-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Sh6EtpXnrEyWGchdTO2gmWBQZSB1Om0Zu/Zf498iZVpl9XRmz6z8WFIXlW07gvG1 MoSbrcOv1Lwcfa1ZIijVFw== 0000731245-97-000002.txt : 19970514 0000731245-97-000002.hdr.sgml : 19970514 ACCESSION NUMBER: 0000731245-97-000002 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 19970331 FILED AS OF DATE: 19970513 SROS: AMEX FILER: COMPANY DATA: COMPANY CONFORMED NAME: PRESIDENTIAL REALTY CORP/DE/ CENTRAL INDEX KEY: 0000731245 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE INVESTMENT TRUSTS [6798] IRS NUMBER: 131954619 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-08594 FILM NUMBER: 97602569 BUSINESS ADDRESS: STREET 1: 180 S BROADWAY CITY: WHITE PLAINS STATE: NY ZIP: 10605 BUSINESS PHONE: 9149481300 MAIL ADDRESS: STREET 1: 180 SOUTH BROADWAY CITY: WHITE PLAINS STATE: NY ZIP: 10605 10-Q 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) [x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 1997 -------------------- OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number 1-8594 ------- PRESIDENTIAL REALTY CORPORATION ------------------------------- (Exact name of registrant as specified in its charter) Delaware 13-1954619 --------- ---------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 180 South Broadway, White Plains, New York 10605 ------------------------------------------ ------ (Address of principal executive offices) (Zip Code) Registrant's telephone number, indicating area code 914-948-1300 ------------ Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ------ ------ The number of shares outstanding of each of the issuer's classes of common stock as of the close of business on May 7, 1997 was 478,940 shares of Class A common and 3,080,921 shares of Class B common. PRESIDENTIAL REALTY CORPORATION AND SUBSIDIARIES Index to 10-Q For the Three Months Ended March 31, 1997 Part I - Financial Information (Unaudited) Consolidated Balance Sheets Consolidated Statements of Operations Consolidated Statements of Cash Flows Notes to Consolidated Financial Statements Management's Discussion and Analysis of Financial Condition and Results of Operations Part II - Other Information Item 6. Exhibits and Reports on Form 8-K PRESIDENTIAL REALTY CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Unaudited)
Assets March 31, December 31 1997 1996 ------------ ------------ Mortgage portfolio (Note 2): Sold properties, accrual $45,752,244 $46,522,752 Related parties, accrual 966,763 976,141 Sold properties, impaired 14,624,344 14,659,841 Related parties, impaired 1,561,587 1,567,400 ------------ ------------ Total mortgage portfolio 62,904,938 63,726,134 ------------ ------------ Less discounts: Sold properties, accrual 5,717,277 6,322,402 Related parties, accrual 142,681 145,915 Sold properties, impaired 7,747,160 7,765,964 ------------ ------------ Total discounts 13,607,118 14,234,281 ------------ ------------ Less deferred gains: Sold properties, accrual 13,573,927 14,046,423 Sold properties, impaired 5,472,420 5,489,113 Related parties, impaired 1,561,587 1,567,400 ------------ ------------ Total deferred gains 20,607,934 21,102,936 ------------ ------------ Net mortgage portfolio (of which $593,354 in 1997 and $587,839 in 1996 are due within one year) 28,689,886 28,388,917 ------------ ------------ Real estate (Note 3) 26,556,955 25,369,405 Less: accumulated depreciation 5,853,139 5,680,108 ------------ ------------ Net real estate 20,703,816 19,689,297 ------------ ------------ Foreclosed properties (Note 4) 588,683 Minority partners' interest (Note 5) 3,757,735 3,830,024 Prepaid expenses and deposits in escrow 1,280,999 1,123,697 Other receivables (net of valuation allowance of $158,917 in 1997 and $184,790 in 1996) 638,784 635,848 Other receivables (related party) 9,939 10,109 Securities available for sale (Note 6) 987,983 975,208 Cash and cash equivalents 2,038,026 1,392,135 Other assets 1,159,582 1,166,115 ------------ ------------ Total Assets $59,266,750 $57,800,033 ============ ============ See notes to consolidated financial statements.
PRESIDENTIAL REALTY CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Unaudited)
Liabilities and Stockholders' Equity March 31, December 31, 1997 1996 ------------- ------------- Liabilities: Mortgage debt : Properties owned $26,370,362 $26,513,465 Wrap mortgage debt on sold properties 5,498,639 5,613,041 ------------- ------------- Total (of which $1,072,773 in 1997 and $1,053,553 in 1996 are due within one year) 31,869,001 32,126,506 Note payable to bank (of which $95,553 in 1997 and $93,377 in 1996 are due within one year) (Note 7) 9,106,475 8,642,600 Executive pension plan liability (Note 10) 1,687,742 1,716,112 Accrued liabilities 2,130,904 2,092,876 Accrued postretirement costs (Note 11) 586,857 592,453 Deferred income 455,718 395,677 Accounts payable 585,899 271,126 Other liabilities 560,658 524,526 ------------- ------------- Total Liabilities 46,983,254 46,361,876 ------------- ------------- Stockholders' Equity: Common stock; par value $.10 a share (Note 1-C) Class A, authorized 700,000 shares, issued and outstanding 478,940 shares 47,894 47,894 Class B March 31, 1997 December 31, 1996 309,356 308,675 ----------- --------------- --------------- Authorized: 10,000,000 10,000,000 Issued: 3,093,559 3,086,750 Treasury: 14,221 14,221 Additional paid-in capital 1,915,291 1,874,341 Retained earnings 10,170,309 9,350,801 Net unrealized gain on securities available for sale (Note 6) 33,214 49,014 Class B, treasury stock (at cost) (192,568) (192,568) ------------- ------------- Total Stockholders' Equity 12,283,496 11,438,157 ------------- ------------- Total Liabilities and Stockholders' Equity $59,266,750 $57,800,033 ============= ============= See notes to consolidated financial statements.
PRESIDENTIAL REALTY CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
THREE MONTHS ENDED MARCH 31, --------------------------------- 1997 1996 Income: ------------ ------------ Rental $2,022,304 $2,229,857 Interest on mortgages - sold properties 1,289,629 536,791 Interest on wrap mortgages 345,525 350,677 Interest on mortgages - related parties 57,786 68,110 Investment income 44,682 69,362 Other 24,416 15,083 ------------ ------------ Total 3,784,342 3,269,880 ------------ ------------ Costs and Expenses: General and administrative 589,554 637,876 Interest on note payable and other 228,801 35,426 Interest on wrap mortgage debt 58,711 63,862 Amortization of loan acquisition costs 6,822 Depreciation on non-rental property 6,739 6,009 Rental property: Operating expenses 987,343 889,207 Interest on mortgages 538,649 551,857 Real estate taxes 151,598 199,122 Depreciation on real estate 173,031 159,019 Amortization of mortgage costs 33,738 36,043 Minority interest share of partnership income 146,134 271,770 Loss from operations of foreclosed properties (Note 4) 9,729 ------------ ------------ Total 2,921,120 2,859,920 ------------ ------------ Income before net gain from sales of properties and securities 863,222 409,960 Net gain from sales of properties and securities 489,376 25,126 ------------ ------------ Net Income $1,352,598 $435,086 ============ ============ Earnings per Common Share (Note 1-C): Income before net gain from sales of properties and securities $0.24 $0.12 Net gain from sales of properties and securities 0.14 0.00 ------------ ------------ Net Income per Common Share $0.38 $0.12 ============ ============ Cash Distributions per Common Share $0.15 $0.15 ============ ============ Weighted Average Number of Shares Outstanding 3,554,080 3,530,047 ============ ============ See notes to consolidated financial statements.
PRESIDENTIAL REALTY CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
THREE MONTHS ENDED MARCH 31, --------------------------------- 1997 1996 Cash Flows from Operating Activities: ------------ ------------ Cash received from rental properties $2,049,835 $2,210,270 Interest received 1,141,485 833,309 Miscellaneous income (disbursements) 23,791 (22,525) Interest paid on rental property mortgages (511,339) (557,658) Interest paid on wrap mortgage debt (58,711) (63,862) Interest paid on loan (179,578) Cash disbursed for rental and foreclosed property operations (989,464) (963,230) Cash disbursed for general and administrative costs (628,482) (654,190) ------------ ------------ Net cash provided by operating activities 847,537 782,114 ------------ ------------ Cash Flows from Investing Activities: Payments received on notes receivable 1,378,953 195,447 Payments disbursed for investments in notes receivable (603,522) (9,928) Payments disbursed for additions and improvements (445,115) (197,374) Proceeds from sales of securities 45,000 100,496 Purchases of securities (79,202) Purchase of 1% interest in partnership (60,000) Net cash receipts from operations of foreclosed properties 1,508 ------------ ------------ Net cash provided by investing activities 236,114 90,149 ------------ ------------ Cash Flows from Financing Activities: Principal payments on mortgage debt: Properties owned (143,103) (134,482) Wrap mortgage debt on sold properties (114,402) (110,375) Note proceeds 600,018 Principal payments on note payable (136,143) Mortgage costs (25,000) (1,250) Cash distributions on common stock (533,090) (529,400) Proceeds from dividend reinvestment and share purchase plan 41,631 33,476 Distributions to minority partners (127,671) (92,754) ------------ ------------ Net cash used in financing activities (437,760) (834,785) ------------ ------------ Net Increase in Cash and Cash Equivalents 645,891 37,478 Cash and Cash Equivalents, Beginning of Period 1,392,135 1,306,505 ------------ ------------ Cash and Cash Equivalents, End of Period $2,038,026 $1,343,983 ============ ============ See notes to consolidated financial statements.
PRESIDENTIAL REALTY CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
THREE MONTHS ENDED MARCH 31, --------------------------------- 1997 1996 ------------ ------------ Reconciliation of Net Income to Net Cash Provided by Operating Activities Net Income $1,352,598 $435,086 ------------ ------------ Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 220,330 201,071 Gain from sales of properties and securities (489,376) (25,126) Amortization of discounts on notes and fees (627,163) (183,386) Increase in accounts receivable (2,766) (123,536) Increase in accounts payable and accrued liabilities 318,835 32,547 Increase in deferred income 60,041 52,526 Decrease (increase) in prepaid expenses, deposits in escrow and deferred charges (157,302) 115,591 Increase in security deposit liabilities 26,827 6,195 Miscellaneous (621) (624) Minority share of partnership income 146,134 271,770 ------------ ------------ Total adjustments (505,061) 347,028 ------------ ------------ Net cash provided by operating activities $847,537 $782,114 ============ ============ Supplemental noncash disclosures: Property received in satisfaction of debt $45,765 ============ See notes to consolidated financial statements.
PRESIDENTIAL REALTY CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE MONTHS ENDED MARCH 31, 1997 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES A. General - Presidential Realty Corporation ("Presidential" or the "Company"), a Real Estate Investment Trust ("REIT"), is engaged principally in the holding of notes and mortgages secured by real estate and in the ownership of income producing real estate. B. Principles of Consolidation - The consolidated financial statements include the accounts of Presidential Realty Corporation and its wholly owned subsidiaries. Additionally, the accompanying consolidated financial statements include 100% of the account balances of UTB Associates and PDL, Inc. and Associates Limited Co-Partnership ("Metmor Plaza Associates"), partnerships in which Presidential is the General Partner. Presidential owns a 66-2/3% interest in UTB Associates. In January, 1997, Presidential acquired an additional 1% interest in Metmor Plaza Associates increasing its interest in this partnership from 25% at December 31, 1996 to 26% at March 31, 1997. See Note 5. All significant intercompany balances and transactions have been eliminated. C. Earnings Per Common Share - Per share data is based on the weighted average number of shares of Class A and Class B common stock outstanding and common stock equivalents during each period. The Company will adopt the provisions of Statement of Financial Accounting Standards ("SFAS") No. 128 "Earnings per Share" in the fourth quarter of 1997. The standard specifies the computation, presentation and disclosure requirements for earnings per share. As required by the standard, the Company will restate all prior period earnings per share data presented. The adoption of the new standard is not expected to have a material effect on the Company's consolidated financial statements. D. Cash and Cash Equivalents - Cash and cash equivalents includes cash on hand, cash in banks and money market funds. E. Basis of Presentation - The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information. In the opinion of management, all adjustments (consisting of only normal recurring accruals) considered necessary for a fair presentation of the results for the respective periods have been reflected. These financial statements and accompanying notes should be read in conjunction with the Company's Form 10-K for the year ended December 31, 1996. F. Management Estimates - In preparing the consolidated financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the consolidated balance sheets and income and expense for the period. Actual results could differ from those estimates. 2. MORTGAGE PORTFOLIO The Company's mortgage portfolio includes notes receivable - sold properties and notes receivable - related parties and includes both accrual and impaired loans. The Company complies with the provisions of SFAS No. 114, "Accounting by Creditors for Impairment of a Loan" and, accordingly, has classified loans that are within the scope of this statement as impaired loans. Notes receivable - sold properties consist of: (1) Long-term purchase money notes from sales of properties previously owned by the Company. These purchase money notes have varying interest rates with balloon payments due at maturity. Also included in this category is the Fairfield Towers First Mortgage which the Company purchased in the fourth quarter of 1996. (2) Notes receivable from sales of cooperative apartment units. Substantially all of these notes were either received from Ivy Properties, Ltd. or its affiliates (collectively "Ivy") in connection with a settlement agreement between the Company and Ivy executed in November, 1991 (the "Settlement Agreement") or from sales of foreclosed cooperative apartments received from Ivy pursuant to the Settlement Agreement (see Note 4). These notes generally have market interest rates and the majority of these notes amortize monthly with balloon payments due at maturity. Notes receivable - related parties are all due from Ivy and consist of: (1) Purchase money notes resulting from sales of property or partnership interests to Ivy. (2) Notes receivable relating to loans made by the Company to Ivy in connection with Ivy's cooperative conversion business. In January, 1997, the Company modified its Woodland notes receivable, extending the maturity date from 2000 to 2005, with interest rates increasing in 2002 from 9% to 9.25%. In March, 1997, the Company received prepayment of its $1,074,200 Cedarbrooke note receivable resulting in the recognition of income from the amortization of discount of $382,796 and a gain on sale of $472,497. In addition, in March, 1997, the Company advanced an additional $600,018 on the Fairfield Towers First Mortgage to the owners of the unsold condominium units to be used for payment of a portion of the unpaid real estate taxes (and interest accrued thereon) on these condominium units. At March 31, 1997, all of the notes in the Company's mortgage portfolio are current with the exception of the Fairfield Towers Second Mortgage (sold properties) and the Overlook loan (related parties), which are classified as impaired loans in accordance with SFAS No. 114. These two loans are in the aggregate amount of $16,185,931 and have a net carrying value of $1,404,764 after deducting discounts of $7,747,160 and deferred gains of $7,034,007. In accordance with SFAS No. 114, the Company has determined that no allowances for credit losses are required for these loans because the net carrying value of these loans is less than the fair value of the underlying collateral. The Company recognizes income on the impaired loans only to the extent that such income is actually received. The average recorded investment in impaired loans during the three months ended March 31, 1997 and March 31, 1996 was $16,208,405 and $17,047,560, respectively. There have been no significant changes in the status of the impaired loans since December 31, 1996. Condominium sales at the Fairfield Towers property have continued and an additional 6 units were sold during the three months ended March 31, 1997. The following table reflects the activity in impaired loans: IMPAIRED LOANS ----------------------------
Impaired Impaired Loan Additions Loan Balance (Payments) Balance Loan Description 12/31/96 1997 3/31/97 --------------------------------- ------------- ------------- ------------ Notes receivable-sold properties: Properties previously owned- Fairfield Towers Second Mortgage $14,659,841 ($35,497) $14,624,344 Notes receivable-related parties: Sold properties- Overlook 1,567,400 (5,813) 1,561,587 ------------- ------------- ------------ Total $16,227,241 ($41,310) $16,185,931 ============= ============= ============ Discount Deferred Net on Gain on Carrying Loans Loans Value Loan Description 3/31/97 3/31/97 3/31/97 --------------------------------- ------------- ------------- ------------ Notes receivable-sold properties: Properties previously owned- Fairfield Towers Second Mortgage ($7,747,160) ($5,472,420) $1,404,764 Notes receivable-related parties: Sold properties- Overlook (1,561,587) ------------- ------------- ------------ Total ($7,747,160) ($7,034,007) $1,404,764 ============= ============= ============ Three months ended March 31, ----------------------------- 1997 1996 ------------- ------------ Reported Interest Income and Amortization of Discount (Cash Basis) ------------------------------------------------------ Fairfield Towers Second Mortgage - interest income $54,746 $25,768 Fairfield Towers Second Mortgage - amortization of discount 18,804 21,758 Overlook - interest income 23,453 24,811 Overlook - additional interest income 6,145 12,036 ------------- ------------ Total $103,148 $84,373 ============= ============ Recognized Gain from Sale of Property -------------------------------------------------------- Fairfield Towers Second Mortgage $16,693 $19,314 Overlook 5,813 5,316 ------------- ------------ Total $22,506 $24,630 ============= ============ Nonreported Interest Income and Amortization of Discount --------------------------------------------------------- The following additional amounts would have been reported if these loans had been fully performing: Fairfield Towers Second Mortgage - interest income $192,412 $216,089 Fairfield Towers Second Mortgage - additional interest income 21,645 84,696 Fairfield Towers Second Mortgage - amortization of discount 266,677 220,648 Overlook - interest income Overlook - additional interest income ------------- ------------ Total $480,734 $521,433 ============= ============
3. REAL ESTATE Real estate is comprised of the following: March 31, December 31, 1997 1996 ----------- ------------ Land $ 3,773,404 $ 3,664,548 Buildings and leaseholds 22,650,998 21,580,207 Furniture and equipment 132,553 124,650 ----------- ----------- Total real estate $26,556,955 $25,369,405 =========== =========== From 1991 through 1994, the Company acquired ownership of cooperative apartment units in satisfaction of loans due Presidential. Such cooperative apartment units had been classified as foreclosed properties on the Company's consolidated balance sheet (see Note 4). Presidential now intends to hold the remaining 53 cooperative apartment units as rental property and, accordingly, has reclassified these units from foreclosed properties to real estate effective January 1, 1997. 4. FORECLOSED PROPERTIES At December 31, 1996, Presidential owned 53 cooperative apartment units which it had received in satisfaction of certain loans due Presidential. These cooperative apartment units are located at four locations: Towne House, New Rochelle, N.Y. (39 units); 6300 Riverdale Avenue, Bronx, N.Y. (8 units); Sherwood House, Long Beach, N.Y. (3 units) and 330 W. 72nd St., New York, N.Y. (3 units). Cooperative apartment units at three of the above properties were received from Ivy in 1991 and 1992 in connection with the Settlement Agreement. The cooperative apartment units at Long Beach were received from Ivy in 1994 in payment of the outstanding loan on that property and other amounts due to Presidential pursuant to the Settlement Agreement. At December 31, 1996, these cooperative apartment units were reported as foreclosed properties on Presidential's consolidated balance sheet and were carried at the lower of cost or estimated fair value (net of estimated costs to sell). Net loss from operations of foreclosed properties prior to 1997 was reported as a separate line item on the statement of operations, while net cash receipts from operations of foreclosed properties reduced the Company's carrying value of the foreclosed property. The Company now intends to hold these cooperative apartment units as rental property and, accordingly, reclassified them from foreclosed properties to real estate effective January 1, 1997. The net carrying value of the foreclosed properties reclassified to real estate on January 1, 1997 was as follows: Towne House $404,337 6300 Riverdale Avenue 76,196 Sherwood House 59,246 330 W. 72nd Street 48,904 -------- Total net carrying value $588,683 ======== Loss from operations of foreclosed properties for the three months ended March 31, 1996 consisted of the following: 6300 Riverdale Avenue $4,668 Sherwood House 1,657 Hastings Gardens (1) 3,404 ------ Total loss $9,729 ====== (1) The remaining cooperative apartments at Hastings Gardens, Hastings, N.Y. were sold in September, 1996. 5. MINORITY PARTNERS' INTEREST Presidential is the General Partner of UTB Associates and Metmor Plaza Associates, partnerships in which in 1996 Presidential had a 66-2/3% interest and a 25% interest, respectively. In January, 1997, Presidential acquired an additional 1% interest in Metmor Plaza Associates for a purchase price of $60,000, which increased its interest in this partnership from 25% at December 31, 1996 to 26% at March 31, 1997. As the General Partner of these partnerships, Presidential exercises effective control over the business of these partnerships, and, accordingly, has included 100% of the account balances of these partnerships in the accompanying financial statements (see Note 1-B). The minority partners' interest reflects the minority partners' equity in the partnerships. Included in the Company's mortgage debt is a mortgage note payable by the Metmor Plaza Associates partnership which is substantially in excess of the historical cost of the property. This was due to a refinancing of the original mortgage note on the building and subsequent distribution of these proceeds to the partners. This event resulted in a negative partnership interest for each partner and a negative minority partners' interest on the Company's books. The estimated fair value of the building is significantly greater than the mortgage debt and the minority partners' interest is expected to be recovered when the building is sold and the partnership is liquidated. Minority partners' interest is comprised of the following: March 31, December 31, 1997 1996 ------------- ------------ Metmor Plaza Associates $3,966,701 $4,036,858 UTB Associates (208,966) (206,834) ---------- ---------- Total minority partners' interest $3,757,735 $3,830,024 ========== ========== 6. SECURITIES AVAILABLE FOR SALE The Company's investments are in marketable equity securities consisting of stocks of listed corporations. The Company does not acquire securities for purposes of engaging in trading activities and, as a result, the Company's investments are classified as securities available for sale in accordance with SFAS No. 115, "Accounting for Certain Investments in Debt and Equity Securities". Disposition of such securities may be appropriate for either liquidity management or in response to changing economic conditions. The cost and fair value of securities available for sale are as follows: March 31, December 31, 1997 1996 --------- ------------ Cost $954,769 $926,194 Gross unrealized gains 69,504 71,033 Gross unrealized losses (36,290) (22,019) -------- -------- Fair value $987,983 $975,208 ======== ======== Net unrealized gain on securities available for sale, which is a separate component of stockholders' equity on the Company's consolidated balance sheets, decreased by $15,800 from $49,014 at December 31, 1996 to $33,214 at March 31, 1997. During the three months ended March 31, 1997, the Company sold securities available for sale for gross proceeds of $45,000 and a gross (and net) loss of $5,627. During the three months ended March 31, 1996, the Company sold securities available for sale for gross proceeds of $101,500 and a gross (and net) gain of $496. Gains and losses on sales of securities are determined using the specific identification method. 7. NOTE PAYABLE TO BANK The Company obtained an $8,650,000 bank loan in the fourth quarter of 1996 from Fleet Bank, N.A. ("Fleet") in connection with the purchase of the Fairfield Towers First Mortgage. The note, which matures on October 30, 2001, is secured by a collateral assignment of the Fairfield Towers First Mortgage and, except for a guarantee by Presidential of $1,000,000 of the indebtedness, is nonrecourse to Presidential. The Company has the option of selecting each month among three interest rates: 1% over Fleet's prime rate; 3% in excess of a cost of funds rate set by the bank for a period of 90 days and 3% in excess of the LIBOR rate for a one, two or three month period. The note amortizes monthly based on a 9.25% interest rate for a 25 year term. In addition, upon the sale of condominium units, the Company is required to make principal payments to Fleet in an amount equal to the amount of principal payments received by the Company on the Fairfield Towers First Mortgage. In March, 1997, the Company received an additional $600,018 advance on this loan from Fleet. This advance was obtained to reimburse the Company for its $600,018 advance on the Fairfield Towers First Mortgage (see Note 2). At March 31, 1997 payments on this loan were current. The outstanding note balance at March 31, 1997 and December 31, 1996 was $9,106,475 and $8,642,600, respectively. In January, 1997, the Company obtained a $250,000 line of credit from Citibank, N.A. The interest rate is 1% above the prime rate and the line of credit expires in January, 1998. Presidential paid a 1% annual fee for the line of credit. At March 31, 1997, no advances have been made on this line of credit. 8. INCOME TAXES Presidential elected to qualify as a Real Estate Investment Trust effective January 1, 1982 under Sections 856-860 of the Internal Revenue Code. Under those sections, a REIT which distributes at least 95% of its real estate investment trust taxable income to its shareholders each year by the end of the following year and which meets certain other conditions will not be taxed on that portion of its taxable income which is distributed to its shareholders. For the year ended December 31, 1996, the Company had taxable income (before distributions to stockholders) of approximately $2,316,000 ($.65 per share), which included approximately $1,441,000 ($.41 per share) of capital gains. This amount will be reduced by approximately $735,000 ($.20 per share) of the 1996 distributions that were not utilized in reducing the Company's 1995 taxable income and by any eligible 1997 distributions that the Company may elect (under Section 858 of the Internal Revenue Code) to utilize as a reduction of its 1996 taxable income. As previously stated, in order to retain REIT status, Presidential is required to distribute 95% of its REIT taxable income (exclusive of capital gains). As of March 31, 1997, Presidential has distributed the required 95% of its 1996 REIT taxable income. In addition, although no assurances can be given, it is the Company's present intention to distribute all of its 1996 taxable income and therefore, no provision for income taxes was made at December 31, 1996. Furthermore, the Company had taxable income (before distributions to stockholders) for the three months ended March 31, 1997 of approximately $1,472,000 ($.41 per share), which included approximately $1,155,000 ($.32 per share) of capital gains. This amount will be reduced by 1997 distributions that were not utilized in reducing the Company's 1996 taxable income and by any eligible 1998 distributions that the Company may elect to utilize as a reduction of its 1997 taxable income. Presidential has, for tax purposes, reported the gain from the sale of certain of its properties using the installment method. 9. COMMITMENTS AND CONTINGENCIES The Company has incurred environmental costs for environmental site investigations and the related response action outcome for potentially hazardous drums found at one site on its Mapletree Industrial Center property in Palmer, Massachusetts. In 1996, the site investigation at this disposal site had been completed and as a result, in the third quarter of 1996, the Company accrued $120,500 of environmental costs to complete further site investigations and cleanup costs at this site. This work, which started in February, 1997, is scheduled to be accomplished over the next four years. At March 31, 1997, there have been no changes to the 1996 estimated costs. Actual costs incurred may vary from these estimates due to the inherent uncertainties involved. 10. PENSION PLANS Defined Benefit Plan Effective January 1, 1994, the Company adopted a noncontributory defined benefit pension plan, which covers substantially all of its employees. The plan provides monthly retirement benefits commencing at age 65. The monthly benefit is equal to the sum of (1) 6.5% of average monthly compensation multiplied by the total number of plan years of service (up to a maximum of 10 years), plus (2) .62% of such average monthly compensation in excess of one- twelfth of covered compensation multiplied by the total number of plan years of service (up to a maximum of 10 years). The Company makes annual contributions that meet the minimum funding requirements and the maximum contribution limitations under the Internal Revenue Code. Periodic pension costs are reflected in general and administrative expenses in the Company's consolidated statements of operations. Net periodic pension cost for the three months ended March 31, 1997, included the following components: Service cost-benefits earned during the period $74,477 Interest cost on projected benefit obligation 13,871 Return on plan assets (16,552) ------- Net periodic pension cost $71,796 ======= The assumptions used in determining net periodic pension cost were 7% for the discount rate, 7% for the expected long-term rate of return on assets, and 5% for the average increase in compensation. Executive Pension Plan Presidential has employment contracts with several active and retired key officers and employees. Such contracts are being accounted for as constituting pension agreements. The contracts generally provide for annual benefits in specified amounts for each participant for life, commencing upon retirement, with an annual adjustment for an increase in the consumer price index. Presidential complies with the provisions of SFAS No. 87, "Employers' Accounting for Pensions". The principal assumption used in the accounting was a discount rate of 7%. Periodic pension costs are reflected in general and administrative expenses in the Company's consolidated statements of operations. Net periodic pension cost for the three months ended March 31, 1997, included the following components: Service cost-benefits earned during the period $ 3,535 Interest cost on projected benefit obligation 46,955 Net amortization 20,805 ------- Net periodic pension cost $71,295 ======= Presidential has elected not to fund expenses accrued under these contracts. 11. POSTRETIREMENT BENEFITS Presidential has employment contracts with several active and retired key officers and employees which provide for postretirement benefits other than pensions (such as health care benefits). The Company complies with the provisions of SFAS No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions". SFAS No. 106 requires the Company to accrue the estimated cost of retiree benefit payments during the years the employee provides services. The components of postretirement benefit cost for the three months ended March 31, 1997, were as follows: Service cost - benefits earned $1,568 Interest cost on accumulated postretirement benefit obligation 8,871 Net amortization (2,017) ------ Postretirement benefit cost $8,422 ====== PRESIDENTIAL REALTY CORPORATION AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1996 Results of Operations Financial Information for the three months ended March 31, 1997 and 1996: Income increased by $514,462 from $3,269,880 in 1996 to $3,784,342 in 1997 primarily as a result of an increase in interest on mortgages-sold properties, partially offset by decreases in rental income and investment income. Rental income decreased by $207,553 from $2,229,857 in 1996 to $2,022,304 in 1997 primarily as a result of decreases of $181,546 at the Metmor Plaza property, of which $120,700 is the result of a lease cancellation fee received in 1996 and $63,730 is the result of increased vacancy loss in 1997, and decreases of $54,737 at the Kent Terrace property resulting from vacancy losses in 1997 at that property which will continue until the upgrading and rerenting of the property is completed. In addition, rental income decreased by $61,022 at the Cambridge Green and Crown Court properties. These decreases were partially offset by an increase of $93,341 as a result of the reclassification of the operations of foreclosed properties into rental property operations in 1997. Interest on mortgages-sold properties increased by $752,838 from $536,791 in 1996 to $1,289,629 in 1997 primarily due to an increase of $446,015 from amortization of discounts on notes, of which $382,796 pertains to the Cedarbrooke note which was prepaid in March, 1997. In addition, the 1997 period had interest income of $341,808 from the Fairfield Towers First Mortgage, which the Company purchased in the fourth quarter of 1996, and a $28,978 increase of interest received on the Fairfield Towers Second Mortgage. These increases were partially offset by decreases in interest income of $55,752 as a result of the prepayments in 1997 and 1996 on the Cedarbrooke, Town House and Hoboken notes. Investment income decreased by $24,680 from $69,362 in 1996 to $44,682 in 1997 primarily as a result of decreased dividend income on securities available for sale. Costs and expenses increased by $61,200 from $2,859,920 in 1996 to $2,921,120 in 1997 primarily due to increases in interest on note payable and rental property operating expenses. These increases were offset by decreases in general and administrative expenses, real estate taxes and a decrease in minority interest share of partnership income. General and administrative expenses decreased by $48,322 from $637,876 in 1996 to $589,554 in 1997 primarily due to decreases in professional fees of $63,141, offset by an increase of $22,808 in salary expense. Interest on note payable and other increased by $193,375 from $35,426 in 1996 to $228,801 primarily as a result of the note payable to Fleet bank obtained in the fourth quarter of 1996. Rental property operating expenses increased by $98,136 from $889,207 in 1996 to $987,343 in 1997 primarily as a result of the reclassification of foreclosed properties operations to rental property operations which resulted in an increase in rental property operating expenses of $91,503. Real estate tax expense decreased by $47,524 from $199,122 in 1996 to $151,598 in 1997 as a result of decreased real estate taxes of $49,439 at the Crown Court property, as a result of refunds of prior years' taxes. Minority interest share of partnership income decreased by $125,636 from $271,770 in 1996 to $146,134 in 1997 as a result of a decrease in partnership income on the Metmor Plaza property. Loss from operations of foreclosed properties was $9,729 in 1996. In 1997, foreclosed properties were reclassified to real estate and their operations are now included in rental property operations. Net gain from sales of properties and securities are sporadic (as they depend on the timing of sales or the receipt of installments or prepayments on purchase money notes). In 1997, the net gain from sales of properties and securities was $489,376 compared with $25,126 in 1996. In the 1997 period, the Company recognized $472,497 of deferred gain from the sale of the Cedarbrooke property as a result of a $1,074,200 principal prepayment received on that note. In addition, the Company recognized deferred gains of $5,813 and $16,693, respectively, from principal payments received on the Overlook loan and the Fairfield Towers Second Mortgage. Balance Sheet Net mortgage portfolio increased by $300,969 from $28,388,917 at December 31, 1996 to $28,689,886 at March 31, 1997. This increase was primarily the result of an advance to the owners of the Fairfield Towers property of $600,018, which was added to the indebtedness secured by the Fairfield Towers First Mortgage. This increase was offset by a net decrease of $218,907 resulting from the prepayment in March, 1997 of the $1,074,200 principal balance of the Cedarbrooke note receivable, which also resulted in the amortization of discount of $382,796 and the recognition of deferred gain of $472,497. Real estate increased by $1,187,550 from $25,369,405 at December 31, 1996 to $26,556,955 at March 31, 1997. This increase was primarily the result of the reclassification of foreclosed properties having a net carrying value of $588,683 to real estate. The Company also recorded additions and improvements of $290,175 to the Kent Terrace property and $308,692 to other properties. Foreclosed properties which had a balance of $588,683 at December 31, 1996, were reclassified to real estate as of January 1, 1997. These properties have been owned by the Company for a number of years and they are fully rented. Management has therefore made the decision to transfer these properties from foreclosed properties to real estate and include their operations in rental property operations. Note payable to bank increased by $463,875 from $8,642,600 at December 31, 1996 to $9,106,475 at March 31, 1997. This increase was primarily the result of an additional $600,018 advanced by Fleet bank. Accounts payable increased by $314,773 from $271,126 at December 31, 1996 to $585,899 at March 31, 1997. This increase was primarily the result of an increase of $294,812 in rental property accounts payable and is due to the timing of the receipt of invoices as well as the scheduling of payments. Net unrealized gain on securities available for sale decreased by $15,800 from $49,014 at December 31, 1996 to $33,214 at March 31, 1997. This decrease in unrealized gain is a result of the decrease in the fair value of the securities available for sale for the period. Liquidity and Capital Resources Management believes that the Company has sufficient liquidity and capital resources to carry on its existing business and, barring any unforeseen circumstances, to pay the dividends required to maintain REIT status in the foreseeable future. Presidential obtains funds for working capital and investment from its available cash and cash equivalents, from operating activities and from repayments of its mortgage portfolio. The Company also has at its disposal a $250,000 line of credit from Citibank, N.A., which it obtained in January, 1997. At March 31, 1997, Presidential had $2,038,026 in available cash and cash equivalents and $987,983 in securities available for sale. The March 31, 1997 total of $3,026,009 represents an increase of $658,666 from the $2,367,343 total at December 31, 1996. This increase is primarily the result of the receipt of the $1,074,200 prepayment on the Cedarbrooke purchase money note. This increase was offset by the $290,175 paid for improvement costs for the Kent Terrace property, the payment of $80,177 in accrued bonuses, the net payment of $34,202 for the purchase and sale of securities, and the $15,800 decrease in the fair value of securities available for sale. Operating Activities Presidential's principal source of cash from operating activities is from interest on its mortgage portfolio, which was $1,082,774 in 1997, net of interest payments on wrap mortgage debt. In 1997, net cash received from rental property operations was $421,361, which is net of distributions to minority partners but before additions and improvements and mortgage amortization. Investing Activities Presidential holds a portfolio of mortgage notes receivable which consist primarily of notes arising from sales of real properties previously owned by the Company. Some of these notes wrap around underlying mortgage debt (the "Underlying Debt") which is paid by Presidential only out of funds received on its mortgage portfolio relating to the Underlying Debt. During 1997, the Company received principal payments of $1,264,551 on its mortgage portfolio (net of any principal payments attributable to the Underlying Debt), of which $1,214,829 represented prepayments, which are sporadic and cannot be relied upon as a regular source of liquidity. During 1997, the Company advanced an additional $600,018 under the Fairfield Towers First Mortgage which was used by the owners of the property to pay a portion of unpaid real estate taxes (and interest accrued thereon) on the unsold Fairfield Towers condominium units which secure the mortgage indebtedness. During 1997, the Company invested $445,115 in additions and improvements to its properties. Financing Activities The Company's indebtedness at March 31, 1997, consisted of $31,869,001 of mortgages (including $5,498,639 of underlying indebtedness on properties not owned by the Company but on which the Company holds wraparound mortgages). The mortgage debt, which is secured by individual properties, is nonrecourse to the Company with the exception of the Mapletree Industrial Center mortgage, which is secured by the property and a guarantee of repayment by Presidential. Generally, mortgage debt repayment is serviced with cash flow from the operations of the individual properties. During 1997, the Company made $143,103 of principal payments on mortgage debt on properties which it owns. The mortgages on the Company's properties are self-liquidating at fixed rates of interest with the exception of the mortgages on Metmor Plaza, Building Industries Center and Continental Gardens. In addition, the Company's indebtedness at March 31, 1997 includes a $9,106,475 bank loan payable to Fleet Bank, N.A. ("Fleet"). This loan was obtained in the fourth quarter of 1996 in connection with the acquisition of the Fairfield Towers First Mortgage. The note is nonrecourse to Presidential except for a guarantee limited to $1,000,000 of the principal amount and matures on October 30, 2001. The interest rate is variable and is based at the Company's election on either the bank's prime rate plus 1%, a cost of funds rate plus 3%, or various LIBOR rates plus 3%. The note amortizes monthly based on a 9.25% interest rate for a 25 year term with additional principal payments due upon the sale of condominium units. During 1997, the Company has made principal payments of $136,143 and received an additional $600,018 advance from Fleet which was added to the bank loan. This advance was obtained in order to reimburse Presidential for its $600,018 advance on the Fairfield Towers First Mortgage. During 1997, Presidential declared and paid cash distributions of $533,090 to its shareholders and received proceeds from dividend reinvestments of $41,631. Fairfield Towers The Company's financial performance and liquidity in 1997 and subsequent years will be affected by the results of the condominium conversion of Fairfield Towers Apartments in Brooklyn, New York by the owner of that property and the rental operations of the unsold condominium units. At March 31, 1997, the outstanding principal balances on the Fairfield Towers First Mortgage and the Fairfield Towers Second Mortgage were $15,137,285 and $14,624,344, respectively. The Fairfield Towers First Mortgage provides for monthly interest payments of 1% above Fleet's prime rate and principal repayments prior to maturity upon the sale of individual condominium units. Until the Fairfield Towers First Mortgage is repaid, Presidential will receive basic interest on the Fairfield Towers Second Mortgage only out of net cash flow from operations of the property and release payments upon the sale of each condominium unit in the amount of $3,000 per unit. All unpaid basic interest and additional interest (which is based on percentages of gross sales proceeds) will be deferred until after repayment of the Fairfield Towers First Mortgage. In June of 1994, the owners of the Fairfield Towers property closed the first sales of the condominium units pursuant to the conversion of the property to condominium status. At March 31, 1997, a total of 141 units were sold. The success of the condominium conversion could be adversely affected by the existence of unpaid real estate taxes and interest accrued thereon in the approximate amount, as of December 31, 1996, of $4,800,000 owed by the owners of the property. Approximately $3,000,000 of this amount arose prior to the condominium conversion of the property and was covered by a deferred payment agreement with the City of New York which required payments as condominium units were sold. However, as a result of the slower than projected pace of sales, the term of the deferred payment agreement expired. In March of 1997, the Company advanced $600,018 to the owners of the property to be used to pay a portion of the unpaid real estate taxes and interest, which amount was added to the indebtedness secured by the Fairfield Towers First Mortgage, and Fleet bank advanced $600,018 to Presidential to reimburse it for its $600,018 advance. The owner is in the process of negotiating a new deferment agreement with the City of New York. However, no assurances can be given that the owner will be successful in negotiating a satisfactory deferment agreement with the City of New York, and if a satisfactory agreement is not obtained, a continuing default in the payment of real estate taxes could adversely affect the success of the condominium conversion at Fairfield Towers and the value of Presidential's First and Second Mortgages. Environmental Matters At March 31, 1997, the Company is still involved in an environmental project for the investigation and removal of potentially hazardous drums found at one site on its Mapletree Industrial Center property in Palmer, Massachusetts. Accrued liabilities for environmental matters have been recorded in operating expenses when it is probable that a liability has been incurred and the amount of the liability can be reasonably estimated. These estimates are exclusive of claims against third parties and have not been discounted. Actual costs incurred may vary from these estimates due to the inherent uncertainties involved. The Company believes that any additional liability in excess of amounts provided which may result from the resolution of this matter will not have a material adverse effect on the financial condition, liquidity or the cash flow of the Company. In 1996, the site investigation at this site had been completed and, as a result, during the third quarter of 1996, the Company accrued an additional $120,500 of environmental costs in order to complete further site investigations and cleanup costs at this disposal site. This work, which started in February, 1997, is scheduled to be accomplished over the next four years. For the three months ended March 31, 1997, there were no environmental costs charged to operations. PART II - OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K. (a) Exhibits: 10.10 Employment Agreement dated January 1, 1997 between the Company and Jeffrey F. Joseph. 10.11 Employment Agreement dated January 1, 1997 between the Company and Steven Baruch. 10.12 Employment Agreement dated January 1, 1997 between the Company and Thomas Viertel. 10.13 First Amendment dated August 1, 1996 to Settlement Agreement dated November 14, 1991 between the Company and Steven Baruch, Jeffrey F. Joseph and Thomas Viertel. 27. Financial Data Schedule. (b) No reports on form 8-K have been filed during the quarter ended March 31, 1997. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. PRESIDENTIAL REALTY CORPORATION (Registrant) DATE: May 12, 1997 By: /s/ Jeffrey F. Joseph --------------------- Jeffrey F. Joseph President DATE: May 12, 1997 By: /s/ Elizabeth Delgado --------------------- Elizabeth Delgado Treasurer EX-10.10 2 EMPLOYMENT AGREEMENT This Employment Agreement, made as of January 1, 1997, by and between Jeffrey F. Joseph, residing at 19 Stillman Lane, Pleasantville, New York 10570 ("Executive") and PRESIDENTIAL REALTY CORPORATION, a Delaware corporation having offices at 180 South Broadway, White Plains, New York 10605 ("Employer" or the "Company"); W I T N E S S E T H: WHEREAS, Employer is desirous of employing Executive as its President; and WHEREAS, Executive desires to render such services to Employer. NOW, THEREFORE, in consideration of the premises and the mutual covenants herein set forth, the parties hereto agree as follows: 1. Employment. Employer hereby employs Executive as its President, and Executive hereby accepts such employment, upon the terms and conditions hereinafter set forth. 2. Duties. (a) In his capacity as President of Employer, Executive shall perform for Employer the executive, administrative and technical duties customarily associated with such position, as well as such other duties reasonably consistent therewith as may be reasonably assigned to Executive from time to time by the Board of Directors of Employer; provided, however, that the duties assigned shall be of a character and dignity appropriate to a senior executive of a corporation and consistent with Executive's experience, education and background. (b) Except as otherwise set forth in this paragraph, (i) Executive shall devote his full time and efforts during normal business days and hours to the performance of this Employment Agreement and (ii) Executive shall not engage in the real estate business or in any other business which conflicts with or competes in any material way with the business of Employer. Notwithstanding the foregoing, Executive may devote such time and efforts to winding up the business of Ivy Properties Ltd. and its affiliates (collectively, "Ivy") as Executive deems reasonably necessary; so long as the devotion of such time and effort does not conflict (without independent committee review) or interfere with Executive's performance of his duties as President of Presidential and in fact Executive does diligently perform his duties as President of Presidential to the satisfaction of the Board of Directors of Employer. 3. Term. (a) This Employment Agreement shall commence on the date hereof and shall continue until December 31, 1999, unless terminated earlier in accordance with this Employment Agreement. (b) This Employment Agreement may be terminated at any time by Employer for "cause," as defined herein. For the purpose of this Employment Agreement, termination of Executive's employment shall be deemed to have been for "cause" only if termination of his employment shall have been the result of (i) the conviction of Executive of any crime constituting a felony or any other crime involving moral turpitude, (ii) Executive's willful refusal to follow a direction of the Board of Directors of Employer after written notice that such continued refusal shall result in termination of his employment for cause, or (iii) Executive's failure to fulfill his duties hereunder as is required by Section 2(b) above after written notice that such continued failure shall result in termination of his employment for cause. (c) This Employment Agreement may also be terminated by Employer as set forth in Section 11 below. 4. Compensation. Employer shall pay to Executive in consideration of the services to be rendered hereunder compensation in the form of a salary: (a) for the period beginning on the date hereof and ending on December 31, 1997, at the annual rate of Two Hundred Fifty Three Thousand Eight Hundred Seventy-nine and no/100 ($253,879.00) Dollars; (b) for the calendar year beginning on January 1, 1998 and ending on December 31, 1998, in an amount equal to the lesser of (i) $266,573 and (ii) $253,879 times the Cost of Living Adjustment Factor (as hereinafter defined); and (c) for the calendar year beginning on January 1, 1999 and ending on December 31, 1999, in an amount equal to the salary paid for the calendar year beginning on January 1, 1998 and ending on December 31, 1998 times the lesser of (i) 1.05 and (ii) the Cost of Living Adjustment Factor. The salary for all such periods shall be paid less appropriate deductions, if any, for federal, state and city income taxes, FICA contributions, N.Y.S. disability and any other deductions required by law. The Cost of Living Adjustment Factor as it is applied in calculating compensation payable to Executive for any period referred to above (and retirement compensation payable to Executive for any period described in Section 12 below) shall be the sum of (x) one (1) plus (y) a fraction (A) which has as its numerator the amount, if any, by which the Revised Consumer Price Index for Urban Wage Earners and Clerical Workers for the New York-Northern New Jersey area, published by the U.S. Department of Labor Statistics (the "Index") for the last calendar month preceding the commence- ment of such period (which will be December in each case of annual salary described in this Section 4) (the "Increase Index Month") exceeds the Index for the calendar month occurring one year prior to the Increase Index Month (the "Base Index Month"), and (B) which has as its denominator the Index for the Base Index Month. In the event that the Index is converted to a different standard reference base or otherwise revised, the determination of increased compensation under this Section 4 and/or retirement compensation under Section 12 shall be made with the use of such conversion factor, formula or table for converting the Index as may be published by the Bureau of Labor Statistics or, if said Bureau shall not publish the same, then with the use of such conversion factor, formula or table as may be published by Prentice-Hall, Inc., or any other nationally recognized publisher of similar statistical information. If the Index ceases to be published, and there is no successor thereto, such other index as Executive and Employer shall agree upon in writing shall be substituted for the Index. If Executive and Employer are unable to agree as to such substituted index, such substituted index shall be that determined by arbitration in accordance with the procedures of the American Arbitration Association. In the event that the Index is not available for any month provided for above, the next available Index shall be used instead, and if the next available Index is available following a payment for which an adjustment should have been, then a retroactive adjustment shall also be made. (b) Executive's compensation shall be payable in equal installments in arrears, in the same frequency as other senior officers of Employer are paid, but in any event not less frequent than twenty-six (26) bi-weekly installments. 5. Indemnification. The Indemnification Agreements previously executed by Executive and Employer shall remain in full force and effect during the term of this Employment Agreement. 6. Vacations. Executive shall be entitled, during the term of this Employment Agreement to four weeks' vacation annually at full compensation. 7. Fringe Benefits. Executive shall be entitled, at Employer's expense, during the term of this Employment Agreement to participate in (a) the following benefit programs which Employer now maintains for its employees: (i) its Defined Benefit Pension Plan, (ii) its Section 125 cafeteria plan, (iii) its Section 401(k) plan if any, (iv) its health insurance plan for employees only, (v) its disability insurance plan and (vi) its group life insurance plan; and (b) all benefit programs that Employer hereafter establishes and makes available to either employees in general or to other senior executive management (without intending to provide duplicate coverage to Executive if Employer makes such available to both employees in general and to senior executive management). If obtainable, at Executive's option and, if exercised, at Executive's sole cost and expense, Employer shall include Executive's spouse and children under the health insurance plan maintained by Employer for Executive. In addition, during the term of this Employment Agreement, (i) Employer shall also pay for the premiums on Executive's existing life insurance policy up to a maximum of $12,750 per annum and (ii) Employer shall pay and be responsible for all costs of ownership attributable to the automobile which Employer currently owns and provides Executive for its use, and for any replacement automobile leased or purchased by Employer pursuant to Section 9 below. In addition, subject to Executive providing proper documentation, Employer shall reimburse Executive for reasonable travel, entertainment and other expenses incurred by Executive in providing services hereunder on behalf of Employer. Following any termination of Executive's employment by Employer, to the extent permitted by law and the party providing such benefits, Executive may, at his sole cost and expense, continue any fringe benefits, if obtainable, then being provided to Executive. 8. Bonus. (a) Subject to paragraph (b) of this Section 8, in addition to the compensation set forth above, Executive shall be entitled to a bonus payable with respect to each of calendar years 1997, 1998 and 1999 (each a "Bonus Year") in an amount equal to 10% of the product of (i) the amount by which the Per Share Net Cash From Operations (as hereinafter defined) for such Bonus Year exceeds $.50 per share and (ii) the number of shares outstanding at the end of such Bonus Year. Notwithstanding the foregoing, the bonus in any Bonus Year shall not exceed 33-1/3% of the salary compensation set forth in Section 4 for such year (prorated if any partial year is involved). The term Per Share Net Cash from operations shall mean the Net Income for such Bonus Year (as shown on the Company's Audited Financial Statements) with the following adjustments: (i) the addition back of any extraordinary deductions to income; (ii) the addition back of depreciation of non-rental property, depreciation on rental real estate and amortization of mortgage and organization costs; (iii) with respect to the sales of property and investments, including foreclosed property, recognized in any Bonus Year (x) there shall be deducted from net gain any discount or deferred gain, and (y) any depreciation taken on the sold property during the period that it was owned by Employer shall be added back before calculating the amount of the net loss or net gain. (iv) the subtraction of all "amortization of discounts on notes and fees" which are included in Net Income. The Compensation Committee of Employer shall calculate the Per Share Net Cash from Operations in accordance with the formula set forth above, subject to such adjustments for extraordinary or unforeseen transactions, including but not limited to capital gains transactions, as in the reasonable judgment of the Compensation Committee are fair and equitable to Employer and Executive. Said calculations shall be made with respect to any Bonus Year without regard to the bonus payable in accordance with this Agreement (or any other employment or similar Agreement with senior management) attributable to said year and/or attributable to a prior year or years but paid in said year. The bonus for any Bonus Year shall be paid on or before March 30th of the next following year; provided however that if by March 30th of any year the bonus for the prior Bonus Year has not been finally determined, then the bonus shall be estimated and an amount equal to the estimated bonus will be paid to Executive on March 30th and as soon as the actual bonus is finally determined, the parties will make an appropriate adjustment. Notwithstanding any other provisions of this Agreement, in the event of any changes in the Company's outstanding common stock by reason of a stock dividend, recapitalization, merger, consolidation, reorganization, split up, extraordinary dividend, combination or exchange of shares, or the like, the Employer and Executive shall, if applicable, attempt in good faith to agree on appropriate adjustments to the bonus calculations referred to in this paragraph so as to substantially carry out the intention of this Agreement. (b) Notwithstanding anything in this Agreement to the contrary (i) Executive shall not be entitled to a bonus on account of any Bonus Year in which his employment terminates pursuant to Section 11(e) below or in which his his employment is terminated for cause, or any Bonus Year thereafter occurring, and (ii) if this Agreement is terminated pursuant to paragraph (b) of Section 11 below, Executive's bonus for the Bonus Year in which such termination occurs shall be prorated as of the date on which compensation is no longer payable under said Section 11(b). In calculating Per Share Net Cash from Operations to any such date (if it is not the last day of a calendar year) the parties shall adjust (by projection to said date or as of said date, as the case may be) based on the Net Income for the period ending on March 31, June 30, September 30 or December 31 of such Bonus Year, whichever of said dates is closest to the date with respect to which the Bonus is calculated. 9. Purchase of Replacement Automobile. Upon the request of Executive, made subsequent to December 31, 1996 but prior to December 31, 1998, Employer shall make available to Executive a new automobile for Executive's use, said automobile to be of a make and model reasonably acceptable to Executive. Said automobile shall, at Employer's option, be either leased by Employer or purchased by Employer (title to remain in Employer's name). The purchase price of said automobile (exclusive of taxes), regardless of whether said automobile is purchased or leased by Employer, shall not exceed $37,500; provided, however, that Executive may select a car costing more than $37,500 if Executive pays for the increased costs to purchase or lease such automobile. Employer shall be responsible for all costs of ownership attributable to said vehicle, including but not limited to insurance, gas, oil, maintenance, repairs, etc. On the termination of Executive's employment, if Employer has purchased the vehicle, Executive may at any time within three (3) weeks following the effective date of termination purchase the vehicle from Employer at a price equal to the then "blue book" value of the vehicle times a fraction, the numerator of which is the amount paid for said vehicle by Employer, including sales tax, "dealer prep", etc., but excluding any contributions made by Executive, and the denominator of which is the amount (the "Total Purchase Price") paid for said vehicle, including sales tax, "dealer prep" etc. and any contributions made by Executive. In the event Executive does not timely purchase the vehicle and Executive has made any contribution towards the purchase thereof, if Employer desires to retain ownership of the vehicle Employer shall, within three weeks following the earlier of (i) the expiration of the aforementioned three (3) week period, or (ii) receipt of notice from Executive that he shall not purchase said vehicle, pay to Executive the "blue book value" of the vehicle, times a fraction, the numerator of which is the amount contributed towards the purchase of said vehicle by Executive and the denominator of which is the Total Purchase Price. If (i) Executive does not timely purchase the vehicle, and (ii) Employer does not desire to retain ownership and Executive has contributed towards the purchase thereof, Employer shall promptly sell the vehicle and the parties shall divide the actual net sales proceeds (after sales taxes and advertising costs, if any), with Executive receiving a fraction (being the same fraction described in the immediately preceding sentence) thereof and Employer receiving the balance. Employer agrees that the automobile presently owned or leased by the Company and utilized by Executive, and for which Employer pays the expenses pursuant to Section 7 above, may be retained or sold by Employer and Executive shall have no interest therein. 10. Stock Options. The stock options granted by Employer to Executive pursuant to Executive's Employment Agreement dated as of November 14, 1993 (the "Existing Stock Options") shall remain in full force and effect on the terms set forth in said Employment Agreement. In addition, Employer agrees that from time to time to the extent that any Existing Stock Options are either (i) exercised by Executive or (ii) lapse on November 17, 1999, if at the time of any such exercise or lapse Executive is employed by Employer, Employer shall (as of the date of such exercise or lapse) grant new stock options to Executive (the "New Stock Options") to purchase a number of shares of Employer's Class B common stock equal to the number of shares covered by the Existing Stock Options which have been exercised or have lapsed. Any New Stock Options so granted by Employer shall be subject to the terms and conditions of the existing Stock Option Plan dated November 17, 1993 (the "Stock Option Plan") and on the following terms and conditions: (a) the exercise price for each New Stock Option granted shall be a price equal to the closing price of the Class B common stock of Employer on the date the option is granted; (b) each New Stock Option granted pursuant to the terms of this Section 10 shall be exercisable for a period of six years from the date such option is granted, subject to earlier termination pursuant to the terms of the Stock Option Plan. (c) upon termination of Executive's employment for any reason whatsoever, the Existing Stock Options and any New Stock Options granted pursuant to the terms hereof shall terminate immediately except as provided for in the Stock Option Plan. 11. Employment Termination; Termination Benefits. The term of employment hereunder shall be terminated upon the first to occur of the following: (a) The expiration of the term of employment purusant to Section 3(a) of this Agreement. (b) Executive's death or permanent disability. "Permanent Disability" shall mean physical or mental incapacity of a nature which prevents Executive, or will prevent Executive, in the reasonable determination of the Board of Directors of Employer, from performing his duties under this Agreement for a continuous period of four months or any aggregate period of six months in any 12 month period. Permanent Disability shall be deemed to have occurred as of said determination. If the term of employment is terminated because of Executive's Permanent Disability, the Employer shall pay, when the same would otherwise have been payable in accordance with this Agreement, to Executive or his representative, (i) Executive's salary described in Section 4 above, as then in effect, less any disability benefits payable to Executive from policies maintained by Employer, (ii) the bonus described in Section 8 above, subject to paragraph (b) thereof, plus (iii) Executive's fringe benefits as described in Section 7 only (but not as described in Section 9 if the automobile in question had not yet been delivered to Executive as of the date of determination by the Board), until (again subject to paragraph (b) of Section 8 with respect to any payment pursuant to Section 8) the later to occur of (A) that day which is twenty-four (24) months after the date of determination of Executive's Permanent Disability and (B) December 31, 1999; provided however that subsequent to that day which is six (6) months after the date of determination of Executive's Permanent Disability, the payments set forth in subparagraphs (i) and (ii) above shall be reduced to 50% of such amounts, less 100% of any disability payments payable to Executive from policies maintained by Employer. If the term of employment is terminated because of Executive's death, the Employer shall pay, when the same would otherwise have been payable in accordance with this Agreement, to Executive's beneficiary or beneficiaries designated in writing to the Company, or to Executive's estate in the absence or lapse of such designation, (i) Executive's salary described in Section 4 above, as then in effect and (ii) the bonus described in Section 8 above, (again subject to paragraph (b) of Section 8 with respect to any payment pursuant to said Section 8), in each case for a period of six months following Executive's death, whether or not the term of employment would have terminated pursuant to Section 3(a) prior to the end of such six month period. (c) Executive's employment being terminated by the Board "for cause" pursuant to Section 3(b) of this Agreement. If Executive's employment is terminated for cause, the Company's only obligation to Executive shall be payment of Executive's salary as described in Section 4 above and fringe benefits as described in Section 7 above (but not the bonus compensation set forth in Section 8 above for any period in the year in which such termination occurs), as in effect at the date of termination, through the date of such termination. Any termination of Executive's employment under this Section 11(c) shall not affect Employer's obligation to make the retirement payments set forth in Section 12(b) below. (d) Executive's employment being terminated by the Board "without cause". Termination "without cause" shall mean termination of the term of employment on any basis other than those provided in paragraphs (a), (b), (c) or (e) of this Section 11. If the term of employment is terminated without cause, the Board shall give 10 days notice thereof to Executive and Executive shall be entitled to receive Executive's salary per Section 4 above, fringe benefits per Section 7 above but not per Section 9 above (unless the automobile described in said Section 9 was delivered to Executive prior to said termination without cause), and, subject to paragraph (c) of Section 10 above, all other compensation (including the bonus compensation set forth in Section 8 above, without regard to the provisions of Section 8(b) above) which he would have received hereunder but for such termination in respect of the unexpired portion of the term of employment (in the amounts and at the times provided in Sections 4 and 8 hereof in the case of compensation pursuant to said Sections). Any termination of Executive's employment "without cause" shall not affect the Employer's obligation to make the retirement payments set forth in Section 12(b) below. (e) Upon Executive voluntarily resigning his employment hereunder. If Executive's employment is terminated because Executive voluntarily resigns his employment hereunder, the Company's only obligation to Executive shall be the payment of Executive's salary pursuant to Section 4 above and fringe benefits pursuant to Section 7 above (but not the bonus provided by Section 8 above) as in effect at the date of such termination through the effective date of such termination. Any termination resulting from Executive's voluntary resignation from his employment hereunder shall not affect Employer's obligation to make the retirement payments set forth in Section 12(b) below. 12. The Retirement Period. (a) The Retirement Period shall commence on the first day of the first calendar month occurring after Executive's sixty-fifth (65th) birthday, but may be postponed by mutual agreement between Executive and Employer. The Retirement Period shall end on the day of Executive's death. The commencement and continuance of the Retirement Period shall not depend in any way upon the existence of an active period of employment relationship between Executive and Employer immediately prior to the commencement of the Retirement Period. (b) During the Retirement Period, the Employer agrees to pay to Executive each year, in equal monthly installments, the sum of $29,000; provided, however, that the $29,000 annual payment shall be increased annually after the first year of the Retirement Period to the product derived by multiplying the payment in what is then the immediately preceding year by the lesser of (i) one (1) plus 50% of the "fraction" forming a part of the definition of the Cost of Living Adjustment Factor (as heretofore defined) for the period in question, and (ii) 1.05. (c) Executive's right to receive the payments provided for in this Section 12 (i) shall not be contestable by Employer for any reason whatsoever and (ii) shall be in lieu of any right of Executive to receive retirement payments under any previous employment agreement with Employer, and Executive hereby waives and relinquishes any such rights. (d) Furthermore, provided that Executive continuously remains an employee of Employer from the date of this Employment Agreement through Executive's 65th birthday, unless otherwise agreed by the parties, during the Retirement Period the Employer shall maintain in full force and effect, Group Life policies and Major Medical and/or "medigap" policies, which (together with Medicare or other benefits which may otherwise then be available to Executive without cost to Executive), shall provide Executive with benefits substantially similar to those existing for senior employees of the Company at the time of Executive's retirement. Executive shall continue to be responsible for any and all premiums attributable to Executive's spouse and children. 13. Entire Agreement; Amendment. This Employment Agreement contains the entire agreement between the parties hereto with respect to the subject matter contained herein. This Employment Agreement may be amended, modified or supplemented only by written agreement of Employer and Executive expressly to that effect. 14. Waiver of Compliance. Any failure of either party to comply with any obligation, covenant, agreement or condition on its part contained herein may be expressly waived in writing by the other party, but such waiver or failure to insist upon strict compliance shall not operate as a waiver of, or estoppel with respect to, any subsequent or other failure. Whenever this Employment Agreement requires or permits consent by or on behalf of any party, such consent shall be given in writing. 15. Notices. All notices, requests, demands and other communications required or permitted hereunder shall be in writing and shall be deemed given if delivered by hand or five days after having been mailed, certified or registered mail with postage prepaid: (a) if to Employer, to: Presidential Realty Corporation 180 South Broadway White Plains, New York 10605 Attention: Chairman of the Board of Directors with a copy to: Chairman, Compensation Committee and Milbank, Tweed, Hadley & McCloy 1 Chase Manhattan Plaza New York, New York 10005 Telecopy No.: (212) 530-5219 Attention: Celia A. Felsher (b) if to Executive, to: Jeffrey F. Joseph 19 Stillman Lane Pleasantville, New York 10570 16. Assignment. This Employment Agreement shall inure to the benefit of Executive and Employer and be binding upon the uccessors and general assigns of Employer. Except as expressly provided herein, this Employment Agreement and Executive's duties hereunder shall not be assigned or delegated. 17. Invalid Provisions. If any provision hereof is held to be illegal, invalid or unenforceable under present or future laws effective during the term hereof, such provision shall be fully severable; this Agreement shall be construed and enforced as if such illegal, invalid or unenforceable provision had never comprised a part hereof; and the remaining provisions hereof shall remain in full force and effect and shall not be affected by the illegal, invalid or unenforceable provision or by its severance herefrom. In lieu of such illegal, invalid or unenforceable provision there shall be added automatically as a part hereof a provision as similar in terms to such illegal, invalid or unenforceable provision as may be possible and be legal, valid and enforceable. 18. Applicable Law. This Employment Agreement shall be construed and enforced in accordance with the laws of the State of New York. IN WITNESS WHEREOF, the parties have executed this Employment Agreement as of the day and year first above written. EMPLOYER: PRESIDENTIAL REALTY CORPORATION BY: /s/ Robert E. Shapiro ________________________________ Robert E. Shapiro, Chairman of the Board of Directors EXECUTIVE: /s/ Jeffrey F. Joseph ___________________________________ Jeffrey F. Joseph EX-10.11 3 EMPLOYMENT AGREEMENT This Employment Agreement, made as of January 1, 1997, by and between Steven Baruch, residing at One Pondview West, Purchase, New York 10577 ("Executive") and PRESIDENTIAL REALTY CORPORATION, a Delaware corporation having offices at 180 South Broadway, White Plains, New York 10605 ("Employer" or the "Company"); W I T N E S S E T H: WHEREAS, Employer is desirous of employing Executive as its Executive Vice President; and WHEREAS, Executive desires to render such services to Employer. NOW, THEREFORE, in consideration of the premises and the mutual covenants herein set forth, the parties hereto agree as follows: 1. Employment. Employer hereby employs Executive as its Executive Vice President, and Executive hereby accepts such employment, upon the terms and conditions hereinafter set forth. 2. Duties. (a) In his capacity as Executive Vice President of Employer, Executive shall perform for Employer the executive, administrative and technical duties customarily associated with such position, as well as such other duties reasonably consistent therewith as may be reasonably assigned to Executive from time to time by the President or Board of Directors of Employer; provided, however, that the duties assigned shall be of a character and dignity appropriate to a senior executive of a corporation and consistent with Executive's experience, education and background. (b) Except as otherwise set forth in this paragraph, (i) Executive shall devote his full time and efforts during normal business days and hours to the performance of this Employment Agreement and (ii) Executive shall not engage in the real estate business or in any other business which conflicts with or competes in any material way with the business of Employer. Notwithstanding the foregoing, (x) Executive may devote reasonable time and efforts during normal business days and hours to the business of Scorpio Entertainment, Inc. and Scorpio Ventures, Inc. (collectively "Scorpio") pursuant to the Option/Shareholders Agreement dated November 14, 1991 among Employer, Scorpio, Steven Baruch, Thomas Viertel and Jeffrey F. Joseph, as modified by certain agreements dated as of December 31, 1996 between such parties (the "Option Agreement") and the Employment Agreement between Executive and Scorpio executed pursuant to the Option Agreement and (y) Executive may devote such time and efforts to winding up the business of Ivy Properties Ltd. and its affiliates (collectively, "Ivy") as Executive deems reasonably necessary; so long as, in either case, the devotion of such time and effort does not conflict (without independent committee review) or interfere with Executive's performance of his duties as Executive Vice President of Presidential and in fact Executive does diligently perform his duties as Executive Vice President of Presidential to the satisfaction of the Board of Directors of Employer. During the term of this Employment Agreement, Employer will permit Executive, at no cost to Executive, to utilize his office space to carry on the business of Scorpio to the extent permitted by this paragraph (b), provided however that Executive and/or Scorpio will pay, or reimburse Employer for, the direct costs for duplicating, telecopying, telephone and other business expenses used by Scorpio in a manner reasonably satisfactory to Employer. 3. Term. (a) This Employment Agreement shall commence on the date hereof and shall continue until December 31, 1999, unless terminated earlier in accordance with this Employment Agreement. (b) This Employment Agreement may be terminated at any time by Employer for "cause," as defined herein. For the purpose of this Employment Agreement, termination of Executive's employment shall be deemed to have been for "cause" only if termination of his employment shall have been the result of (i) the conviction of Executive of any crime constituting a felony or any other crime involving moral turpitude, (ii) Executive's willful refusal to follow a direction of the Board of Directors of Employer after written notice that such continued refusal shall result in termination of his employment for cause, or (iii) Executive's failure to fulfill his duties hereunder as is required by Section 2(b) above after written notice that such continued failure shall result in termination of his employment for cause. (c) This Employment Agreement may also be terminated by Employer as set forth in Section 11 below. 4. Compensation. Employer shall pay to Executive in consideration of the services to be rendered hereunder compensation in the form of a salary: (a) for the period beginning on the date hereof and ending on December 31, 1997, at the annual rate of One Hundred Seventy Thousand Six Hundred and no/100 ($170,600.00) Dollars; (b) for the calendar year beginning on January 1, 1998 and ending on December 31, 1998, in an amount equal to the lesser of (i) $179,130 and (ii) $170,600 times the Cost of Living Adjustment Factor (as hereinafter defined); and (c) for the calendar year beginning on January 1, 1999 and ending on December 31, 1999, in an amount equal to the salary paid for the calendar year beginning on January 1, 1998 and ending on December 31, 1998 times the lesser of (i) 1.05 and (ii) the Cost of Living Adjustment Factor. The salary for all such periods shall be paid less appropriate deductions, if any, for federal, state and city income taxes, FICA contributions, N.Y.S. disability and any other deductions required by law. The Cost of Living Adjustment Factor as it is applied in calculating compensation payable to Executive for any period referred to above (and retirement compensation payable to Executive for any period described in Section 12 below) shall be the sum of (x) one (1) plus (y) a fraction (A) which has as its numerator the amount, if any, by which the Revised Consumer Price Index for Urban Wage Earners and Clerical Workers for the New York-Northern New Jersey area, published by the U.S. Department of Labor Statistics (the "Index") for the last calendar month preceding the commence- ment of such period (which will be December in each case of annual salary described in this Section 4) (the "Increase Index Month") exceeds the Index for the calendar month occurring one year prior to the Increase Index Month (the "Base Index Month"), and (B) which has as its denominator the Index for the Base Index Month. In the event that the Index is converted to a different standard reference base or otherwise revised, the determination of increased compensation under this Section 4 and/or retirement compensation under Section 12 shall be made with the use of such conversion factor, formula or table for converting the Index as may be published by the Bureau of Labor Statistics or, if said Bureau shall not publish the same, then with the use of such conversion factor, formula or table as may be published by Prentice-Hall, Inc., or any other nationally recognized publisher of similar statistical information. If the Index ceases to be published, and there is no successor thereto, such other index as Executive and Employer shall agree upon in writing shall be substituted for the Index. If Executive and Employer are unable to agree as to such substituted index, such substituted index shall be that determined by arbitration in accordance with the procedures of the American Arbitration Association. In the event that the Index is not available for any month provided for above, the next available Index shall be used instead, and if the next available Index is available following a payment for which an adjustment should have been, then a retroactive adjustment shall also be made. (b) Executive's compensation shall be payable in equal installments in arrears, in the same frequency as other senior officers of Employer are paid, but in any event not less frequent than twenty-six (26) bi-weekly installments. 5. Indemnification. The Indemnification Agreements previously executed by Executive and Employer shall remain in full force and effect during the term of this Employment Agreement. 6. Vacations. Executive shall be entitled, during the term of this Employment Agreement to four weeks' vacation annually at full compensation. 7. Fringe Benefits. Executive shall be entitled, at Employer's expense, during the term of this Employment Agreement to participate in (a) the following benefit programs which Employer now maintains for its employees: (i) its Defined Benefit Pension Plan, (ii) its Section 125 cafeteria plan, (iii) its Section 401(k) plan if any, (iv) its health insurance plan for employees only, (v) its disability insurance plan and (vi) its group life insurance plan; and (b) all benefit programs that Employer hereafter establishes and makes available to either employees in general or to other senior executive management (without intending to provide duplicate coverage to Executive if Employer makes such available to both employees in general and to senior executive management). If obtainable, at Executive's option and, if exercised, at Executive's sole cost and expense, Employer shall include Executive's spouse and children under the health insurance plan maintained by Employer for Executive. In addition, during the term of this Employment Agreement, (i) Employer shall also pay for the premiums on Executive's existing life insurance policy up to a maximum of $10,500 per annum and (ii) Employer shall pay and be responsible for all costs of ownership attributable to the automobile which Employer currently owns and provides Executive for its use, and for any replacement automobile leased or purchased by Employer pursuant to Section 9 below. In addition, subject to Executive providing proper documentation, Employer shall reimburse Executive for reasonable travel, entertainment and other expenses incurred by Executive in providing services hereunder on behalf of Employer. Following any termination of Executive's employment by Employer, to the extent permitted by law and the party providing such benefits, Executive may, at his sole cost and expense, continue any fringe benefits, if obtainable, then being provided to Executive. 8. Bonus. (a) Subject to paragraph (b) of this Section 8, in addition to the compensation set forth above, Executive shall be entitled to a bonus payable with respect to each of calendar years 1997, 1998 and 1999 (each a "Bonus Year") in an amount equal to 7.5% of the product of (i) the amount by which the Per Share Net Cash From Operations (as hereinafter defined) for such Bonus Year exceeds $.50 per share and (ii) the number of shares outstanding at the end of such Bonus Year. Notwithstanding the foregoing, the bonus in any Bonus Year shall not exceed 33-1/3% of the salary compensation set forth in Section 4 for such year (prorated if any partial year is involved). The term Per Share Net Cash from operations shall mean the Net Income for such Bonus Year (as shown on the Company's Audited Financial Statements) with the following adjustments: (i) the addition back of any extraordinary deductions to income; (ii) the addition back of depreciation of non-rental property, depreciation on rental real estate and amortization of mortgage and organization costs; (iii) with respect to the sales of property and investments, including foreclosed property, recognized in any Bonus Year (x) there shall be deducted from net gain any discount or deferred gain, and (y) any depreciation taken on the sold property during the period that it was owned by Employer shall be added back before calculating the amount of the net loss or net gain. (iv) the subtraction of all "amortization of discounts on notes and fees" which are included in Net Income. The Compensation Committee of Employer shall calculate the Per Share Net Cash from Operations in accordance with the formula set forth above, subject to such adjustments for extraordinary or unforeseen transactions, including but not limited to capital gains transactions, as in the reasonable judgment of the Compensation Committee are fair and equitable to Employer and Executive. Said calculations shall be made with respect to any Bonus Year without regard to the bonus payable in accordance with this Agreement (or any other employment or similar Agreement with senior management) attributable to said year and/or attributable to a prior year or years but paid in said year. The bonus for any Bonus Year shall be paid on or before March 30th of the next following year; provided however that if by March 30th of any year the bonus for the prior Bonus Year has not been finally determined, then the bonus shall be estimated and an amount equal to the estimated bonus will be paid to Executive on March 30th and as soon as the actual bonus is finally determined, the parties will make an appropriate adjustment. Notwithstanding any other provisions of this Agreement, in the event of any changes in the Company's outstanding common stock by reason of a stock dividend, recapitalization, merger, consolidation, reorganization, split up, extraordinary dividend, combination or exchange of shares, or the like, the Employer and Executive shall, if applicable, attempt in good faith to agree on appropriate adjustments to the bonus calculations referred to in this paragraph so as to substantially carry out the intention of this Agreement. (b) Notwithstanding anything in this Agreement to the contrary (i) Executive shall not be entitled to a bonus on account of any Bonus Year in which his employment terminates pursuant to Section 11(f) below or in which his his employment is terminated for cause, or any Bonus Year thereafter occurring, and (ii) if this Agreement is terminated pursuant to paragraphs (b) or (d) of Section 11 below, Executive's bonus for the Bonus Year in which such termination occurs shall be prorated (x) in the case of a termination pursuant to Section 11(b), as of the date on which compensation is no longer payable under said Section 11(b) and (y) in the case of termination pursuant to Section 11(d) below, as of the end of the calendar year in which notice of termination is given. In calculating Per Share Net Cash from Operations to any such date (if it is not the last day of a calendar year) the parties shall adjust (by projection to said date or as of said date, as the case may be) based on the Net Income for the period ending on March 31, June 30, September 30 or December 31 of such Bonus Year, whichever of said dates is closest to the date with respect to which the Bonus is calculated. 9. Purchase of Replacement Automobile. Upon the request of Executive, made subsequent to December 31, 1996 but prior to December 31, 1998, Employer shall make available to Executive a new automobile for Executive's use, said automobile to be of a make and model reasonably acceptable to Executive. Said automobile shall, at Employer's option, be either leased by Employer or purchased by Employer (title to remain in Employer's name). The purchase price of said automobile (exclusive of taxes), regardless of whether said automobile is purchased or leased by Employer, shall not exceed $37,500; provided, however, that Executive may select a car costing more than $37,500 if Executive pays for the increased costs to purchase or lease such automobile. Employer shall be responsible for all costs of ownership attributable to said vehicle, including but not limited to insurance, gas, oil, maintenance, repairs, etc. On the termination of Executive's employment, if Employer has purchased the vehicle, Executive may at any time within three (3) weeks following the effective date of termination purchase the vehicle from Employer at a price equal to the then "blue book" value of the vehicle times a fraction, the numerator of which is the amount paid for said vehicle by Employer, including sales tax, "dealer prep", etc., but excluding any contributions made by Executive, and the denominator of which is the amount (the "Total Purchase Price") paid for said vehicle, including sales tax, "dealer prep" etc. and any contributions made by Executive. In the event Executive does not timely purchase the vehicle and Executive has made any contribution towards the purchase thereof, if Employer desires to retain ownership of the vehicle Employer shall, within three weeks following the earlier of (i) the expiration of the aforementioned three (3) week period, or (ii) receipt of notice from Executive that he shall not purchase said vehicle, pay to Executive the "blue book value" of the vehicle, times a fraction, the numerator of which is the amount contributed towards the purchase of said vehicle by Executive and the denominator of which is the Total Purchase Price. If (i) Executive does not timely purchase the vehicle, and (ii) Employer does not desire to retain ownership and Executive has contributed towards the purchase thereof, Employer shall promptly sell the vehicle and the parties shall divide the actual net sales proceeds (after sales taxes and advertising costs, if any), with Executive receiving a fraction (being the same fraction described in the immediately preceding sentence) thereof and Employer receiving the balance. Employer agrees that the automobile presently owned or leased by the Company and utilized by Executive, and for which Employer pays the expenses pursuant to Section 7 above, may be retained or sold by Employer and Executive shall have no interest therein. 10. Stock Options. The stock options granted by Employer to Executive pursuant to Executive's Employment Agreement dated as of November 14, 1993 (the "Existing Stock Options") shall remain in full force and effect on the terms set forth in said Employment Agreement. In addition, Employer agrees that from time to time to the extent that any Existing Stock Options are either (i) exercised by Executive or (ii) lapse on November 17, 1999, if at the time of any such exercise or lapse Executive is employed by Employer, Employer shall (as of the date of such exercise or lapse) grant new stock options to Executive (the "New Stock Options") to purchase a number of shares of Employer's Class B common stock equal to the number of shares covered by the Existing Stock Options which have been exercised or have lapsed. Any New Stock Options so granted by Employer shall be subject to the terms and conditions of the existing Stock Option Plan dated November 17, 1993 (the "Stock Option Plan") and on the following terms and conditions: (a) the exercise price for each New Stock Option granted shall be a price equal to the closing price of the Class B common stock of Employer on the date the option is granted; (b) each New Stock Option granted pursuant to the terms of this Section 10 shall be exercisable for a period of six years from the date such option is granted, subject to earlier termination pursuant to the terms of the Stock Option Plan. (c) upon termination of Executive's employment for any reason whatsoever, the Existing Stock Options and any New Stock Options granted pursuant to the terms hereof shall terminate immediately except as provided for in the Stock Option Plan. 11. Employment Termination; Termination Benefits. The term of employment hereunder shall be terminated upon the first to occur of the following: (a) The expiration of the term of employment purusant to Section 3(a) of this Agreement. (b) Executive's death or permanent disability. "Permanent Disability" shall mean physical or mental incapacity of a nature which prevents Executive, or will prevent Executive, in the reasonable determination of the Board of Directors of Employer, from performing his duties under this Agreement for a continuous period of four months or any aggregate period of six months in any 12 month period. Permanent Disability shall be deemed to have occurred as of said determination. If the term of employment is terminated because of Executive's Permanent Disability, the Employer shall pay, when the same would otherwise have been payable in accordance with this Agreement, to Executive or his representative, (i) Executive's salary described in Section 4 above, as then in effect, less any disability benefits payable to Executive from policies maintained by Employer, (ii) the bonus described in Section 8 above, subject to paragraph (b) thereof, plus (iii) Executive's fringe benefits as described in Section 7 only (but not as described in Section 9 if the automobile in question had not yet been delivered to Executive as of the date of determination by the Board), until (again subject to paragraph (b) of Section 8 with respect to any payment pursuant to Section 8) the later to occur of (A) that day which is twenty-four (24) months after the date of determination of Executive's Permanent Disability and (B) December 31, 1999; provided however that subsequent to that day which is six (6) months after the date of determination of Executive's Permanent Disability, the payments set forth in subparagraphs (i) and (ii) above shall be reduced to 50% of such amounts, less 100% of any disability payments payable to Executive from policies maintained by Employer. If the term of employment is terminated because of Executive's death, the Employer shall pay, when the same would otherwise have been payable in accordance with this Agreement, to Executive's beneficiary or beneficiaries designated in writing to the Company, or to Executive's estate in the absence or lapse of such designation, (i) Executive's salary described in Section 4 above, as then in effect and (ii) the bonus described in Section 8 above, (again subject to paragraph (b) of Section 8 with respect to any payment pursuant to said Section 8), in each case for a period of six months following Executive's death, whether or not the term of employment would have terminated pursuant to Section 3(a) prior to the end of such six month period. (c) Executive's employment being terminated by the Board "for cause" pursuant to Section 3(b) of this Agreement. If Executive's employment is terminated for cause, the Company's only obligation to Executive shall be payment of Executive's salary as described in Section 4 above and fringe benefits as described in Section 7 above (but not the bonus compensation set forth in Section 8 above for any period in the year in which such termination occurs), as in effect at the date of termination, through the date of such termination. Any termination of Executive's employment under this Section 11(c) shall not affect Employer's obligation to make the retirement payments set forth in Section 12(b) below. (d) Year end termination. Executive's employment may be terminated by the Company at December 31, 1997 or at December 31, 1998 upon written notice to Executive given at any time prior to such dates if the Board of the Directors of the Company in its sole discretion determines in good faith that Executive has not diligently performed his duties as Executive Vice-President of the Company to the satisfaction of the Board of Directors. If Executive's employment is terminated pursuant to this paragraph (d) of Section 11, Executive shall be entitled to receive Executive's salary per Section 4 above and fringe benefits per Section 7 above but not per Section 9 above (unless the automobile described in said Section 9 was delivered to Executive prior to said termination without cause), which he would but for such termination have received hereunder during or with respect to the period ending ninety (90) days after the end of the calendar year in which Executive's employment is terminated pursuant to this Section 11 (d) (and at the times provided in Section 4 hereof in the case of compensation pursuant to said Section). Any termination of Executive's employment under this Section 11 (d) shall not affect the Employer's obligation to make the retirement payments set forth in Section 12(b) below. (e) Executive's employment being terminated by the Board "without cause". Termination "without cause" shall mean termination of the term of employment on any basis other than those provided in paragraphs (a), (b), (c), (d) or (f) of this Section 11. If the term of employment is terminated without cause, the Board shall give 10 days notice thereof to Executive and Executive shall be entitled to receive Executive's salary per Section 4 above, fringe benefits per Section 7 above but not per Section 9 above (unless the automobile described in said Section 9 was delivered to Executive prior to said termination without cause), and, subject to paragraph (c) of Section 10 above, all other compensation (including the bonus compensation set forth in Section 8 above, without regard to the provisions of Section 8(b) above) which he would have received hereunder but for such termination in respect of the unexpired portion of the term of employment (in the amounts and at the times provided in Sections 4 and 8 hereof in the case of compensation pursuant to said Sections). Any termination of Executive's employment "without cause" shall not affect the Employer's obligation to make the retirement payments set forth in Section 12(b) below. (f) Upon Executive voluntarily resigning his employment hereunder. If Executive's employment is terminated because Executive voluntarily resigns his employment hereunder, the Company's only obligation to Executive shall be the payment of Executive's salary pursuant to Section 4 above and fringe benefits pursuant to Section 7 above (but not the bonus provided by Section 8 above) as in effect at the date of such termination through the effective date of such termination. Any termination resulting from Executive's voluntary resignation from his employment hereunder shall not affect Employer's obligation to make the retirement payments set forth in Section 12(b) below. 12. The Retirement Period. (a) The Retirement Period shall commence on the first day of the first calendar month occurring after Executive's sixty-fifth (65th) birthday, but may be postponed by mutual agreement between Executive and Employer. The Retirement Period shall end on the day of Executive's death. The commencement and continuance of the Retirement Period shall not depend in any way upon the existence of an active period of employment relationship between Executive and Employer immediately prior to the commencement of the Retirement Period. (b) During the Retirement Period, the Employer agrees to pay to Executive each year, in equal monthly installments, the sum of $29,000; provided, however, that the $29,000 annual payment shall be increased annually after the first year of the Retirement Period to the product derived by multiplying the payment in what is then the immediately preceding year by the lesser of (i) one (1) plus 50% of the "fraction" forming a part of the definition of the Cost of Living Adjustment Factor (as heretofore defined) for the period in question, and (ii) 1.05. (c) Executive's right to receive the payments provided for in this Section 12 (i) shall not be contestable by Employer for any reason whatsoever and (ii) shall be in lieu of any right of Executive to receive retirement payments under any previous employment agreement with Employer, and Executive hereby waives and relinquishes any such rights. (d) Furthermore, provided that Executive continuously remains an employee of Employer from the date of this Employment Agreement through Executive's 65th birthday, unless otherwise agreed by the parties, during the Retirement Period the Employer shall maintain in full force and effect, Group Life policies and Major Medical and/or "medigap" policies, which (together with Medicare or other benefits which may otherwise then be available to Executive without cost to Executive), shall provide Executive with benefits substantially similar to those existing for senior employees of the Company at the time of Executive's retirement. Executive shall continue to be responsible for any and all premiums attributable to Executive's spouse and children. 13. Entire Agreement; Amendment. This Employment Agreement contains the entire agreement between the parties hereto with respect to the subject matter contained herein. This Employment Agreement may be amended, modified or supplemented only by written agreement of Employer and Executive expressly to that effect. 14. Waiver of Compliance. Any failure of either party to comply with any obligation, covenant, agreement or condition on its part contained herein may be expressly waived in writing by the other party, but such waiver or failure to insist upon strict compliance shall not operate as a waiver of, or estoppel with respect to, any subsequent or other failure. Whenever this Employment Agreement requires or permits consent by or on behalf of any party, such consent shall be given in writing. 15. Notices. All notices, requests, demands and other communications required or permitted hereunder shall be in writing and shall be deemed given if delivered by hand or five days after having been mailed, certified or registered mail with postage prepaid: (a) if to Employer, to: Presidential Realty Corporation 180 South Broadway White Plains, New York 10605 Attention: Chairman of the Board of Directors with a copy to: Chairman, Compensation Committee and Milbank, Tweed, Hadley & McCloy 1 Chase Manhattan Plaza New York, New York 10005 Telecopy No.: (212) 530-5219 Attention: Celia A. Felsher (b) if to Executive, to: Steven Baruch One Pondview West Purchase, New York 10577 16. Assignment. This Employment Agreement shall inure to the benefit of Executive and Employer and be binding upon the uccessors and general assigns of Employer. Except as expressly provided herein, this Employment Agreement and Executive's duties hereunder shall not be assigned or delegated. 17. Invalid Provisions. If any provision hereof is held to be illegal, invalid or unenforceable under present or future laws effective during the term hereof, such provision shall be fully severable; this Agreement shall be construed and enforced as if such illegal, invalid or unenforceable provision had never comprised a part hereof; and the remaining provisions hereof shall remain in full force and effect and shall not be affected by the illegal, invalid or unenforceable provision or by its severance herefrom. In lieu of such illegal, invalid or unenforceable provision there shall be added automatically as a part hereof a provision as similar in terms to such illegal, invalid or unenforceable provision as may be possible and be legal, valid and enforceable. 18. Applicable Law. This Employment Agreement shall be construed and enforced in accordance with the laws of the State of New York. IN WITNESS WHEREOF, the parties have executed this Employment Agreement as of the day and year first above written. EMPLOYER: PRESIDENTIAL REALTY CORPORATION BY: /s/ Robert E. Shapiro ________________________________ Robert E. Shapiro, Chairman of the Board of Directors EXECUTIVE: /s/ Steven Baruch ___________________________________ Steven Baruch EX-10.12 4 EMPLOYMENT AGREEMENT This Employment Agreement, made as of January 1, 1997, by and between Thomas Viertel, residing at 333 West 56th Street, New York, New York 10019("Executive") and PRESIDENTIAL REALTY CORPORATION, a Delaware corporation having offices at 180 South Broadway, White Plains, New York 10605 ("Employer" or the "Company"); W I T N E S S E T H: WHEREAS, Employer is desirous of employing Executive as its Executive Vice President; and WHEREAS, Executive desires to render such services to Employer. NOW, THEREFORE, in consideration of the premises and the mutual covenants herein set forth, the parties hereto agree as follows: 1. Employment. Employer hereby employs Executive as its Executive Vice President, and Executive hereby accepts such employment, upon the terms and conditions hereinafter set forth. 2. Duties. (a) In his capacity as Executive Vice President of Employer, Executive shall perform for Employer the executive, administrative and technical duties customarily associated with such position, as well as such other duties reasonably consistent therewith as may be reasonably assigned to Executive from time to time by the President or Board of Directors of Employer; provided, however, that the duties assigned shall be of a character and dignity appropriate to a senior executive of a corporation and consistent with Executive's experience, education and background. (b) Except as otherwise set forth in this paragraph, (i) Executive shall devote his full time and efforts during normal business days and hours to the performance of this Employment Agreement and (ii) Executive shall not engage in the real estate business or in any other business which conflicts with or competes in any material way with the business of Employer. Notwithstanding the foregoing, (x) Executive may devote reasonable time and efforts during normal business days and hours to the business of Scorpio Entertainment, Inc. and Scorpio Ventures, Inc. (collectively "Scorpio") pursuant to the Option/Shareholders Agreement dated November 14, 1991 among Employer, Scorpio, Steven Baruch, Thomas Viertel and Jeffrey F. Joseph, as modified by certain agreements dated as of December 31, 1996 between such parties (the "Option Agreement") and the Employment Agreement between Executive and Scorpio executed pursuant to the Option Agreement and (y) Executive may devote such time and efforts to winding up the business of Ivy Properties Ltd. and its affiliates (collectively, "Ivy") as Executive deems reasonably necessary; so long as, in either case, the devotion of such time and effort does not conflict (without independent committee review) or interfere with Executive's performance of his duties as Executive Vice President of Presidential and in fact Executive does diligently perform his duties as Executive Vice President of Presidential to the satisfaction of the Board of Directors of Employer. During the term of this Employment Agreement, Employer will permit Executive, at no cost to Executive, to utilize his office space to carry on the business of Scorpio to the extent permitted by this paragraph (b), provided however that Executive and/or Scorpio will pay, or reimburse Employer for, the direct costs for duplicating, telecopying, telephone and other business expenses used by Scorpio in a manner reasonably satisfactory to Employer. 3. Term. (a) This Employment Agreement shall commence on the date hereof and shall continue until December 31, 1999, unless terminated earlier in accordance with this Employment Agreement. (b) This Employment Agreement may be terminated at any time by Employer for "cause," as defined herein. For the purpose of this Employment Agreement, termination of Executive's employment shall be deemed to have been for "cause" only if termination of his employment shall have been the result of (i) the conviction of Executive of any crime constituting a felony or any other crime involving moral turpitude, (ii) Executive's willful refusal to follow a direction of the Board of Directors of Employer after written notice that such continued refusal shall result in termination of his employment for cause, or (iii) Executive's failure to fulfill his duties hereunder as is required by Section 2(b) above after written notice that such continued failure shall result in termination of his employment for cause. (c) This Employment Agreement may also be terminated by Employer as set forth in Section 11 below. 4. Compensation. Employer shall pay to Executive in consideration of the services to be rendered hereunder compensation in the form of a salary: (a) for the period beginning on the date hereof and ending on December 31, 1997, at the annual rate of One Hundred Seventy Thousand Six Hundred and no/100 ($170,600.00) Dollars; (b) for the calendar year beginning on January 1, 1998 and ending on December 31, 1998, in an amount equal to the lesser of (i) $179,130 and (ii) $170,600 times the Cost of Living Adjustment Factor (as hereinafter defined); and (c) for the calendar year beginning on January 1, 1999 and ending on December 31, 1999, in an amount equal to the salary paid for the calendar year beginning on January 1, 1998 and ending on December 31, 1998 times the lesser of (i) 1.05 and (ii) the Cost of Living Adjustment Factor. The salary for all such periods shall be paid less appropriate deductions, if any, for federal, state and city income taxes, FICA contributions, N.Y.S. disability and any other deductions required by law. The Cost of Living Adjustment Factor as it is applied in calculating compensation payable to Executive for any period referred to above (and retirement compensation payable to Executive for any period described in Section 12 below) shall be the sum of (x) one (1) plus (y) a fraction (A) which has as its numerator the amount, if any, by which the Revised Consumer Price Index for Urban Wage Earners and Clerical Workers for the New York-Northern New Jersey area, published by the U.S. Department of Labor Statistics (the "Index") for the last calendar month preceding the commence- ment of such period (which will be December in each case of annual salary described in this Section 4) (the "Increase Index Month") exceeds the Index for the calendar month occurring one year prior to the Increase Index Month (the "Base Index Month"), and (B) which has as its denominator the Index for the Base Index Month. In the event that the Index is converted to a different standard reference base or otherwise revised, the determination of increased compensation under this Section 4 and/or retirement compensation under Section 12 shall be made with the use of such conversion factor, formula or table for converting the Index as may be published by the Bureau of Labor Statistics or, if said Bureau shall not publish the same, then with the use of such conversion factor, formula or table as may be published by Prentice-Hall, Inc., or any other nationally recognized publisher of similar statistical information. If the Index ceases to be published, and there is no successor thereto, such other index as Executive and Employer shall agree upon in writing shall be substituted for the Index. If Executive and Employer are unable to agree as to such substituted index, such substituted index shall be that determined by arbitration in accordance with the procedures of the American Arbitration Association. In the event that the Index is not available for any month provided for above, the next available Index shall be used instead, and if the next available Index is available following a payment for which an adjustment should have been, then a retroactive adjustment shall also be made. (b) Executive's compensation shall be payable in equal installments in arrears, in the same frequency as other senior officers of Employer are paid, but in any event not less frequent than twenty-six (26) bi-weekly installments. 5. Indemnification. The Indemnification Agreements previously executed by Executive and Employer shall remain in full force and effect during the term of this Employment Agreement. 6. Vacations. Executive shall be entitled, during the term of this Employment Agreement to four weeks' vacation annually at full compensation. 7. Fringe Benefits. Executive shall be entitled, at Employer's expense, during the term of this Employment Agreement to participate in (a) the following benefit programs which Employer now maintains for its employees: (i) its Defined Benefit Pension Plan, (ii) its Section 125 cafeteria plan, (iii) its Section 401(k) plan if any, (iv) its health insurance plan for employees only, (v) its disability insurance plan and (vi) its group life insurance plan; and (b) all benefit programs that Employer hereafter establishes and makes available to either employees in general or to other senior executive management (without intending to provide duplicate coverage to Executive if Employer makes such available to both employees in general and to senior executive management). If obtainable, at Executive's option and, if exercised, at Executive's sole cost and expense, Employer shall include Executive's spouse and children under the health insurance plan maintained by Employer for Executive. In addition, during the term of this Employment Agreement, (i) Employer shall also pay for the premiums on Executive's existing life insurance policy up to a maximum of $9,250 per annum and (ii) Employer shall pay and be responsible for all costs of ownership attributable to the automobile which Employer currently owns and provides Executive for its use, and for any replacement automobile leased or purchased by Employer pursuant to Section 9 below. In addition, subject to Executive providing proper documentation, Employer shall reimburse Executive for reasonable travel, entertainment and other expenses incurred by Executive in providing services hereunder on behalf of Employer. Following any termination of Executive's employment by Employer, to the extent permitted by law and the party providing such benefits, Executive may, at his sole cost and expense, continue any fringe benefits, if obtainable, then being provided to Executive. 8. Bonus. (a) Subject to paragraph (b) of this Section 8, in addition to the compensation set forth above, Executive shall be entitled to a bonus payable with respect to each of calendar years 1997, 1998 and 1999 (each a "Bonus Year") in an amount equal to 7.5% of the product of (i) the amount by which the Per Share Net Cash From Operations (as hereinafter defined) for such Bonus Year exceeds $.50 per share and (ii) the number of shares outstanding at the end of such Bonus Year. Notwithstanding the foregoing, the bonus in any Bonus Year shall not exceed 33-1/3% of the salary compensation set forth in Section 4 for such year (prorated if any partial year is involved). The term Per Share Net Cash from operations shall mean the Net Income for such Bonus Year (as shown on the Company's Audited Financial Statements) with the following adjustments: (i) the addition back of any extraordinary deductions to income; (ii) the addition back of depreciation of non-rental property, depreciation on rental real estate and amortization of mortgage and organization costs; (iii) with respect to the sales of property and investments, including foreclosed property, recognized in any Bonus Year (x) there shall be deducted from net gain any discount or deferred gain, and (y) any depreciation taken on the sold property during the period that it was owned by Employer shall be added back before calculating the amount of the net loss or net gain. (iv) the subtraction of all "amortization of discounts on notes and fees" which are included in Net Income. The Compensation Committee of Employer shall calculate the Per Share Net Cash from Operations in accordance with the formula set forth above, subject to such adjustments for extraordinary or unforeseen transactions, including but not limited to capital gains transactions, as in the reasonable judgment of the Compensation Committee are fair and equitable to Employer and Executive. Said calculations shall be made with respect to any Bonus Year without regard to the bonus payable in accordance with this Agreement (or any other employment or similar Agreement with senior management) attributable to said year and/or attributable to a prior year or years but paid in said year. The bonus for any Bonus Year shall be paid on or before March 30th of the next following year; provided however that if by March 30th of any year the bonus for the prior Bonus Year has not been finally determined, then the bonus shall be estimated and an amount equal to the estimated bonus will be paid to Executive on March 30th and as soon as the actual bonus is finally determined, the parties will make an appropriate adjustment. Notwithstanding any other provisions of this Agreement, in the event of any changes in the Company's outstanding common stock by reason of a stock dividend, recapitalization, merger, consolidation, reorganization, split up, extraordinary dividend, combination or exchange of shares, or the like, the Employer and Executive shall, if applicable, attempt in good faith to agree on appropriate adjustments to the bonus calculations referred to in this paragraph so as to substantially carry out the intention of this Agreement. (b) Notwithstanding anything in this Agreement to the contrary (i) Executive shall not be entitled to a bonus on account of any Bonus Year in which his employment terminates pursuant to Section 11(f) below or in which his his employment is terminated for cause, or any Bonus Year thereafter occurring, and (ii) if this Agreement is terminated pursuant to paragraphs (b) or (d) of Section 11 below, Executive's bonus for the Bonus Year in which such termination occurs shall be prorated (x) in the case of a termination pursuant to Section 11(b), as of the date on which compensation is no longer payable under said Section 11(b) and (y) in the case of termination pursuant to Section 11(d) below, as of the end of the calendar year in which notice of termination is given. In calculating Per Share Net Cash from Operations to any such date (if it is not the last day of a calendar year) the parties shall adjust (by projection to said date or as of said date, as the case may be) based on the Net Income for the period ending on March 31, June 30, September 30 or December 31 of such Bonus Year, whichever of said dates is closest to the date with respect to which the Bonus is calculated. 9. Purchase of Replacement Automobile. Upon the request of Executive, made subsequent to December 31, 1996 but prior to December 31, 1998, Employer shall make available to Executive a new automobile for Executive's use, said automobile to be of a make and model reasonably acceptable to Executive. Said automobile shall, at Employer's option, be either leased by Employer or purchased by Employer (title to remain in Employer's name). The purchase price of said automobile (exclusive of taxes), regardless of whether said automobile is purchased or leased by Employer, shall not exceed $37,500; provided, however, that Executive may select a car costing more than $37,500 if Executive pays for the increased costs to purchase or lease such automobile. Employer shall be responsible for all costs of ownership attributable to said vehicle, including but not limited to insurance, gas, oil, maintenance, repairs, etc. On the termination of Executive's employment, if Employer has purchased the vehicle, Executive may at any time within three (3) weeks following the effective date of termination purchase the vehicle from Employer at a price equal to the then "blue book" value of the vehicle times a fraction, the numerator of which is the amount paid for said vehicle by Employer, including sales tax, "dealer prep", etc., but excluding any contributions made by Executive, and the denominator of which is the amount (the "Total Purchase Price") paid for said vehicle, including sales tax, "dealer prep" etc. and any contributions made by Executive. In the event Executive does not timely purchase the vehicle and Executive has made any contribution towards the purchase thereof, if Employer desires to retain ownership of the vehicle Employer shall, within three weeks following the earlier of (i) the expiration of the aforementioned three (3) week period, or (ii) receipt of notice from Executive that he shall not purchase said vehicle, pay to Executive the "blue book value" of the vehicle, times a fraction, the numerator of which is the amount contributed towards the purchase of said vehicle by Executive and the denominator of which is the Total Purchase Price. If (i) Executive does not timely purchase the vehicle, and (ii) Employer does not desire to retain ownership and Executive has contributed towards the purchase thereof, Employer shall promptly sell the vehicle and the parties shall divide the actual net sales proceeds (after sales taxes and advertising costs, if any), with Executive receiving a fraction (being the same fraction described in the immediately preceding sentence) thereof and Employer receiving the balance. Employer agrees that the automobile presently owned or leased by the Company and utilized by Executive, and for which Employer pays the expenses pursuant to Section 7 above, may be retained or sold by Employer and Executive shall have no interest therein. 10. Stock Options. The stock options granted by Employer to Executive pursuant to Executive's Employment Agreement dated as of November 14, 1993 (the "Existing Stock Options") shall remain in full force and effect on the terms set forth in said Employment Agreement. In addition, Employer agrees that from time to time to the extent that any Existing Stock Options are either (i) exercised by Executive or (ii) lapse on November 17, 1999, if at the time of any such exercise or lapse Executive is employed by Employer, Employer shall (as of the date of such exercise or lapse) grant new stock options to Executive (the "New Stock Options") to purchase a number of shares of Employer's Class B common stock equal to the number of shares covered by the Existing Stock Options which have been exercised or have lapsed. Any New Stock Options so granted by Employer shall be subject to the terms and conditions of the existing Stock Option Plan dated November 17, 1993 (the "Stock Option Plan") and on the following terms and conditions: (a) the exercise price for each New Stock Option granted shall be a price equal to the closing price of the Class B common stock of Employer on the date the option is granted; (b) each New Stock Option granted pursuant to the terms of this Section 10 shall be exercisable for a period of six years from the date such option is granted, subject to earlier termination pursuant to the terms of the Stock Option Plan. (c) upon termination of Executive's employment for any reason whatsoever, the Existing Stock Options and any New Stock Options granted pursuant to the terms hereof shall terminate immediately except as provided for in the Stock Option Plan. 11. Employment Termination; Termination Benefits. The term of employment hereunder shall be terminated upon the first to occur of the following: (a) The expiration of the term of employment purusant to Section 3(a) of this Agreement. (b) Executive's death or permanent disability. "Permanent Disability" shall mean physical or mental incapacity of a nature which prevents Executive, or will prevent Executive, in the reasonable determination of the Board of Directors of Employer, from performing his duties under this Agreement for a continuous period of four months or any aggregate period of six months in any 12 month period. Permanent Disability shall be deemed to have occurred as of said determination. If the term of employment is terminated because of Executive's Permanent Disability, the Employer shall pay, when the same would otherwise have been payable in accordance with this Agreement, to Executive or his representative, (i) Executive's salary described in Section 4 above, as then in effect, less any disability benefits payable to Executive from policies maintained by Employer, (ii) the bonus described in Section 8 above, subject to paragraph (b) thereof, plus (iii) Executive's fringe benefits as described in Section 7 only (but not as described in Section 9 if the automobile in question had not yet been delivered to Executive as of the date of determination by the Board), until (again subject to paragraph (b) of Section 8 with respect to any payment pursuant to Section 8) the later to occur of (A) that day which is twenty-four (24) months after the date of determination of Executive's Permanent Disability and (B) December 31, 1999; provided however that subsequent to that day which is six (6) months after the date of determination of Executive's Permanent Disability, the payments set forth in subparagraphs (i) and (ii) above shall be reduced to 50% of such amounts, less 100% of any disability payments payable to Executive from policies maintained by Employer. If the term of employment is terminated because of Executive's death, the Employer shall pay, when the same would otherwise have been payable in accordance with this Agreement, to Executive's beneficiary or beneficiaries designated in writing to the Company, or to Executive's estate in the absence or lapse of such designation, (i) Executive's salary described in Section 4 above, as then in effect and (ii) the bonus described in Section 8 above, (again subject to paragraph (b) of Section 8 with respect to any payment pursuant to said Section 8), in each case for a period of six months following Executive's death, whether or not the term of employment would have terminated pursuant to Section 3(a) prior to the end of such six month period. (c) Executive's employment being terminated by the Board "for cause" pursuant to Section 3(b) of this Agreement. If Executive's employment is terminated for cause, the Company's only obligation to Executive shall be payment of Executive's salary as described in Section 4 above and fringe benefits as described in Section 7 above (but not the bonus compensation set forth in Section 8 above for any period in the year in which such termination occurs), as in effect at the date of termination, through the date of such termination. Any termination of Executive's employment under this Section 11(c) shall not affect Employer's obligation to make the retirement payments set forth in Section 12(b) below. (d) Year end termination. Executive's employment may be terminated by the Company at December 31, 1997 or at December 31, 1998 upon written notice to Executive given at any time prior to such dates if the Board of the Directors of the Company in its sole discretion determines in good faith that Executive has not diligently performed his duties as Executive Vice-President of the Company to the satisfaction of the Board of Directors. If Executive's employment is terminated pursuant to this paragraph (d) of Section 11, Executive shall be entitled to receive Executive's salary per Section 4 above and fringe benefits per Section 7 above but not per Section 9 above (unless the automobile described in said Section 9 was delivered to Executive prior to said termination without cause), which he would but for such termination have received hereunder during or with respect to the period ending ninety (90) days after the end of the calendar year in which Executive's employment is terminated pursuant to this Section 11 (d) (and at the times provided in Section 4 hereof in the case of compensation pursuant to said Section). Any termination of Executive's employment under this Section 11 (d) shall not affect the Employer's obligation to make the retirement payments set forth in Section 12(b) below. (e) Executive's employment being terminated by the Board "without cause". Termination "without cause" shall mean termination of the term of employment on any basis other than those provided in paragraphs (a), (b), (c), (d) or (f) of this Section 11. If the term of employment is terminated without cause, the Board shall give 10 days notice thereof to Executive and Executive shall be entitled to receive Executive's salary per Section 4 above, fringe benefits per Section 7 above but not per Section 9 above (unless the automobile described in said Section 9 was delivered to Executive prior to said termination without cause), and, subject to paragraph (c) of Section 10 above, all other compensation (including the bonus compensation set forth in Section 8 above, without regard to the provisions of Section 8(b) above) which he would have received hereunder but for such termination in respect of the unexpired portion of the term of employment (in the amounts and at the times provided in Sections 4 and 8 hereof in the case of compensation pursuant to said Sections). Any termination of Executive's employment "without cause" shall not affect the Employer's obligation to make the retirement payments set forth in Section 12(b) below. (f) Upon Executive voluntarily resigning his employment hereunder. If Executive's employment is terminated because Executive voluntarily resigns his employment hereunder, the Company's only obligation to Executive shall be the payment of Executive's salary pursuant to Section 4 above and fringe benefits pursuant to Section 7 above (but not the bonus provided by Section 8 above) as in effect at the date of such termination through the effective date of such termination. Any termination resulting from Executive's voluntary resignation from his employment hereunder shall not affect Employer's obligation to make the retirement payments set forth in Section 12(b) below. 12. The Retirement Period. (a) The Retirement Period shall commence on the first day of the first calendar month occurring after Executive's sixty-fifth (65th) birthday, but may be postponed by mutual agreement between Executive and Employer. The Retirement Period shall end on the day of Executive's death. The commencement and continuance of the Retirement Period shall not depend in any way upon the existence of an active period of employment relationship between Executive and Employer immediately prior to the commencement of the Retirement Period. (b) During the Retirement Period, the Employer agrees to pay to Executive each year, in equal monthly installments, the sum of $29,000; provided, however, that the $29,000 annual payment shall be increased annually after the first year of the Retirement Period to the product derived by multiplying the payment in what is then the immediately preceding year by the lesser of (i) one (1) plus 50% of the "fraction" forming a part of the definition of the Cost of Living Adjustment Factor (as heretofore defined) for the period in question, and (ii) 1.05. (c) Executive's right to receive the payments provided for in this Section 12 (i) shall not be contestable by Employer for any reason whatsoever and (ii) shall be in lieu of any right of Executive to receive retirement payments under any previous employment agreement with Employer, and Executive hereby waives and relinquishes any such rights. (d) Furthermore, provided that Executive continuously remains an employee of Employer from the date of this Employment Agreement through Executive's 65th birthday, unless otherwise agreed by the parties, during the Retirement Period the Employer shall maintain in full force and effect, Group Life policies and Major Medical and/or "medigap" policies, which (together with Medicare or other benefits which may otherwise then be available to Executive without cost to Executive), shall provide Executive with benefits substantially similar to those existing for senior employees of the Company at the time of Executive's retirement. Executive shall continue to be responsible for any and all premiums attributable to Executive's spouse and children. 13. Entire Agreement; Amendment. This Employment Agreement contains the entire agreement between the parties hereto with respect to the subject matter contained herein. This Employment Agreement may be amended, modified or supplemented only by written agreement of Employer and Executive expressly to that effect. 14. Waiver of Compliance. Any failure of either party to comply with any obligation, covenant, agreement or condition on its part contained herein may be expressly waived in writing by the other party, but such waiver or failure to insist upon strict compliance shall not operate as a waiver of, or estoppel with respect to, any subsequent or other failure. Whenever this Employment Agreement requires or permits consent by or on behalf of any party, such consent shall be given in writing. 15. Notices. All notices, requests, demands and other communications required or permitted hereunder shall be in writing and shall be deemed given if delivered by hand or five days after having been mailed, certified or registered mail with postage prepaid: (a) if to Employer, to: Presidential Realty Corporation 180 South Broadway White Plains, New York 10605 Attention: Chairman of the Board of Directors with a copy to: Chairman, Compensation Committee and Milbank, Tweed, Hadley & McCloy 1 Chase Manhattan Plaza New York, New York 10005 Telecopy No.: (212) 530-5219 Attention: Celia A. Felsher (b) if to Executive, to: Thomas Viertel 333 West 56th Street, #11-H New York, New York 10019 16. Assignment. This Employment Agreement shall inure to the benefit of Executive and Employer and be binding upon the uccessors and general assigns of Employer. Except as expressly provided herein, this Employment Agreement and Executive's duties hereunder shall not be assigned or delegated. 17. Invalid Provisions. If any provision hereof is held to be illegal, invalid or unenforceable under present or future laws effective during the term hereof, such provision shall be fully severable; this Agreement shall be construed and enforced as if such illegal, invalid or unenforceable provision had never comprised a part hereof; and the remaining provisions hereof shall remain in full force and effect and shall not be affected by the illegal, invalid or unenforceable provision or by its severance herefrom. In lieu of such illegal, invalid or unenforceable provision there shall be added automatically as a part hereof a provision as similar in terms to such illegal, invalid or unenforceable provision as may be possible and be legal, valid and enforceable. 18. Applicable Law. This Employment Agreement shall be construed and enforced in accordance with the laws of the State of New York. IN WITNESS WHEREOF, the parties have executed this Employment Agreement as of the day and year first above written. EMPLOYER: PRESIDENTIAL REALTY CORPORATION BY: /s/ Robert E. Shapiro ________________________________ Robert E. Shapiro, Chairman of the Board of Directors EXECUTIVE: /s/ Thomas Viertel ___________________________________ Thomas Viertel EX-10.13 5 FIRST AMENDMENT TO SETTLEMENT AGREEMENT DATED AUGUST 1, 1996 AMONG PRESIDENTIAL REALTY CORPORATION, STEVEN BARUCH, JEFFREY JOSEPH AND THOMAS VIERTEL FIRST AMENDMENT TO SETTLEMENT AGREEMENT dated August 1, 1996 between PRESIDENTIAL REALTY CORPORATION, a Delaware corporation having its principal place of business at 180 South Broadway, White Plains, New York 10605 ("Presidential"), STEVEN BARUCH, residing at One Pondview West, Purchase, New York 10577, JEFFREY JOSEPH, residing at 19 Stillman Lane, Pleasantville, New York 10570, and THOMAS VIERTEL, residing at 333 West 56th Street, New York, New York 10019 (Messrs. Baruch, Joseph and Viertel are sometimes referred to herein collectively as the "Ivy Partners"). W I T N E S S E T H: WHEREAS, Presidential and the Ivy Partners entered into that certain Settlement Agreement dated November 14, 1991 (the "Settlement Agreement"); and WHEREAS, Presidential and the Ivy Partners desire to modify the Settlement Agreement on the terms set forth herein. NOW, THEREFORE, it is agreed by Presidential and the Ivy Partners as follows: 1. All capitalized terms used herein, unless otherwise defined, shall have the meaning ascribed thereto in the Settlement Agreement. 2. (a) Effective as of the date hereof, Section 12 of the Settlement Agreement is hereby modified to provide that it shall also be an event of default under the First Consolidated Note and the Second Consolidated Note if, in addition to all other sums due under said Section 12, the obligors thereunder do not also pay the interest on and the principal of the First Consolidated Note and the Second Consolidated Note, from time to time, to the extent of, and in an amount equal to, twenty-five (25%) per cent of an amount equal to (i) the "Scorpio NOI" (as hereinafter defined) less (ii) the amounts, if any, payable in accordance with paragraph (b) of this Section 2. All such additional payments made on the First Consolidated Note and Second Consolidated Note shall be applied first to interest due on the First Consolidated Note and Second Consolidated Note for the current period, then to deferred interest previously accrued on the First Consolidated Note and Second Consolidated Note, then to principal of the First Consolidated Note and then to principal of the Second Consolidated Note. (b) In addition to the provisions of Section (2)(a) above, if the Special Reserve referred to in Section (4)(b) below is in fact funded, in whole or in part, then it shall also be a default under the First Consolidated Note if, in addition to the payments provided for in Section (2)(a) above, the obligors under the First Consolidated Note do not pay interest thereon in an amount (the "Priority Payment") equal to the lesser of (i) an amount equal to 12-1/2% of the amount funded to the Special Reserve in said fiscal period or year, as the case may be, and (ii) 100% of the Scorpio NOI in said fiscal year or period, as the case may be. To the extent the amount described in clause (i) above exceeds the amount described in clause (ii) above, the excess shall be paid from the first available Scorpio NOI in any subsequent fiscal period (after making the payment, if any, then due pursuant to this paragraph (b) on account of said period). (c) Notwithstanding the provisions of Sections (2)(a) and (b) above, if all of the funds deposited into the Special Reserve are released from the Special Reserve into the general assets of Newco without payment of any of the potential liabilities referred to in Section 4 (b) below, then (i) as provided for in Section 4(b) below, the amount released shall be added to operating income in calculating Scorpio NOI in the period in which it is so released, (ii) 75% of the Priority Payments previously made to Presidential shall be credited against the future obligations of the obligors under the First Consolidated Note and Second Consolidated Note to make payments pursuant to Section 2(a) above, and (iii) there may be no further payments made to the Special Reserve. 3. In consideration of the provisions of Section 2 above, the parties are hereby simultaneously modifying (a) the Modification and Consolidation Agreement dated as of November 14, 1991 by and between Presidential, the Ivy Partners and the Ivy Entities referred to therein (the "Modification Agreement"), and (b) that certain Option/Shareholders Agreement by and among Presidential, the Ivy Partners, Scorpio Entertainment, Inc. and Scorpio Ventures, Inc., as previously amended (the "Shareholders Agreement"). 4. "Scorpio NOI" shall mean, with respect to each fiscal period or year of Newco I and Newco II (collectively "Newco") commencing on or after January 1, 1996 and continuing through and including their fiscal years ending prior to the payment in full of both the First Consolidated Note and the Second Consolidated Note, an amount equal to the aggregate "net operating income" (as defined under generally accepted accounting principles), using the cash method of accounting, earned by Newco in said fiscal period or year, subject to the following adjustments: (a) (i) Included as an operating expense shall be those amounts applied by Newco to fund, or refund, a reserve (the "Newco Reserve"), provided that for purposes of calculating Scorpio NOI, the Newco Reserve shall not exceed at any time $100,000 without Presidential's written consent (which may be withheld for any or no reason whatsoever). The Newco Reserve may be used for the purpose of paying any and all operating expenses of Newco, subject, however, to the limits imposed pursuant to paragraph (c) below and provided that amounts spent on "Permitted Early Production Investment", as defined in Section 7 of the Shareholders Agreement, shall not exceed the limits set forth in said Section 7. To the extent of any and all payments hereafter made to fund or refund the Newco Reserve (up to said $100,000 figure) and characterized as an operating expense in accordance with the first sentence of this subparagraph (a) (i), any and all operating expenses paid from the Newco Reserve shall not be treated as operating expenses in calculating Scorpio NOI. The Ivy Partners represent that as of the commencement of the fiscal year commencing January 1, 1996, the Newco Reserve contained $63,487.77. (ii) The Newco Reserve and the Special Reserve referred to in subparagraph (b) below shall be subject to a lien in favor of Presidential to secure payment of the First Consolidated Note and the Second Consolidated Note. Notwithstanding anything in this Agreement to the contrary, amounts may not be withdrawn from the Newco Reserve or the Special Reserve at any time during which an event of default under the First Consolidated Note, the Second Consolidated Note, the Shareholders Agreement or the Settlement Agreement shall have occurred and be continuing. (b) Also included as an operating expense shall be those amounts applied by Newco to fund, or refund, a reserve (the "Special Reserve") in an amount determined from time to time by Newco in its sole discretion (provided that such amount shall not exceed the sum of $355,000) to provide for the payment of any liabilities or obligations that Newco or the Ivy Partners may incur to Samsung, Inc. or to the other investors in the production of "Time and Again" as a result of any obligation that Newco or the Ivy Partners may have to return the full investment of Samsung, Inc. Any and all payments to Samsung, Inc. or to the other investors in "Time and Again" from the Special Reserve shall not be an operating expense. The funds in the Special Reserve may be used only to pay any such obligations or liabilities, provided however that at the election of Newco (which may be exercised in its sole discretion) the funds in the Special Reserve may be otherwise released therefrom, at which time such funds so released shall be included as operating income for purposes of determining Scorpio NOI. The Ivy Partners represent that as of the commencement of the fiscal year commencing January 1, 1996, the Special Reserve contained zero. (c) (i) For purposes of calculating Scorpio NOI, the salaries paid by Newco to Thomas Viertel or any affiliates of his (collectively, "Viertel"), and/or Steven Baruch or any affiliates of his (collectively, "Baruch"), respectively, in any fiscal year (collectively, the "Newco Salaries"), shall equal the lesser of (i) said salaries to the extent actually paid, and (ii) the greater of (x) $52,500 and (y) one-third of the base salary, excluding both bonuses, pension plan benefits and other fringe benefits, paid by Presidential in said fiscal year to Viertel and Baruch, as the case may be (for example, the base salary of Viertel and Baruch for calendar 1996 is $165,631). (ii) Notwithstanding anything in this Agreement to the contrary, the Newco Salaries shall not be paid, but shall be deferred, at any time that (x) the Newco Reserve is less than $100,000 or to the extent any such payment would reduce the Newco Reserve to less than $100,000, and (y) any other operating expenses of Newco remain unpaid for in excess of thirty (30) days. Subject to clause (y) above and subparagraph (i) of this paragraph (c), any such deferred salary may be paid after, and to the extent that, the Newco Reserve has been replenished so as to equal $100,000. (d) To the extent the same would otherwise not be included in calculating Scorpio NOI, (i) subject to the limits set forth in Section 7 of the Shareholders Agreement, Permitted Early Production Investment shall be included as an operating expense, (ii) reimbursements of Permitted Early Production Investment from particular productions shall be included as operating income and (iii) subject to the aforesaid limit on Permitted Early Production Investment, payments of obligations incurred to partners other than Samsung, Inc. in connection with the production of "Time and Again" shall be included as an operating expense. (e) (i) Viertel and Baruch may continue to participate in and Newco may continue to own an interest in Showtix, Inc. ("Showtix"), a company specializing in brokering theater tickets. Any and all compensation paid to Viertel or Baruch in connection with Showtix shall reduce the amount of the permissible Newco Salaries of Viertel and/or Baruch, as the case may be, for purposes of calculating Scorpio NOI in accordance with clause (i) of paragraph (c) above. (ii) Operating income or losses of Showtix shall not be included in the calculation of Scorpio NOI. However, any dividends or other distributions, fees or loans actually received by Newco shall be included in the calculation of Scorpio NOI. Baruch and Viertel agree that they will cause Showtix not to retain operating reserves on June 30th of any year in excess of $50,000 without Presidential's consent. Any cash or liquid assets in excess of the allowable reserve on June 30th of any year shall be distributed to stockholders of Showtix. (f) As provided for in that certain First Amendment to Option/Shareholders Agreement dated August 1, 1996 (the "First Amendment"), Newco, Viertel and/or Baruch may form entities to serve as general partners in limited partnerships which will own and finance individual theatrical ventures. The operations of said general partnership entities shall be aggregated with the operations of Newco for purposes of calculating Scorpio NOI (without limiting the overall "cap" on Permitted Early Production Investment provided for in Section 7 of the Shareholder's Agreement). As provided in paragraph (b) of Section 5 of the First Amendment (which modifies Section 7(b) of the Shareholders Agreement), Newco shall calculate Scorpio NOI for the first quarter of each fiscal year, for the first six months of each fiscal year, for the first nine months of each fiscal year and for the entire fiscal year, with the calculation for the entire fiscal year to be prepared by a certified public accountant. Payments of interest based on the Scorpio NOI shall be made with respect to each fiscal period within ten days after the receipt by Newco of the calculations of the Scorpio NOI for such period (but in any event within forty (40) days after the end of the first three fiscal quarters and within fifty-five (55) days after the end of the fiscal year with respect to the last quarter), provided however that the calculation of Scorpio NOI for the entire fiscal year prepared by the Newco's certified public accountant shall be determinative of the Scorpio NOI for the fiscal year (subject to the provision of paragraph (e) of Section 5 of the First Amendment) and the parties will adjust for any under-payment or over- payment made during the prior fiscal periods. 5. Except as specifically modified herein, the Settlement Agreement shall remain unmodified and in full force and effect. IN WITNESS WHEREOF, the parties hereto have executed this First Amendment to Settlement Agreement as of the date first above written. PRESIDENTIAL REALTY CORPORATION By: /s/ Robert E. Shapiro ____________________________ /s/ Steven Baruch _______________________________ Steven Baruch /s/ Jeffery Joseph _______________________________ Jeffery Joseph /s/ Thomas Viertel _______________________________ Thomas Viertel EX-27 6
5 3-MOS DEC-31-1997 MAR-31-1997 2,038,026 987,983 29,497,526 158,917 0 5,549,085 26,556,955 5,853,139 59,266,750 4,340,847 39,807,150 0 0 357,250 11,926,246 59,266,750 0 3,784,342 0 1,491,844 0 0 826,161 1,352,598 0 1,352,598 0 0 0 1,352,598 0.38 0.38
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