FIRST AMENDMENT TO SETTLEMENT AGREEMENT
DATED AUGUST 1, 1996
AMONG
PRESIDENTIAL REALTY CORPORATION, XXXXXX XXXXXX,
XXXXXXX XXXXXX AND XXXXXX XXXXXXX
FIRST AMENDMENT TO SETTLEMENT AGREEMENT dated August 1, 1996 between
PRESIDENTIAL REALTY CORPORATION, a Delaware corporation having its principal
place of business at 000 Xxxxx Xxxxxxxx, Xxxxx Xxxxxx, Xxx Xxxx 00000
("Presidential"), XXXXXX XXXXXX, residing at Xxx Xxxxxxxx Xxxx, Xxxxxxxx, Xxx
Xxxx 00000, XXXXXXX XXXXXX, residing at 00 Xxxxxxxx Xxxx, Xxxxxxxxxxxxx, Xxx
Xxxx 00000, and XXXXXX XXXXXXX, residing at 000 Xxxx 00xx Xxxxxx, Xxx Xxxx,
Xxx Xxxx 00000 (Messrs. Xxxxxx, Xxxxxx and Xxxxxxx 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 Xxxxxx Xxxxxxx or any affiliates of his (collectively, "Xxxxxxx"),
and/or Xxxxxx Xxxxxx 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 Xxxxxxx and Xxxxxx, as the case may be (for example, the
base salary of Xxxxxxx 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) Xxxxxxx and Xxxxxx 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 Xxxxxxx or
Baruch in connection with Showtix shall reduce the amount of the permissible
Newco Salaries of Xxxxxxx 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 Xxxxxxx 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, Xxxxxxx 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/ Xxxxxx X. Xxxxxxx
____________________________
/s/ Xxxxxx Xxxxxx
_______________________________
Xxxxxx Xxxxxx
/s/ Xxxxxxx Xxxxxx
_______________________________
Xxxxxxx Xxxxxx
/s/ Xxxxxx Xxxxxxx
_______________________________
Xxxxxx Xxxxxxx
