UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<Table>
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
</Table>
PRESIDENTIAL REALTY CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
------------------------------------------------------------------------
PRESIDENTIAL REALTY CORPORATION
180 SOUTH BROADWAY,
WHITE PLAINS, N.Y. 10605
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
JUNE 15, 2004
------------------------
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of
PRESIDENTIAL REALTY CORPORATION has been called for and will be held at 2:00
P.M., New York Time, on Tuesday, June 15, 2004 at the Marriott Residence Inn, 5
Barker Avenue, White Plains, New York, for the following purposes:
1. To elect, by vote of the Class A shares, 4 directors of the
Company to serve for the ensuing year;
2. To elect, by vote of the Class B shares, 2 directors of the
Company to serve for the ensuing year; and
3. To transact such other business as may properly come before the
meeting.
Only stockholders of record at the close of business on April 22, 2004 are
entitled to notice of and to vote at the meeting.
Stockholders are cordially invited to attend the meeting in person. If you
are not able to do so and wish your stock voted, you are requested to complete,
sign and date the accompanying proxy or proxies and promptly return the same in
the enclosed stamped envelope. The proxy for Class A stock is blue and the proxy
for Class B stock is white. If you hold both classes of stock, please make sure
that you send in both proxies.
BY ORDER OF THE
BOARD OF DIRECTORS
ROBERT E. SHAPIRO
Chairman of the Board of Directors
Dated: April 28, 2004
PRESIDENTIAL REALTY CORPORATION
180 SOUTH BROADWAY, WHITE PLAINS, NEW YORK 10605
------------------------
PROXY STATEMENT
------------------------
This Proxy Statement is furnished in connection with the solicitation by
the management of PRESIDENTIAL REALTY CORPORATION of proxies to be used at the
Annual Meeting of Stockholders of the Company to be held June 15, 2004, and at
any adjournment thereof. If proxies in the accompanying form are properly
executed and returned, the shares represented thereby will be voted as
instructed in the proxy. A stockholder executing and returning a proxy has the
power to revoke it at any time before it is voted by giving written notice to
the Secretary of the Company, by submission of another proxy bearing a later
date or by attending the meeting and requesting to vote in person.
Only stockholders of record as of the close of business on April 22, 2004
will be entitled to vote.
The distribution of this Proxy Statement and the enclosed form of Proxy to
stockholders will commence on or about April 28, 2004. The Company's annual
report to stockholders for 2003, including financial statements, is being mailed
to stockholders with this Proxy Statement.
As of March 29, 2004, there were outstanding and entitled to vote at the
Annual Meeting 478,840 shares of the Company's Class A Common Stock (held by
approximately 122 holders of record) and 3,309,089 shares of the Company's Class
B Common Stock (held by approximately 575 holders of record). The Company is
authorized to issue 700,000 Class A shares and 10,000,000 Class B shares. The
presence at the Annual Meeting of a majority, or 239,421, of the outstanding
shares of the Company's Class A Common Stock and a majority, or 1,654,545, of
the outstanding shares of the Company's Class B Common Stock, either in person
or by proxy, will constitute a quorum for the transaction of business at the
Annual Meeting.
The holders of the Class A Common Stock have the right at all times to
elect two-thirds of the membership of the Board of Directors of the Company, and
the holders of the Class B Common Stock have the right at all times to elect
one-third of the membership of the Board of Directors of the Company. All
directors, once elected, have equal authority and responsibility. On all other
matters, the holders of the Class A Common Stock and the holders of the Class B
Common Stock have one vote per share for all purposes. However, no action may be
taken which would alter or change the special rights or powers given to either
class of Common Stock so as to affect such class adversely, or which would
increase or decrease the amount of the authorized stock of such class, or
increase or decrease the par value thereof, except upon the affirmative vote of
the holders of the majority of the outstanding shares of the class of stock so
affected.
Accordingly, the Class A shares will vote as a class for the election of
four Directors of the Company to serve for the ensuing year (Proposal No. 1 on
the accompanying Notice of Annual Meeting), and for this purpose each Class A
share will be entitled to one vote. The Class B shares will vote as a class for
the election of two directors of the Company for the ensuing year (Proposal No.
2 on the accompanying Notice of Annual Meeting), and for this purpose each Class
B share will be entitled to one vote.
With respect to Proposals No. 1 and 2, directors are elected by a plurality
of the votes of the shares of common stock represented and voted at the meeting.
This means that the director nominee with the most affirmative votes for a
particular position is elected for that position. Consequently, only the number
of votes "for" and "against" affect the outcome, and abstentions and broker
non-votes will have no effect on the outcome of the election of directors,
except to the extent that failure to vote for an individual results in another
individual receiving a larger number of votes. A "broker non-vote" occurs when a
nominee holding shares for a beneficial owner does not vote on a particular
proposal because the nominee does not have discretionary power for that
particular item and has not received instructions from the beneficial owner. The
Company believes that abstentions and broker non-votes should be counted for
purposes of determining if a quorum is present at the Annual Meeting for the
transaction of business.
ELECTION OF DIRECTORS
ELECTION OF DIRECTORS BY CLASS A STOCKHOLDERS
It is intended that proxies in the accompanying form received from the
holders of Class A Common Stock will be voted FOR the four persons listed below,
each of whom is at present a director, as directors for the ensuing year. If for
any reason any of these nominees becomes unable to serve as a director, it is
intended that such proxies will be voted for the election, in his place, of any
substituted nominee as management may recommend, and of the other nominees
listed. Management, however, has no reason to believe that any nominee will be
unable to serve as director. The directors so elected will serve until the next
Annual Meeting of Stockholders and until their respective successors are duly
elected and have qualified.
<Table>
<Caption>
FIRST CLASS A CLASS B
BECAME COMMON COMMON
DIRECTOR BENEFICIALLY BENEFICIALLY PERCENTAGE OF ALL
OCCUPATION OR OF PRESIDENTIAL OWNED OWNED OUTSTANDING
PRINCIPAL OR ITS AND AND STOCK
EMPLOYMENT PREDECESSOR PERCENTAGE PERCENTAGE (CLASS A AND B
NAME AND AGE OF DIRECTOR FOR PAST 5 YEARS COMPANY OF CLASS(1) OF CLASS(1) COMBINED)
------------------------ ----------------- ---------------- ------------ ------------ -----------------
Robert Feder (73)................. Partner Cuddy & 1981 916* 13,552* *
Feder, Attorneys
Jeffrey F. Joseph (62)**.......... President and 1993 198,735(2) 70,365(3) 7%
Chief Executive 41.5% 2.9%
Officer of
Presidential
Robert E. Shapiro (86)**.......... Chairman of the 1961 None 41,744 1.1%
Board of 2%
Directors of
Presidential
Joseph Viertel (88)**............. Director and 1961 3,000* 12,900* *
Chairman of the
Executive
Committee of
Presidential
</Table>
- ---------------
* Less than 1% of the class of stock
** Member of the Executive Committee of the Board of Directors
(1) These figures, based on information as of March 29, 2004, include 124 shares
of Class A Common Stock and 10,763 shares of Class B Common Stock of
Presidential held in trust or in the names of wives, the beneficial
ownership of which is disclaimed by the respective Directors. Each of the
owners of the shares set forth in the table has the sole voting and
investment power over such shares except that such owner has no voting or
investment power over shares the beneficial ownership of which is
disclaimed.
(2) These shares are owned by Pdl Partnership, a general partnership in which
Mr. Joseph has a 20% partnership interest. See Principal Holders of
Securities below.
(3) Includes presently exercisable options to purchase 24,000 shares of Class B
Common Stock.
Robert E. Shapiro and Joseph Viertel are brothers.
ELECTION OF DIRECTORS BY CLASS B STOCKHOLDERS
It is intended that proxies in the accompanying form received from the
holders of Class B Common Stock will be voted FOR the two persons listed below,
each of whom is at present a director, as directors for the ensuing year. If for
any reason any of these nominees becomes unable to serve as a director, it is
intended that such proxies will be voted for the election, in his place, of any
substituted nominee as management may recommend, and of the other nominees
listed. Management, however, has no reason to believe that any
2
nominee will be unable or unwilling to serve as a director. The directors so
elected will serve until the next Annual Meeting of Stockholders and until their
respective successors are duly elected and have qualified.
<Table>
<Caption>
FIRST CLASS A CLASS B
BECAME DIRECTOR COMMON COMMON
OCCUPATION OR OF PRESIDENTIAL BENEFICIALLY BENEFICIALLY PERCENTAGE OF ALL
PRINCIPAL OR ITS OWNED AND OWNED AND OUTSTANDING STOCK
EMPLOYMENT PREDECESSOR PERCENTAGE PERCENTAGE (CLASS A AND B
NAME AND AGE OF DIRECTOR FOR PAST 5 YEARS COMPANY OF CLASS OF CLASS(1) COMBINED)
------------------------ ---------------- --------------- ------------ ------------ -----------------
Richard Brandt (76)............... Chairman 1972 none 12,000* *
Emeritus of the
Board of
Directors of
Trans-Lux
Corporation(2)
Mortimer M. Caplin (87)........... Partner, Caplin 1984 none 77,866% 2.0%
& Drysdale, 2.3
Attorneys(3)
</Table>
- ---------------
* Less than 1% of the class of stock
(1) These figures, based on information as of March 29, 2004, include 39,775
shares of Class B Common Stock of Presidential held by a private charitable
foundation established by Mr. Caplin, the beneficial ownership of which is
disclaimed. Each of the owners of the shares set forth in the table has the
sole voting and investment power over such shares except that such owner has
no voting or investment power over shares the beneficial ownership of which
is disclaimed.
(2) Trans-Lux Corporation is a manufacturer of stock tickers and electronic
displays and its entertainment division operates motion picture theaters.
(3) Mr. Caplin is a director of Fairchild Corporation and Danaher Corporation.
PRINCIPAL HOLDERS OF SECURITIES
As of March 29, 2004 the following persons owned beneficially the following
amounts and percentages of the Class A and Class B Common Stock of Presidential:
<Table>
<Caption>
CLASS A PERCENTAGE OF ALL
COMMON CLASS B PERCENTAGE OF OUTSTANDING STOCK
STOCK PERCENTAGE OF COMMON STOCK CLASS B (CLASS A AND B
BENEFICIALLY CLASS A BENEFICIALLY COMMON COMMON STOCK
NAME OWNED COMMON STOCK OWNED STOCK COMBINED)
---- ------------- ------------- ------------ ------------- -----------------
Pdl Partnership....... 198,735(1) 41.5% none none 5.2%
180 South Broadway
White Plains,
NY 10605
The Trust Company of
New Jersey.......... none none 328,300(2) 9.7% 8.5%
35 Journal Square
Jersey City, NJ
07306
Wilshire Oil Company
of Texas............ none none 277,700(3) 8.2% 7.2%
921 Bergen Avenue
11th Floor
Jersey City, NJ
07306
Westport Asset
Management Inc. .... none none 173,443(4) 5.2% 4.5%
253 Riverside
Avenue Westport,
CT 06880
All officers and
directors as a group
(9 persons)......... 227,252(5) 47.5% 324,297(5) 9% 14.3%
</Table>
3
- ---------------
(1) Such amount does not include 24,601 shares owned by certain partners of Pdl
Partnership, including 4,762 shares owned by a partner as trustee, the
beneficial ownership of which 4,762 shares is disclaimed. The partners of
Pdl Partnership are Jeffrey Joseph, an officer and director of Presidential
and a nominee for director, and Steven Baruch and Thomas Viertel, officers
of Presidential.
(2) The Company has been informed by The Trust Company of New Jersey that it has
sole voting and dispositive power with respect to 322,800 of such shares and
shared voting and dispositive power with respect to 5,500 of such shares.
This information is based upon Amendment No. 14 dated February 6, 2004 to a
Schedule 13G filed by The Trust Company of New Jersey.
(3) The Company has been informed by Wilshire Oil Company of Texas that it has
sole voting and dispositive power with respect to 277,700 shares of Class B
Common Stock. This information is based upon a Schedule 13D dated December
31, 2001 filed by Wilshire Oil Company of Texas.
(4) The Company has been informed by Westport Asset Management Inc. that it has
shared voting and dispositive power with respect to all of such 173,443
shares and that it disclaims beneficial ownership of such shares. This
information is based upon Amendment No. 4 dated February 12, 2004 to a
Schedule 13G filed by Westport Asset Management Inc.
(5) Such amount includes (i) 198,735 shares of Class A Common Stock owned by Pdl
Partnership (see Note 1 above), (ii) 4,886 shares of Class A Common Stock
and 50,538 shares of Class B Common Stock held in trust or in the names of
wives, the beneficial ownership of which is disclaimed by the respective
persons and (iii) options to purchase 60,000 shares of Class B Common Stock.
Except as set forth in the notes to the table, each of the owners of the
shares set forth in the table has the sole voting and dispositive power over
such shares except that such owner has no voting or dispositive power over
shares the beneficial ownership of which is disclaimed.
The Company's management knows of no other persons owning beneficially more
than 5% of either the outstanding Class A Common Stock or the outstanding Class
B Common Stock of the Company.
Neither Pdl Partnership nor its partners have any contract, arrangement,
understanding or relationship (legal or otherwise) with respect to any
securities of the Company, except as described below. 212,648 Class A Shares
owned by Pdl Partnership or its partners are pledged to Robert E. Shapiro and
Joseph Viertel, directors of the Company, as security for loans previously made
in connection with the purchase of 134,334 Class A Shares by Pdl Partnership's
predecessor in interest. The partners of Pdl Partnership have entered into an
Agreement pursuant to which they have agreed among themselves that the Class A
Shares owned by Pdl Partnership may (1) be voted by Pdl Partnership only by
action of any two of them or (2) be sold by Pdl Partnership only with the
approval of any two of them.
EXECUTIVE OFFICERS
The following table sets forth information with respect to the executive
officers of Presidential. Each officer has been elected for a period of one year
and thereafter until his successor is elected, subject to the terms of the
Employment Agreements described below.
<Table>
<Caption>
NAME AGE POSITION WITH REGISTRANT
---- --- ------------------------
Jeffrey F. Joseph..................... 62 President, Chief Executive Officer and a Director
Thomas Viertel........................ 62 Executive Vice President and Chief Financial Officer
Steven Baruch......................... 65 Executive Vice President
Elizabeth Delgado..................... 59 Treasurer and Secretary
</Table>
Mr. Joseph has been President of the Company since February, 1992 and a
Director since April, 1993.
Thomas Viertel has been an Executive Vice President of the Company since
January, 1993 and its Chief Financial Officer since April of that year. Mr.
Viertel is also the Chairman of the Board of Scorpio Entertainment, Inc., a
privately owned company which produces theatrical enterprises. (See Certain
Transactions below.)
4
Mr. Baruch has been an Executive Vice President of the Company since
January, 1993. Mr. Baruch is also the President of Scorpio Entertainment, Inc.
(See Certain Transactions below.) Mr. Baruch also serves as a member of the
Board of Directors of Trans-Lux Corporation, of which Richard Brandt, a director
of Presidential Realty Corporation and a member of its Compensation Committee,
is Chairman of the Board of Directors.
Ms. Delgado has been Treasurer of the Company since 1986, and the Secretary
of the Company since 2002.
Thomas Viertel is the son of Joseph Viertel, a Director of Presidential,
and the nephew of Robert E. Shapiro, a Director of Presidential. Steven Baruch
is the cousin of Robert E. Shapiro and Joseph Viertel.
REMUNERATION OF EXECUTIVE OFFICERS AND DIRECTORS
The following table and discussion summarizes the compensation for the
three years ended December 31, 2003, 2002 and 2001 of the Chief Executive
Officer of the Company and of any other executive officer of the Company who
served as such at December 31, 2003 and whose total annual compensation exceeded
$100,000.
SUMMARY COMPENSATION TABLE
<Table>
<Caption>
ANNUAL COMPENSATION(A) LONG TERM COMPENSATION
--------------------------- --------------------------
OTHER ANNUAL STOCK
SALARY BONUS COMPENSATION(A) OPTIONS
NAME AND PRINCIPAL POSITION YEAR ($) ($) ($) (#)
- --------------------------- ---- -------- ------- --------------- -------
Jeffrey F. Joseph..................... 2003 $290,747 0
President, Chief Executive 2002 281,731 $93,909 0 0
Officer and Director 2001 277,361 92,423 0 0
Thomas Viertel........................ 2003 195,374 0
Executive Vice President and 2002 189,316 63,105 0 0
Chief Financial Officer 2001 186,380 62,105 0 0
Steven Baruch......................... 2003 195,374 0
Executive Vice President 2002 189,316 63,105 0 0
2001 186,380 62,105 0 0
Elizabeth Delgado..................... 2003 117,503 0
Treasurer and Secretary 2002 112,984 0 0 0
2001 106,715 0 0 0
</Table>
- ---------------
(A) Does not include perquisites or other personal benefits which in the
aggregate do not exceed the lesser of (a) 10% of annual salary and bonus or
(b) $50,000. The Company pays the premiums on life insurance policies on the
lives of, and owned by, Jeffrey F. Joseph, Thomas Viertel and Steven Baruch.
The annual premiums for 2003 were $15,250 for Mr. Joseph, $12,075 for Mr.
Viertel and $11,700 for Mr. Baruch. The annual premiums for each of years
2002 and 2001 were $12,750 for Mr. Joseph, $9,250 for Mr. Viertel and
$10,500 for Mr. Baruch. These amounts are not included because the aggregate
perquisites and other personal benefits do not exceed the lesser of (a) 10%
of annual salary and bonus or (b) $50,000.
There were no grants of options or stock appreciation rights in the year
ended December 31, 2003.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUES
<Table>
<Caption>
NUMBER OF
SECURITIES
UNDERLYING VALUE OF
UNEXERCISED UNEXERCISED
OPTIONS IN-THE-MONEY
12/31/03 OPTIONS 12/31/03(A)
---------------- -------------------
SHARES (#) ($)
ACQUIRED ON VALUE EXERCISABLE(E) EXERCISABLE(E)
NAME EXERCISE(#) REALIZED($) UNEXERCISABLE(U) UNEXERCISABLE(U)
- ---- ----------- ----------- ---------------- -------------------
Jeffrey F. Joseph...................... 0 0 E - 24,000 E - $22,680
President, Chief Executive
Officer and Director
Thomas Viertel......................... 0 0 E - 18,000 E - 17,010
Executive Vice President and
Chief Financial Officer
Steven Baruch.......................... 0 0 E - 18,000 E - 17,010
Executive Vice President
</Table>
- ---------------
(A) Based on the $6.375 per share exercise price of all options and the $7.32
per share closing price on the American Stock Exchange on December 30, 2003.
5
In connection with the exercise of stock options in 1999, the Company
loaned $367,500 in the aggregate to Jeffrey Joseph ($147,000), Thomas Viertel
($110,250) and Steven Baruch ($110,250) to pay for the purchase price of the
stock. The recourse notes, secured by the stock, bear interest at 8% per annum,
payable quarterly, and the principal is due at maturity on November 30, 2004.
The Employment Agreements for Messrs. Joseph, Viertel and Baruch provide
that to the extent that any of the existing stock options held by those
executives are either exercised or lapse, the Company will grant to the
executive new options in the amount of the stock options that have either been
exercised or have lapsed, which new options will have an exercise price equal to
the closing price of the Class B common stock on the date that the new option is
actually granted, will have a term of six years from the date such new option is
granted and will be otherwise subject to the terms of the 1999 Stock Option Plan
or any successor plan.
DEFINED BENEFIT PENSION PLAN
The Company has a Defined Benefit Pension Plan which covers substantially
all of its employees, including the officers listed in the Summary Compensation
Table. Directors who are not employees of the Company are not eligible to
participate in the Plan.
The Plan is a non-contributory, tax qualified defined benefit plan which
provides a monthly retirement benefit payable for a participant's lifetime in an
amount equal to the sum of (i) 7.15% of an employee's average monthly
compensation and (ii) .62% of such employee's average monthly compensation in
excess of the average Social Security wage base, multiplied in each case by the
employee's years of service commencing after December 31, 1993 (up to a maximum
of 10 years). Average monthly compensation for these purposes is the employee's
monthly compensation averaged over the five consecutive Plan years which produce
the highest monthly average within the employee's last ten years of service.
However, the amount of compensation taken into account under a tax qualified
plan was limited to $170,000 per annum in 2001, which limit was increased to
$200,000 for 2002 and 2003 and may be increased in future years for cost of
living increases. Maximum benefits under the Plan are attainable after ten years
of service commencing after December 31, 1993, and are payable at age 65. Mr.
Joseph (62 years old), Mr. Viertel (62 years old) and Mr. Baruch (65 years old)
all have ten years of service credited under the Plan.
EMPLOYMENT AGREEMENTS
The Company has an employment agreement with Jeffrey F. Joseph, President
and Chief Executive Officer of the Company, that extends through December 31,
2005 and provides for annual compensation of $299,760 for calendar year 2004.
The employee may also become entitled to a bonus for each calendar year based on
a formula relating to the Company's earnings, which bonus is limited to a
maximum amount of 33 1/3% of his annual basic compensation for that year. The
agreement also provides for retirement benefits commencing at age 69 (or four
years after retirement, whichever is later) in the annual amount of $29,000,
subject to increases based on 50% of any increase in the cost of living
subsequent to the first year of retirement.
The Company also has employment agreements with Steven Baruch, Executive
Vice President of the Company, and Thomas Viertel, Executive Vice President and
Chief Financial Officer of the Company, that each extend to December 31, 2005
and provide for annual compensation of $201,431 for calendar year 2004. Mr.
Baruch and Mr. Viertel may also become entitled to a bonus for each calendar
year based on a formula relating to the Company's earnings, which bonus is
limited to a maximum amount of 33 1/3% of the annual basic compensation for the
year. Each of the agreements also provides for retirement benefits commencing at
age 69 (or four years after retirement, whichever is later) in the annual amount
of $29,000, subject to increases based on 50% of any increase in the cost of
living subsequent to the first year of retirement. The Company's employment
agreements with Mr. Baruch and Mr. Viertel permit them to spend a reasonable
amount of their time during normal business hours on matters related to Scorpio
Entertainment, Inc., a company which is engaged in theatrical productions, so
long as the time and effort for Scorpio Entertainment, Inc. does not conflict or
interfere with the performance of their duties for the Company and they
diligently perform their duties for the Company to the satisfaction of the Board
of Directors. (See Certain Transactions below.)
6
The Company also has an employment agreement with Elizabeth Delgado, the
Company's Secretary and Treasurer, that extends through December 31, 2005 and
provides for annual compensation of $123,029 for calendar year 2004. The
employment agreement provides for a retirement period that commences at age 65
with annual cash benefits during retirement equal to $50,046 per annum, provided
however that any payments to be made under the retirement provisions of the
employment agreement shall be reduced dollar for dollar by any amounts payable
to the employee as a participant under the Company's Defined Benefit Pension
Plan.
During the retirement periods under the above agreements, the employees
will also be entitled to the continuation of certain life, group health and
disability insurance benefits. None of the employment contracts described above
provide death benefits for the recipients or for funding by Presidential of the
anticipated retirement benefits.
COMPENSATION OF DIRECTORS
The Company pays each Director (other than Jeffrey F. Joseph, who is the
President of the Company, Robert E. Shapiro, who is the Chairman of the Board of
Directors of the Company, and Joseph Viertel, who is the Chairman of the
Executive Committee of the Board of Directors of the Company) $11,000 per annum,
plus $1,500 for each meeting of the Board of Directors or Committee thereof
attended and $625 for each meeting of the Audit Committee for the review of the
Company's unaudited quarterly financial statements attended, plus reimbursement
of expenses. A portion of the directors' fees is paid by the issuance of 1,000
shares of the Company's Class B Common Stock to each Director in January of each
year. The Company ordinarily does not pay any other compensation to Directors
for their services as Directors.
Presidential also has employment agreements with two directors (who were
executive officers of the Company prior to their retirement) providing for
stipulated annual payments for life (plus continuation of life, group health and
disability insurance benefits). The annual cash retirement benefits paid under
these contracts in 2003 (including insurance premiums) were as follows:
<Table>
<Caption>
ANNUAL CASH RETIREMENT
BENEFIT (SUBJECT TO INCREASE
NAME AND AGE POSITION WITH PRESIDENTIAL FOR INFLATION)
- --------------------------------------- ------------------------------- ----------------------------
Robert E. Shapiro (86)................. Director and Chairman of the $203,229
Board of Directors. Retired as
President In 1992.
Joseph Viertel (88).................... Director and Chairman of the 185,914
Executive Committee. Retired as
President in 1987.
</Table>
CERTAIN TRANSACTIONS
Presidential currently has loans outstanding to certain affiliates of Ivy
Properties, Ltd. (collectively "Ivy") as more fully described in the table set
forth below. Ivy is owned by Thomas Viertel, Steven Baruch and Jeffrey Joseph
(the "Ivy Principals"). Mr. Joseph is the President, Chief Executive Officer and
a Director of Presidential and is a nominee for Director. Mr. Viertel is an
Executive Vice President and the Chief Financial Officer of Presidential and is
the son of Joseph Viertel, a Director of Presidential, and a nephew of Robert E.
Shapiro, also a Director of Presidential. Steven Baruch is an Executive Vice
President of Presidential and is a cousin of Robert E. Shapiro and Joseph
Viertel.
Pdl Partnership, a partnership which is wholly owned by the Ivy Principals,
currently owns 198,735 shares of the Company's Class A Common Stock. As a result
of the ownership of these shares by Pdl Partnership, together with the ownership
of an aggregate of 24,601 additional shares of Class A Common Stock individually
by the Ivy Principals, Pdl Partnership and the Ivy Principals have beneficial
ownership of an aggregate of approximately 47% of the outstanding shares of
Class A Common Stock of the Company, which class of stock is entitled to elect
two-thirds of the Board of Directors of the Company. By reason of such
beneficial ownership, the Ivy Principals are in a position substantially to
control elections of the Board of Directors of the Company.
7
The Board of Directors has adopted a resolution pursuant to which
Presidential will not make any loan to Ivy nor enter into any other material
transaction with Ivy unless such transaction is unanimously approved by the
Directors of Presidential who are not otherwise affiliated with Presidential or
Ivy (with no more than one abstention).
The following table sets forth information with respect to all outstanding
loans to Ivy at December 31, 2002 and December 31, 2003:
<Table>
<Caption>
ORIGINAL
LOAN BASIC
DATE ADVANCED DESCRIPTION INTEREST RATE 12/31/03 12/31/02
- ---- ---------- -------------------------------- -------------- -------- ----------
1981 $5,285,000 UTB Associates, a partnership in 11.8 to 25.33% $285,905 $ 376,904
which Presidential owned a
66 2/3% interest, sold an apt.
property in New Haven, CT to Ivy
for long-term, non-recourse
purchase money notes.
1984 4,305,500 Sale by Presidential to Ivy of 6.00% 0 830,927
50% interest in a partnership
which owns an apartment complex
in Alexandria, VA (Overlook
loan).(1)
1991 526,454 UTB End Loans: Purchase money Various 92,619 118,681
notes on co-op apts. These notes
were transferred to Presidential
as part of the Ivy settlement.
1991 155,084 Consolidated Loans: Replaced Chase Prime 0 0
previously defaulted loans.(2)
-------- ----------
Total Loans 378,524 1,326,512
Less: Discounts 61,951 105,669
Deferred gain on Overlook loan 0 830,927
-------- ----------
Net Carrying Value $316,573 $ 389,916
======== ==========
</Table>
- ---------------
(1) The Overlook loan, which was a nonrecourse loan resulting from the sale by
the Company to Ivy in 1984 of an apartment property, was secured by a
mortgage note (the "Collateral Security") with an outstanding principal
balance of $830,927 at December 31, 2002. All interest and principal
collected by Ivy on the Collateral Security was paid to Presidential in
reduction of current interest, previously deferred interest or principal.
This note was paid in full in 2003.
(2) As part of the Settlement Agreement effectuated in November, 1991 between
the Company and Ivy, certain of Presidential's outstanding nonrecourse loans
to Ivy (most of which had previously been written down to zero) were
modified and consolidated into two nonrecourse loans (collectively, the
"Consolidated Loans") which currently have an aggregate outstanding
principal balance of $4,770,050 and a net carrying value of zero. In 1996
Presidential and the Ivy Principals agreed to modify the Settlement
Agreement to provide that the Ivy Principals will make payments on the
Consolidated Loans in an amount equal to 25% of the operating cash flow
(after provision for certain reserves) of Scorpio Entertainment, Inc., a
company owned by two of the Ivy Principals which acts as a producer of
theatrical productions. To the extent that Presidential receives payments
under these notes, such payments will be applied to unpaid and unaccrued
interest and recognized as income. During 2003, Presidential received
$275,750 of interest on the Consolidated Loans. At December 31, 2003, the
total unpaid and unaccrued interest on the Consolidated Loans was
$3,497,417. Presidential does not expect to recover any of the principal
amounts of the Consolidated Loans.
As described under Remuneration of Executive Officers and Directors above,
the Company made an aggregate of $367,500 of loans in 1999 to Jeffrey Joseph,
Thomas Viertel and Steven Baruch in connection with their exercise of stock
options.
8
Jeffrey Joseph has, with the prior consent of the Board of Directors,
performed legal services for David Lichtenstein and received fees in the amounts
of $7,750 and $20,000 in 2002 and 2001, respectively. In 2001, Mr. Joseph also
acquired a 6% limited partnership interest in a partnership controlled by Mr.
Lichtenstein. Presidential has made five loans in the aggregate outstanding
principal amount of $12,875,000 to entities that are controlled by David
Lichtenstein. Some, but not all, of these loans are guaranteed in whole or in
part by Mr. Lichtenstein and all of these loans are in good standing.
THE BOARD OF DIRECTORS
INDEPENDENT DIRECTORS
The Board of Directors has determined that Richard Brandt, Mortimer Caplin
and Robert Feder are independent directors pursuant to Section 121A of the
American Stock Exchange Company Guide.
COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors of Presidential has a standing Executive Committee,
Audit Committee, Compensation and Pension Committee and an Unaffiliated Director
Committee. The Board of Directors does not have a standing nominating committee.
Executive Committee. The members of the Executive Committee are Jeffrey F.
Joseph, Robert E. Shapiro and Joseph Viertel. The function of the Executive
Committee is to make general and specific recommendations to the Board of
Directors with respect to matters to be considered by the Board. The Executive
Committee meets monthly and from time to time as required by the business of
Presidential.
Audit Committee. The members of the Audit Committee are Richard Brandt,
Mortimer Caplin and Robert Feder. The function of the Audit Committee, which is
established in accordance with Section 3(a)(58)(A) of the Exchange Act, is to
oversee the accounting and financial reporting process of the Company and the
audits of the financial statements of the Company. Each member of the Audit
Committee is independent (as defined in Section 121(A) of the American Stock
Exchange Company Guide). The Board of Directors of the Company has adopted a
written Charter for the Audit Committee, a copy of which is attached as Exhibit
A to this Proxy Statement. The Audit Committee Report dated March 23, 2004 is
attached as Exhibit B to this Proxy Statement. The Audit Committee held four
meetings during the Company's last fiscal year.
The Board of Directors of the Company has determined that Richard Brandt, a
member of the Audit Committee, is financially sophisticated as defined by
Section 121B(2)(A)(ii) of the American Stock Exchange Company Guide. However,
the Board of Directors of the Company has also determined that the Audit
Committee does not have any member who qualifies as a financial expert pursuant
to Item 401(e) of Regulation SB. The Board of Directors does not believe that it
is necessary to have a member of the Audit Committee who meets the definition of
a financial expert pursuant to Item 401(e) of Regulation SB because all of the
members of the Audit Committee satisfy the American Stock Exchange requirements
for Audit Committee membership applicable to American Stock Exchange listed
companies and, as mentioned above, Mr. Brandt is a financially sophisticated
individual as defined by the American Stock Exchange Company Guide. In addition,
all members of the Audit Committee have been members for at least ten years and
are familiar with the business and accounting practices of the Company.
Compensation and Pension Committee. The members of the Compensation and
Pension Committee are Richard Brandt, Mortimer Caplin and Robert Feder. The
function of the Compensation and Pension Committee is to recommend guidelines
and specific compensation levels to the Board of Directors of the Company for
the executive officers of the Company. The Compensation and Pension Committee
held one meeting during the Company's last fiscal year.
Unaffiliated Director Committee. Until March 31, 2004, the Board of
Directors had an Unaffiliated Director Committee, whose members were Richard
Brandt, Mortimer Caplin and Robert Feder. The function of the Unaffiliated
Director Committee was to review and vote upon any material transaction with Ivy
9
Properties, Ltd. or any of its affiliates. The Company will not enter into any
material transaction with Ivy or any affiliate of Ivy unless the members of the
Unaffiliated Director Committee unanimously approve the transaction, with no
more than one abstention. The Unaffiliated Director Committee did not hold any
meetings during the Company's last fiscal year. The Unaffiliated Director
Committee has been disbanded and the Audit Committee will have the right to
review and approve all transactions between the Company and related parties.
Nominating Committee. The Company does not have a standing nominating
Committee. All current Board members have served on the Board for at least ten
years. In effect, the entire Board has been serving the function of a nominating
committee. However, in accordance with Section 804(a) of the American Stock
Exchange Company Guide, all future nominations to the Board of Directors will be
selected or approved by at least a majority of the Independent Directors. Since
there is no formal nominating committee, the Board does not have a specific
policy with respect to the consideration of any candidate for membership on the
Board that may be recommended by a security holder and in fact there have been
no such recommendations by security holders for over twenty years. There are no
formal minimum qualifications or specific qualities or skills that candidates
must meet, but the Board will evaluate the overall qualities that a person might
bring to the Board, including relevant experience in the real estate industry,
business insight, and overall ability to contribute to the Company and the
Board. The Company does not pay a fee to a third party to assist in the
nomination process.
ATTENDANCE AT MEETINGS OF THE BOARD OF DIRECTORS AND COMMITTEES
The Board of Directors of the Company held four meetings during the
Company's last fiscal year. All of the directors attended all of the meetings in
2003 of the Board of Directors and the committees of which they were members.
MISCELLANEOUS
The Company does not have a specific policy with respect to the attendance
of members of the Board of Directors at its Annual Meeting of Stockholders.
Three members of the Board of Directors attended the Company's Annual Meeting of
Stockholders in 2003.
The Company has not yet adopted a Code of Ethics that applies to its Chief
Executive Officer, Chief Financial Officer and Principal Accounting Officer. The
Company is in the process of preparing a Code of Ethics and will do so within
the time required by the American Stock Exchange Rules.
Shareholders may send communications to the Board of Directors or to
individual Directors by sending such communication addressed to the Board of
Directors or an individual Director to the Company's office at 180 South
Broadway, White Plains, New York 10605. All written communications addressed to
the Board of Directors or to an individual Director will be forwarded to such
Director or Directors.
SECTION 16(a)BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Robert Feder, a Director of the Company, has informed the Company that he
inadvertently failed to file certain reports on Forms 4 and 5 reflecting (i) the
issuance to him by the Company of 1,000 shares of Class B Common Stock in each
of the years 1998 through 2004 (a total of 7,000 shares) as part of his
compensation for serving as a Director of the Company during those years and
(ii) the deletion from a previously filed Form 4 of a total of 19,479 shares of
Class B Common Stock held by him as trustee under two Trusts for the benefit of
unrelated parties (the beneficial ownership of which shares was disclaimed) upon
the termination of the Trusts. A Form 4 has recently been filed to reflect these
transactions.
INDEPENDENT AUDITORS
Deloitte & Touche LLP have been and are presently our independent auditors.
Representatives of the Deloitte & Touche LLP are expected to be present at the
annual meeting and to be available to respond to
10
appropriate questions from holders of our common shares. In addition, such
representatives will have the opportunity to make a statement if they desire to
do so.
The following table presents fees for professional audit services rendered
by Deloitte & Touche LLP, the member firms of Deloitte Touche Tohmatsu, and
their respective affiliates (collectively, "Deloitte & Touche") for the audit of
our financial statements for the fiscal years ended December 31, 2003 and
December 31, 2002, and fees for other services rendered by Deloitte & Touche
during those periods.
<Table>
<Caption>
2003 2002
-------- --------
Audit Fees (a)............................................ $ 98,350 $121,500
Audit-Related Fees (b).................................... -- --
Tax Fees (c).............................................. 12,000 18,100
All Other Fees (d)........................................ 2,625 2,500
-------- --------
Total........................................... $112,975 $142,100
======== ========
</Table>
- ---------------
(a) Fees for audit services billed in 2003 and 2002 consisted of the audit of
the Company's annual financial statements, reviews of the Company's
quarterly financial statements, and assistance with Securities and Exchange
Commission matters.
(b) No audit-related services were rendered by Deloitte & Touche in 2003 or
2002.
(c) Fees for tax services billed in 2003 and 2002 consisted of tax compliance
services. Tax compliance services are services rendered based upon facts
already in existence or transactions that have already occurred to document,
compute, and obtain government approval for amounts to be included in tax
filings and consisted of Federal, state and local income tax return
assistance and REIT compliance testing.
(d) Fees for audit services billed in 2003 and 2002 consisted of an audit of one
of the Company's wholly-owned subsidiaries.
All audit-related services, tax services and other services were
pre-approved by the audit committee, which concluded that the provision of those
services by Deloitte & Touche was compatible with the maintenance of Deloitte &
Touche's independence in the conduct of its auditing functions.
POLICY ON PRE-APPROVAL OF INDEPENDENT AUDITOR SERVICES
The audit committee is responsible for appointing, setting compensation and
overseeing the work of the independent auditors. The audit committee has
established a policy regarding pre-approval of all audit and non-audit services
provided by our Company's independent auditors.
On an on-going basis, management communicates specific projects and
categories of service for which the advance approval of the audit committee is
requested. The audit committee reviews these requests and advises management if
the audit committee approves the engagement of the independent auditors. The
audit committee may also delegate the ability to pre-approve audit and permitted
non-audit services to one or more of its members, provided that any
pre-approvals are reported to the audit committee at its next regularly
scheduled meeting.
OTHER MATTERS
At the date of this Proxy Statement, the only proposals which the
management intends to present at the meeting are those set forth in the Notice
of the Annual Meeting of Stockholders. Management knows of no other matter which
may come before the meeting, but if any other matters properly come before the
meeting, it is intended that proxies in the accompanying forms will be voted
thereon in accordance with the judgment of the person or persons voting the
proxies.
11
PROPOSALS FOR 2005 ANNUAL MEETING OF STOCKHOLDERS
Shareholder proposals for the 2005 Annual Meeting of Stockholders must be
received by the Secretary at the corporate offices of Presidential, 180 South
Broadway, White Plains, New York 10605, no later than December 27, 2004 for
inclusion in the Proxy Statement for the 2005 Annual Meeting of Stockholders.
COST OF SOLICITATION
The cost of soliciting proxies in the accompanying forms has been or will
be borne by the Company. In addition to solicitation by mail, solicitations may
be made by telephone calls by existing employees of the Company.
IT IS IMPORTANT THAT YOUR STOCK BE REPRESENTED AT THE MEETING. IF YOU ARE
UNABLE TO BE PRESENT IN PERSON, YOU ARE REQUESTED TO SIGN THE ENCLOSED PROXY OR
PROXIES AND RETURN SAME IN THE ENCLOSED STAMPED AND ADDRESSED ENVELOPE AS
PROMPTLY AS POSSIBLE.
A STOCKHOLDER EXECUTING AND RETURNING A PROXY HAS THE POWER TO REVOKE IT AT
ANY TIME BEFORE IT IS VOTED BY GIVING WRITTEN NOTICE TO THE SECRETARY OF THE
COMPANY, BY SUBMISSION OF ANOTHER PROXY BEARING A LATER DATE, OR BY ATTENDING
THE MEETING AND REQUESTING TO VOTE IN PERSON.
April 28, 2004
12
EXHIBIT A
AUDIT COMMITTEE CHARTER
OF
PRESIDENTIAL REALTY CORPORATION
PURPOSES, AUTHORITY & FUNDING
The Audit Committee (the "Committee") of the Board of Directors (the
"Board") of Presidential Realty Corporation, a Delaware corporation (the
"Company"), is appointed by the Board for the purpose of overseeing the
Company's accounting and financial reporting processes and the audits of the
Company's financial statements. In so doing, the Committee shall endeavor to
maintain free and open communication among the Company's directors, independent
auditor and financial management.
The Committee shall have the authority to retain independent legal,
accounting or other advisers as it determines necessary to carry out its duties
and, if necessary, to institute special investigations. The Committee may
request any officer or employee of the Company, or the Company's outside counsel
or independent auditor, to attend a meeting of the Committee or to meet with any
members of, or consultants to, the Committee. Further, the Committee may request
any such officer, employee, outside counsel or independent auditor to provide
any pertinent information to the Committee or to any other person or entity
designated by the Committee.
The Company shall provide the Committee with appropriate funding, as
determined by the Committee in its capacity as a committee of the Board, for the
payments of: (1) compensation to any registered public accounting firm engaged
for the purpose of preparing or issuing an audit report or performing other
audit, review or attest services for the Company; (2) compensation to any
independent advisers retained by the Committee in carrying out its duties; and
(3) ordinary administrative expenses of the Committee that are necessary or
appropriate in carrying out its duties.
COMMITTEE MEMBERSHIP
The members of the Committee (the "Members") shall be appointed by the
Board and shall serve at the discretion of the Board. The Committee shall
consist of at least three Members (unless the Company then satisfies the Small
Business Issuer exception provided in Paragraph B(2)(c) of Section 121A
("Section 121A") of the Company Guide of the American Stock Exchange (the
"Amex"), in which case the Committee shall consist of at least two Members),
each of which shall be a member of the Board. The following membership
requirements shall also apply:
(i) each Member must be "independent" as defined in (and subject to
any available exceptions or exemptions therein) Section 121A;
(ii) each Member must meet the criteria for independence set forth in
Rule 10A-3(b)(1) promulgated under the Securities and Exchange Act of 1934,
as amended (the "Act"), subject to the exemptions provided in Rule 10A-3(c)
under the Act;
(iii) each Member must be able to read and understand fundamental
financial statements, including the Company's balance sheet, income
statement, and cash flow statement; and
(iv) at least one Member must have past employment experience in
finance or accounting, requisite professional certification in accounting,
or other comparable experience or background that results in such Member's
financial sophistication, including being or having been a chief executive
officer, chief financial officer or other senior officer with financial
oversight responsibilities.
Notwithstanding subparagraph (i) above, one director who: (a) is not
independent (as defined in Section 121A); (b) meets the criteria set forth in
Section 10A(m)(3) under the Act and the rules promulgated thereunder; and (c) is
not a current officer or employee of the Company or Immediate Family
A-1
Member (as defined in Section 121A) of such an officer or employee, may be
appointed to the Committee if the Board, under exceptional and limited
circumstances, determines that membership on the Committee by the individual is
required by the best interests of the Company and its stockholders, and the
Board discloses, in the Company's next annual proxy statement subsequent to such
determination, the nature of the relationship and the reasons for that
determination. A Member appointed under the exception set forth in the preceding
sentence must not serve longer than two years and must not serve as chairperson
of the Committee. (This exception shall not apply if the Company satisfies the
Small Business Issuer exception provided in Paragraph B(2)(c) of Section 121A.)
If a current Member of the Committee ceases to be independent under the
requirements of subparagraphs (i) and (ii) above for reasons outside the
Member's reasonable control, the affected Member may remain on the Committee
until the earlier of the Company's next annual stockholders' meeting or one year
from the occurrence of the event that caused the failure to comply with those
requirements; provided, however, that when relying on the exception set forth in
this sentence the Committee shall cause the Company to provide notice to the
Amex promptly upon learning of the event or circumstance that caused the non-
compliance. Further, if the Committee fails to comply with the requirements set
forth in this "Committee Membership" section of the Charter due to one vacancy
on the Committee, and the cure period set forth in the preceding sentence is not
otherwise being relied upon for another Member, the Company will have until the
earlier of its next annual stockholders' meeting or one year from the occurrence
of the event that caused the failure to comply with the requirements to rectify
such non-compliance; provided, however, that when relying on the exception set
forth in this sentence the Committee shall cause the Company to provide notice
to the Amex immediately upon learning of the event or circumstance that caused
the non-compliance.
DUTIES & RESPONSIBILITIES
In fulfilling its purposes as stated in this Charter, the Committee shall
undertake the specific duties and responsibilities listed below and such other
duties and responsibilities as the Board shall from time to time prescribe, and
shall have all powers necessary and proper to fulfill all such duties and
responsibilities. Subject to applicable Board and stockholder approvals, the
Committee shall:
FINANCIAL STATEMENT & DISCLOSURE MATTERS
1. Review the policies and procedures adopted by the Company to fulfill its
responsibilities regarding the fair and accurate presentation of financial
statements in accordance with generally accepted accounting principles and
applicable rules and regulations of the Securities and Exchange Commission
(the "SEC") and the Amex;
2. Oversee the Company's accounting and financial reporting processes;
3. Oversee audits of the Company's financial statements;
4. Review and discuss reports from the Company's management or independent
auditor regarding: (a) all critical accounting policies and practices to be
used by the Company; (b) all alternative treatments of financial information
within generally accepted accounting principles ("GAAP") that have been
discussed with management, including ramifications of the use of such
alternative disclosures and treatments and the treatment preferred by the
independent auditor; and (c) other material written communications between
the independent auditor and management, such as any management letter or
schedule of unadjusted differences;
5. Review and discuss with management the Company's independent auditor the
Company's financial statements (including disclosures made under
"Management's Discussion and Analysis of Financial Condition and Results of
Operations") prior to the filing with the SEC of any report containing such
financial statements;
6. Review and discuss the Company's earnings press releases (including type and
presentation of information) prior to release;
A-2
7. If deemed appropriate, recommend to the Board that the Company's audited
financial statements be included in its annual report on Form 10-K for the
last fiscal year;
8. Prepare and approve the report required by the rules of the SEC to be
included in the Company's annual proxy statement in accordance with the
requirements of Item 7(d)(3)(i) of Schedule 14A and Item 306 of Regulation
S-B (or S-K if then applicable);
MATTERS REGARDING OVERSIGHT OF THE COMPANY'S INDEPENDENT AUDITOR
9. Be directly responsible, in its capacity as a committee of the Board, for
the appointment, compensation, retention and oversight of the work of any
registered public accounting firm engaged (including resolution of
disagreements between management and the auditor regarding financial
reporting) for the purpose of preparing or issuing an audit report or
performing other audit, review or attest services for the Company, and each
such registered public accounting firm shall report directly to the
Committee;
10. Receive and review a formal written statement from the Company's independent
auditor delineating all relationships between the independent auditor and
the Company, consistent with Independence Standards Board Standard 1, as it
may be modified or supplemented;
11. Actively engage in a dialogue with the Company's independent auditor with
respect to any disclosed relationship or service that may impact the
objectivity and independence of the independent auditor;
12. Take, or recommend that the Board take, appropriate action to oversee and
ensure the independence of the Company's independent auditor;
13. Review and approve any hiring of employees and former employees of the
Company's independent auditor;
14. Establish policies and procedures for review and pre-approval by the
Committee of all audit services and permissible non-audit services
(including the fees and terms thereof) to be performed by the Company's
independent auditor, with exceptions provided for de minimis amounts under
certain circumstances as permitted by law; provided, however, that: (a) the
Committee may delegate to one or more Members the authority to grant such
pre-approvals if the pre-approval decisions of any such delegate Member(s)
are presented to the Committee at its next-scheduled meeting; and (b) all
approvals of non-audit services to be performed by the independent auditor
must be disclosed in the Company's applicable periodic reports;
15. Discuss with the Company's independent auditor the matters required to be
discussed by Statement on Auditing Standards No. 61, as may be modified or
supplemented, relating to the conduct of the audit and any major changes to
the Company's auditing and accounting principles and practices;
16. Review with the Company's independent auditor any audit problems,
difficulties or disagreements with management that the independent auditor
may have encountered, as well as any management letter provided by the
independent auditor and the Company's response to that letter, including a
review of any difficulties encountered in the course of the audit work,
including any restrictions on the scope of activities or access to required
information;
17. Oversee the rotation of the lead (or coordinating) audit partner of the
Company's independent auditor having primary responsibility for the audit
and the audit partner responsible for reviewing the audit at least every
five years;
MATTERS REGARDING OVERSIGHT OF THE COMPANY'S INTERNAL AUDIT FUNCTION
18. Establish policies and procedures for evaluating the adequacy and
effectiveness of internal controls that could significantly affect the
Company's financial statements, including the retention of any third party
providers, as well as the adequacy and effectiveness of the Company's
disclosure controls and procedures and management's reports thereon;
19. Review and approve the appointment of, and any replacement of, any third
party provider to perform any internal audit procedures;
A-3
20. Review and discuss any reports prepared in connection with any internal
audit;
MATTERS REGARDING OVERSIGHT OF COMPLIANCE RESPONSIBILITIES
21. Establish procedures for: (a) the receipt, retention and treatment of
complaints received by the Company regarding accounting, internal accounting
controls, or auditing matters; and (b) the confidential, anonymous
submission by employees of the Company of concerns regarding questionable
accounting or auditing matters;
22. Review all related party transactions for potential conflict of interest
situations on an ongoing basis and approve all such transactions (if such
transactions are not approved by another independent body of the Board);
23. Review and address any concerns regarding potentially illegal actions raised
by the Company's independent auditor pursuant to Section 10A(b) of the Act,
and cause the Company to inform the SEC of any report issued by the
Company's independent auditor to the Board regarding such conduct pursuant
to Rule 10A-1 under the Act;
24. Obtain from the Company's independent auditor assurance that it has complied
with Section 10A of the Act;
ADDITIONAL DUTIES & RESPONSIBILITIES
25. Review and reassess the adequacy of this Charter annually;
26. Review and assess the performance and effectiveness of the Committee at
least annually;
27. Report regularly to the Board with respect to the Committee's activities and
make recommendations as appropriate;
28. Review with the Company's outside counsel any legal matters that may have a
material impact on the financial statements, the Company's compliance
policies and any material reports or inquiries received from regulators or
governmental agencies; and
29. Take any other actions that the Committee deems necessary or proper to
fulfill the purposes and intent of this Charter.
While the Committee has the responsibilities, duties and powers set forth
in this Charter, it is not the duty of the Committee to plan or conduct audits
or to determine that the Company's financial statements are complete and
accurate and are in accordance with generally accepted accounting principles.
Rather, those duties are the responsibility of management and the independent
auditor.
Nothing contained in this Charter is intended to alter or impair the
operation of the "business judgment rule" as interpreted by the courts under the
Delaware General Corporation Law. Further, nothing contained in this Charter is
intended to alter or impair the right of the Members to rely, in discharging
their duties and responsibilities, on the records of the Company and on other
information presented to the Committee, Board or Company by its officers or
employees or by outside experts and advisers such as the Company's independent
auditor.
STRUCTURE & MEETINGS
The Committee shall conduct its business and meetings in accordance with
this Charter, the Company's bylaws and any direction set forth by the Board. The
chairperson of the Committee shall be designated by the Board or, in the absence
of such a designation, by a majority of the Members. The designated chairperson
shall preside at each meeting of the Committee and, in consultation with the
other Members, shall set the frequency and length of each meeting and the agenda
of items to be addressed at each meeting. In the absence of the designated
chairperson at any meeting of the Committee, the Members present at such meeting
shall designate a chairperson pro tem to serve in that capacity for the purposes
of such meeting (not to include any
A-4
adjournment thereof) by majority vote. The chairperson (other than a chairperson
pro tem) shall ensure that the agenda for each meeting is distributed to each
Member in advance of the applicable meeting.
The Committee shall meet as often as it determines to be necessary and
appropriate, but not less than quarterly each year. The Committee may establish
its own schedule, provided that it shall provide such schedule to the Board in
advance. The chairperson of the Committee or a majority of the Members may call
special meetings of the Committee upon notice as is required for special
meetings of the Board in accordance with the Company's bylaws. A majority of the
appointed Members, but not less than two Members, shall constitute a quorum for
the transaction of business. Members may participate in a meeting through use of
conference telephone or similar communications equipment, so long as all Members
participating in such meeting can hear one another, and such participation shall
constitute presence in person at such meeting.
The Committee may meet with any person or entity in executive session as
desired by the Committee. The Committee shall meet with the Company's
independent auditors, at such times as the Committee deems appropriate, to
review the independent auditor's examination and management report.
Unless the Committee by resolution determines otherwise, any action
required or permitted to be taken by the Committee may be taken without a
meeting if all Members consent thereto in writing and the writing or writings
are filed with the minutes of the proceedings of the Committee. The Committee
may form and delegate authority to subcommittees when appropriate.
MINUTES
The Committee shall maintain written minutes of its meetings, which minutes
shall be filed with the minutes of the meetings of the Board.
A-5
EXHIBIT B
PRESIDENTIAL REALTY CORPORATION
AUDIT COMMITTEE REPORT
In accordance with its written charter adopted by the Board of Directors
(Board), the Audit Committee of the Board (Committee) assists the Board in
fulfilling its responsibility for oversight of the quality and integrity of the
accounting, auditing and financial reporting practices of the Company. During
fiscal year 2003, the Committee met four times and discussed the interim
financial information contained in each quarterly earnings announcement with the
Chief Executive Officer, Chief Financial Officer, Treasurer and independent
auditors prior to public release.
In discharging its oversight responsibility as to the audit process, the
Committee obtained from the independent auditors a formal written statement
describing all relationships between the auditors and the Company that might
bear on the auditors' independence consistent with Independence Standards Board
Standard No. 1, "Independence Discussions with Audit Committees,"; discussed
with the auditors any relationships that may impact their objectivity and
independence and satisfied itself as to the auditors' independence. The
Committee also discussed with management and the independent auditors the
quality and adequacy of the Company's internal controls and reviewed with the
independent auditors their audit scope, and identification of audit risks.
The Committee discussed and reviewed with the independent auditors all
communications required by generally accepted auditing standards, including
those described in Statement on Auditing Standards No. 61, as amended,
"Communication with Audit Committees" and, with and without management present,
discussed and reviewed the results of the independent auditors' examination of
the financial statements.
The Committee reviewed the audited financial statements of the Company as
of and for the fiscal year ended December 31, 2003, with management and the
independent auditors. Management has the responsibility for the preparation of
the Company's financial statements and the independent auditors have the
responsibility for the examination of those statements.
Based on the above-mentioned review and discussions with management and the
independent auditors, the Committee recommended to the Board that the Company's
audited financial statements be included in its Annual Report on Form 10-K for
the fiscal year ended December 31, 2003, for filing with the Securities and
Exchange Commission. The Committee also recommended the reappointment of the
independent auditors and the Board concurred in such recommendation.
Richard Brandt, Chairman
Mortimer Caplin
Robert Feder
Date: March 23, 2004
B-1
(CLASS A SHARES)
PRESIDENTIAL REALTY CORPORATION
180 SOUTH BROADWAY, WHITE PLAINS, NEW YORK 10605
MANAGEMENT PROXY
The undersigned hereby appoints JEFFREY F. JOSEPH and THOMAS VIERTEL, as
Proxies, each with the power to appoint his substitute, and hereby authorizes
them to appear and vote all of the shares of Class A stock standing in the name
of the undersigned on April 22, 2004, at the Annual Meeting of Stockholders of
Presidential Realty Corporation to be held at the Marriott Residence Inn, 5
Barker Avenue, White Plains, New York, on June 15, 2004 at 2:00 P.M., New York
time, and at any and all adjournments thereof, and the undersigned hereby
instructs said attorneys to vote as designated on reverse:
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
(CONTINUED AND TO BE DATED AND SIGNED ON REVERSE SIDE)
SEE REVERSE
SIDE
A [X] PLEASE MARK YOUR
VOTES AS IN THIS
EXAMPLE
FOR ALL NOMINEES LISTED AT WITHHOLD AUTHORITY
RIGHT: (EXCEPT AS MARKED TO TO VOTE FOR ALL NOMINEES
THE CONTRARY BELOW) LISTED AT RIGHT
1. ELECTION OF [ ] [ ] NOMINEES: ROBERT FEDER,
DIRECTORS JEFFREY F. JOSEPH,
ROBERT E. SHAPIRO,
JOSEPH VIERTEL
INSTRUCTIONS: To withhold authority to vote for any individual nominee, write
that nominee's name in the space provided below.
- -------------------------------------
2. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting or any adjournments
thereof.
MARK HERE IF YOU PLAN TO ATTEND [ ]
THE MEETING
The undersigned hereby acknowledges receipt of the Proxy Statement dated April
28, 2004
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY
THE UNDERSIGNED STOCKHOLDER, IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED
FOR PROPOSAL 1.
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
SIGNATURE(S) DATED: , 2004
------------------------------------- -----------------
Please sign exactly as name appears above. When shares are held by joint
tenants, both should sign. When signing as attorney, as executor, administrator,
trustee or guardian, please give full title as such. If a corporation, please
sign in full corporate name by President or other authorized officer. If a
partnership, please sign in partnership name by authorized person.
(CLASS B SHARES)
PRESIDENTIAL REALTY CORPORATION
180 SOUTH BROADWAY, WHITE PLAINS, NEW YORK 10605
MANAGEMENT PROXY
The undersigned hereby appoints JEFFREY F. JOSEPH and THOMAS VIERTEL, as
Proxies, each with the power to appoint his substitute, and hereby authorizes
them to appear and vote all of the shares of Class B stock standing in the name
of the undersigned on April 22, 2004, at the Annual Meeting of Stockholders of
Presidential Realty Corporation to be held at the Marriott Residence Inn, 5
Barker Avenue, White Plains, New York, on June 15, 2004 at 2:00 P.M., New York
time, and at any and all adjournments thereof, and the undersigned hereby
instructs said attorneys to vote as designated on reverse:
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
(CONTINUED AND TO BE SIGNED AND DATED ON REVERSE SIDE)
SEE REVERSE
SIDE
A [X] PLEASE MARK YOUR
VOTES AS IN THIS
EXAMPLE
FOR ALL NOMINEES LISTED AT WITHHOLD AUTHORITY
RIGHT: (EXCEPT AS MARKED TO TO VOTE FOR ALL NOMINEES
THE CONTRARY BELOW) LISTED AT RIGHT
1. ELECTION OF [ ] [ ] NOMINEES: RICHARD BRANDT,
DIRECTORS MORTIMER M. CAPLIN
INSTRUCTIONS: To withhold authority to vote for any individual nominee, write
that nominee's name in the space provided below.
- -------------------------------------
2. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting or any adjournments thereof.
MARK HERE IF YOU PLAN TO ATTEND [ ]
THE MEETING
The undersigned hereby acknowledges receipt of the Proxy Statement dated April
28, 2004
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY
THE UNDERSIGNED STOCKHOLDER, IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED
FOR PROPOSAL 1.
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
SIGNATURE(S) DATED: , 2004
--------------------------------------------- ---------
Please sign exactly as name appears above. When shares are held by joint
tenants, both should sign. When signing as attorney, as executor, administrator,
trustee or guardian, please give full title as such. If a corporation, please
sign in full corporate name by President or other authorized officer. If a
partnership, please sign in partnership name by authorized person.