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, 2000
----------------
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
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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 8, 2000 was 478,940 shares of Class A common
and 3,217,773 shares of Class B common.
PRESIDENTIAL REALTY CORPORATION AND SUBSIDIARIES
Index to Form 10-Q
For the Three Months Ended
March 31, 2000
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,
2000 1999
-------------------- -------------------
<S> <C> <C>
Real estate (Note 2) $62,978,704 $35,647,633
Less: accumulated depreciation 8,501,203 8,231,480
-------------------- -------------------
Net real estate 54,477,501 27,416,153
-------------------- -------------------
Mortgage portfolio (Note 3):
Sold properties 28,456,200 28,481,797
Related parties 1,558,025 1,574,028
-------------------- -------------------
Total mortgage portfolio 30,014,225 30,055,825
-------------------- -------------------
Less discounts:
Sold properties 1,783,490 1,837,722
Related parties 129,633 132,073
-------------------- -------------------
Total discounts 1,913,123 1,969,795
-------------------- -------------------
Less deferred gains:
Sold properties 11,320,373 11,320,373
Related parties 902,568 908,343
-------------------- -------------------
Total deferred gains 12,222,941 12,228,716
-------------------- -------------------
Net mortgage portfolio (of which $123,872 in 2000
and $127,803 in 1999 are due within one year) 15,878,161 15,857,314
-------------------- -------------------
Minority partners' interest (Note 4) 7,869,541 7,904,533
Prepaid expenses and deposits in escrow 1,930,383 1,434,079
Other receivables (net of valuation allowance of
$80,317 in 2000 and $139,822 in 1999) 604,691 494,220
Securities available for sale (Note 5) 1,049,528 2,299,494
Cash and cash equivalents 1,965,788 7,014,542
Other assets 1,942,162 1,641,095
-------------------- -------------------
Total Assets $85,717,755 $64,061,430
==================== ===================
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,
2000 1999
------------------ ------------------
<S> <C> <C>
Liabilities:
Mortgage debt (of which $1,487,011 in 2000 and
$1,338,491 in 1999 are due within one year) (Note 6) $61,168,868 $39,379,458
Executive pension plan liability 1,492,776 1,479,185
Accrued liabilities 1,638,112 1,637,069
Accrued taxes payable 220,500
Accrued postretirement costs 530,132 538,398
Deferred income 94,196 46,533
Accounts payable 360,572 414,195
Other liabilities 882,291 799,490
------------------ ------------------
Total Liabilities 66,166,947 44,514,828
------------------ ------------------
Stockholders' Equity:
Common stock; par value $.10 per share
Class A, authorized 700,000 shares, issued and
outstanding 478,940 shares 47,894 47,894
Class B March 31, 2000 December 31, 1999 321,896 321,240
----------- ------------------ ------------------
Authorized: 10,000,000 10,000,000
Issued: 3,218,957 3,212,402
Treasury: 1,258 1,258
Additional paid-in capital 2,611,864 2,573,281
Retained earnings 17,090,255 17,209,589
Net unrealized loss on securities available for sale (Notes 5 and 8) (136,773) (221,074)
Class B, treasury stock (at cost) (16,828) (16,828)
Notes receivable for exercise of stock options (367,500) (367,500)
------------------ ------------------
Total Stockholders' Equity 19,550,808 19,546,602
------------------ ------------------
Total Liabilities and Stockholders' Equity $85,717,755 $64,061,430
================== ==================
See notes to consolidated financial statements.
</TABLE>
<TABLE>
PRESIDENTIAL REALTY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
<CAPTION>
THREE MONTHS ENDED MARCH 31,
---------------------------------------
2000 1999
-------------- --------------
Income:
<S> <C> <C>
Rental $2,880,532 $2,603,761
Interest on mortgages - sold properties 744,165 841,053
Interest on wrap mortgages 299,387
Interest on mortgages - related parties 45,209 55,452
Investment income 126,753 111,407
Other 20,314 10,698
-------------- --------------
Total 3,816,973 3,921,758
-------------- --------------
Costs and Expenses:
General and administrative 721,169 666,867
Interest on note payable and other 185,849
Interest on wrap mortgage debt 31,322
Amortization of loan acquisition costs 3,128
Depreciation on non-rental property 5,675 6,255
Rental property:
Operating expenses 1,158,270 1,168,759
Interest on mortgages 766,049 746,305
Real estate taxes 247,392 221,575
Depreciation on real estate 270,584 243,441
Amortization of mortgage costs 20,741 221,771
Minority interest share of partnership income 168,195 128,653
-------------- --------------
Total 3,358,075 3,623,925
-------------- --------------
Income before net gain from sales of properties, notes and securities 458,898 297,833
Net gain from sales of properties, notes and securities (includes a provision
for Federal and State taxes of $1,566,474 in 1999) 12,703 6,718,968
-------------- --------------
Net Income $471,601 $7,016,801
============== ==============
Earnings per Common Share (basic and diluted) (Note 1-C):
Income before net gain from sales of properties, notes and securities $0.13 $0.08
Net gain from sales of properties, notes and securities 0.00 1.86
-------------- --------------
Net Income per Common Share $0.13 $1.94
============== ==============
Cash Distributions per Common Share $0.16 $0.16
============== ==============
Weighted Average Number of Shares Outstanding 3,692,081 3,608,628
============== ==============
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,
--------------------------------------------
2000 1999
---------------- ----------------
Cash Flows from Operating Activities:
<S> <C> <C>
Cash received from rental properties $2,997,647 $2,674,090
Interest received 800,259 1,119,661
Miscellaneous income 19,690 10,074
Interest paid on rental property mortgages (766,652) (751,264)
Interest paid on wrap mortgage debt (31,322)
Interest paid on note payable and other (199,983)
Cash disbursed for rental property operations (1,849,318) (1,052,703)
Cash disbursed for general and administrative costs (812,906) (392,859)
---------------- ----------------
Net cash provided by operating activities 388,720 1,375,694
---------------- ----------------
Cash Flows from Investing Activities:
Payments received on notes receivable 41,600 790,446
Proceeds from sale of notes receivable 20,331,599
Payments of taxes payable on gain from sale of notes (220,500)
Deposit received on contract of sale of property 87,300
Payments disbursed for additions and improvements (69,212) (267,844)
Purchase of property (27,275,886)
Proceeds from sale of property 69,979
Purchases of securities (3,120,231)
Proceeds from sales of securities 1,280,355
---------------- ----------------
Net cash (used in) provided by investing activities (26,173,664) 17,821,270
---------------- ----------------
Cash Flows from Financing Activities:
Principal payments on mortgage debt:
Properties owned (110,590) (105,600)
Wrap mortgage debt on sold properties (98,723)
Mortgage debt payment from proceeds of mortgage refinancing (3,120,190)
Mortgage proceeds 21,900,000 3,195,500
Mortgage costs (350,096) (82,824)
Principal payments on note payable (10,395,361)
Cash distributions on common stock (590,935) (576,651)
Proceeds from dividend reinvestment and share purchase plan 21,014 24,969
Distributions to minority partners (133,203) (270,670)
---------------- ----------------
Net cash provided by (used in) financing activities 20,736,190 (11,429,550)
---------------- ----------------
Net Increase (Decrease) in Cash and Cash Equivalents (5,048,754) 7,767,414
Cash and Cash Equivalents, Beginning of Period 7,014,542 1,764,465
---------------- ----------------
Cash and Cash Equivalents, End of Period $1,965,788 $9,531,879
================ ================
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,
--------------------------------------------
2000 1999
---------------- ----------------
<S> <C> <C>
Reconciliation of Net Income to Net Cash
Provided by Operating Activities
Net Income $471,601 $7,016,801
---------------- ----------------
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization 297,000 474,595
Gain from sales of properties, notes and securities (12,703) (6,718,968)
Issuance of treasury stock for fees and expenses 5,378
Amortization of discounts on notes and fees (92,562) (296,829)
Minority share of partnership income 168,195 128,653
Changes in assets and liabilities:
Decrease (increase) in accounts receivable (74,580) 137,674
Increase (decrease) in accounts payable and accrued liabilities (47,255) 456,109
Increase (decrease) in deferred income 47,663 (2,515)
Decrease (increase) in prepaid expenses, deposits in escrow
and deferred charges (454,619) 173,077
Increase in security deposit liabilities 82,046 2,601
Other 3,934 (882)
---------------- ----------------
Total adjustments (82,881) (5,641,107)
---------------- ----------------
Net cash provided by operating activities $388,720 $1,375,694
================ ================
See notes to consolidated financial statements.
</TABLE>
PRESIDENTIAL REALTY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2000
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. Presidential operates in a single business segment,
investments in real estate related assets.
B. Principles of Consolidation - The consolidated financial statements include
the accounts of Presidential Realty Corporation and its wholly owned
subsidiaries. Additionally, the consolidated financial statements include 100%
of the account balances of UTB Associates and PDL, Inc. and Associates Limited
Co-Partnership ("Home Mortgage Partnership"), partnerships in which Presidential
or PDL, Inc., a wholly owned subsidiary of Presidential, is the General Partner.
All significant intercompany balances and transactions have been eliminated.
C. Net Income Per Share - Basic net income per share data is computed by
dividing the net income by the weighted average number of shares of Class A and
Class B common stock outstanding during each period. Basic net income per share
and diluted income per share are the same for the three months ended March 31,
2000 and 1999. The dilutive effect of stock options is calculated using the
treasury stock method.
D. 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, 1999.
E. Management Estimates - In preparing the consolidated financial statements in
conformity with generally accepted accounting principles, management is required
to make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities as of the date
of the consolidated balance sheets and the reported amounts of income and
expense for the reporting period. Actual results could differ from those
estimates.
2. REAL ESTATE
Real estate is comprised of the following:
March 31, December 31,
2000 1999
----------- -----------
Land $ 9,599,970 $ 5,461,173
Buildings and leaseholds 53,074,148 29,909,205
Furniture and equipment 304,586 277,255
----------- -----------
Total real estate $62,978,704 $35,647,633
=========== ===========
In March, 2000, the Company purchased two apartment properties, Farrington
Apartments, a 224 unit garden apartment property in Clearwater, Florida and
Preston Lake Apartments, a 320 unit garden apartment property in Tucker,
Georgia. The purchase price for the Farrington Apartments property was
$9,630,950 and the purchase price for the Preston Lake Apartments property was
$17,450,000. In connection with the purchase of these two apartment properties,
the Company obtained first mortgage loans of $7,900,000 and $14,000,000,
respectively.
The following pro forma consolidated results of operations are presented as if
the acquisitions of Farrington Apartments and Preston Lake Apartments had
occurred on January 1, 2000.
Three Months Ended March 31, 2000
----------------------------------
As Reported Pro Forma
----------- ----------
Income:
Rental $2,880,532 $3,872,137
Other 936,441 936,441
---------- ----------
Total 3,816,973 4,808,578
---------- ----------
Costs and Expenses:
Rental property:
Operating expenses 1,158,270 1,503,693
Interest on mortgages 766,049 1,183,744
Real estate taxes 247,392 322,071
Depreciation and amortization 291,325 452,936
Other 895,039 895,039
---------- ----------
Total 3,358,075 4,357,483
---------- ----------
Income before net gain from sales of
properties, notes and securities 458,898 451,095
Net gain from sales of properties,
notes and securities 12,703 12,703
---------- ----------
Net Income $ 471,601 $ 463,798
========== ==========
Net Income per Common Share (basic
and diluted) $0.13 $0.13
========== ==========
The pro forma consolidated results of operations include the actual operating
results of the acquired properties from January 1, 2000 to the date of
acquisition, plus adjustments to give effect to revised property management
fees, interest expense on acquisition debt, depreciation expense on the acquired
properties and amortization of mortgage costs. The pro forma information is not
necessarily indicative of the results of operations that would have occurred had
the acquisitions been made at the beginning of 2000 or the results of operations
for future periods.
3. MORTGAGE PORTFOLIO
The Company's mortgage portfolio includes notes receivable - sold properties and
notes receivable - related parties.
Notes receivable - sold properties consist of:
(1) Long-term purchase money notes from sales of properties previously owned by
the Company or notes purchased by the Company. These purchase money notes have
varying interest rates with balloon payments due at maturity.
(2) Notes receivable from sales of cooperative apartment units. 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 Properties, Ltd. or its
affiliates (collectively "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.
At March 31, 2000, all of the notes in the Company's mortgage portfolio are
current with the exception of the Mark Terrace mortgage note, which is secured
by 172 unsold cooperative apartment units at Mark Terrace Apartments, Bronx, New
York. The annual interest on the Mark Terrace note is due in advance in February
of each year. The 2000 interest payment of $140,084 has not been received and
the Company has accrued interest income of $36,423 for the period. The
outstanding principal balance of the note is $2,244,000 and the net carrying
value of the note is $1,685,750 after deducting a deferred gain of $558,250. The
Company anticipates that the annual interest payment will be received in the
second quarter of 2000.
4. MINORITY PARTNERS' INTEREST
Presidential is the General Partner of UTB Associates and PDL, Inc., a wholly
owned subsidiary of Presidential, is the General Partner of Home Mortgage
Partnership. Presidential has a 66-2/3% interest in UTB Associates, and
Presidential and PDL, Inc. have an aggregate 26% interest in Home Mortgage
Partnership. As the General Partner of these partnerships, Presidential and PDL,
Inc., respectively, exercise effective control over the business of these
partnerships, and, accordingly, Presidential consolidates these partnerships in
the accompanying financial statements. The minority partners' interest reflects
the minority partners' equity in the partnerships.
The minority partners' interest in the Home Mortgage Partnership is a negative
interest and therefore, minority partners' interest is a net asset on the
Company's financial statements. The negative basis for each partner's interest
in the Home Mortgage Partnership is due to the refinancing of the mortgage on
the property and the distribution of the proceeds to the partners. The mortgage
debt, which is included in the Company's financial statements, is substantially
in excess of the net carrying amount of the property, but the estimated fair
value of the property is significantly greater than the mortgage debt. Thus, the
asset recorded as minority partners' interest should be realized upon sale of
the property.
Minority partners' interest is comprised of the following:
March 31, December 31,
2000 1999
---------- ------------
Home Mortgage Partnership $8,092,494 $8,112,127
UTB Associates (222,953) (207,594)
---------- ------------
Total minority partners' interest $7,869,541 $7,904,533
========== ============
5. SECURITIES AVAILABLE FOR SALE
The cost and fair value of securities available for sale are as follows:
March 31, December 31,
2000 1999
---------- -----------
Cost $1,186,301 $2,520,568
Gross unrealized gains 1,590 1,824
Gross unrealized losses (138,363) (222,898)
---------- -----------
Fair value $1,049,528 $2,299,494
========== ===========
During the three months ended March 31, 2000, the Company sold securities
available for sale for gross proceeds of $1,285,263 and a net loss of $53,911.
This net loss was composed of a gross loss of $56,217 and a gross gain of
$2,306. During the three months ended March 31, 1999, there were no sales of
securities available for sale.
6. MORTGAGE DEBT
In connection with the purchase of Farrington Apartments and Preston Lake
Apartments in March, 2000, the Company obtained first mortgage loans secured by
the properties as follows:
Mortgage Interest Monthly Maturity Balloon
Property Loan Rate Payment Date Payment
- -------- -------- -------- ------- -------- -------
Farrington Apartments $ 7,900,000 8.25% $ 59,350 5/1/2010 $ 7,106,299
Preston Lake Apartments 14,000,000 8.15% 104,195 5/1/2010 12,564,077
7. INCOME TAXES
Presidential has elected to qualify as a Real Estate Investment Trust under the
Internal Revenue Code. 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, 1999, the Company had taxable income (before
distributions to stockholders) of approximately $3,711,000 ($1.01 per share),
which included approximately $2,836,000 ($.77 per share) of capital gains. The
$3,711,000 was reduced by the $630,000 ($.17 per share) of undistributed
capital gains designated as paid under Section 857(b)(3)(D). At December 31,
1999, the Company accrued $220,500 for income taxes on the $630,000
undistributed capital gain, which tax was subsequently paid in January, 2000.
The $3,081,000 balance of taxable income will be reduced by the $801,000 ($.22
per share) of its 1999 distributions that were not utilized in reducing the
Company's 1998 taxable income. In addition, the Company may elect to apply any
eligible year 2000 distributions to reduce its 1999 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, 2000, Presidential has distributed all of the required 95% ($.23
per share) of its 1999 REIT taxable income. In addition, although no assurances
can be given, it is the Company's present intention to distribute all of its
1999 taxable income (after the $630,000 retained capital gain) and therefore, no
provision for income taxes was made for the $3,081,000 of taxable income at
December 31, 1999.
Furthermore, the Company had taxable income (before distributions to
stockholders) for the three months ended March 31, 2000 of approximately
$235,000 ($.06 per share), which included approximately $13,000 ($.00 per share)
of capital gains. This amount will be reduced by 2000 distributions
that were not utilized in reducing the Company's 1999 taxable income and by
any eligible 2001 distributions that the Company may elect to utilize as a
reduction of its 2000 taxable income.
Presidential intends to continue to maintain its REIT status. Presidential has,
for tax purposes, reported the gain from the sale of certain of its properties
using the installment method.
8. COMPREHENSIVE INCOME
The Company's only element of other comprehensive income is the change in the
unrealized gain (loss) on the Company's securities available for sale. Thus,
comprehensive income, which consists of net income plus or minus other
comprehensive income, for the three months ended March 31, 2000 and 1999 was
$555,902 and $6,951,889, respectively.
9. COMMITMENTS AND CONTINGENCIES
Presidential is not a party to any material legal proceedings except as noted
below.
UTB Associates, a partnership in which the Company holds a 66-2/3% interest, is
a tenant under a lease (the "Professional Space Lease") of 24,400 square feet of
professional office space at University Towers, a cooperative apartment building
in New Haven, Connecticut. UTB Associates sublets the professional space to
unrelated parties. In June, 1999, University Towers Owners Corp., the
cooperative corporation, filed a petition for reorganization under Chapter 11 of
the U.S. Bankruptcy Code in the United States Bankruptcy Court for the District
of Connecticut, New Haven division. As part of the bankruptcy proceedings, in
July, 1999 the cooperative corporation filed an Adversary Proceeding against UTB
Associates for termination of the Professional Space Lease and damages primarily
based on claims arising under Connecticut law. The Company has been advised by
its litigation counsel that there are meritorious defenses to the claim raised
by the cooperative corporation and that if these defenses are successful, it is
unlikely that the Professional Space Lease will be terminated or that any
damages will be assessed against UTB Associates. However, in light of the
uncertainties of litigation, no assurances can be given as to the outcome of the
litigation. The Company's financial statements reflect approximately $19,000 of
income from the Professional Space Lease for each of the quarters ended March
31, 2000 and 1999.
In addition, the Company may be a party to routine litigation incidental to the
ordinary course of its business. In the opinion of management, all of the
Company's properties are adequately covered by insurance in accordance with
normal insurance practices. The Company is not aware of any environmental issues
at any of its properties, with the exception of the environmental expenses
incurred in prior years at its Mapletree Industrial Center property in Palmer,
Massachusetts. The presence, with or without the Company's knowledge, of
hazardous substances at any of its properties could have an adverse effect on
the Company's operating results and financial condition.
PRESIDENTIAL REALTY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND 1999
Results of Operations
Financial Information for the three months ended March 31, 2000 and 1999:
- ----------------------------------------------------------------------------
Revenue decreased by $104,785 primarily as a result of decreases in interest on
wrap mortgages and mortgages-sold properties. These decreases were offset by
increases in rental income.
Rental income increased by $276,771 primarily as a result of the purchase of
Farrington Apartments on March 15, 2000, which increased rental income by
$86,043. In addition, rental income increased by $71,807 at the Home Mortgage
Plaza property and by $118,921 at all other properties. The Farrington
Apartments and the Preston Lake Apartments properties were purchased late in the
first quarter of 2000 and did not significantly impact results of operations.
Interest on wrap mortgages decreased by $299,387 as a result of the modification
of the New Haven wraparound mortgage notes in 1999 and the sale of the Grant
House wraparound mortgage note in 1999. As a result of these transactions, the
Company no longer holds any wraparound mortgage notes.
Interest on mortgages-sold properties decreased by $96,888 primarily due to the
$240,795 decrease in amortization of discounts on notes. The majority of the
discounts on the notes held by Presidential were entirely amortized as the notes
matured, or when a particular note was paid off or sold. This decrease was
partially offset by the $145,746 increase in interest as a result of rate
increases and modifications.
Costs and expenses decreased by $265,850 primarily due to decreases in interest
on note payable and other and decreases in amortization of mortgage costs. These
decreases were offset by increases in general and administrative expenses, real
estate tax expenses and minority interest share of partnership income.
Interest on note payable and other decreased by $185,849 as a result of the
repayment of the note payable in February, 1999.
Amortization of mortgage costs decreased by $201,030 primarily as a result of
the write-off in 1999 of unamortized mortgage costs of $166,756 and the $31,200
prepayment penalty fee associated with the prior mortgage on the Cambridge Green
property which was refinanced in 1999.
General and administrative expenses increased by $54,302 primarily as a result
of increases in salary expense of $22,743 and increases in executive pension
plan and employee pension plan expenses of $19,052 and $21,851, respectively.
Real estate tax expenses increased by $25,817 primarily as a result of property
tax rate increases and assessment increases.
Minority interest share of partnership income increased by $39,542 as a result
of an increase in partnership income on the Home Mortgage Plaza property.
Net gain from sales of properties, notes and securities are sporadic (as they
depend on the timing of sales or the receipt of installments or prepayments on
purchase money notes). In 2000, the net gain from sales of properties, notes and
securities was $12,703 compared with $6,718,968 in 1999:
Gain from sales recognized at March 31, 2000 1999
---- ----
Sales of mortgage notes:
Fairfield Towers First and Second Mortgages
(net of taxes of $1,566,474) sold in 1999 $6,050,740
Grant House wraparound mortgage note sold in 1999 425,000
Deferred gains recognized upon receipt of
principal payments on notes:
Pinewood - $317,662 principal prepayment
received in 1999 218,534
Overlook $ 5,775 5,228
Fairfield Towers Second Mortgage 19,466
Sale of property:
Broad Park Lodge 60,839
Sales of securities (53,911)
------- ----------
$12,703 $6,718,968
======= ==========
Balance Sheet
Real estate increased by $27,331,071 as a result of the purchase of Farrington
Apartments and Preston Lake Apartments in March, 2000. The capitalized costs for
Farrington Apartments, a 224 unit garden apartment property in Clearwater,
Florida was $1,900,000 for land and $7,896,421 for buildings and improvements.
The capitalized costs for Preston Lake Apartments, a 320 unit garden apartment
property in Tucker, Georgia, was $2,240,000 for land and $15,239,465 for
buildings and improvements. In addition, additions and improvements to other
properties were $65,185.
Prepaid expenses and deposits in escrow increased by $496,304 as a result of the
purchase of Farrington Apartments and Preston Lake Apartments in March of 2000.
Securities available for sale decreased by $1,249,966 as a result of the sale of
$1,334,267 in marketable equity securities, primarily interest-bearing corporate
preferred stocks, offset by an $84,301 increase in the fair value of securities
available for sale.
Cash and cash equivalents decreased by $5,048,754 primarily as a result of the
cash utilized for the purchase of Farrington Apartments and Preston Lake
Apartments.
Mortgage debt increased by $21,789,410 primarily due to the $7,900,000 mortgage
on Farrington Apartments and the $14,000,000 mortgage on Preston Lake
Apartments.
Deferred income increased by $47,663 primarily as a result of an increase of
$42,213 in prepaid rents.
In March, 2000, three directors of the Company were each given 1,000 shares of
the Company's Class B common stock as partial payment for directors fees for the
2000 year. The average market value for the previous month of the Class B common
stock, on which the fees were based, was $6.075 per share. As a result of this
transaction, the Company recorded $18,225 in prepaid directors fees (to be
amortized during 2000) based on the average market value of the stock. The
Company recorded additions to the Company's Class B common stock of $300 at par
value of $.10 per share and $17,925 to additional paid-in capital.
Net unrealized loss on securities available for sale decreased by $84,301 as a
result of the increase in the fair value of securities available for sale.
Forward-Looking Statements
Certain statements made in this report may constitute "forward-looking
statements" within the meaning of Section 27A of the Securities Act of 1933, as
amended and Section 21E of the Securities Exchange Act of 1934, as amended. Such
forward-looking statements include statements regarding the intent, belief or
current expectations of the Company and its management and involve known and
unknown risks, uncertainties and other factors which may cause the actual
results, performance or achievements of the Company to be materially different
from any future results, performance or achievements expressed or implied by
such forward-looking statements. Such factors include, among other things, the
following: general economic and business conditions, which will, among other
things affect the demand for apartments or commercial space, availability and
creditworthiness of prospective tenants, lease rents and the terms and
availability of financing; adverse changes in the real estate markets including,
among other things, competition with other companies; risks of real estate
development and acquisition; governmental actions and initiatives; and
environment/safety requirements.
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. During the quarter ended March 31, 2000, the Company
purchased two new properties and utilized a substantial portion of its available
funds, as well as obtaining mortgage financing for the purchase of these
properties. Except as discussed herein, management is not aware of any other
trends, events, commitments or uncertainties that will have a significant effect
on liquidity.
Presidential obtains funds for working capital and investment from its
available cash and cash equivalents, from securities available for sale, from
operating activities, from refinancing of mortgage loans on its real estate
equities, and from the sales of or repayments on its mortgage portfolio. The
Company also has at its disposal a $250,000 unsecured line of credit from a
lending institution.
At March 31, 2000, Presidential had $1,965,788 in available cash and cash
equivalents, a decrease of $5,048,754 from the $7,014,542 at December 31, 1999.
This decrease in cash and cash equivalents was due to cash provided by operating
activities of $388,720 and financing activities of $20,736,190, offset by cash
used in investing activities of $26,173,664.
Operating Activities
Presidential's principal source of cash from operating activities is from
interest on its mortgage portfolio, which was $800,259 in 2000. In 2000, net
cash received from rental property operations was $248,474, which is net of
distributions from partnership operations 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. During 2000, the Company received principal payments of $41,600 on
its mortgage portfolio of which $4,866 represented prepayments, which are
sporadic and cannot be relied upon as a regular source of liquidity.
In March, 2000, the Company purchased Farrington Apartments and Preston Lake
Apartments for a purchase price of $9,630,950 and $17,450,000, respectively.
The Company obtained first mortgage loans of $7,900,000 and $14,000,000,
respectively, which are secured by the properties. (See Balance Sheet above and
Financing Activities below).
During 2000, the Company invested $69,212 in additions and improvements to its
properties.
The Company also holds a portfolio of marketable equitable securities which
decreased by $1,249,966, primarily as a result of the $1,334,267 sale of
corporate preferred stocks, offset by an increase in the fair value of
securities of $84,301.
Financing Activities
The Company's indebtedness at March 31, 2000, consisted of $61,168,868 of
mortgage debt. The mortgage debt, which is secured by individual properties, is
nonrecourse to the Company with the exception of the $255,541 Mapletree
Industrial Center mortgage, which is secured by the property and a guarantee of
repayment by Presidential. In addition, some of the Company's mortgages provide
for personal liability for damages resulting from specified acts or
circumstances, such as for environmental liabilities and fraud. Generally,
mortgage debt repayment is serviced with cash flow from the operations of the
individual properties. During 2000, the Company made $110,590 of principal
payments on mortgage debt.
In connection with the purchase of Farrington Apartments and Preston Lake
Apartments in March, 2000, the Company obtained first mortgage loans secured by
the properties as follows:
Mortgage Interest Monthly Maturity Balloon
Property Loan Rate Payment Date Payment
- -------- ---------- -------- -------- --------- ----------
Farrington Apartments $ 7,900,000 8.25% $ 59,350 5/1/2010 $ 7,106,299
Preston Lake Apartments 14,000,000 8.15% 104,195 5/1/2010 12,564,077
In addition, the Company paid mortgage costs of $350,096 for the mortgages
obtained for the new properties. These mortgage costs were capitalized to other
assets and will be amortized over the life of the mortgages applying the
interest method.
The mortgages on the Company's properties are at fixed rates of interest. The
majority of the mortgages have balloon payments due at maturity with the
exception of four mortgages which are self-liquidating.
During 2000, Presidential declared and paid cash distributions of $590,935 to
its shareholders and received proceeds from its dividend reinvestment and share
purchase plan of $21,014.
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits:
10.12 Employment Agreement dated January 1, 2000 between the Company and
Jeffrey F. Joseph.
10.13 Employment Agreement dated January 1, 2000 between the Company and
Steven Baruch.
10.14 Employment Agreement dated January 1, 2000 between the Company and
Thomas Viertel.
27. Financial Data Schedule.
(b) During the calendar quarter ended March 31, 2000, the Company filed two
Form 8-K's dated March 27, 2000, and April 10, 2000 which disclosed
under Item 2 - Acquisition or Disposition of Assets the purchase of
Farrington Apartments and the purchase of Preston Lake Apartments,
respectively.
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, 2000 By: /s/ Jeffrey F. Joseph
---------------------
Jeffrey F. Joseph
President
DATE: May 12, 2000 By: /s/ Elizabeth Delgado
---------------------
Elizabeth Delgado
Treasurer
EMPLOYMENT AGREEMENT
This Employment Agreement, made as of January 1, 2000, 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, 2002, 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, 2000, at the annual rate of Two Hundred
Sixty Two Thousand Five Hundred Eighty-four and no/100 ($262,584.00) Dollars
times the Cost of Living Adjustment Factor (as hereinafter defined);
(b) for the calendar year beginning on January 1, 2001 and ending on
December 31, 2001, in an amount equal to the salary paid for the calendar year
beginning January 1, 2000 and ending on December 31, 2000 times the lesser of
(i) 1.05 and (ii) the Cost of Living Adjustment Factor; and
(c) for the calendar year beginning on January 1, 2002 and ending on
December 31, 2002, in an amount equal to the salary paid for the calendar year
beginning on January 1, 2001 and ending on December 31, 2001 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 2000, 2001 and 2002 (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 $.53 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 April 1, 2000 but prior to December 31, 2001, 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 $43,000; provided, however,
that Executive may select a car costing more than $43,000 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 January 1, 1997 (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, 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 January 1, 1999 (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, 2002; 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
(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: Robert E. Shapiro
-----------------
Robert E. Shapiro, Chairman
of the Board of Directors
EXECUTIVE:
Jeffrey F. Joseph
-----------------
Jeffrey F. Joseph
EMPLOYMENT AGREEMENT
This Employment Agreement, made as of January 1, 2000, 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 August 1, 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, 2002, 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, 2000, at the annual rate of One Hundred
Seventy Six Thousand Four Hundred Fifty and no/100 ($176,450.00) Dollars times
the Cost of Living Adjustment Factor (as hereinafter defined);
(b) for the calendar year beginning on January 1, 2001 and ending on
December 31, 2001, in an amount equal to the salary paid for the calendar year
beginning January 1, 2000 and ending on December 31, 2000 times the lesser of
(i) 1.05 and (ii) the Cost of Living Adjustment Factor; and
(c) for the calendar year beginning on January 1, 2002 and ending on
December 31, 2002, in an amount equal to the salary paid for the calendar year
beginning on January 1, 2001 and ending on December 31, 2001 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 2000, 2001 and 2002 (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 $.53 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 April 1, 2000 but prior to December 31, 2001, 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 $43,000; provided, however,
that Executive may select a car costing more than $43,000 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 January 1, 1997 (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, 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 January 1, 1999 (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, 2002; 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, 2000 or at December 31, 2001 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
(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 successors 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: Robert E. Shapiro
-----------------
Robert E. Shapiro, Chairman
of the Board of Directors
EXECUTIVE:
Steven Baruch
-------------
Steven Baruch
EMPLOYMENT AGREEMENT
This Employment Agreement, made as of January 1, 2000, 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 August 1, 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, 2002, 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, 2000, at the annual rate of One Hundred
Seventy Six Thousand Four Hundred Fifty and no/100 ($176,450.00) Dollars times
the Cost of Living Adjustment Factor (as hereinafter defined);
(b) for the calendar year beginning on January 1, 2001 and ending on
December 31, 2001, in an amount equal to the salary paid for the calendar year
beginning January 1, 2000 and ending on December 31, 2000 times the lesser of
(i) 1.05 and (ii) the Cost of Living Adjustment Factor; and
(c) for the calendar year beginning on January 1, 2002 and ending on
December 31, 2002, in an amount equal to the salary paid for the calendar year
beginning on January 1, 2001 and ending on December 31, 2001 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 2000, 2001 and 2002 (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 $.53 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 April 1, 2000 but prior to December 31, 2001, 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 $43,000; provided, however,
that Executive may select a car costing more than $43,000 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 January 1, 1997 (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, 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 January 1, 1999 (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, 2002; 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, 2000 or at December 31, 2001 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
(b) if to Executive, to:
Thomas Viertel
333 West 56th Street
New York, New York 10019
16. Assignment. This Employment Agreement shall inure to the benefit of
Executive and Employer and be binding upon the successors 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: Robert E. Shapiro
-----------------
Robert E. Shapiro, Chairman
of the Board of Directors
EXECUTIVE:
Thomas Viertel
--------------
Thomas Viertel
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