Year without
regard to the bonus payable in accordance with this Agreement (or
any other employment or similar Agreement with senior management)
attributable to said year and/or attributable to a prior year or
years but paid in said year.
The bonus for any Bonus Year shall be paid on or before March
30th of the next following year; provided however that if by March
30th of any year the bonus for the prior Bonus Year has not been
finally determined, then the bonus shall be estimated and an amount
equal to the estimated bonus will be paid to Executive on March
30th and as soon as the actual bonus is finally determined, the
parties will make an appropriate adjustment.
Notwithstanding any other provisions of this Agreement, in
the event of any changes in the Company's outstanding common stock
by reason of a stock dividend, recapitalization, merger,
consolidation, reorganization, split up, extraordinary dividend,
combination or exchange of shares, or the like, the Employer and
Executive shall, if applicable, attempt in good faith to agree on
appropriate adjustments to the bonus calculations referred to in
this paragraph so as to substantially carry out the intention of
this Agreement.
(b) Notwithstanding anything in this Agreement to the
contrary (i) Executive shall not be entitled to a bonus on account
of any Bonus Year in which his employment terminates pursuant to
Section 11(e) below or in which his his employment is terminated
for cause, or any Bonus Year thereafter occurring, and (ii) if this
Agreement is terminated pursuant to paragraph (b) of Section 11
below, Executive's bonus for the Bonus Year in which such
termination occurs shall be prorated as of the date on which
compensation is no longer payable under said Section 11(b). In
calculating Per Share Net Cash from Operations to any such date (if
it is not the last day of a calendar year) the parties shall adjust
(by projection to said date or as of said date, as the case may be)
based on the Net Income for the period ending on March 31, June 30,
September 30 or December 31 of such Bonus Year, whichever of said
dates is closest to the date with respect to which the Bonus is
calculated.
9. Purchase of Replacement Automobile. Upon the request of
Executive, made subsequent to December 31, 1996 but prior to
December 31, 1998, Employer shall make available to Executive a new
automobile for Executive's use, said automobile to be of a make and
model reasonably acceptable to Executive. Said automobile shall,
at Employer's option, be either leased by Employer or purchased by
Employer (title to remain in Employer's name). The purchase price
of said automobile (exclusive of taxes), regardless of whether said
automobile is purchased or leased by Employer, shall not exceed
$37,500; provided, however, that Executive may select a car
costing more than $37,500 if Executive pays for the increased costs
to purchase or lease such automobile. Employer shall be
responsible for all costs of ownership attributable to said
vehicle, including but not limited to insurance, gas, oil,
maintenance, repairs, etc. On the termination of Executive's
employment, if Employer has purchased the vehicle, Executive may
at any time within three (3) weeks following the effective date of
termination purchase the vehicle from Employer at a price equal to
the then "blue book" value of the vehicle times a fraction, the
numerator of which is the amount paid for said vehicle by Employer,
including sales tax, "dealer prep", etc., but excluding any
contributions made by Executive, and the denominator of which is
the amount (the "Total Purchase Price") paid for said vehicle,
including sales tax, "dealer prep" etc. and any contributions made
by Executive. In the event Executive does not timely purchase the
vehicle and Executive has made any contribution towards the
purchase thereof, if Employer desires to retain ownership of the
vehicle Employer shall, within three weeks following the earlier
of (i) the expiration of the aforementioned three (3) week period,
or (ii) receipt of notice from Executive that he shall not purchase
said vehicle, pay to Executive the "blue book value" of the
vehicle, times a fraction, the numerator of which is the amount
contributed towards the purchase of said vehicle by Executive and
the denominator of which is the Total Purchase Price. If (i)
Executive does not timely purchase the vehicle, and (ii) Employer
does not desire to retain ownership and Executive has contributed
towards the purchase thereof, Employer shall promptly sell the
vehicle and the parties shall divide the actual net sales proceeds
(after sales taxes and advertising costs, if any), with Executive
receiving a fraction (being the same fraction described in the
immediately preceding sentence) thereof and Employer receiving the
balance. Employer agrees that the automobile presently owned or
leased by the Company and utilized by Executive, and for which
Employer pays the expenses pursuant to Section 7 above, may be
retained or sold by Employer and Executive shall have no interest
therein.
10. Stock Options. The stock options granted by Employer
to Executive pursuant to Executive's Employment Agreement dated as
of November 14, 1993 (the "Existing Stock Options") shall remain
in full force and effect on the terms set forth in said Employment
Agreement. In addition, Employer agrees that from time to time to
the extent that any Existing Stock Options are either (i) exercised
by Executive or (ii) lapse on November 17, 1999, if at the time of
any such exercise or lapse Executive is employed by Employer,
Employer shall (as of the date of such exercise or lapse) grant new
stock options to Executive (the "New Stock Options") to purchase
a number of shares of Employer's Class B common stock equal to the
number of shares covered by the Existing Stock Options which have
been exercised or have lapsed. Any New Stock Options so granted
by Employer shall be subject to the terms and conditions of the
existing Stock Option Plan dated November 17, 1993 (the "Stock
Option Plan") and on the following terms and conditions:
(a) the exercise price for each New Stock Option granted
shall be a price equal to the closing price of the Class B common
stock of Employer on the date the option is granted;
(b) each New Stock Option granted pursuant to the terms of
this Section 10 shall be exercisable for a period of six years from
the date such option is granted, subject to earlier termination
pursuant to the terms of the Stock Option Plan.
(c) upon termination of Executive's employment for any reason
whatsoever, the Existing Stock Options and any New Stock Options
granted pursuant to the terms hereof shall terminate immediately
except as provided for in the Stock Option Plan.
11. Employment Termination; Termination Benefits. The term
of employment hereunder shall be terminated upon the first to occur
of the following:
(a) The expiration of the term of employment purusant to
Section 3(a) of this Agreement.
(b) Executive's death or permanent disability. "Permanent
Disability" shall mean physical or mental incapacity of a nature
which prevents Executive, or will prevent Executive, in the
reasonable determination of the Board of Directors of Employer,
from performing his duties under this Agreement for a continuous
period of four months or any aggregate period of six months in any
12 month period. Permanent Disability shall be deemed to have
occurred as of said determination. If the term of employment is
terminated because of Executive's Permanent Disability, the
Employer shall pay, when the same would otherwise have been payable
in accordance with this Agreement, to Executive or his
representative, (i) Executive's salary described in Section 4
above, as then in effect, less any disability benefits payable to
Executive from policies maintained by Employer, (ii) the bonus
described in Section 8 above, subject to paragraph (b) thereof,
plus (iii) Executive's fringe benefits as described in Section 7
only (but not as described in Section 9 if the automobile in
question had not yet been delivered to Executive as of the date of
determination by the Board), until (again subject to paragraph (b)
of Section 8 with respect to any payment pursuant to Section 8) the
later to occur of (A) that day which is twenty-four (24) months
after the date of determination of Executive's Permanent Disability
and (B) December 31, 1999; provided however that subsequent to
that day which is six (6) months after the date of determination
of Executive's Permanent Disability, the payments set forth in
subparagraphs (i) and (ii) above shall be reduced to 50% of such
amounts, less 100% of any disability payments payable to Executive
from policies maintained by Employer.
If the term of employment is terminated because of Executive's
death, the Employer shall pay, when the same would otherwise have
been payable in accordance with this Agreement, to Executive's
beneficiary or beneficiaries designated in writing to the Company,
or to Executive's estate in the absence or lapse of such
designation, (i) Executive's salary described in Section 4 above,
as then in effect and (ii) the bonus described in Section 8 above,
(again subject to paragraph (b) of Section 8 with respect to any
payment pursuant to said Section 8), in each case for a period of
six months following Executive's death, whether or not the term of
employment would have terminated pursuant to Section 3(a) prior to
the end of such six month period.
(c) Executive's employment being terminated by the Board "for
cause" pursuant to Section 3(b) of this Agreement. If Executive's
employment is terminated for cause, the Company's only obligation
to Executive shall be payment of Executive's salary as described
in Section 4 above and fringe benefits as described in Section 7
above (but not the bonus compensation set forth in Section 8 above
for any period in the year in which such termination occurs), as
in effect at the date of termination, through the date of such
termination. Any termination of Executive's employment under this
Section 11(c) shall not affect Employer's obligation to make the
retirement payments set forth in Section 12(b) below.
(d) Executive's employment being terminated by the Board
"without cause". Termination "without cause" shall mean
termination of the term of employment on any basis other than those
provided in paragraphs (a), (b), (c) or (e) of this Section 11.
If the term of employment is terminated without cause, the Board
shall give 10 days notice thereof to Executive and Executive shall
be entitled to receive Executive's salary per Section 4 above,
fringe benefits per Section 7 above but not per Section 9 above
(unless the automobile described in said Section 9 was delivered
to Executive prior to said termination without cause), and, subject
to paragraph (c) of Section 10 above, all other compensation
(including the bonus compensation set forth in Section 8 above,
without regard to the provisions of Section 8(b) above) which he
would have received hereunder but for such termination in respect
of the unexpired portion of the term of employment (in the amounts
and at the times provided in Sections 4 and 8 hereof in the case
of compensation pursuant to said Sections). Any termination of
Executive's employment "without cause" shall not affect the
Employer's obligation to make the retirement payments set forth in
Section 12(b) below.
(e) Upon Executive voluntarily resigning his employment
hereunder. If Executive's employment is terminated because
Executive voluntarily resigns his employment hereunder, the
Company's only obligation to Executive shall be the payment of
Executive's salary pursuant to Section 4 above and fringe benefits
pursuant to Section 7 above (but not the bonus provided by Section
8 above) as in effect at the date of such termination through the
effective date of such termination. Any termination resulting from
Executive's voluntary resignation from his employment hereunder
shall not affect Employer's obligation to make the retirement
payments set forth in Section 12(b) below.
12. The Retirement Period.
(a) The Retirement Period shall commence on the first day of
the first calendar month occurring after Executive's sixty-fifth
(65th) birthday, but may be postponed by mutual agreement between
Executive and Employer. The Retirement Period shall end on the day
of Executive's death. The commencement and continuance of the
Retirement Period shall not depend in any way upon the existence
of an active period of employment relationship between Executive
and Employer immediately prior to the commencement of the
Retirement Period.
(b) During the Retirement Period, the Employer agrees to pay
to Executive each year, in equal monthly installments, the sum of
$29,000; provided, however, that the $29,000 annual payment shall
be increased annually after the first year of the Retirement Period
to the product derived by multiplying the payment in what is then
the immediately preceding year by the lesser of (i) one (1) plus
50% of the "fraction" forming a part of the definition of the Cost
of Living Adjustment Factor (as heretofore defined) for the period
in question, and (ii) 1.05.
(c) Executive's right to receive the payments provided for
in this Section 12 (i) shall not be contestable by Employer for
any reason whatsoever and (ii) shall be in lieu of any right of
Executive to receive retirement payments under any previous
employment agreement with Employer, and Executive hereby waives
and relinquishes any such rights.
(d) Furthermore, provided that Executive continuously remains
an employee of Employer from the date of this Employment Agreement
through Executive's 65th birthday, unless otherwise agreed by the
parties, during the Retirement Period the Employer shall maintain
in full force and effect, Group Life policies and Major Medical
and/or "medigap" policies, which (together with Medicare or other
benefits which may otherwise then be available to Executive without
cost to Executive), shall provide Executive with benefits
substantially similar to those existing for senior employees of the
Company at the time of Executive's retirement. Executive shall
continue to be responsible for any and all premiums attributable
to Executive's spouse and children.
13. Entire Agreement; Amendment. This Employment Agreement
contains the entire agreement between the parties hereto with
respect to the subject matter contained herein. This Employment
Agreement may be amended, modified or supplemented only by written
agreement of Employer and Executive expressly to that effect.
14. Waiver of Compliance. Any failure of either party to
comply with any obligation, covenant, agreement or condition on
its part contained herein may be expressly waived in writing by
the other party, but such waiver or failure to insist upon strict
compliance shall not operate as a waiver of, or estoppel with
respect to, any subsequent or other failure. Whenever this
Employment Agreement requires or permits consent by or on behalf
of any party, such consent shall be given in writing.
15. Notices. All notices, requests, demands and other
communications required or permitted hereunder shall be in writing
and shall be deemed given if delivered by hand or five days after
having been mailed, certified or registered mail with postage
prepaid:
(a) if to Employer, to:
Presidential Realty Corporation 180 South Broadway
White Plains, New York 10605
Attention: Chairman of the Board of Directors
with a copy to:
Chairman, Compensation Committee
and
Milbank, Tweed, Hadley & McCloy
1 Chase Manhattan Plaza
New York, New York 10005
Telecopy No.: (212) 530-5219
Attention: Celia A. Felsher
(b) if to Executive, to:
Jeffrey F. Joseph
19 Stillman Lane
Pleasantville, New York 10570
16. Assignment. This Employment Agreement shall inure to the
benefit of Executive and Employer and be binding upon the uccessors
and general assigns of Employer. Except as expressly provided
herein, this Employment Agreement and Executive's duties hereunder
shall not be assigned or delegated.
17. Invalid Provisions. If any provision hereof is held to
be illegal, invalid or unenforceable under present or future laws
effective during the term hereof, such provision shall be fully
severable; this Agreement shall be construed and enforced as if
such illegal, invalid or unenforceable provision had never
comprised a part hereof; and the remaining provisions hereof shall
remain in full force and effect and shall not be affected by the
illegal, invalid or unenforceable provision or by its severance
herefrom. In lieu of such illegal, invalid or unenforceable
provision there shall be added automatically as a part hereof a
provision as similar in terms to such illegal, invalid or
unenforceable provision as may be possible and be legal, valid and
enforceable.
18. Applicable Law. This Employment Agreement shall be
construed and enforced in accordance with the laws of the State of
New York.
IN WITNESS WHEREOF, the parties have executed this
Employment Agreement as of the day and year first above written.
EMPLOYER:
PRESIDENTIAL REALTY CORPORATION
BY: /s/ Robert E. Shapiro
________________________________
Robert E. Shapiro, Chairman
of the Board of Directors
EXECUTIVE:
/s/ Jeffrey F. Joseph
___________________________________
Jeffrey F. Joseph
EMPLOYMENT AGREEMENT
This Employment Agreement, made as of January 1, 1997, by and
between Steven Baruch, residing at One Pondview West, Purchase,
New York 10577 ("Executive") and PRESIDENTIAL REALTY CORPORATION,
a Delaware corporation having offices at 180 South Broadway, White
Plains, New York 10605 ("Employer" or the "Company");
W I T N E S S E T H:
WHEREAS, Employer is desirous of employing Executive as its
Executive Vice President; and
WHEREAS, Executive desires to render such services to
Employer.
NOW, THEREFORE, in consideration of the premises and the
mutual covenants herein set forth, the parties hereto agree as
follows:
1. Employment. Employer hereby employs Executive as its
Executive Vice President, and Executive hereby accepts such
employment, upon the terms and conditions hereinafter set forth.
2. Duties.
(a) In his capacity as Executive Vice President of Employer,
Executive shall perform for Employer the executive, administrative
and technical duties customarily associated with such position, as
well as such other duties reasonably consistent therewith as may
be reasonably assigned to Executive from time to time by the
President or Board of Directors of Employer; provided, however,
that the duties assigned shall be of a character and dignity
appropriate to a senior executive of a corporation and consistent
with Executive's experience, education and background.
(b) Except as otherwise set forth in this paragraph, (i)
Executive shall devote his full time and efforts during normal
business days and hours to the performance of this Employment
Agreement and (ii) Executive shall not engage in the real estate
business or in any other business which conflicts with or competes
in any material way with the business of Employer. Notwithstanding
the foregoing, (x) Executive may devote reasonable time and efforts
during normal business days and hours to the business of Scorpio
Entertainment, Inc. and Scorpio Ventures, Inc. (collectively
"Scorpio") pursuant to the Option/Shareholders Agreement dated
November 14, 1991 among Employer, Scorpio, Steven Baruch, Thomas
Viertel and Jeffrey F. Joseph, as modified by certain agreements
dated as of December 31, 1996 between such parties (the "Option
Agreement") and the Employment Agreement between Executive and
Scorpio executed pursuant to the Option Agreement and (y) Executive
may devote such time and efforts to winding up the business of Ivy
Properties Ltd. and its affiliates (collectively, "Ivy") as
Executive deems reasonably necessary; so long as, in either case,
the devotion of such time and effort does not conflict (without
independent committee review) or interfere with Executive's
performance of his duties as Executive Vice President of
Presidential and in fact Executive does diligently perform his
duties as Executive Vice President of Presidential to the
satisfaction of the Board of Directors of Employer. During the
term of this Employment Agreement, Employer will permit Executive,
at no cost to Executive, to utilize his office space to carry on
the business of Scorpio to the extent permitted by this paragraph
(b), provided however that Executive and/or Scorpio will pay, or
reimburse Employer for, the direct costs for duplicating,
telecopying, telephone and other business expenses used by Scorpio
in a manner reasonably satisfactory to Employer.
3. Term.
(a) This Employment Agreement shall commence on the date
hereof and shall continue until December 31, 1999, unless
terminated earlier in accordance with this Employment Agreement.
(b) This Employment Agreement may be terminated at any time
by Employer for "cause," as defined herein. For the purpose of
this Employment Agreement, termination of Executive's employment
shall be deemed to have been for "cause" only if termination of
his employment shall have been the result of (i) the conviction of
Executive of any crime constituting a felony or any other crime
involving moral turpitude, (ii) Executive's willful refusal to
follow a direction of the Board of Directors of Employer after
written notice that such continued refusal shall result in
termination of his employment for cause, or (iii) Executive's
failure to fulfill his duties hereunder as is required by Section
2(b) above after written notice that such continued failure shall
result in termination of his employment for cause.
(c) This Employment Agreement may also be terminated by
Employer as set forth in Section 11 below.
4. Compensation. Employer shall pay to Executive in
consideration of the services to be rendered hereunder
compensation in the form of a salary:
(a) for the period beginning on the date hereof and
ending on December 31, 1997, at the annual rate of One Hundred
Seventy Thousand Six Hundred and no/100 ($170,600.00) Dollars;
(b) for the calendar year beginning on January 1, 1998 and
ending on December 31, 1998, in an amount equal to the lesser of
(i) $179,130 and (ii) $170,600 times the Cost of Living Adjustment
Factor (as hereinafter defined); and
(c) for the calendar year beginning on January 1, 1999 and
ending on December 31, 1999, in an amount equal to the salary paid
for the calendar year beginning on January 1, 1998 and ending on
December 31, 1998 times the lesser of (i) 1.05 and (ii) the Cost
of Living Adjustment Factor.
The salary for all such periods shall be paid less
appropriate deductions, if any, for federal, state and city income
taxes, FICA contributions, N.Y.S. disability and any other
deductions required by law.
The Cost of Living Adjustment Factor as it is applied in
calculating compensation payable to Executive for any period
referred to above (and retirement compensation payable to Executive
for any period described in Section 12 below) shall be the sum of
(x) one (1) plus (y) a fraction (A) which has as its numerator the
amount, if any, by which the Revised Consumer Price Index for Urban
Wage Earners and Clerical Workers for the New York-Northern New
Jersey area, published by the U.S. Department of Labor Statistics
(the "Index") for the last calendar month preceding the commence-
ment of such period (which will be December in each case of annual
salary described in this Section 4) (the "Increase Index Month")
exceeds the Index for the calendar month occurring one year prior
to the Increase Index Month (the "Base Index Month"), and (B) which
has as its denominator the Index for the Base Index Month.
In the event that the Index is converted to a different
standard reference base or otherwise revised, the determination of
increased compensation under this Section 4 and/or retirement
compensation under Section 12 shall be made with the use of such
conversion factor, formula or table for converting the Index as
may be published by the Bureau of Labor Statistics or, if said
Bureau shall not publish the same, then with the use of such
conversion factor, formula or table as may be published by
Prentice-Hall, Inc., or any other nationally recognized publisher
of similar statistical information. If the Index ceases to be
published, and there is no successor thereto, such other index as
Executive and Employer shall agree upon in writing shall be
substituted for the Index. If Executive and Employer are unable
to agree as to such substituted index, such substituted index shall
be that determined by arbitration in accordance with the procedures
of the American Arbitration Association.
In the event that the Index is not available for any month
provided for above, the next available Index shall be used instead,
and if the next available Index is available following a payment
for which an adjustment should have been, then a retroactive
adjustment shall also be made.
(b) Executive's compensation shall be payable in equal
installments in arrears, in the same frequency as other senior
officers of Employer are paid, but in any event not less frequent
than twenty-six (26) bi-weekly installments.
5. Indemnification. The Indemnification Agreements previously
executed by Executive and Employer shall remain in full force and
effect during the term of this Employment Agreement.
6. Vacations. Executive shall be entitled, during the
term of this Employment Agreement to four weeks' vacation
annually at full compensation.
7. Fringe Benefits. Executive shall be entitled, at
Employer's expense, during the term of this Employment Agreement
to participate in (a) the following benefit programs which Employer
now maintains for its employees: (i) its Defined Benefit Pension
Plan, (ii) its Section 125 cafeteria plan, (iii) its Section 401(k)
plan if any, (iv) its health insurance plan for employees only,
(v) its disability insurance plan and (vi) its group life insurance
plan; and (b) all benefit programs that Employer hereafter
establishes and makes available to either employees in general or
to other senior executive management (without intending to provide
duplicate coverage to Executive if Employer makes such available
to both employees in general and to senior executive management).
If obtainable, at Executive's option and, if exercised, at
Executive's sole cost and expense, Employer shall include
Executive's spouse and children under the health insurance plan
maintained by Employer for Executive. In addition, during the term
of this Employment Agreement, (i) Employer shall also pay for the
premiums on Executive's existing life insurance policy up to a
maximum of $10,500 per annum and (ii) Employer shall pay and be
responsible for all costs of ownership attributable to the
automobile which Employer currently owns and provides Executive for
its use, and for any replacement automobile leased or purchased by
Employer pursuant to Section 9 below. In addition, subject to
Executive providing proper documentation, Employer shall reimburse
Executive for reasonable travel, entertainment and other expenses
incurred by Executive in providing services hereunder on behalf of
Employer. Following any termination of Executive's employment by
Employer, to the extent permitted by law and the party providing
such benefits, Executive may, at his sole cost and expense,
continue any fringe benefits, if obtainable, then being provided
to Executive.
8. Bonus. (a) Subject to paragraph (b) of this Section 8, in
addition to the compensation set forth above, Executive shall be
entitled to a bonus payable with respect to each of calendar years
1997, 1998 and 1999 (each a "Bonus Year") in an amount equal to
7.5% of the product of (i) the amount by which the Per Share Net
Cash From Operations (as hereinafter defined) for such Bonus Year
exceeds $.50 per share and (ii) the number of shares outstanding
at the end of such Bonus Year. Notwithstanding the foregoing, the
bonus in any Bonus Year shall not exceed 33-1/3% of the salary
compensation set forth in Section 4 for such year (prorated if any
partial year is involved). The term Per Share Net Cash from
operations shall mean the Net Income for such Bonus Year (as shown
on the Company's Audited Financial Statements) with the following
adjustments:
(i) the addition back of any extraordinary deductions to
income;
(ii) the addition back of depreciation of non-rental property,
depreciation on rental real estate and amortization of mortgage and
organization costs;
(iii) with respect to the sales of property and investments,
including foreclosed property, recognized in any Bonus Year (x)
there shall be deducted from net gain any discount or deferred
gain, and (y) any depreciation taken on the sold property during
the period that it was owned by Employer shall be added back before
calculating the amount of the net loss or net gain.
(iv) the subtraction of all "amortization of discounts on
notes and fees" which are included in Net Income.
The Compensation Committee of Employer shall calculate the
Per Share Net Cash from Operations in accordance with the formula
set forth above, subject to such adjustments for extraordinary or
unforeseen transactions, including but not limited to capital gains
transactions, as in the reasonable judgment of the Compensation
Committee are fair and equitable to Employer and Executive. Said
calculations shall be made with respect to any Bonus Year without
regard to the bonus payable in accordance with this Agreement (or
any other employment or similar Agreement with senior management)
attributable to said year and/or attributable to a prior year or
years but paid in said year.
The bonus for any Bonus Year shall be paid on or before March
30th of the next following year; provided however that if by March
30th of any year the bonus for the prior Bonus Year has not been
finally determined, then the bonus shall be estimated and an amount
equal to the estimated bonus will be paid to Executive on March
30th and as soon as the actual bonus is finally determined, the
parties will make an appropriate adjustment.
Notwithstanding any other provisions of this Agreement, in
the event of any changes in the Company's outstanding common stock
by reason of a stock dividend, recapitalization, merger,
consolidation, reorganization, split up, extraordinary dividend,
combination or exchange of shares, or the like, the Employer and
Executive shall, if applicable, attempt in good faith to agree on
appropriate adjustments to the bonus calculations referred to in
this paragraph so as to substantially carry out the intention of
this Agreement.
(b) Notwithstanding anything in this Agreement to the
contrary (i) Executive shall not be entitled to a bonus on account
of any Bonus Year in which his employment terminates pursuant to
Section 11(f) below or in which his his employment is terminated
for cause, or any Bonus Year thereafter occurring, and (ii) if this
Agreement is terminated pursuant to paragraphs (b) or (d) of
Section 11 below, Executive's bonus for the Bonus Year in which
such termination occurs shall be prorated (x) in the case of a
termination pursuant to Section 11(b), as of the date on which
compensation is no longer payable under said Section 11(b) and (y)
in the case of termination pursuant to Section 11(d) below, as of
the end of the calendar year in which notice of termination is
given. In calculating Per Share Net Cash from Operations to any
such date (if it is not the last day of a calendar year) the
parties shall adjust (by projection to said date or as of said
date, as the case may be) based on the Net Income for the period
ending on March 31, June 30, September 30 or December 31 of such
Bonus Year, whichever of said dates is closest to the date with
respect to which the Bonus is calculated.
9. Purchase of Replacement Automobile. Upon the request of
Executive, made subsequent to December 31, 1996 but prior to
December 31, 1998, Employer shall make available to Executive a new
automobile for Executive's use, said automobile to be of a make and
model reasonably acceptable to Executive. Said automobile shall,
at Employer's option, be either leased by Employer or purchased by
Employer (title to remain in Employer's name). The purchase price
of said automobile (exclusive of taxes), regardless of whether said
automobile is purchased or leased by Employer, shall not exceed
$37,500; provided, however, that Executive may select a car
costing more than $37,500 if Executive pays for the increased costs
to purchase or lease such automobile. Employer shall be
responsible for all costs of ownership attributable to said
vehicle, including but not limited to insurance, gas, oil,
maintenance, repairs, etc. On the termination of Executive's
employment, if Employer has purchased the vehicle, Executive may
at any time within three (3) weeks following the effective date of
termination purchase the vehicle from Employer at a price equal to
the then "blue book" value of the vehicle times a fraction, the
numerator of which is the amount paid for said vehicle by Employer,
including sales tax, "dealer prep", etc., but excluding any
contributions made by Executive, and the denominator of which is
the amount (the "Total Purchase Price") paid for said vehicle,
including sales tax, "dealer prep" etc. and any contributions made
by Executive. In the event Executive does not timely purchase the
vehicle and Executive has made any contribution towards the
purchase thereof, if Employer desires to retain ownership of the
vehicle Employer shall, within three weeks following the earlier
of (i) the expiration of the aforementioned three (3) week period,
or (ii) receipt of notice from Executive that he shall not purchase
said vehicle, pay to Executive the "blue book value" of the
vehicle, times a fraction, the numerator of which is the amount
contributed towards the purchase of said vehicle by Executive and
the denominator of which is the Total Purchase Price. If (i)
Executive does not timely purchase the vehicle, and (ii) Employer
does not desire to retain ownership and Executive has contributed
towards the purchase thereof, Employer shall promptly sell the
vehicle and the parties shall divide the actual net sales proceeds
(after sales taxes and advertising costs, if any), with Executive
receiving a fraction (being the same fraction described in the
immediately preceding sentence) thereof and Employer receiving the
balance. Employer agrees that the automobile presently owned or
leased by the Company and utilized by Executive, and for which
Employer pays the expenses pursuant to Section 7 above, may be
retained or sold by Employer and Executive shall have no interest
therein.
10. Stock Options. The stock options granted by Employer
to Executive pursuant to Executive's Employment Agreement dated as
of November 14, 1993 (the "Existing Stock Options") shall remain
in full force and effect on the terms set forth in said Employment
Agreement. In addition, Employer agrees that from time to time to
the extent that any Existing Stock Options are either (i) exercised
by Executive or (ii) lapse on November 17, 1999, if at the time of
any such exercise or lapse Executive is employed by Employer,
Employer shall (as of the date of such exercise or lapse) grant new
stock options to Executive (the "New Stock Options") to purchase
a number of shares of Employer's Class B common stock equal to the
number of shares covered by the Existing Stock Options which have
been exercised or have lapsed. Any New Stock Options so granted
by Employer shall be subject to the terms and conditions of the
existing Stock Option Plan dated November 17, 1993 (the "Stock
Option Plan") and on the following terms and conditions:
(a) the exercise price for each New Stock Option granted
shall be a price equal to the closing price of the Class B common
stock of Employer on the date the option is granted;
(b) each New Stock Option granted pursuant to the terms of
this Section 10 shall be exercisable for a period of six years from
the date such option is granted, subject to earlier termination
pursuant to the terms of the Stock Option Plan.
(c) upon termination of Executive's employment for any reason
whatsoever, the Existing Stock Options and any New Stock Options
granted pursuant to the terms hereof shall terminate immediately
except as provided for in the Stock Option Plan.
11. Employment Termination; Termination Benefits. The term
of employment hereunder shall be terminated upon the first to occur
of the following:
(a) The expiration of the term of employment purusant to
Section 3(a) of this Agreement.
(b) Executive's death or permanent disability. "Permanent
Disability" shall mean physical or mental incapacity of a nature
which prevents Executive, or will prevent Executive, in the
reasonable determination of the Board of Directors of Employer,
from performing his duties under this Agreement for a continuous
period of four months or any aggregate period of six months in any
12 month period. Permanent Disability shall be deemed to have
occurred as of said determination. If the term of employment is
terminated because of Executive's Permanent Disability, the
Employer shall pay, when the same would otherwise have been payable
in accordance with this Agreement, to Executive or his
representative, (i) Executive's salary described in Section 4
above, as then in effect, less any disability benefits payable to
Executive from policies maintained by Employer, (ii) the bonus
described in Section 8 above, subject to paragraph (b) thereof,
plus (iii) Executive's fringe benefits as described in Section 7
only (but not as described in Section 9 if the automobile in
question had not yet been delivered to Executive as of the date of
determination by the Board), until (again subject to paragraph (b)
of Section 8 with respect to any payment pursuant to Section 8) the
later to occur of (A) that day which is twenty-four (24) months
after the date of determination of Executive's Permanent Disability
and (B) December 31, 1999; provided however that subsequent to
that day which is six (6) months after the date of determination
of Executive's Permanent Disability, the payments set forth in
subparagraphs (i) and (ii) above shall be reduced to 50% of such
amounts, less 100% of any disability payments payable to Executive
from policies maintained by Employer.
If the term of employment is terminated because of Executive's
death, the Employer shall pay, when the same would otherwise have
been payable in accordance with this Agreement, to Executive's
beneficiary or beneficiaries designated in writing to the Company,
or to Executive's estate in the absence or lapse of such
designation, (i) Executive's salary described in Section 4 above,
as then in effect and (ii) the bonus described in Section 8 above,
(again subject to paragraph (b) of Section 8 with respect to any
payment pursuant to said Section 8), in each case for a period of
six months following Executive's death, whether or not the term of
employment would have terminated pursuant to Section 3(a) prior to
the end of such six month period.
(c) Executive's employment being terminated by the Board "for
cause" pursuant to Section 3(b) of this Agreement. If Executive's
employment is terminated for cause, the Company's only obligation
to Executive shall be payment of Executive's salary as described
in Section 4 above and fringe benefits as described in Section 7
above (but not the bonus compensation set forth in Section 8 above
for any period in the year in which such termination occurs), as
in effect at the date of termination, through the date of such
termination. Any termination of Executive's employment under this
Section 11(c) shall not affect Employer's obligation to make the
retirement payments set forth in Section 12(b) below.
(d) Year end termination. Executive's employment may be
terminated by the Company at December 31, 1997 or at December 31,
1998 upon written notice to Executive given at any time prior to
such dates if the Board of the Directors of the Company in its sole
discretion determines in good faith that Executive has not
diligently performed his duties as Executive Vice-President of the
Company to the satisfaction of the Board of Directors. If
Executive's employment is terminated pursuant to this paragraph (d)
of Section 11, Executive shall be entitled to receive Executive's
salary per Section 4 above and fringe benefits per Section 7 above
but not per Section 9 above (unless the automobile described in
said Section 9 was delivered to Executive prior to said termination
without cause), which he would but for such termination have
received hereunder during or with respect to the period ending
ninety (90) days after the end of the calendar year in which
Executive's employment is terminated pursuant to this Section 11
(d) (and at the times provided in Section 4 hereof in the case of
compensation pursuant to said Section). Any termination of
Executive's employment under this Section 11 (d) shall not affect
the Employer's obligation to make the retirement payments set forth
in Section 12(b) below.
(e) Executive's employment being terminated by the Board
"without cause". Termination "without cause" shall mean
termination of the term of employment on any basis other than those
provided in paragraphs (a), (b), (c), (d) or (f) of this Section
11. If the term of employment is terminated without cause, the
Board shall give 10 days notice thereof to Executive and Executive
shall be entitled to receive Executive's salary per Section 4
above, fringe benefits per Section 7 above but not per Section 9
above (unless the automobile described in said Section 9 was
delivered to Executive prior to said termination without cause),
and, subject to paragraph (c) of Section 10 above, all other
compensation (including the bonus compensation set forth in Section
8 above, without regard to the provisions of Section 8(b) above)
which he would have received hereunder but for such termination in
respect of the unexpired portion of the term of employment (in the
amounts and at the times provided in Sections 4 and 8 hereof in the
case of compensation pursuant to said Sections). Any termination
of Executive's employment "without cause" shall not affect the
Employer's obligation to make the retirement payments set forth in
Section 12(b) below.
(f) Upon Executive voluntarily resigning his employment
hereunder. If Executive's employment is terminated because
Executive voluntarily resigns his employment hereunder, the
Company's only obligation to Executive shall be the payment of
Executive's salary pursuant to Section 4 above and fringe benefits
pursuant to Section 7 above (but not the bonus provided by Section
8 above) as in effect at the date of such termination through the
effective date of such termination. Any termination resulting from
Executive's voluntary resignation from his employment hereunder
shall not affect Employer's obligation to make the retirement
payments set forth in Section 12(b) below.
12. The Retirement Period.
(a) The Retirement Period shall commence on the first day of
the first calendar month occurring after Executive's sixty-fifth
(65th) birthday, but may be postponed by mutual agreement between
Executive and Employer. The Retirement Period shall end on the day
of Executive's death. The commencement and continuance of the
Retirement Period shall not depend in any way upon the existence
of an active period of employment relationship between Executive
and Employer immediately prior to the commencement of the
Retirement Period.
(b) During the Retirement Period, the Employer agrees to pay
to Executive each year, in equal monthly installments, the sum of
$29,000; provided, however, that the $29,000 annual payment shall
be increased annually after the first year of the Retirement Period
to the product derived by multiplying the payment in what is then
the immediately preceding year by the lesser of (i) one (1) plus
50% of the "fraction" forming a part of the definition of the Cost
of Living Adjustment Factor (as heretofore defined) for the period
in question, and (ii) 1.05.
(c) Executive's right to receive the payments provided for
in this Section 12 (i) shall not be contestable by Employer for
any reason whatsoever and (ii) shall be in lieu of any right of
Executive to receive retirement payments under any previous
employment agreement with Employer, and Executive hereby waives
and relinquishes any such rights.
(d) Furthermore, provided that Executive continuously remains
an employee of Employer from the date of this Employment Agreement
through Executive's 65th birthday, unless otherwise agreed by the
parties, during the Retirement Period the Employer shall maintain
in full force and effect, Group Life policies and Major Medical
and/or "medigap" policies, which (together with Medicare or other
benefits which may otherwise then be available to Executive without
cost to Executive), shall provide Executive with benefits
substantially similar to those existing for senior employees of the
Company at the time of Executive's retirement. Executive shall
continue to be responsible for any and all premiums attributable
to Executive's spouse and children.
13. Entire Agreement; Amendment. This Employment Agreement
contains the entire agreement between the parties hereto with
respect to the subject matter contained herein. This Employment
Agreement may be amended, modified or supplemented only by written
agreement of Employer and Executive expressly to that effect.
14. Waiver of Compliance. Any failure of either party to
comply with any obligation, covenant, agreement or condition on
its part contained herein may be expressly waived in writing by
the other party, but such waiver or failure to insist upon strict
compliance shall not operate as a waiver of, or estoppel with
respect to, any subsequent or other failure. Whenever this
Employment Agreement requires or permits consent by or on behalf
of any party, such consent shall be given in writing.
15. Notices. All notices, requests, demands and other
communications required or permitted hereunder shall be in writing
and shall be deemed given if delivered by hand or five days after
having been mailed, certified or registered mail with postage
prepaid:
(a) if to Employer, to:
Presidential Realty Corporation 180 South Broadway
White Plains, New York 10605
Attention: Chairman of the Board of Directors
with a copy to:
Chairman, Compensation Committee
and
Milbank, Tweed, Hadley & McCloy
1 Chase Manhattan Plaza
New York, New York 10005
Telecopy No.: (212) 530-5219
Attention: Celia A. Felsher
(b) if to Executive, to:
Steven Baruch
One Pondview West
Purchase, New York 10577
16. Assignment. This Employment Agreement shall inure to the
benefit of Executive and Employer and be binding upon the uccessors
and general assigns of Employer. Except as expressly provided
herein, this Employment Agreement and Executive's duties hereunder
shall not be assigned or delegated.
17. Invalid Provisions. If any provision hereof is held to
be illegal, invalid or unenforceable under present or future laws
effective during the term hereof, such provision shall be fully
severable; this Agreement shall be construed and enforced as if
such illegal, invalid or unenforceable provision had never
comprised a part hereof; and the remaining provisions hereof shall
remain in full force and effect and shall not be affected by the
illegal, invalid or unenforceable provision or by its severance
herefrom. In lieu of such illegal, invalid or unenforceable
provision there shall be added automatically as a part hereof a
provision as similar in terms to such illegal, invalid or
unenforceable provision as may be possible and be legal, valid and
enforceable.
18. Applicable Law. This Employment Agreement shall be
construed and enforced in accordance with the laws of the State of
New York.
IN WITNESS WHEREOF, the parties have executed this
Employment Agreement as of the day and year first above written.
EMPLOYER:
PRESIDENTIAL REALTY CORPORATION
BY: /s/ Robert E. Shapiro
________________________________
Robert E. Shapiro, Chairman
of the Board of Directors
EXECUTIVE:
/s/ Steven Baruch
___________________________________
Steven Baruch
EMPLOYMENT AGREEMENT
This Employment Agreement, made as of January 1, 1997, by and
between Thomas Viertel, residing at 333 West 56th Street, New York,
New York 10019("Executive") and PRESIDENTIAL REALTY CORPORATION,
a Delaware corporation having offices at 180 South Broadway, White
Plains, New York 10605 ("Employer" or the "Company");
W I T N E S S E T H:
WHEREAS, Employer is desirous of employing Executive as its
Executive Vice President; and
WHEREAS, Executive desires to render such services to
Employer.
NOW, THEREFORE, in consideration of the premises and the
mutual covenants herein set forth, the parties hereto agree as
follows:
1. Employment. Employer hereby employs Executive as its
Executive Vice President, and Executive hereby accepts such
employment, upon the terms and conditions hereinafter set forth.
2. Duties.
(a) In his capacity as Executive Vice President of Employer,
Executive shall perform for Employer the executive, administrative
and technical duties customarily associated with such position, as
well as such other duties reasonably consistent therewith as may
be reasonably assigned to Executive from time to time by the
President or Board of Directors of Employer; provided, however,
that the duties assigned shall be of a character and dignity
appropriate to a senior executive of a corporation and consistent
with Executive's experience, education and background.
(b) Except as otherwise set forth in this paragraph, (i)
Executive shall devote his full time and efforts during normal
business days and hours to the performance of this Employment
Agreement and (ii) Executive shall not engage in the real estate
business or in any other business which conflicts with or competes
in any material way with the business of Employer. Notwithstanding
the foregoing, (x) Executive may devote reasonable time and efforts
during normal business days and hours to the business of Scorpio
Entertainment, Inc. and Scorpio Ventures, Inc. (collectively
"Scorpio") pursuant to the Option/Shareholders Agreement dated
November 14, 1991 among Employer, Scorpio, Steven Baruch, Thomas
Viertel and Jeffrey F. Joseph, as modified by certain agreements
dated as of December 31, 1996 between such parties (the "Option
Agreement") and the Employment Agreement between Executive and
Scorpio executed pursuant to the Option Agreement and (y) Executive
may devote such time and efforts to winding up the business of Ivy
Properties Ltd. and its affiliates (collectively, "Ivy") as
Executive deems reasonably necessary; so long as, in either case,
the devotion of such time and effort does not conflict (without
independent committee review) or interfere with Executive's
performance of his duties as Executive Vice President of
Presidential and in fact Executive does diligently perform his
duties as Executive Vice President of Presidential to the
satisfaction of the Board of Directors of Employer. During the
term of this Employment Agreement, Employer will permit Executive,
at no cost to Executive, to utilize his office space to carry on
the business of Scorpio to the extent permitted by this paragraph
(b), provided however that Executive and/or Scorpio will pay, or
reimburse Employer for, the direct costs for duplicating,
telecopying, telephone and other business expenses used by Scorpio
in a manner reasonably satisfactory to Employer.
3. Term.
(a) This Employment Agreement shall commence on the date
hereof and shall continue until December 31, 1999, unless
terminated earlier in accordance with this Employment Agreement.
(b) This Employment Agreement may be terminated at any time
by Employer for "cause," as defined herein. For the purpose of
this Employment Agreement, termination of Executive's employment
shall be deemed to have been for "cause" only if termination of
his employment shall have been the result of (i) the conviction of
Executive of any crime constituting a felony or any other crime
involving moral turpitude, (ii) Executive's willful refusal to
follow a direction of the Board of Directors of Employer after
written notice that such continued refusal shall result in
termination of his employment for cause, or (iii) Executive's
failure to fulfill his duties hereunder as is required by Section
2(b) above after written notice that such continued failure shall
result in termination of his employment for cause.
(c) This Employment Agreement may also be terminated by
Employer as set forth in Section 11 below.
4. Compensation. Employer shall pay to Executive in
consideration of the services to be rendered hereunder
compensation in the form of a salary:
(a) for the period beginning on the date hereof and
ending on December 31, 1997, at the annual rate of One Hundred
Seventy Thousand Six Hundred and no/100 ($170,600.00) Dollars;
(b) for the calendar year beginning on January 1, 1998 and
ending on December 31, 1998, in an amount equal to the lesser of
(i) $179,130 and (ii) $170,600 times the Cost of Living Adjustment
Factor (as hereinafter defined); and
(c) for the calendar year beginning on January 1, 1999 and
ending on December 31, 1999, in an amount equal to the salary paid
for the calendar year beginning on January 1, 1998 and ending on
December 31, 1998 times the lesser of (i) 1.05 and (ii) the Cost
of Living Adjustment Factor.
The salary for all such periods shall be paid less
appropriate deductions, if any, for federal, state and city income
taxes, FICA contributions, N.Y.S. disability and any other
deductions required by law.
The Cost of Living Adjustment Factor as it is applied in
calculating compensation payable to Executive for any period
referred to above (and retirement compensation payable to Executive
for any period described in Section 12 below) shall be the sum of
(x) one (1) plus (y) a fraction (A) which has as its numerator the
amount, if any, by which the Revised Consumer Price Index for Urban
Wage Earners and Clerical Workers for the New York-Northern New
Jersey area, published by the U.S. Department of Labor Statistics
(the "Index") for the last calendar month preceding the commence-
ment of such period (which will be December in each case of annual
salary described in this Section 4) (the "Increase Index Month")
exceeds the Index for the calendar month occurring one year prior
to the Increase Index Month (the "Base Index Month"), and (B) which
has as its denominator the Index for the Base Index Month.
In the event that the Index is converted to a different
standard reference base or otherwise revised, the determination of
increased compensation under this Section 4 and/or retirement
compensation under Section 12 shall be made with the use of such
conversion factor, formula or table for converting the Index as
may be published by the Bureau of Labor Statistics or, if said
Bureau shall not publish the same, then with the use of such
conversion factor, formula or table as may be published by
Prentice-Hall, Inc., or any other nationally recognized publisher
of similar statistical information. If the Index ceases to be
published, and there is no successor thereto, such other index as
Executive and Employer shall agree upon in writing shall be
substituted for the Index. If Executive and Employer are unable
to agree as to such substituted index, such substituted index shall
be that determined by arbitration in accordance with the procedures
of the American Arbitration Association.
In the event that the Index is not available for any month
provided for above, the next available Index shall be used instead,
and if the next available Index is available following a payment
for which an adjustment should have been, then a retroactive
adjustment shall also be made.
(b) Executive's compensation shall be payable in equal
installments in arrears, in the same frequency as other senior
officers of Employer are paid, but in any event not less frequent
than twenty-six (26) bi-weekly installments.
5. Indemnification. The Indemnification Agreements previously
executed by Executive and Employer shall remain in full force and
effect during the term of this Employment Agreement.
6. Vacations. Executive shall be entitled, during the
term of this Employment Agreement to four weeks' vacation
annually at full compensation.
7. Fringe Benefits. Executive shall be entitled, at
Employer's expense, during the term of this Employment Agreement
to participate in (a) the following benefit programs which Employer
now maintains for its employees: (i) its Defined Benefit Pension
Plan, (ii) its Section 125 cafeteria plan, (iii) its Section 401(k)
plan if any, (iv) its health insurance plan for employees only,
(v) its disability insurance plan and (vi) its group life insurance
plan; and (b) all benefit programs that Employer hereafter
establishes and makes available to either employees in general or
to other senior executive management (without intending to provide
duplicate coverage to Executive if Employer makes such available
to both employees in general and to senior executive management).
If obtainable, at Executive's option and, if exercised, at
Executive's sole cost and expense, Employer shall include
Executive's spouse and children under the health insurance plan
maintained by Employer for Executive. In addition, during the term
of this Employment Agreement, (i) Employer shall also pay for the
premiums on Executive's existing life insurance policy up to a
maximum of $9,250 per annum and (ii) Employer shall pay and be
responsible for all costs of ownership attributable to the
automobile which Employer currently owns and provides Executive for
its use, and for any replacement automobile leased or purchased by
Employer pursuant to Section 9 below. In addition, subject to
Executive providing proper documentation, Employer shall reimburse
Executive for reasonable travel, entertainment and other expenses
incurred by Executive in providing services hereunder on behalf of
Employer. Following any termination of Executive's employment by
Employer, to the extent permitted by law and the party providing
such benefits, Executive may, at his sole cost and expense,
continue any fringe benefits, if obtainable, then being provided
to Executive.
8. Bonus. (a) Subject to paragraph (b) of this Section 8, in
addition to the compensation set forth above, Executive shall be
entitled to a bonus payable with respect to each of calendar years
1997, 1998 and 1999 (each a "Bonus Year") in an amount equal to
7.5% of the product of (i) the amount by which the Per Share Net
Cash From Operations (as hereinafter defined) for such Bonus Year
exceeds $.50 per share and (ii) the number of shares outstanding
at the end of such Bonus Year. Notwithstanding the foregoing, the
bonus in any Bonus Year shall not exceed 33-1/3% of the salary
compensation set forth in Section 4 for such year (prorated if any
partial year is involved). The term Per Share Net Cash from
operations shall mean the Net Income for such Bonus Year (as shown
on the Company's Audited Financial Statements) with the following
adjustments:
(i) the addition back of any extraordinary deductions to
income;
(ii) the addition back of depreciation of non-rental property,
depreciation on rental real estate and amortization of mortgage and
organization costs;
(iii) with respect to the sales of property and investments,
including foreclosed property, recognized in any Bonus Year (x)
there shall be deducted from net gain any discount or deferred
gain, and (y) any depreciation taken on the sold property during
the period that it was owned by Employer shall be added back before
calculating the amount of the net loss or net gain.
(iv) the subtraction of all "amortization of discounts on
notes and fees" which are included in Net Income.
The Compensation Committee of Employer shall calculate the
Per Share Net Cash from Operations in accordance with the formula
set forth above, subject to such adjustments for extraordinary or
unforeseen transactions, including but not limited to capital gains
transactions, as in the reasonable judgment of the Compensation
Committee are fair and equitable to Employer and Executive. Said
calculations shall be made with respect to any Bonus Year without
regard to the bonus payable in accordance with this Agreement (or
any other employment or similar Agreement with senior management)
attributable to said year and/or attributable to a prior year or
years but paid in said year.
The bonus for any Bonus Year shall be paid on or before March
30th of the next following year; provided however that if by March
30th of any year the bonus for the prior Bonus Year has not been
finally determined, then the bonus shall be estimated and an amount
equal to the estimated bonus will be paid to Executive on March
30th and as soon as the actual bonus is finally determined, the
parties will make an appropriate adjustment.
Notwithstanding any other provisions of this Agreement, in
the event of any changes in the Company's outstanding common stock
by reason of a stock dividend, recapitalization, merger,
consolidation, reorganization, split up, extraordinary dividend,
combination or exchange of shares, or the like, the Employer and
Executive shall, if applicable, attempt in good faith to agree on
appropriate adjustments to the bonus calculations referred to in
this paragraph so as to substantially carry out the intention of
this Agreement.
(b) Notwithstanding anything in this Agreement to the
contrary (i) Executive shall not be entitled to a bonus on account
of any Bonus Year in which his employment terminates pursuant to
Section 11(f) below or in which his his employment is terminated
for cause, or any Bonus Year thereafter occurring, and (ii) if this
Agreement is terminated pursuant to paragraphs (b) or (d) of
Section 11 below, Executive's bonus for the Bonus Year in which
such termination occurs shall be prorated (x) in the case of a
termination pursuant to Section 11(b), as of the date on which
compensation is no longer payable under said Section 11(b) and (y)
in the case of termination pursuant to Section 11(d) below, as of
the end of the calendar year in which notice of termination is
given. In calculating Per Share Net Cash from Operations to any
such date (if it is not the last day of a calendar year) the
parties shall adjust (by projection to said date or as of said
date, as the case may be) based on the Net Income for the period
ending on March 31, June 30, September 30 or December 31 of such
Bonus Year, whichever of said dates is closest to the date with
respect to which the Bonus is calculated.
9. Purchase of Replacement Automobile. Upon the request of
Executive, made subsequent to December 31, 1996 but prior to
December 31, 1998, Employer shall make available to Executive a new
automobile for Executive's use, said automobile to be of a make and
model reasonably acceptable to Executive. Said automobile shall,
at Employer's option, be either leased by Employer or purchased by
Employer (title to remain in Employer's name). The purchase price
of said automobile (exclusive of taxes), regardless of whether said
automobile is purchased or leased by Employer, shall not exceed
$37,500; provided, however, that Executive may select a car
costing more than $37,500 if Executive pays for the increased costs
to purchase or lease such automobile. Employer shall be
responsible for all costs of ownership attributable to said
vehicle, including but not limited to insurance, gas, oil,
maintenance, repairs, etc. On the termination of Executive's
employment, if Employer has purchased the vehicle, Executive may
at any time within three (3) weeks following the effective date of
termination purchase the vehicle from Employer at a price equal to
the then "blue book" value of the vehicle times a fraction, the
numerator of which is the amount paid for said vehicle by Employer,
including sales tax, "dealer prep", etc., but excluding any
contributions made by Executive, and the denominator of which is
the amount (the "Total Purchase Price") paid for said vehicle,
including sales tax, "dealer prep" etc. and any contributions made
by Executive. In the event Executive does not timely purchase the
vehicle and Executive has made any contribution towards the
purchase thereof, if Employer desires to retain ownership of the
vehicle Employer shall, within three weeks following the earlier
of (i) the expiration of the aforementioned three (3) week period,
or (ii) receipt of notice from Executive that he shall not purchase
said vehicle, pay to Executive the "blue book value" of the
vehicle, times a fraction, the numerator of which is the amount
contributed towards the purchase of said vehicle by Executive and
the denominator of which is the Total Purchase Price. If (i)
Executive does not timely purchase the vehicle, and (ii) Employer
does not desire to retain ownership and Executive has contributed
towards the purchase thereof, Employer shall promptly sell the
vehicle and the parties shall divide the actual net sales proceeds
(after sales taxes and advertising costs, if any), with Executive
receiving a fraction (being the same fraction described in the
immediately preceding sentence) thereof and Employer receiving the
balance. Employer agrees that the automobile presently owned or
leased by the Company and utilized by Executive, and for which
Employer pays the expenses pursuant to Section 7 above, may be
retained or sold by Employer and Executive shall have no interest
therein.
10. Stock Options. The stock options granted by Employer
to Executive pursuant to Executive's Employment Agreement dated as
of November 14, 1993 (the "Existing Stock Options") shall remain
in full force and effect on the terms set forth in said Employment
Agreement. In addition, Employer agrees that from time to time to
the extent that any Existing Stock Options are either (i) exercised
by Executive or (ii) lapse on November 17, 1999, if at the time of
any such exercise or lapse Executive is employed by Employer,
Employer shall (as of the date of such exercise or lapse) grant new
stock options to Executive (the "New Stock Options") to purchase
a number of shares of Employer's Class B common stock equal to the
number of shares covered by the Existing Stock Options which have
been exercised or have lapsed. Any New Stock Options so granted
by Employer shall be subject to the terms and conditions of the
existing Stock Option Plan dated November 17, 1993 (the "Stock
Option Plan") and on the following terms and conditions:
(a) the exercise price for each New Stock Option granted
shall be a price equal to the closing price of the Class B common
stock of Employer on the date the option is granted;
(b) each New Stock Option granted pursuant to the terms of
this Section 10 shall be exercisable for a period of six years from
the date such option is granted, subject to earlier termination
pursuant to the terms of the Stock Option Plan.
(c) upon termination of Executive's employment for any reason
whatsoever, the Existing Stock Options and any New Stock Options
granted pursuant to the terms hereof shall terminate immediately
except as provided for in the Stock Option Plan.
11. Employment Termination; Termination Benefits. The term
of employment hereunder shall be terminated upon the first to occur
of the following:
(a) The expiration of the term of employment purusant to
Section 3(a) of this Agreement.
(b) Executive's death or permanent disability. "Permanent
Disability" shall mean physical or mental incapacity of a nature
which prevents Executive, or will prevent Executive, in the
reasonable determination of the Board of Directors of Employer,
from performing his duties under this Agreement for a continuous
period of four months or any aggregate period of six months in any
12 month period. Permanent Disability shall be deemed to have
occurred as of said determination. If the term of employment is
terminated because of Executive's Permanent Disability, the
Employer shall pay, when the same would otherwise have been payable
in accordance with this Agreement, to Executive or his
representative, (i) Executive's salary described in Section 4
above, as then in effect, less any disability benefits payable to
Executive from policies maintained by Employer, (ii) the bonus
described in Section 8 above, subject to paragraph (b) thereof,
plus (iii) Executive's fringe benefits as described in Section 7
only (but not as described in Section 9 if the automobile in
question had not yet been delivered to Executive as of the date of
determination by the Board), until (again subject to paragraph (b)
of Section 8 with respect to any payment pursuant to Section 8) the
later to occur of (A) that day which is twenty-four (24) months
after the date of determination of Executive's Permanent Disability
and (B) December 31, 1999; provided however that subsequent to
that day which is six (6) months after the date of determination
of Executive's Permanent Disability, the payments set forth in
subparagraphs (i) and (ii) above shall be reduced to 50% of such
amounts, less 100% of any disability payments payable to Executive
from policies maintained by Employer.
If the term of employment is terminated because of Executive's
death, the Employer shall pay, when the same would otherwise have
been payable in accordance with this Agreement, to Executive's
beneficiary or beneficiaries designated in writing to the Company,
or to Executive's estate in the absence or lapse of such
designation, (i) Executive's salary described in Section 4 above,
as then in effect and (ii) the bonus described in Section 8 above,
(again subject to paragraph (b) of Section 8 with respect to any
payment pursuant to said Section 8), in each case for a period of
six months following Executive's death, whether or not the term of
employment would have terminated pursuant to Section 3(a) prior to
the end of such six month period.
(c) Executive's employment being terminated by the Board "for
cause" pursuant to Section 3(b) of this Agreement. If Executive's
employment is terminated for cause, the Company's only obligation
to Executive shall be payment of Executive's salary as described
in Section 4 above and fringe benefits as described in Section 7
above (but not the bonus compensation set forth in Section 8 above
for any period in the year in which such termination occurs), as
in effect at the date of termination, through the date of such
termination. Any termination of Executive's employment under this
Section 11(c) shall not affect Employer's obligation to make the
retirement payments set forth in Section 12(b) below.
(d) Year end termination. Executive's employment may be
terminated by the Company at December 31, 1997 or at December 31,
1998 upon written notice to Executive given at any time prior to
such dates if the Board of the Directors of the Company in its sole
discretion determines in good faith that Executive has not
diligently performed his duties as Executive Vice-President of the
Company to the satisfaction of the Board of Directors. If
Executive's employment is terminated pursuant to this paragraph (d)
of Section 11, Executive shall be entitled to receive Executive's
salary per Section 4 above and fringe benefits per Section 7 above
but not per Section 9 above (unless the automobile described in
said Section 9 was delivered to Executive prior to said termination
without cause), which he would but for such termination have
received hereunder during or with respect to the period ending
ninety (90) days after the end of the calendar year in which
Executive's employment is terminated pursuant to this Section 11
(d) (and at the times provided in Section 4 hereof in the case of
compensation pursuant to said Section). Any termination of
Executive's employment under this Section 11 (d) shall not affect
the Employer's obligation to make the retirement payments set forth
in Section 12(b) below.
(e) Executive's employment being terminated by the Board
"without cause". Termination "without cause" shall mean
termination of the term of employment on any basis other than those
provided in paragraphs (a), (b), (c), (d) or (f) of this Section
11. If the term of employment is terminated without cause, the
Board shall give 10 days notice thereof to Executive and Executive
shall be entitled to receive Executive's salary per Section 4
above, fringe benefits per Section 7 above but not per Section 9
above (unless the automobile described in said Section 9 was
delivered to Executive prior to said termination without cause),
and, subject to paragraph (c) of Section 10 above, all other
compensation (including the bonus compensation set forth in Section
8 above, without regard to the provisions of Section 8(b) above)
which he would have received hereunder but for such termination in
respect of the unexpired portion of the term of employment (in the
amounts and at the times provided in Sections 4 and 8 hereof in the
case of compensation pursuant to said Sections). Any termination
of Executive's employment "without cause" shall not affect the
Employer's obligation to make the retirement payments set forth in
Section 12(b) below.
(f) Upon Executive voluntarily resigning his employment
hereunder. If Executive's employment is terminated because
Executive voluntarily resigns his employment hereunder, the
Company's only obligation to Executive shall be the payment of
Executive's salary pursuant to Section 4 above and fringe benefits
pursuant to Section 7 above (but not the bonus provided by Section
8 above) as in effect at the date of such termination through the
effective date of such termination. Any termination resulting from
Executive's voluntary resignation from his employment hereunder
shall not affect Employer's obligation to make the retirement
payments set forth in Section 12(b) below.
12. The Retirement Period.
(a) The Retirement Period shall commence on the first day of
the first calendar month occurring after Executive's sixty-fifth
(65th) birthday, but may be postponed by mutual agreement between
Executive and Employer. The Retirement Period shall end on the day
of Executive's death. The commencement and continuance of the
Retirement Period shall not depend in any way upon the existence
of an active period of employment relationship between Executive
and Employer immediately prior to the commencement of the
Retirement Period.
(b) During the Retirement Period, the Employer agrees to pay
to Executive each year, in equal monthly installments, the sum of
$29,000; provided, however, that the $29,000 annual payment shall
be increased annually after the first year of the Retirement Period
to the product derived by multiplying the payment in what is then
the immediately preceding year by the lesser of (i) one (1) plus
50% of the "fraction" forming a part of the definition of the Cost
of Living Adjustment Factor (as heretofore defined) for the period
in question, and (ii) 1.05.
(c) Executive's right to receive the payments provided for
in this Section 12 (i) shall not be contestable by Employer for
any reason whatsoever and (ii) shall be in lieu of any right of
Executive to receive retirement payments under any previous
employment agreement with Employer, and Executive hereby waives
and relinquishes any such rights.
(d) Furthermore, provided that Executive continuously remains
an employee of Employer from the date of this Employment Agreement
through Executive's 65th birthday, unless otherwise agreed by the
parties, during the Retirement Period the Employer shall maintain
in full force and effect, Group Life policies and Major Medical
and/or "medigap" policies, which (together with Medicare or other
benefits which may otherwise then be available to Executive without
cost to Executive), shall provide Executive with benefits
substantially similar to those existing for senior employees of the
Company at the time of Executive's retirement. Executive shall
continue to be responsible for any and all premiums attributable
to Executive's spouse and children.
13. Entire Agreement; Amendment. This Employment Agreement
contains the entire agreement between the parties hereto with
respect to the subject matter contained herein. This Employment
Agreement may be amended, modified or supplemented only by written
agreement of Employer and Executive expressly to that effect.
14. Waiver of Compliance. Any failure of either party to
comply with any obligation, covenant, agreement or condition on
its part contained herein may be expressly waived in writing by
the other party, but such waiver or failure to insist upon strict
compliance shall not operate as a waiver of, or estoppel with
respect to, any subsequent or other failure. Whenever this
Employment Agreement requires or permits consent by or on behalf
of any party, such consent shall be given in writing.
15. Notices. All notices, requests, demands and other
communications required or permitted hereunder shall be in writing
and shall be deemed given if delivered by hand or five days after
having been mailed, certified or registered mail with postage
prepaid:
(a) if to Employer, to:
Presidential Realty Corporation 180 South Broadway
White Plains, New York 10605
Attention: Chairman of the Board of Directors
with a copy to:
Chairman, Compensation Committee
and
Milbank, Tweed, Hadley & McCloy
1 Chase Manhattan Plaza
New York, New York 10005
Telecopy No.: (212) 530-5219
Attention: Celia A. Felsher
(b) if to Executive, to:
Thomas Viertel
333 West 56th Street, #11-H
New York, New York 10019
16. Assignment. This Employment Agreement shall inure to the
benefit of Executive and Employer and be binding upon the uccessors
and general assigns of Employer. Except as expressly provided
herein, this Employment Agreement and Executive's duties hereunder
shall not be assigned or delegated.
17. Invalid Provisions. If any provision hereof is held to
be illegal, invalid or unenforceable under present or future laws
effective during the term hereof, such provision shall be fully
severable; this Agreement shall be construed and enforced as if
such illegal, invalid or unenforceable provision had never
comprised a part hereof; and the remaining provisions hereof shall
remain in full force and effect and shall not be affected by the
illegal, invalid or unenforceable provision or by its severance
herefrom. In lieu of such illegal, invalid or unenforceable
provision there shall be added automatically as a part hereof a
provision as similar in terms to such illegal, invalid or
unenforceable provision as may be possible and be legal, valid and
enforceable.
18. Applicable Law. This Employment Agreement shall be
construed and enforced in accordance with the laws of the State of
New York.
IN WITNESS WHEREOF, the parties have executed this
Employment Agreement as of the day and year first above written.
EMPLOYER:
PRESIDENTIAL REALTY CORPORATION
BY: /s/ Robert E. Shapiro
________________________________
Robert E. Shapiro, Chairman
of the Board of Directors
EXECUTIVE:
/s/ Thomas Viertel
___________________________________
Thomas Viertel
FIRST AMENDMENT TO SETTLEMENT AGREEMENT
DATED AUGUST 1, 1996
AMONG
PRESIDENTIAL REALTY CORPORATION, STEVEN BARUCH,
JEFFREY JOSEPH AND THOMAS VIERTEL
FIRST AMENDMENT TO SETTLEMENT AGREEMENT dated August 1, 1996 between
PRESIDENTIAL REALTY CORPORATION, a Delaware corporation having its principal
place of business at 180 South Broadway, White Plains, New York 10605
("Presidential"), STEVEN BARUCH, residing at One Pondview West, Purchase, New
York 10577, JEFFREY JOSEPH, residing at 19 Stillman Lane, Pleasantville, New
York 10570, and THOMAS VIERTEL, residing at 333 West 56th Street, New York,
New York 10019 (Messrs. Baruch, Joseph and Viertel are sometimes referred to
herein collectively as the "Ivy Partners").
W I T N E S S E T H:
WHEREAS, Presidential and the Ivy Partners entered into that certain
Settlement Agreement dated November 14, 1991 (the "Settlement Agreement"); and
WHEREAS, Presidential and the Ivy Partners desire to modify the
Settlement Agreement on the terms set forth herein.
NOW, THEREFORE, it is agreed by Presidential and the Ivy Partners as
follows:
1. All capitalized terms used herein, unless otherwise defined, shall
have the meaning ascribed thereto in the Settlement Agreement.
2. (a) Effective as of the date hereof, Section 12 of the Settlement
Agreement is hereby modified to provide that it shall also be an event of
default under the First Consolidated Note and the Second Consolidated Note if,
in addition to all other sums due under said Section 12, the obligors thereunder
do not also pay the interest on and the principal of the First Consolidated Note
and the Second Consolidated Note, from time to time, to the extent of, and in
an amount equal to, twenty-five (25%) per cent of an amount equal to (i) the
"Scorpio NOI" (as hereinafter defined) less (ii) the amounts, if any, payable
in accordance with paragraph (b) of this Section 2. All such additional
payments made on the First Consolidated Note and Second Consolidated Note shall
be applied first to interest due on the First Consolidated Note and Second
Consolidated Note for the current period, then to deferred interest previously
accrued on the First Consolidated Note and Second Consolidated Note, then to
principal of the First Consolidated Note and then to principal of the Second
Consolidated Note.
(b) In addition to the provisions of Section (2)(a) above, if the
Special Reserve referred to in Section (4)(b) below is in fact funded, in whole
or in part, then it shall also be a default under the First Consolidated Note
if, in addition to the payments provided for in Section (2)(a) above, the
obligors under the First Consolidated Note do not pay interest thereon in an
amount (the "Priority Payment") equal to the lesser of (i) an amount equal to
12-1/2% of the amount funded to the Special Reserve in said fiscal period or
year, as the case may be, and (ii) 100% of the Scorpio NOI in said fiscal year
or period, as the case may be. To the extent the amount described in clause
(i) above exceeds the amount described in clause (ii) above, the excess shall
be paid from the first available Scorpio NOI in any subsequent fiscal period
(after making the payment, if any, then due pursuant to this paragraph (b) on
account of said period).
(c) Notwithstanding the provisions of Sections (2)(a) and (b) above, if
all of the funds deposited into the Special Reserve are released from the
Special Reserve into the general assets of Newco without payment of any of the
potential liabilities referred to in Section 4 (b) below, then (i) as provided
for in Section 4(b) below, the amount released shall be added to operating
income in calculating Scorpio NOI in the period in which it is so released,
(ii) 75% of the Priority Payments previously made to Presidential shall be
credited against the future obligations of the obligors under the First
Consolidated Note and Second Consolidated Note to make payments pursuant to
Section 2(a) above, and (iii) there may be no further payments made to the
Special Reserve.
3. In consideration of the provisions of Section 2 above, the parties
are hereby simultaneously modifying (a) the Modification and Consolidation
Agreement dated as of November 14, 1991 by and between Presidential, the Ivy
Partners and the Ivy Entities referred to therein (the "Modification
Agreement"), and (b) that certain Option/Shareholders Agreement by and among
Presidential, the Ivy Partners, Scorpio Entertainment, Inc. and Scorpio
Ventures, Inc., as previously amended (the "Shareholders Agreement").
4. "Scorpio NOI" shall mean, with respect to each fiscal period or year
of Newco I and Newco II (collectively "Newco") commencing on or after January
1, 1996 and continuing through and including their fiscal years ending prior to
the payment in full of both the First Consolidated Note and the Second
Consolidated Note, an amount equal to the aggregate "net operating income" (as
defined under generally accepted accounting principles), using the cash method
of accounting, earned by Newco in said fiscal period or year, subject to the
following adjustments:
(a) (i) Included as an operating expense shall be those amounts
applied by Newco to fund, or refund, a reserve (the "Newco Reserve"),
provided that for purposes of calculating Scorpio NOI, the Newco Reserve
shall not exceed at any time $100,000 without Presidential's written consent
(which may be withheld for any or no reason whatsoever). The Newco Reserve
may be used for the purpose of paying any and all operating expenses of
Newco, subject, however, to the limits imposed pursuant to paragraph (c)
below and provided that amounts spent on "Permitted Early Production
Investment", as defined in Section 7 of the Shareholders Agreement, shall
not exceed the limits set forth in said Section 7. To the extent of any
and all payments hereafter made to fund or refund the Newco Reserve (up to
said $100,000 figure) and characterized as an operating expense in accordance
with the first sentence of this subparagraph (a) (i), any and all operating
expenses paid from the Newco Reserve shall not be treated as operating
expenses in calculating Scorpio NOI. The Ivy Partners represent that as of
the commencement of the fiscal year commencing January 1, 1996, the Newco
Reserve contained $63,487.77.
(ii) The Newco Reserve and the Special Reserve referred to in
subparagraph (b) below shall be subject to a lien in favor of Presidential to
secure payment of the First Consolidated Note and the Second Consolidated Note.
Notwithstanding anything in this Agreement to the contrary, amounts may not be
withdrawn from the Newco Reserve or the Special Reserve at any time during which
an event of default under the First Consolidated Note, the Second Consolidated
Note, the Shareholders Agreement or the Settlement Agreement shall have occurred
and be continuing.
(b) Also included as an operating expense shall be those amounts applied
by Newco to fund, or refund, a reserve (the "Special Reserve") in an amount
determined from time to time by Newco in its sole discretion (provided that such
amount shall not exceed the sum of $355,000) to provide for the payment of any
liabilities or obligations that Newco or the Ivy Partners may incur to Samsung,
Inc. or to the other investors in the production of "Time and Again" as a result
of any obligation that Newco or the Ivy Partners may have to return the full
investment of Samsung, Inc. Any and all payments to Samsung, Inc. or to the
other investors in "Time and Again" from the Special Reserve shall not be an
operating expense. The funds in the Special Reserve may be used only to pay any
such obligations or liabilities, provided however that at the election of Newco
(which may be exercised in its sole discretion) the funds in the Special Reserve
may be otherwise released therefrom, at which time such funds so released shall
be included as operating income for purposes of determining Scorpio NOI. The
Ivy Partners represent that as of the commencement of the fiscal year commencing
January 1, 1996, the Special Reserve contained zero.
(c) (i) For purposes of calculating Scorpio NOI, the salaries paid by
Newco to Thomas Viertel or any affiliates of his (collectively, "Viertel"),
and/or Steven Baruch or any affiliates of his (collectively, "Baruch"),
respectively, in any fiscal year (collectively, the "Newco Salaries"), shall
equal the lesser of (i) said salaries to the extent actually paid, and (ii) the
greater of (x) $52,500 and (y) one-third of the base salary, excluding both
bonuses, pension plan benefits and other fringe benefits, paid by Presidential
in said fiscal year to Viertel and Baruch, as the case may be (for example, the
base salary of Viertel and Baruch for calendar 1996 is $165,631).
(ii) Notwithstanding anything in this Agreement to the contrary, the
Newco Salaries shall not be paid, but shall be deferred, at any time that (x)
the Newco Reserve is less than $100,000 or to the extent any such payment would
reduce the Newco Reserve to less than $100,000, and (y) any other operating
expenses of Newco remain unpaid for in excess of thirty (30) days. Subject to
clause (y) above and subparagraph (i) of this paragraph (c), any such deferred
salary may be paid after, and to the extent that, the Newco Reserve has been
replenished so as to equal $100,000.
(d) To the extent the same would otherwise not be included in
calculating Scorpio NOI, (i) subject to the limits set forth in Section 7 of
the Shareholders Agreement, Permitted Early Production Investment shall be
included as an operating expense, (ii) reimbursements of Permitted Early
Production Investment from particular productions shall be included as
operating income and (iii) subject to the aforesaid limit on Permitted Early
Production Investment, payments of obligations incurred to partners other than
Samsung, Inc. in connection with the production of "Time and Again" shall be
included as an operating expense.
(e) (i) Viertel and Baruch may continue to participate in and Newco may
continue to own an interest in Showtix, Inc. ("Showtix"), a company specializing
in brokering theater tickets. Any and all compensation paid to Viertel or
Baruch in connection with Showtix shall reduce the amount of the permissible
Newco Salaries of Viertel and/or Baruch, as the case may be, for purposes of
calculating Scorpio NOI in accordance with clause (i) of paragraph (c) above.
(ii) Operating income or losses of Showtix shall not be included
in the calculation of Scorpio NOI. However, any dividends or other
distributions, fees or loans actually received by Newco shall be included in
the calculation of Scorpio NOI. Baruch and Viertel agree that they will cause
Showtix not to retain operating reserves on June 30th of any year in excess of
$50,000 without Presidential's consent. Any cash or liquid assets in excess of
the allowable reserve on June 30th of any year shall be distributed to
stockholders of Showtix.
(f) As provided for in that certain First Amendment to
Option/Shareholders Agreement dated August 1, 1996 (the "First Amendment"),
Newco, Viertel and/or Baruch may form entities to serve as general partners in
limited partnerships which will own and finance individual theatrical ventures.
The operations of said general partnership entities shall be aggregated with the
operations of Newco for purposes of calculating Scorpio NOI (without limiting
the overall "cap" on Permitted Early Production Investment provided for in
Section 7 of the Shareholder's Agreement).
As provided in paragraph (b) of Section 5 of the First Amendment (which
modifies Section 7(b) of the Shareholders Agreement), Newco shall calculate
Scorpio NOI for the first quarter of each fiscal year, for the first six months
of each fiscal year, for the first nine months of each fiscal year and for the
entire fiscal year, with the calculation for the entire fiscal year to be
prepared by a certified public accountant. Payments of interest based on the
Scorpio NOI shall be made with respect to each fiscal period within ten days
after the receipt by Newco of the calculations of the Scorpio NOI for such
period (but in any event within forty (40) days after the end of the first
three fiscal quarters and within fifty-five (55) days after the end of the
fiscal year with respect to the last quarter), provided however that the
calculation of Scorpio NOI for the entire fiscal year prepared by the Newco's
certified public accountant shall be determinative of the Scorpio NOI for the
fiscal year (subject to the provision of paragraph (e) of Section 5 of the
First Amendment) and the parties will adjust for any under-payment or over-
payment made during the prior fiscal periods.
5. Except as specifically modified herein, the Settlement Agreement
shall remain unmodified and in full force and effect.
IN WITNESS WHEREOF, the parties hereto have executed this First Amendment
to Settlement Agreement as of the date first above written.
PRESIDENTIAL REALTY CORPORATION
By: /s/ Robert E. Shapiro
____________________________
/s/ Steven Baruch
_______________________________
Steven Baruch
/s/ Jeffery Joseph
_______________________________
Jeffery Joseph
/s/ Thomas Viertel
_______________________________
Thomas Viertel
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
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<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 2,038,026
<SECURITIES> 987,983
<RECEIVABLES> 29,497,526
<ALLOWANCES> 158,917
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<PP&E> 26,556,955
<DEPRECIATION> 5,853,139
<TOTAL-ASSETS> 59,266,750
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<BONDS> 39,807,150
0
0
<COMMON> 357,250
<OTHER-SE> 11,926,246
<TOTAL-LIABILITY-AND-EQUITY> 59,266,750
<SALES> 0
<TOTAL-REVENUES> 3,784,342
<CGS> 0
<TOTAL-COSTS> 1,491,844
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