-----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, LChFirOYm1jXxotYHz2no0tv2yVAoVslklN5TnfXtvjyGFGiEnRVKsYC0IjMkGC5 RdzsNiJ7jaZmSMTWwxEg4A== 0000903112-98-001137.txt : 19980807 0000903112-98-001137.hdr.sgml : 19980807 ACCESSION NUMBER: 0000903112-98-001137 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19980630 FILED AS OF DATE: 19980806 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: ATLANTIC REALTY TRUST CENTRAL INDEX KEY: 0000948975 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE INVESTMENT TRUSTS [6798] IRS NUMBER: 133849655 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-27198 FILM NUMBER: 98678282 BUSINESS ADDRESS: STREET 1: 747 THIRD AVE CITY: NEW YORK STATE: NY ZIP: 10017 BUSINESS PHONE: 2123551255 MAIL ADDRESS: STREET 1: 747 THIRD AVE CITY: NEW YORK STATE: NY ZIP: 10017 10-Q 1 FORM 10-Q FORM 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 (Mark One) [ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES ----- EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 1998 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 0-27562 ........................................................ ATLANTIC REALTY TRUST ..................................................... (Exact name of registrant as specified in its charter) MARYLAND 13-3849655 ............................... ......................... (State or other jurisdiction of (I.R.S. Employer Incorporation or organization) Identification No.) 747 Third Avenue, New York, N.Y. 10017 ........................................ (Address of principal executive offices) (Zip Code) 212-702-8561 .................................................. (Registrant's telephone number, including area code) 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 ...... Number of shares of beneficial interest ($.01 par value) of the Registrant outstanding as of August 1, 1998: 3,561,553 740267.1 INDEX This Quarterly Report on Form 10-Q contains historical information and forward-looking statements. Statements looking forward in time are included in this Form 10-Q pursuant to the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. They involve known and unknown risks and uncertainties that may cause the Trust's actual results in future periods to be materially different from any future performance suggested herein. In the context of forward-looking information provided in this Form 10-Q and in other reports, please refer to the discussion of risk factors detailed in, as well as the other information contained in, the Trust's Form 10 filed with the Securities and Exchange Commission on March 28, 1996 as well as the Trust's filings with the Securities and Exchange Commission since that date.
PAGE NO. -------- Part I. FINANCIAL INFORMATION Item 1. Financial Statements.................................................................................3 Consolidated Statements of Net Assets in Liquidation June 30, 1998 and December 31, 1997..................................................................3 Consolidated Statements of Changes in Net Assets in Liquidation Periods April 1, 1998 through June 30, 1998, January 1, 1998 through June 30, 1998 and Periods April 1, 1997 through June 30, 1997, January 1, 1997 through June 30, 1997................................................................4 Notes to Financial Statements........................................................................5 Item 2. Management's Discussion and Analysis of Financial Condition and Liquidation Activities...........................................................................................9 Part II. OTHER INFORMATION Item 4. Submission of Matters to a Vote of Securityholders..................................................10 Item 5. Other Information...................................................................................10 Item 6. Exhibits and Reports on Form 8-K....................................................................11
740267.1 2 PART I - FINANCIAL INFORMATION Item 1. Financial Statements. ATLANTIC REALTY TRUST AND SUBSIDIARY CONSOLIDATED STATEMENTS OF NET ASSETS IN LIQUIDATION (Liquidation Basis of Accounting)
June 30, 1998 December 31, 1997 --------------------- ---------------------- ASSETS Investments in Real Estate.............................. $38,125,000 $41,327,000 Cash and Short Term Investments......................... 19,516,232 15,635,910 ----------------- ---------------- Total Assets................................... $57,641,232 $56,962,910 ================= ================ LIABILITIES Estimated Costs of Liquidation.......................... 3,108,501 2,914,206 ----------------- ---------------- Total Liabilities.............................. $3,108,501 $2,914,206 ----------------- ---------------- Net Assets in Liquidation............................... $54,532,731 $54,048,704 ================= ================
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 740267.1 3 ATLANTIC REALTY TRUST AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS IN LIQUIDATION (Liquidation Basis of Accounting)
For the Period For the Period 4/1/98 to 6/30/98 1/1/98 to 6/30/98 ----------------- ----------------- Net Assets in Liquidation Beginning of Period...................................... $54,508,375 $54,048,704 Adjustments to Reflect Liquidation Basis of Accounting.......................... 24,356 484,027 ------------ ------------ Net Assets in Liquidation End of Period................... $54,532,731 $54,532,731 ============ ============ For the Period For the Period 4/1/97 to 6/30/97 1/1/97 to 6/30/97 ----------------- ----------------- Net Assets in Liquidation Beginning of Period...................................... $47,916,316 $47,615,764 Adjustments to Reflect Liquidation Basis of Accounting.......................... 2,726,918 3,027,470 ------------ ------------ Net Assets in Liquidation End of Period................... $50,643,234 $50,643,234 ============ ============
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 740267.1 4 ATLANTIC REALTY TRUST AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. Organization and Significant Accounting Policies Atlantic Realty Trust (the "Trust"), a Maryland real estate investment trust, was formed on July 27, 1995 for the purpose of liquidating its interests in real properties, a mortgage loan portfolio and certain other assets and liabilities which were transferred to the Trust from RPS Realty Trust ("RPS") on May 10, 1996 (the "Spin-Off Transaction"). The Trust adopted the liquidation basis of accounting as of the date of the Spin-Off Transaction based on its intention to liquidate its assets or merge or combine operations with another real estate entity within eighteen months from the date of the Spin-Off Transaction. Liquidation Basis of Accounting As a result of the Spin-Off Transaction, the Trust has adopted the liquidation basis of accounting. The liquidation basis of accounting is appropriate when liquidation appears imminent and the Trust is no longer viewed as a going concern. Under this method of accounting, assets are stated at their estimated net realizable values and liabilities are stated at the anticipated settlement amounts. The valuations presented in the accompanying Statement of Net Assets in Liquidation represent the estimates at the dates shown, based on current facts and circumstances, of the estimated net realizable value of assets and estimated costs of liquidating the Trust. In determining the net realizable values of the assets, the Trust considered each asset's ability to generate future cash flows, offers to purchase received from third parties, if any, and other general market information. Such information was considered in conjunction with operating the Trust's plan for disposition of assets. The estimated costs of liquidation represent the estimated costs of operating the Trust through its anticipated termination. These costs primarily include payroll, consulting and related costs, rent, shareholder relations, legal and auditing. Computations of net realizable value necessitate the use of certain assumptions and estimates. Future events, including economic conditions that relate to real estate markets in general, may differ from those assumed or estimated at the time such computations are made. Because of inherent uncertainty of valuation when an entity is in liquidation, the amounts ultimately realized from assets disposed and costs incurred to settle liabilities may materially differ from amounts presented. Pursuant to the terms of the Trust's Amended and Restated Declaration of Trust, the Trust was to continue for a period of 18 months from the date of the Spin-Off Transaction (November 10, 1997), subject to, among certain other things, satisfactory resolution of the RPS Tax Issues (as such term is defined in footnote 5 below). Because the RPS Tax Issues have not yet been satisfactorily resolved, the Trust will continue its business past that date. The Trust cannot currently estimate the timing of the future satisfactory resolution of the RPS Tax Issues. Accordingly, the Trust will continue until there is a final determination of these issues. 740267.1 5 Consolidation The consolidated financial statements include the accounts of the Trust and its subsidiary. All significant intercompany accounts and transactions have been eliminated in consolidation. 2. Investments in Real Estate (a) Estimated Net Realizable Value Property Location 6/30/98(b) -------- -------- ---------- Hylan Shopping Center Staten Island, NY $38,125,000 - ------------- (a) On February 25, 1998, the Trust sold the Norgate Shopping Center for approximately $3,850,000 and received net proceeds of $3,242,000. (b) Includes estimated cash flows using a disposition period of 12 months. Realized values may differ depending on actual disposition results and time period. 3. Shares Outstanding The weighted average number of common shares outstanding for the periods ending June 30, 1998 and March 31, 1998 was 3,561,553. 4. Short-Term Investments Short-term investments at June 30, 1998 consist primarily of Certificates of Deposit at a major New York bank of $19,000,000 bearing interest at a fixed rate of 4.80%. 5. Tax Contingency During the third quarter of 1994, RPS held more than 25% of the value of its gross assets in overnight Treasury Bill reverse repurchase transactions which the Internal Revenue Service ("IRS") may view as non-qualifying assets for the purposes of satisfying an asset qualification test applicable to REITs, based on a Revenue Ruling published in 1977 (the "Asset Issue"). RPS has requested that the IRS enter into a closing agreement with RPS that the Asset Issue will not impact RPS' status as a REIT. The IRS has deferred any action relating to the Asset Issue pending the further examination of RPS' 1991-1995 tax returns (the "RPS Audit," and together with the Asset Issue, the "RPS Tax Issues"). Based on developments in the law which occurred since 1977, RPS' tax counsel, Battle Fowler LLP, rendered an opinion that RPS' investment in Treasury Bill repurchase obligations would not adversely affect its REIT status. However, such opinion is not binding upon the IRS. In connection with the Spin-Off Transaction, the Trust assumed all tax liability arising out of the RPS Tax Issues (other than liability that relates to events occurring or actions taken by RPS following the date of the Transaction) pursuant to a tax agreement, dated May 10, 1996, by and between RPS and the Trust, which provides that RPS (now named Ramco-Gershenson Properties 740267.1 6 Trust) under the direction of its "continuing trustees", and not the Trust, will control, conduct and effect the settlement of any tax claims against RPS relating to the RPS Tax Issues. Accordingly, the Trust does not have any control as to the timing of the resolution or disposition of any such claims and no assurance can be given that the resolution or disposition of any such claims will be on terms or conditions as favorable to the Trust as if they were resolved or disposed of by the Trust. RPS and the Trust also have received an opinion from Special Tax Counsel, Wolf, Block, Schorr and Solis-Cohen LLP, that, to the extent there is a deficiency in RPS' taxable income arising out of the IRS examination and provided RPS timely makes a deficiency dividend (i.e. declares and pays a distribution which is permitted to relate back to the year for which each deficiency was determined to satisfy the requirement that a REIT distribute 95 percent of its taxable income), the classification of RPS as a REIT for the taxable years under examination would not be affected. If, notwithstanding the above-described opinions of legal counsel, the IRS successfully challenged the status of RPS as a REIT, the REIT status of the Trust could be adversely affected. Management estimates that this would have an effect of approximately $415,000 for 1997, $0 for 1996, $600,000 for 1995 and $400,000 for 1994 for state taxes in prior years as well as $145,000 for 1997 for federal taxes which have not been provided in the financial statements of RPS or the Trust. Such amounts do not include potential penalties and interest. The possible effect on the Trust for subsequent periods could be significant depending on the taxable income of either RPS or the Trust in such periods. As of June 30, 1998 the Trust has not been required to perform its indemnity with respect to the RPS Tax Issues other than with respect to legal fees and expenses paid in connection with the IRS' ongoing examination. Although the agent conducting the examination has not issued his final examination report with respect to the RPS Tax Issues, RPS has received a preliminary draft of the examining agent's report, and a copy of that draft report has been furnished by RPS to the Trust. Although the examining agent's draft report proposes to disallow RPS' status as a REIT for the taxable years 1991-1995 and to assess deficiencies in income tax, plus interest and penalties for such years, the "continuing trustees" are engaged in ongoing discussions with the examining agent and his supervisors with regard to the positions set forth in the draft report. Special Tax Counsel, referred to above, has reviewed the examining agent's draft report and the positions set forth therein. One of the positions, dealing with the failure of RPS to send certain shareholder demand letters, is the subject of a Closing Agreement previously entered into by RPS and the IRS pursuant to which the IRS agreed that the status of RPS as a REIT will not be lost solely because of its failure to satisfy certain shareholder demand notice requirements for RPS' taxable years 1988-1992. Another position, the acquisition of assets by RPS that could be viewed as nonqualifying assets for REIT purposes, has been addressed in the opinion letter of counsel referred to above. Finally, the agent has proposed to disallow the deductions for bad debts and certain other items claimed by RPS in the years under examination. In reaching his conclusion with respect to the deduction for bad debts, the examining agent has disregarded transactions with third parties involving either the loans, or the subject properties, in which the values of the assets corresponded to the values used by RPS in determining its bad debt deductions. Special Tax Counsel, referred to above, has advised that, to the extent that there is a deficiency in RPS' taxable income arising out of the RPS Audit and provided that RPS timely makes a deficiency dividend distribution, the classification of RPS as a REIT for the taxable years under examination should not be affected adversely. There can be no assurance that the examining agent will not issue the proposed report in the form previously delivered to RPS (or another form). Issuance of the revenue agent's report constitutes only the first step in the IRS administrative process for determining whether there is any deficiency in the RPS tax liability for the years at issue and any adverse determination by the 740267.1 7 examining agent is subject to administrative appeal within the IRS and, thereafter, to judicial review. If the examining agent were to issue his report in its current form and if the determinations made in the draft report were sustained following the exhaustion by RPS of its rights to contest such IRS determinations, the Trust's indemnification liability to RPS could be substantial and could exceed the assets of the Trust. 740267.1 8 Item 2. Management's Discussion and Analysis of Financial Condition and Liquidation Activities. Capital Resources and Liquidity At June 30, 1998, the Trust owned one retail property (Hylan Plaza Shopping Center, located in Staten Island, New York) as well as cash and certain other assets, which include furniture, fixtures and equipment. The Trust does not intend to make new loans or actively engage in either the mortgage lending or the property acquisition business. The Trust's primary objective has been to liquidate its assets in an eighteen-month period from the date of the Spin-Off Transaction while realizing the maximum values for such assets; however, because the RPS Tax Issues have not been satisfactorily resolved, the Trust has continued its business beyond such period. Although the Trust considers its assumptions and estimates as to the values and timing of such liquidations to be reasonable, the period of time to liquidate the assets and distribute the proceeds of such assets is subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond the Trust's control. There can be no assurance that the net values ultimately realized and costs actually incurred for such assets will not materially differ from the Trust's estimate. The Trust believes that cash and cash equivalents on hand, proceeds generated by the remaining property and the proceeds from the eventual sale of such property will be sufficient to support the Trust and meet its obligations. As of June 30, 1998, the Trust had approximately $19,516,000 in cash and short-term investments. 740267.1 9 PART II - OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders. The Annual Meeting of Shareholders of the Trust was held on May 20, 1998 (i) to elect eight trustees to sit on the Board of Trustees of the Trust (the "Board") until the next Annual Meeting of Shareholders and until their successors are duly elected and qualified; and (ii) to ratify the selection by the Board of Deloitte & Touche LLP as the independent auditors of the Trust for the fiscal year commencing January 1, 1998. On the first proposal relating to the election of trustees, the votes of the Shareholders were as follows: FOR WITHHOLD AUTHORITY ABSTAIN --- ------------------- ------- Stephen R. Blank 2,783,981 17,308 00 Edward Blumenfeld 2,790,521 10,768 00 Samuel M. Eisenstat 2,790,564 10,729 00 Edwin J. Glickman 2,790,526 10,763 00 Arthur H. Goldberg 2,790,381 10,908 00 Herbert Liechtung 2,790,076 11,213 00 Joel M. Pashcow 2,790,402 10,887 00 William A. Rosoff 2,790,521 10,768 00 For the second proposal, the Shareholders voted to ratify the selection of Deloitte & Touche LLP as the independent auditors. There were 2,782,521 votes for, 8,541 votes against, and 10,227 votes abstained. Item 5. Other Information. Pursuant to the terms of the Trust's Amended and Restated Declaration of Trust, the Trust was to continue for a period of 18 months from the date of the Spin-Off Transaction (November 10, 1997), subject to, among other things, satisfactory resolution of the RPS Tax Issues. Because the RPS Tax Issues have not yet been satisfactorily resolved, the Trust has continued its business past that date. The Trust cannot currently estimate the timing of the future satisfactory resolution of the RPS Tax Issues. Accordingly, the Trust will continue until there is a final determination of these issues. 740267.1 10 Item 6. Exhibits and Reports on Form 8-K. (a) Exhibits 10.1 Employment Agreement, entered into June 11, 1998, between Atlantic Realty Trust and Edwin R. Frankel 27.1 Financial Data Schedule (b) The registrant has not filed any current reports on Form 8-K for the three month period ended June 30, 1998. 740267.1 11 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. ATLANTIC REALTY TRUST Date: August 6, 1998 /s/Joel M. Pashcow ------------------ Joel M. Pashcow Chairman and President (Principal Executive Officer) Date: August 6, 1998 /s/Edwin R. Frankel ------------------- Edwin R. Frankel Executive Vice President, Chief Financial Officer and Secretary (Principal Financial and Accounting Officer) 740267.1 Exhibit Index The following exhibits are filed as part of this Quarterly Report on Form 10-Q: Exhibit No. Description 10.1 Employment Agreement, entered into June 11, 1998 between Atlantic Realty Trust and Edwin R. Frankel 27.1 Financial Data Schedule 740267.1 EX-10.1 2 EMPLOYMENT AGREEMENT Exhibit 10.1 EMPLOYMENT AGREEMENT This Employment Agreement ("Agreement") is made and entered into as of June 11, 1998 by and between ATLANTIC REALTY TRUST, a Maryland real estate investment trust (the "Company"), whose principal place of business is 747 Third Avenue, New York, New York 10017 and EDWIN R. FRANKEL ("Employee"), who resides at 49 Demopolis Avenue, Staten Island, New York 10308. W I T N E S S E T H: WHEREAS, the Company desires to employ Employee to devote full time to the business of the Company, and Employee desires to be so employed hereunder effective as of the date hereof; NOW, THEREFORE, in consideration of the mutual agreements herein made, the Company and Employee do hereby agree as follows: 1. Employment. The Company agrees to employ Employee, and Employee accepts such employment, as Executive Vice President, Chief Financial Officer and Secretary, on the terms and conditions hereinafter set forth. 2. Powers and Duties; Location. As Executive Vice President, Chief Financial Officer and Secretary of the Company, Employee shall have such powers and duties as are consistent with the offices of Executive Vice President, Chief Financial Officer and Secretary. Employee will report directly to the Board of Trustees of the Company. Employee shall be based in New York, New York. 3. Term. The term of employment under this Agreement shall commence on the date hereof, and shall terminate on the date of the Change in Control (as defined below) of the Company unless earlier terminated by either party hereto upon written notice to the other (the "Employment Term"). Excluding periods of vacation and sick leave to which Employee is entitled, Employee agrees during the Employment Term to devote his full business time to the business and affairs of the Company and to the duties and responsibilities assigned to Employee hereunder. For purposes of this Agreement, a "Change in Control" means the occurrence of any one of the following events: (i) when the Company acquires actual knowledge that any person (as such term is used in Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")), other than an employee benefit plan established or maintained by the Company or any of its affiliates, is or becomes the beneficial owner (as defined in Rule 13d-3 of the Exchange Act) directly or indirectly, of securities of the Company representing 50% or more of the combined voting power of the 740267.1 Company's then-outstanding securities; (ii) upon the final purchase of the Company's common stock pursuant to a tender or exchange offer (other than a tender or exchange offer made by the Company or an employee benefit plan established or maintained by the Company or any of its affiliates); or (iii) upon the consummation of (A) a merger or consolidation of the Company with or into another corporation (other than a merger or consolidation in which the Company is the surviving corporation and which does not result in any capital reorganization or reclassification or other change in the Company's then-outstanding shares of common stock, (B) a sale or disposition of all or substantially all of the Company's assets, or (C) a plan of liquidation or dissolution of the Company. 4. Compensation. (a) As compensation for the services to be rendered by Employee hereunder, the Company will pay or cause to be paid to Employee during the Employment Term an annual base salary (the "Base Salary") of $158,000, to be increased each year as provided below. The Base Salary for each calendar year shall be increased over the Base Salary for the preceding calendar year by a cost of living adjustment determined by the Company's Board of Trustees, which shall be no more than three (3%) percent. The Base Salary will be payable to Employee in equal monthly or more frequent installments, as the Company shall determine. Increases in salary, once granted, shall not be subject to revocation or decrease thereafter, and "Base Salary" for all purposes herein shall be deemed to be a reference to such higher amount. (b) As soon as practicable after the execution of this Agreement, the Company will lend Employee the sum of $37,500 (the "Loan"). The Loan will be payable on demand, and will be evidenced by a promissory note to be executed by Employee in favor of the Company, in the form attached hereto as Exhibit A. The Loan will be forgiven upon the occurrence of any of the following: (i) a Change in Control of the Company; (ii) the death of Employee; or (iii) Employee shall have received notice of termination from the Company prior to the termination of the Employment Term pursuant to Section 6(a) hereof. If any of (i), (ii) or (iii) above occurs, the Loan will be forgiven as of the date of such occurrence, and Employee shall be deemed to have received compensation in an amount equal to the principal amount of the Loan (plus imputed interest thereon as provided in Section 7872 of the Internal Revenue Code of 1986) as of the date thereof. If at any time prior to the Change in Control of the Company (i) Employee gives notice to terminate this Agreement or (ii) Employee is terminated for Cause (as defined herein),then the Loan will become immediately due and payable. 5. Benefits. During the Employment Term, Employee shall be entitled to: (i) receive all benefits and participate in all benefit plans generally made available to employees of the Company; (ii) vacation time of 4 weeks per year which, to the extent not taken, shall be non-cumulative and non-compensatory, and increasing in accordance with the Company's vacation policy; and (iii) reimbursement for expenses reasonably incurred by Employee in connection with his employment hereunder, in accordance 740267.1 with the Company's policies, as in effect from time to time during the Employment Term. 6. Termination. (a) Termination Prior to Change in Control. If Employee's employment is terminated for any reason other than Cause (as defined below) prior to the Change in Control of the Company, the Employee shall only be entitled to receive accrued but unpaid Base Salary, unpaid bonus, if any, and benefits through the date of termination. (b) Termination on or after Change in Control. If Employee's employment is terminated for any reason other than Cause (as defined below) coincident with or after the Change in Control of the Company, the Employee shall be entitled to receive (i) accrued but unpaid Base Salary, unpaid bonus, if any, and benefits through the date of termination and (ii) a lump-sum payment equal to 150 percent of Employee's Base Salary as in effect on the date of termination. (c) Termination for Cause. Notwithstanding Section 3 hereof, Employee's employment shall terminate immediately for Cause. For purposes of this Agreement, "Cause" shall mean either (i) a material breach by Employee of any material provision of this Agreement; provided, that the Company gives Employee written notice of such breach and Employee fails to cure the breach within thirty (30) days after receipt of such notice, or (ii) any action by Employee constituting willful malfeasance, and having a material adverse effect on the Company, or (iii) an act of fraud, misappropriation of funds or embezzlement by Employee in connection with his employment. If Employee is terminated for Cause under clause (i) or (ii) hereof, Employee's right to further compensation shall be limited to the payment of any accrued but unpaid Base Salary, unpaid bonus, if any, and benefits through the date of termination. If Employee is terminated for Cause under clause (iii) hereof, Employee shall have no right to further compensation. (d) No Further Notice or Compensation. Employee understands and agrees that he shall not be entitled to any further notice or compensation upon termination of his employment with the Company, other than amounts specified in Section 3 or Section 6 hereof. Employee shall not have any obligation to seek comparable employment following such termination, nor shall any compensation received from any subsequent employment reduce the Company's obligations hereunder. 7. Confidentiality. While employed by the Company, and at any time thereafter, Employee shall not, without the prior written consent of the Company, use, divulge, disclose or make accessible to any other person, firm, partnership, corporation or other entity any Confidential Information pertaining to the business of the Company or any of its affiliates, except (i) while employed by the Company, in the business of and for the benefit of the Company or (ii) when required to do so by applicable law, by a court, by 740267.1 any governmental agency, or by any administrative body or legislative body (including a committee thereof); provided, however, that Employee shall give reasonable notice under the circumstances to the Company that he has been notified that he will be required to so disclose as soon as possible after receipt of such notice, in order to permit the Company to take whatever action it reasonably deems necessary to prevent such disclosure and Employee shall cooperate with the Company to the extent it reasonably requests him to do so. For purpose of this Section 7, "Confidential Information" shall mean non-public information concerning the financial data, strategic business plan or other non-public, proprietary and confidential information of the Company, its affiliates or customers that, in any case, is not otherwise available to the public (other than by Employee's breach of the terms hereof). 8. Completeness and Modification. This Agreement supersedes in its entirety all other agreements and understandings, both written and oral, regarding Employee's employment with the Company and contains the entire understanding and agreement between the parties with respect to the subject matter hereof. Any representations, promises or conditions in connection therewith not incorporated herein shall not be binding upon either party. No modification, waiver or agreement of termination of this Agreement shall be binding upon either party unless made in writing and signed for or on behalf of both parties. 9. Withholding. The Company shall be entitled to withhold from payment any amount of withholding required by law. 10. Severability. In the event that any one or more of the provisions of this Agreement shall be or become invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein shall not be affected thereby. 11. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of New York, without regard to conflict of law principles. 12. Arbitration. Any controversy or claim arising out of or relating to this Agreement or the breach thereof shall be settled by binding arbitration in New York City by a single neutral arbitrator in accordance with the Commercial Arbitration Rules of the American Arbitration Association. Judgment upon any award rendered may be entered in any court having jurisdiction thereof, except in the event of a controversy related to any alleged violation of Section 7 hereof, in which case the Company shall be entitled to seek injunctive relief from a court of competent jurisdiction without the requirement to seek arbitration. 740267.1 13. Indemnification. To the fullest extent permitted by applicable law, Employee shall be indemnified and held harmless for any action or failure to act in his capacity as an officer or employee of the Company. In furtherance of the foregoing and not by way of limitation, if Employee is a party or is threatened to be made a party to any suit because he is an officer or employee of the Company, he shall be indemnified against expenses, including reasonable attorney's fees, judgments, fines and amounts paid in settlement if he acted in good faith and in a manner reasonably believed to be in or not opposed to the best interest of the Company, and with respect to any criminal action or proceeding, he had no reasonable cause to believe his conduct was unlawful. Indemnification under this Section 13 shall be in addition to any other indemnification by the Company of its officers and directors. Expenses incurred by Employee in defending an action, suit or proceeding for which he claims the right to be indemnified pursuant to this Section 13 shall be paid by the Company in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of Employee to repay such amount in the event that it shall ultimately be determined that he is not entitled to indemnification by the Company. Such undertaking shall be accepted without reference to the financial ability of Employee to make repayment. In addition, the Company shall use its best efforts to obtain and maintain a directors' and officers' liability insurance policy at a reasonable cost providing insurance coverage with respect to claims made against officers and directors as to which they are entitled to be indemnified by the Company. 14. Notices. Unless otherwise hereinafter designated by either party, any notice required or desired to be given under this Agreement shall be deemed to be given if in writing and sent by certified mail to his residence in the case of Employee, or to its principal office in the case of the Company, or to such other address or such other person as Employee or the Company shall designate in writing in accordance with this Section 14. 15. Successors and Assigns. This Agreement shall inure to and be binding on the heirs and representatives of the Employee and the successors and assigns of the Company. This Agreement contemplates personal services and shall not be assignable by Employee. 16. Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which shall constitute but one agreement. 17. Further Assurances. The parties hereto shall execute and deliver such other instruments and do such other acts as may be necessary to carry out the intent and purposes of this Agreement. 740267.1 18. Headings. The headings of the sections are for convenience only and shall not control or affect the meaning or construction or limit the scope or intent of any of the provisions of this Agreement. 740267.1 IN WITNESS WHEREOF, the Company and Employee have caused this Agreement to be executed as of the day and year first above written. COMPANY: ATLANTIC REALTY TRUST By: /s/ Joel M. Pashcow -------------------- Name: Joel M. Pashcow Title: President and Chairman of the Board EMPLOYEE: /s/ Edwin R. Frankel --------------------- 740267.1 EX-27 3 FINANCIAL DATA SCHEDULE
5 NO 1 U.S. DOLLARS YEAR DEC-31-1998 JAN-01-1998 JUN-30-1998 1 19,516,232 0 0 0 0 19,516,232 38,125,000 0 57,641,232 3,108,501 0 0 0 0 54,532,731 57,641,232 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
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