UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION
13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO
SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission file number: 1-8120
BAIRNCO CORPORATION
(Exact name of Registrant as specified in its charter)
Delaware 13-3057520
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
300 Primera Blvd., Lake Mary, Florida 32746
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (407) 875-2222
Securities registered pursuant to Section 12(b) of the Act:
Name of each Exchange on
Title of each class which registered
Common Stock, par value $.01 per share New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of Registrant's knowledge, in definitive proxy
or information statements incorporated by reference in Part III of
this Form 10-K or any amendment to this Form 10-K. [ ]
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
On March 16, 2000, the aggregate market value of the Registrant's
voting stock held by non-affiliates was $49,434,113.
On March 16, 2000, there were 7,741,384 shares of Common Stock
outstanding, exclusive of treasury shares or shares held by
subsidiaries of the Registrant.
Parts I, II and IV incorporate information by reference from the
Annual Report to Stockholders for the fiscal year ended December 31,
2000. Part III incorporates information by reference from the Proxy
Statement dated March 14, 2000 in connection with the Registrant's
Annual Meeting of Stockholders to be held on April 21, 2000.
PART I
Item 1. BUSINESS
a. Recent Developments and Description
Bairnco Corporation was incorporated under the laws of the State
of New York on April 9, 1981. Effective September 24, 1991, Bairnco
Corporation changed its state of incorporation from New York to
Delaware. Unless otherwise indicated herein, the terms "Bairnco" and
the "Corporation" refer to Bairnco Corporation and its subsidiaries.
Bairnco's two core businesses are Arlon's Engineered Materials
and Components, and Kasco's Replacement Products and Services. In
February of 2000 Bairnco purchased certain assets of the materials
business ("Signtech") of Signtech USA, Ltd., a manufacturer of
laminated vinyl fabrics designated for use in the commercial graphics
market. Signtech's product lines complement Arlon's current vinyl
product lines, and will provide product line extensions, additional
brand recognition, product development synergies, and penetration into
new customer segments and markets.
At December 31, 1999, Bairnco employed 820 persons including 14
headquarters personnel. Bairnco's operations occupy approximately
605,000 square feet of factory and office space at its principal
locations. There is an additional 53,000 square feet of leased space
used as field warehouses throughout North America.
b. & c. Financial Information About Industry Segments
and Narrative Description of Business
Bairnco Corporation is a diversified multinational company that
operates two business sectors. Engineered materials and components are
designed, manufactured and sold under the Arlon brand identity to
electronic, industrial and commercial markets. These products are
based on common technologies in coating, laminating, polymers and
dispersion chemistry. Replacement products and services are
manufactured and distributed under the Kasco brand identity
principally to supermarkets, meat and deli operations, and meat,
poultry and fish processing plants throughout the United States,
Canada and Europe. Kasco also manufactures small band saw blades for
cutting metal and wood, and large band saw blades for use at lumber
mills. In Canada and France, in addition to providing its replacement
products, Kasco also distributes equipment to the supermarket and food
processing industries.
Financial data and other information about the Corporation's
segments is set forth in Note 10 to the Consolidated Financial
Statements on pages 28 through 30 and on pages 4 through 7 of
Bairnco's 1999 Annual Report to Stockholders which is incorporated
herein by reference. This information should be read in conjunction
with the "Financial History" set forth on page 9 of Bairnco's 1999
Annual Report to Stockholders, and "Management's Discussion and
Analysis" set forth on pages 10 through 12 of Bairnco's 1999 Annual
Report to Stockholders, which is incorporated herein by reference.
The principal facilities utilized by each segment are detailed on
page 10 under "Item 2. PROPERTIES" of this filing.
ENGINEERED MATERIALS AND COMPONENTS (ARLON)
Description of Business
Engineered materials and components are designed, manufactured
and sold under the Arlon brand identity. These products are based on
common technologies in coating, laminating, polymers, and dispersion
chemistry. Arlon's principal products include high performance
materials for the printed circuit board industry, adhesive coated cast
and calendered vinyl films, custom-engineered laminates, and
calendered and extruded silicone rubber insulation products used in a
broad range of industrial, consumer and commercial products.
Arlon Materials for Electronics has an international reputation
as the premier supplier of high technology materials for the printed
circuit board industry. These products are marketed principally to
printed circuit board manufacturers and OEM's by technical sales
representatives in the US, and through distributors and manufacturers
representatives in Europe, the Far East, and South America, supported
by direct technical sales specialists in Europe and Asia. Our
Electronic Substrates product line includes high temperature, high
performance thermoset laminates and prepreg bonding plies used in
circuit boards for sophisticated commercial applications and military
electronics. These applications require materials that are highly
reliable, withstand continuous high or widely varying operating
temperatures, provide ease of field repairability, or improve board
fabrication yields. Intermediate temperature laminates, which provide
improved product reliability and ease of manufacture at a lower cost,
are also key to the line. The Microwave Materials product line offers
application matched, reinforced PTFE and other resin based laminates
providing high yields and high performance for low signal-loss and
frequency-dependent microwave applications. The applications for this
product line include microwave antennas, digital cordless telephones,
cellular phone handsets, cellular phone base stations, direct
broadcast satellite TV systems, personal communications networks,
global positioning satellites, local area networks, collision
avoidance systems, and radar detection systems.
Arlon specialty graphic films are marketed under the Calon brand
name and include cast and calendered vinyl films that are manufactured
in a wide variety of colors, face stocks and adhesive systems. These
vinyl films are used in commercial and electrical signage, point of
purchase displays, highway signage, fleet markings, and other
commercial advertising applications. In February of 2000, Bairnco
announced it had purchased certain assets of the materials business
("Signtech") of Signtech USA, Ltd., a manufacturer of laminated vinyl
fabrics designated for use in the commercial graphics market.
Signtech's product lines complement Arlon's current vinyl product
lines, and will provide product line extensions, additional brand
recognition, product development synergies, and penetration into new
customer segments and markets.
Custom engineered laminates and coated products are also
manufactured and marketed under the Arlon brand identity. Typical
applications include insulating foam tapes for thermopane windows,
specialty flexible circuit materials, electrical insulation materials
for motors and transformers, thermal insulation panels for appliances
and cars, identification cards and labels, durable printing stock, and
other custom engineered laminates for specific industrial
applications.
Arlon also manufactures a line of silicone rubber materials, used
in a broad range of consumer, industrial and commercial products.
Typical applications and products include silicone sheet rubber for
producing composite parts, silicone rubber insulating tapes for
electric traction motor coil windings, insulation for industrial and
commercial flexible heaters, silicone products for high temperature
hose and duct markets, insulating tape for medium and high voltage
electrical splices and terminations, as well as compliant, thermally
or electrically conductive silicone sheet adhesives known as
ThermabondT.
Competition
Arlon has numerous competitors ranging in size from small, sole
proprietorships to units of very large, multinational corporations
that in certain instances have far greater market positions and
financial resources than the Corporation's.
The principal method of competition for Arlon's products varies
by product line and type of customer. While competition for
established lines is usually based on one or more of lead time, price,
product performance, or technical support and customer service, it may
also be based on the ability to service emerging technologies through
the custom design of new products, or redesign of existing products,
and materials for the new applications. As an example, for some high
performance materials sold to the printed circuit board industry, the
consistent technical performance of the materials supplied in excess
of minimum specified standards can be the critical competitive
element. In addition, Arlon sells a significant portion of its
circuit board materials into the Far Eastern and European markets
where local producers of similar materials have a competitive
advantage related to their geographic location.
Distribution
Arlon products are marketed by company sales personnel, outside
sales representatives and distributors in the North and South America,
Europe, the Far East and several other international markets.
Raw Materials and Purchased Parts
The essential raw materials used in Arlon engineered materials
and components are silicone rubber, fiberglass cloth, pigments, steel
and aluminum parts, copper foil, aluminum foil, polyethylene foam and
various plastic films, special papers and release liners, vinyl
resins, various adhesives and solvents, TeflonT or
polytetrafluoroethylene (PTFE) resin, polyimide resin, epoxy resins,
other thermoset resins, and various chemicals. Generally, these
materials are each available from several qualified suppliers. There
are, however, several raw materials used in Arlon's products that are
purchased from chemical companies and are proprietary in nature.
Other raw materials are purchased from a single approved vendor on a
"sole source" basis although alternative sources could be developed in
the future if necessary. However, the qualification procedure can
take up to several months and could therefore interrupt production if
the primary raw material source was lost unexpectedly.
Due to the number and diversity of Arlon's products it is
unlikely that availability problems with any one raw material would
have a material adverse effect on Arlon. There are no known
limitations to the continued availability of Arlon's raw materials.
Current suppliers are located in the United States, Japan, Europe and
Brazil.
Employees
As of December 31, 1999, approximately 502 employees were
employed by the operations, which constitute Arlon's engineered
materials and components.
Patents and Trademarks
The Corporation owns several registered trademarks under which
certain Arlon products are sold. The Corporation does not believe that
the loss of any or all of these trademarks would have a material
adverse effect on this segment.
REPLACEMENT PRODUCTS AND SERVICES (KASCO)
Description of Business
Replacement products and services are manufactured and
distributed under the Kasco brand identity principally to the meat,
deli and seafood departments of supermarkets; to meat, poultry and
fish processing plants; and to manufacturers and distributors of
electrical saws and cutting equipment throughout the United States,
Canada and Europe. These products and services include band saw
blades for cutting meat and fish, saw blades for cutting wood and
metal, chopper plates and knives for grinding meat, electrical saws
and cutting machines, seasoning products, preventive maintenance for
equipment in meat and deli operations, and other related butcher
supply products.
Replacement products and services are sold under a number of
brand names including Kasco in the United States and Canada, Atlantic
Service in the United Kingdom and Canada, and Bertram & Graf and Biro
France in Continental Europe.
Competition and Marketing
Kasco competes with several large and medium-sized national and
regional companies, as well as numerous small local companies. The
principal methods of competition are service, price and product
performance. The performance of meat band saw blades used in cutting
meat or other food items is balanced between minimizing waste and
maximizing the efficiency and productivity of the band saw machine and
operator or other cutting/processing equipment being used.
Kasco has a significant distribution network that reaches over
30,000 retail grocery stores, restaurants, delis, and processing
plants in the US, Canada, Europe, Latin America and Asia. Kasco's
distribution network is made up of Territory Managers and Distributors
who have in-depth knowledge of the local markets and the customer's
needs. Kasco has an extensive training program for its Territory
Managers so that each is proficient in the installation, repair, and
service of meat, deli and seafood department equipment.
Within our extensive market coverage of retail grocery stores,
Kasco also offers a unique product offering of seasoning blends,
recipes and instructions under the tradename Mealtime SolutionsT,
which allows a supermarket to present value-added products in their
meat, deli and seafood departments.
Raw Materials and Purchased Supplies
High quality carbon steel is the principal raw material used in
the manufacture of band saw blades and is purchased from multiple
domestic and international suppliers. Tool steel is utilized in
manufacturing meat grinder plates and knives and is purchased from
qualified suppliers located in the United States, Europe and Japan.
Equipment, replacement parts and supplies are purchased from a number
of manufacturers and distributors, mostly in the United States and
Europe. In France, certain specialty equipment and other items used
in the supermarket industry and in the food processing industry are
purchased and resold under exclusive distributorship agreements with
the equipment manufacturers. All of the raw materials and purchased
products utilized by this segment have been readily available
throughout this last year.
Employees
As of December 31, 1999, approximately 304 persons were employed
in the replacement products and services segment.
Patents and Trademarks
The Corporation has a number of United States and foreign
mechanical patents related to several of the products manufactured and
sold by Kasco, as well as a number of design patents and registered
trademarks. The Corporation does not believe, however, that the loss
of any or all of those patents would have a material adverse effect on
this segment.
d. Foreign Operations
The Corporation has foreign operations located in Canada, the
United Kingdom, France, and Germany. Information on the Corporation's
operations by geographical area for the last three fiscal years is set
forth in Note 10 to the Consolidated Financial Statements on pages 28
through 30 of Bairnco's 1999 Annual Report to Stockholders which is
incorporated herein by reference.
In addition, export sales from the Corporation's US based
operations for the years ended December 31, 1999, 1998 and 1997 were
$39,291,000, $30,554,000 and $28,770,000, respectively. Export sales
to any particular country or geographic area did not exceed 10% of
consolidated sales during any of these years.
Item 2. PROPERTIES
The following chart lists for the Corporation as a whole, and by
each of its segments, the principal locations of the Corporation's
facilities and indicates whether the property is owned or leased and
if leased, the lease expiration date.
LEASED OR OWNED
LOCATION SQUARE FEET (LEASE EXPIRATION)
CORPORATION TOTAL 658,000
Headquarters
Lake Mary, FL 11,000 Leased (Expires 2009)
Engineered Materials and Components (Arlon)
Bear, DE 135,000 Owned
East Providence, RI 60,000 Owned
Northbrook, IL 30,000 Owned
Rancho Cucamonga, CA 80,000 Owned
Santa Ana, CA 124,000 Leased (Expires 2003)
Replacement Products and Services (Kasco)
Gwent, Wales, UK 25,000 Owned
Pansdorf, Germany 22,000 Owned
Paris, France 20,000 Leased (Expires 2001)
St. Louis, MO 78,000 Owned
St. Louis, MO 20,000 Leased (Expires 2000)
Field Warehouses
(Approximately 70 locations
in North America) 53,000 Leased
Item 3. LEGAL PROCEEDINGS
Bairnco and its subsidiaries are among the defendants in a
lawsuit pending in the U.S. District Court for the Southern
District of New York (the "Transactions Lawsuit") in which it
is alleged that Bairnco and others are derivatively liable for
the asbestos-related claims against its former subsidiary,
Keene Corporation ("Keene"). The plaintiffs in the
Transactions Lawsuit are the trustees of Keene Creditors Trust
("KCT"), a successor in interest to Keene. In the Transactions
Lawsuit complaint, the KCT alleges that certain sales of assets
by Keene to other subsidiaries of Bairnco were fraudulent
conveyances and otherwise violative of state law, as well as
being violative of the civil RICO statute, 18 U.S.C. Section
1964. The complaint seeks compensatory damages of $700
million, interest, punitive damages, and trebling of the
compensatory damages pursuant to civil RICO. In a series of
decisions that remain subject to appeal, the court has
dismissed plaintiff's civil RICO claims; dismissed 14 of the 21
defendants named in the complaint; and partially granted
defendants' motions for summary judgment on statute of
limitations grounds. Discovery is now underway as to the
remaining claims and defendants. The court has entered a
scheduling order requiring the completion of all discovery
(including expert discovery) by May 11, 2001. A trial date has
not been set, but the Court has scheduled a conference for June
19, 2001, to determine dates for filing a pretrial order, for
trial, and/or for any pretrial motions.
Keene was spun off in 1990, filed for relief under Chapter
11 of the Bankruptcy Code in 1993, and emerged from Chapter 11
pursuant to a plan of reorganization approved in 1996 (the
"Keene Plan"). The Keene Plan provided for the creation of the
KCT, and transferred the authority to prosecute the
Transactions Lawsuit from the Official Committee of Unsecured
Creditors of Keene (which initiated the lawsuit in the
Bankruptcy Court in 1995) to the KCT. The Keene Plan further
provided that only the KCT, and no other entity, can sue
Bairnco in connection with the claims in the Transactions
Lawsuit complaint. Therefore, although a number of other
asbestos-related personal injury and property damage cases
against Bairnco nominally remain pending in courts around the
country, it is expected that the resolution of the Transactions
Lawsuit in substance will resolve all such claims.
Bairnco also is the defendant in a separate action by the
KCT (the "NOL Lawsuit"), also pending in the United States
District Court for the Southern District of New York, in which
the KCT seeks the exclusive benefit of tax refunds attributable
to the carryback by Keene of certain net operating losses ("NOL
Refunds"), notwithstanding certain provisions of applicable tax
sharing agreements between Keene and Bairnco. (As with the
Transactions Lawsuit, the NOL Lawsuit was commenced during
Keene's Chapter 11 case and, pursuant to the Keene Plan, the
KCT became the plaintiff in the lawsuit and the lawsuit was
moved from the Bankruptcy Court to the District Court.)
Pending resolution of the NOL Lawsuit, any refunds actually
received are to be placed in escrow. Through December 31,
1999, approximately $28.5 million of NOL Refunds had been
received and placed in escrow. There can be no assurance
whatsoever that resolution of the NOL Lawsuit will result in
the release of any portion of the NOL Refunds to Bairnco.
Bairnco and its Arlon subsidiary ("Arlon") also are among
the defendants in a third action by the KCT (the "Properties
Lawsuit"), commenced December 8, 1998 and pending in the United
States District Court for the Southern District of New York.
In the Properties Lawsuit complaint, the KCT seeks a
declaratory judgment that it owns certain patents and real
property purchased by Arlon from Keene in 1989, based on the
allegations that technical title to these assets was not
conveyed at the time of the sale and that no proof of claim
specifically referencing these assets was filed during Keene's
Chapter 11 case. In an answer and counterclaims, Bairnco and
Arlon have denied the KCT's claims and have requested a
declaratory judgment that full title to the patents and real
property in question in fact was transferred to Arlon at the
time of the 1989 asset sale. The Properties Lawsuit has been
transferred to the Transactions Lawsuit Judge for consolidated
discovery and other proceedings.
Management believes that Bairnco has meritorious defenses
to all claims or liability purportedly derived from Keene and
that it is not liable, as an alter ego, successor, fraudulent
transferee or otherwise, for the asbestos-related claims
against Keene or with respect to Keene products.
Bairnco Corporation and its subsidiaries are defendants in
a number of other actions. Management of Bairnco believes that
the disposition of these other actions, as well as the actions
and proceedings described above, will not have a material
adverse effect on the consolidated results of operations or the
financial position of Bairnco Corporation and its subsidiaries
as of December 31, 1999.
Item 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS
No matter was submitted to a vote of security holders during
the fourth quarter of 1999.
EXECUTIVE OFFICERS OF THE REGISTRANT
The information required with respect to executive
officers of the Corporation is as follows:
Name and Age of Data Pertaining to
Executive Officers Executive Officers
Luke E. Fichthorn III (58) Mr. Fichthorn has
served as Chairman of
Bairnco since May 23, 1990,
and on December 18, 1991,
became Chief Executive
Officer of Bairnco. For
over twenty-five years, Mr.
Fichthorn has been a private
investment banker and
partner of Twain Associates,
a private investment banking
and consulting firm. Mr.
Fichthorn served as a
director of Keene
Corporation, a former
subsidiary of Bairnco
Corporation from August,
1969 until May, 1981, and
became a director of Bairnco
in January, 1981. Mr.
Fichthorn is also a director
of Florida Rock Industries,
Inc. and FRP Properties,
Inc., neither of which is
affiliated with Bairnco.
Larry D. Smith (50) Mr. Smith was
elected Vice President -
Administration and Secretary
of Bairnco in April 1999.
Prior to joining Bairnco,
Mr. Smith was employed for
over 14 years with Emerson
Electric Company in various
human resource managerial
capacities. Most recently,
Mr. Smith was Vice President
Human Resources for
Emerson's Therm-O-Disc, Inc.
division in Mansfield, Ohio.
James W. Lambert (46) Mr. Lambert was
appointed Vice President -
Finance and Treasurer of
Bairnco in December 1999.
From August 1997 to December
1999, Mr. Lambert was
Bairnco's Corporate
Controller. Prior to joining
Bairnco, Mr. Lambert was
employed for over 15 years
by Air Products and
Chemicals Inc., in a variety
of financial, marketing and
product management
capacities.
Lawrence C. Maingot (40) Mr. Maingot was
appointed Corporate
Controller of Bairnco in
December 1999. From May 1997
to December 1999, Mr.
Maingot was Bairnco's
Assistant Controller. From
April 1992 to May 1997, Mr.
Maingot was Bairnco's
Accounting Manager. Prior to
joining Bairnco, Mr. Maingot
was employed with Arthur
Andersen LLP.
PART II
Item 5. MARKET FOR THE REGISTRANTS COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
a. & c. Data regarding market prices of Bairnco's
common stock is included in the "Quarterly Results of
Operations" on page 13 of Bairnco's 1999 Annual Report to
Stockholders which is incorporated herein by reference.
Bairnco's common stock is traded on the New York Stock
Exchange under the symbol BZ. Data on dividends paid is
included in the Consolidated Statements of Income on page 15
of Bairnco's 1999 Annual Report to Stockholders, which is
incorporated herein by reference. The quarterly cash
dividend remained constant at $0.05 per share during 1999.
The Board continues to review the dividend on a quarterly
basis.
b. The approximate number of holders of record of
Bairnco common stock (par value $.01 per share) as of
December 31, 1999 was 1,356.
Item 6. SELECTED FINANCIAL DATA
Reference is made to "Financial History" on page 9 of
Bairnco's 1999 Annual Report to Stockholders, which is
incorporated herein by reference.
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Reference is made to the "Management's Discussion and
Analysis" on pages 10 through 12 of Bairnco's 1999 Annual
Report to Stockholders which is incorporated herein by
reference.
Item 7A.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK
The interest on the Corporation's bank debt is floating
and based on prevailing market interest rates. For market
rate based debt, interest rate changes generally do not
affect the market value of the debt but do impact future
interest expense and hence earnings and cash flows, assuming
other factors remain unchanged. A theoretical one-
percentage point change in market rates in effect on
December 31, 1999 would increase interest expense and hence
reduce the net income of the Corporation by approximately
$210,000 per year.
The Corporation's fiscal 1999 sales denominated in a
currency other than U.S. dollars were approximately 14% of
total sales and net assets maintained in a functional
currency other than U.S. dollars at December 31, 1999 were
approximately 19% of total net assets. The effects of
changes in foreign currency exchange rates has not
historically been significant to the Corporation's
operations or net assets.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Reference is made to the Consolidated Financial
Statements and accompanying Notes included on pages 15
through 31 and the "Quarterly Results of Operations" on page
13 of Bairnco's 1999 Annual Report to Stockholders which is
incorporated herein by reference. Financial Statement
Schedules are included in Part IV of this filing.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required with respect to directors of
Bairnco is included in the Proxy Statement for the 2000
Annual Meeting of Stockholders of Bairnco, which has been
filed with the Securities and Exchange Commission and is
incorporated herein by reference.
See the information regarding executive officers of the
Corporation on pages 13 and 14 of this Annual Report on Form
10-K.
Item 11. EXECUTIVE COMPENSATION
The information required by Item 11 is included in the
Proxy Statement for the 2000 Annual Meeting of Stockholders
of Bairnco, which has been filed with the Securities and
Exchange Commission and is incorporated herein by reference.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The information required by Item 12 is included in the
Proxy Statement for the 2000 Annual Meeting of Stockholders
of Bairnco, which has been filed with the Securities and
Exchange Commission and is incorporated herein by reference.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by Item 13 is included in the
Proxy Statement for the 2000 Annual Meeting of Stockholders
of Bairnco, which has been filed with the Securities and
Exchange Commission and is incorporated herein by reference.
PART IV
Item 14.EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS
ON FORM 8-K
a) 1. Financial Statements
Included in the 1999 Annual Report to Stockholders
which is included as Exhibit 13 to this Annual
Report on Form 10-K:
Report of Independent Certified Public
Accountants;
Consolidated Statements of Income for the years
ended December 31, 1999, 1998 and 1997;
Consolidated Statements of Comprehensive Income
for the years ended December 31, 1999, 1998 and
1997;
Consolidated Balance Sheets as of December 31,
1999 and 1998;
Consolidated Statements of Cash Flows for the
years ended December 31, 1999, 1998 and 1997;
Consolidated Statements of Stockholders'
Investment for the years ended December 31,
1999, 1998 and 1997;
Notes to Consolidated Financial Statements.
2. Financial Statement Schedules
Included in Part IV of this Annual Report on Form 10-K:
Report of Independent Certified Public
Accountants on Financial Statement Schedules on
page 21 of this Annual Report on Form 10-K;
Financial Statement Schedules for the years
ended December 31, 1999, 1998 and 1997:
Schedule II - Valuation and Qualifying
Accounts on page 22 of this Annual Report on
Form 10-K;
All other schedules and notes are omitted because
they are either not applicable, not required or the
information called for therein appears in the
Consolidated Financial Statements or Notes thereto.
3. See Index to Exhibits on pages 24 through 26 of
this Annual Report on Form 10-K.
b) Reports on Form 8-K - None filed in the fourth
quarter of 1999.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
BAIRNCO CORPORATION
(Registrant)
Date: March 27, 2000 By: /s/ James W. Lambert
James W. Lambert
Vice President-Finance and
Treasurer
(Principal Financial Officer)
SIGNATURES
Pursuant to the requirements of the Securities Exchange
Act of 1934, this Report has been executed below by the
following persons on behalf of the Registrant and in the
capacities and on the date indicated above.
/s/ Luke E. Fichthorn III
Luke E. Fichthorn III - Chairman and CEO
/s/ Richard A. Shantz
Richard A. Shantz - Director
/s/ Charles T. Foley
Charles T. Foley - Director
/s/ William F. Yelverton
William F. Yelverton - Director
/s/ James W. Lambert
James W. Lambert - Vice President-Finance
and Treasurer
(Principal Financial Officer)
/s/ Lawrence C. Maingot
Larry C. Maingot - Controller
(Principal Accounting Officer)
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
ON FINANCIAL STATEMENT SCHEDULES
TO BAIRNCO CORPORATION:
We have audited in accordance with generally accepted
auditing standards, the consolidated financial statements
included in Bairnco Corporation's Annual Report to
Stockholders incorporated by reference in this Form 10-K,
and have issued our report thereon dated January 21, 2000,
except with respect to the matters discussed in Note 12, as
to which the date is February 16, 2000. Our audits were
made for the purpose of forming an opinion on those
statements taken as a whole. The schedule listed in Item
14(a) 2 is the responsibility of the company's management
and is presented for purposes of complying with the
Securities and Exchange Commission's rules and is not part
of the basic consolidated financial statements. This
schedule has been subjected to the auditing procedures
applied in the audits of the basic consolidated financial
statements and, in our opinion, fairly states in all
material respects the financial data required to be set
forth therein in relation to the basic consolidated
financial statements taken as a whole.
Orlando, Florida
January 21, 2000
(except with respect to the matters discussed in Note 12, as
to which the date is February 16, 2000)
Arthur Andersen LLP
BAIRNCO CORPORATION AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
Balance Balance
Year Ended Beginning Deductions End
December 31, of Year Expenses (a) Other (b) of Year
1999
Reserve for
Doubtful
Accounts $1,224,000 $ 647,000 $ (735,000) $ -- $1,136,000
Reserve for
Excess and
Obsolete
Inventory $2,559,000 $3,739,000 $(2,156,000) $ -- $4,142,000
1998
Reserve for
Doubtful
Accounts $ 943,000 $ 372,000 $ (241,000) $150,000 $1,224,000
Reserve for
Excess and
Obsolete
Inventory $1,673,000 $3,029,000 $(2,612,000) $469,000 $2,559,000
1997
Reserve for
Doubtful
Accounts $ 822,000 $ 365,000 $ (244,000) $ -- $ 943,000
Reserve for
Excess and
Obsolete
Inventory $2,057,000 $2,036,000 $(2,420,000) $ -- $1,673,000
(a) Actual charges incurred in connection with the purpose for
which the reserves were established.
(b) Additions to the reserve from acquisition.
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
EXHIBITS
TO
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1999
Commission File No.: 1-8120
BAIRNCO CORPORATION
(Exact name of registrant as specified in the charter)
INDEX TO EXHIBITS
Description Incorporated Herein By Reference
To
Certificate of Incorporation, as Exhibit 3 to Bairnco's Annual
amended through September 24, 1991. Report on Form 10-K for fiscal
year ended December 31, 1991.
By Laws, as amended through December Exhibit 3 to Bairnco's Annual
18, 1991. Report on Form 10-K for fiscal
year ended December 31, 1991.
Promissory note dated as of Exhibit 4 to Bairnco's Annual
September 1, 1989, between Arlon, Report on Form 10-K for fiscal
Inc. And the Delaware Economic year ended December 31, 1989.
Development Authority.
Indenture of Trust, series 1989, Exhibit 4 to Bairnco's Annual
dated as of September 1, 1989, Report on Form 10-K for fiscal
between the Delaware Economic year ended December 31, 1989.
Development Authority and
Manufacturers and Traders Trust
Company, securing variable rate
demand Industrial Development
Refunding Revenue Bonds (Arlon, Inc.
Project), series 1989 of the
Delaware Economic Development
Authority.
Loan Agreement, dated as of Exhibit 4 to Bairnco's Annual
September 1, 1989, between the Report on Form 10-K for fiscal
Delaware Economic Development year ended December 31, 1989.
Authority and Arlon, Inc.
Reimbursement Agreement dated as of Exhibit 4 to Bairnco's Annual
September 1, 1989 by and among Report on Form 10-K for fiscal
Arlon, Inc., Bairnco Corporation and year ended December 31, 1989.
Continental Bank NA (now Bank of
America, Illinois).
Agreement of the Company, dated Exhibit 4(e) to Bairnco's
March 30, 1987, to furnish a copy of Annual Report on Form 10-K for
any instrument with respect to fiscal year ended December 31,
certain other long-term debt to the 1986.
Securities and Exchange Commission
upon its request.
Standard Industrial Lease dated June Exhibit 10 to Bairnco's
30, 1983 between James E. and Nancy Annual Report on Form 10-K
S. Welsh, trustees under Welsh for fiscal year ended
Family Trust, dated April 20, 1979 December 31, 1983.
and Arlon, Inc. as successor to
Keene Corporation.
Bairnco Corporation 401(k) Savings Exhibit 4.3 to Bairnco's
Plan and Trust. Registration Statement on
Form S-8, No. 33-41313.
Bairnco Corporation 1990 Stock Exhibit 4.3 to Bairnco's
Incentive Plan. Registration Statement on
Form S-8, No. 33-36330.
INDEX TO EXHIBITS
Description Incorporated Herein By
Reference To
Bairnco Corporation Management Exhibit 10 to Bairnco's
Incentive Compensation Plan. Annual Report on Form 10-K
for fiscal year ended
December 31, 1981.
Employment Agreement dated January Exhibit 10 to Bairnco's
22, 1990, between Bairnco Annual Report on Form 10-K
Corporation and Luke E. Fichthorn for fiscal year ended
III. December 31, 1989.
Promissory Note dated January 31, Exhibit 4 to Bairnco's
1998, between Bairnco Corporation Annual Report on Form 10-K
and Bank of America NT&SA. for fiscal year ended
December 31, 1997.
Second Amended and Restated Credit Exhibit 2 to Bairnco's
Agreement dated as of February 22, Current Report on Form 8-K
2000, by and among Bairnco dated February 24, 2000.
Corporation and certain of its
subsidiaries and certain Commercial
Lending Institutions and Bank of
America, N.A., as the Agent for
Lenders.
Exhibits to Second Amended and Exhibit 3 to Bairnco's
Restated Credit Agreement dated as Current Report on Form 8-K
of February 22, 2000, by and among dated February 24, 2000.
Bairnco Corporation and certain of
its subsidiaries and certain
Commercial Lending Institutions and
Bank of America, N.A., as the Agent
for Lenders.
Lease, dated May 17, 1999, between Exhibit 10.1 filed herewith.
Crescent Resources, Inc. a South
Carolina Corporation, and Bairnco
Corporation.
Lease, dated February 16, 2000, Exhibit 10.2 filed herewith.
between Signtech USA, Ltd., a Texas
Limited Partnership, and Arlon
Signtech Ltd.
Calculation of Basic and Diluted Exhibit 11 filed herewith.
Earnings per Share for the years
ended December 31, 1999, 1998 and
1997.
1999 Annual Report to Stockholders. Exhibit 13 filed herewith.
INDEX TO EXHIBITS
Description Incorporated Herein By
Reference To
Subsidiaries of the Registrant. Exhibit 21 filed herewith.
Consent of Independent Certified Exhibit 23 filed herewith.
Public Accountants.
Financial Data Schedules. Exhibit 27 filed herewith
(electronic filing only).
Form 11-K Re: Bairnco Corporation Exhibit 99 filed herewith.
401(k) Savings Plan and Trust for
the fiscal year ended December 31,
1999.
THE CRESCENT AT PRIMERA, BUILDING FOUR
LEASE SUMMARY
LEASE DATE: May 17, 1999
LANDLORD: Crescent Resources, Inc., a South Carolina corporation
NOTICE: Post Office Box 1003 [zip code 28201-1003]
(If delivered by mail)
ADDRESS OF LANDLORD 400 South Tryon Street, Suite 1300
[zip code 28202] (If personally delivery or
overnight service or telegram)
Charlotte, North Carolina
Attention: Regional Vice PresidentTelephone: (704) 382-8009
Facsimile: (704) 382-6385
COPY TO: Crescent Resources, Inc.
605 Crescent Executive Court, Suite 112
Lake Mary, Florida 32746
Attention: Property Manager Telephone: (407)804-1200
Facsimile: (407)804-1222
COPY TO: Pohl & Short, P.A.
280 West Canton Avenue, Suite 410
Winter Park, Florida 32789
Attention: John R. Simpson, Jr., Esquire
Telephone: (407)647-7645
Facsimile: (407)647-2314
TENANT: Bairnco Corporation, a Delaware corporation
NOTICE Bairnco Corporation
ADDRESS OF 2251 Lucien Way, Suite 300
TENANT: Maitland, Florida 32751
Attention: James W. Lambert,Telephone: (407) 875-2222
Facsimile: (407) 875-3398
COPY TO: Holland & Knight, LLP
Two South Orange Avenue
Orlando, Florida 32801
Attn: Christopher Brockman, EsquireTelephone: (407) 244-1100
Facsimile: (407) 244-5288
BUILDING: Office building known as The
Crescent at Primera, Building Four, located on the
Land (at 300 Primera Boulevard , Lake Mary,
Florida).
LAND: That certain tract or parcel of
land located in Lake Mary, Florida, and described
on Exhibit A attached hereto and incorporated
herein by reference.
PREMISES: Suite 432 on the fourth floor of
the Building, as more particularly described on
Exhibit B attached hereto and incorporated herein
by reference. The Premises Net Rentable Area and
the Premises Net Usable Area described below are
estimates. Upon completion of the final space
plan for the Premises, the actual Rentable Area
and Usable Area shall be calculated in accordance
with the measurement method promulgated by the
Building Owners and Managers Association (BOMA)
based upon a common area factor of thirteen
percent (13%). The Premises Net Rentable Area and
the Premises Net Usable Area shall then be
adjusted and determined in accordance with such
calculations and all other provisions of this
Lease which are based upon the Premises Net
Rentable Area or the Premises Net Usable Area
shall likewise be adjusted. Landlord and Tenant
shall execute an amendment to this Lease to
evidence all such adjustments.
PREMISES NET
RENTABLE
AREA: 11,241 square feet located on the
fourth floor in the Building, subject to
adjustment as described above.
PREMISES NET
USABLE AREA: 9,948 square feet located on the fourth floor in
the Building, subject to adjustment as described
above.
BUILDING NET
RENTABLE AREA: 121,467 square feet, measured in accordance with
BOMA standards.
LEASE TERM: Ten (10) years, beginning on the Commencement
Date. Provided, however, if the Commencement Date
is any day other than the first day of a calendar
month, the Lease Term shall be extended
automatically until midnight on the last day of
the calendar month in which the Lease Term
otherwise would expire.
COMMENCEMENT
DATE: August 15, 1999.
BASE RENTAL: Period Annual Rent per Monthly Rent*
Rentable Square Foot
Year One $19.25 $18,032.44
Year Two $19.65 $18,407.14
Year Three $20.06 $18,791.21
Year Four $20.48 $19,184.64
Year Five $20.91 $19,587.44
Year Six $21.36 $20,008.98
Year Seven $21.82 $20,439.89
Year Eight $22.30 $20,889.53
Year Nine $22.78 $21,339.17
Year Ten $23.29 $21,816.91
* - Monthly Rent shall be
adjusted upon final measurement of the Premises
Net Rentable Area and evidenced by an amendment to
this Lease.
RENT
CONCESSION: Tenant shall be entitled to a Rent Concession
which is equal to the Base Rental payable for the
first four months of the Lease Term. Landlord
shall provide such Rent Concession by waiving Base
Rental for the first four months of the Lease
Term. Accordingly, the Advance Base Rental
payment shall be applied to the rent due for the
fifth month of the Lease Term.
BASIC COSTS
EXPENSE STOP: Shall mean the Basic Costs paid or incurred by
Landlord during calendar year 1999, grossed up to
reflect occupancy of 95% of the rentable area in
the Building for the entire year. Provided,
however, that the component of the Basic Costs
Expense Stop for real estate taxes for the
Building shall be $1.70 multiplied by the Building
Net Rentable Area regardless of the actual real
estate taxes for calendar year 1999. Accordingly,
no payment shall be due from Tenant for increases
in Basic Costs until calendar year 2000, at which
time Tenant shall pay Landlord for increases in
Basic Costs as described in Paragraph 7 of this
Lease. Tenant acknowledges that the Premises
Electrical Expense Stop is 60 cents per rentable square
foot per year and that Tenant is obligated to pay
electrical expenses exceeding the Premises
Electrical Expense Stop pursuant to Paragraph 13
of this Lease. For purposes of calculating
Tenant's payment of excess Basic Costs as provided
in Paragraph 7 of this Lease, annual total
increases in "Controllable Basic Costs" (as
defined below) for calendar years 2000 and
thereafter shall be limited to eight percent (8%)
of the prior year's Controllable Basic Costs.
"Controllable Basic Costs" shall mean the costs
incurred by Landlord for janitorial service and
supplies, common area maintenance and
administrative services. For purposes of applying
and calculating this limitation, Controllable
Basic Costs shall be grossed up, if necessary, to
reflect occupancy of 95% of the rentable space in
the Building. This limitation on increases in
Controllable Basic Costs shall apply to annual
increase of total Controllable Basic Costs, not to
any single component or item of Controllable Basic
Costs.
PREMISES
ELECTRICAL
EXPENSE STOP: Sixty cents (60 cents) multiplied by the Premises Net
Rentable Area, per year.
ADVANCE
BASE RENTAL
PAYMENT: Nineteen Thousand Two Hundred
Ninety-Four and 71/100 Dollars ($19,294.71),
including 7% sales tax, payable upon occupancy of
the Premises.
SECURITY
DEPOSIT: Not Applicable.
TENANT
IMPROVEMENTS
ALLOWANCE: Shall be $20.00 per rentable square foot of the
Premises for space planning, architectural,
mechanical and construction drawings and hard
construction costs. The Tenant Improvements
Allowance shall be applied and paid as described
in Paragraph 9 of this Lease.
BROKER: The Welsh Company (Agent: Greg Morrison)
The foregoing summary (the "Lease Summary") is hereby
incorporated into and made a part of the Lease Agreement. In the
event, however, of a conflict between the terms of the Lease
Summary and the terms of the Lease Agreement, the latter shall
control.
Initial: RJH (For Landlord)
Initial: JWL (For Tenant)
TABLE OF CONTENTS
PARAGRAPH DESCRIPTION PAGE
1. Definitions 1
2. Lease Grant 3
3. Lease Term 4
4. Use 5
5. Base Rental 5
6. Adjustments to Base Rental 6
7. Adjustments for Increase in Basic Costs 6
8. Services to Be Furnished by Landlord 7
9. Construction of Improvements 10
10. Maintenance and Repair by Landlord 10
11. Maintenance and Repair by Tenant 11
12. Alterations by Tenant 12
13. Use of Electrical Services by Tenant 12
14. Graphics and Signage 13
15. Parking 13
16. Compliance with Laws 14
17. Building Rules 14
18. Entry by Landlord 15
19. Assignment and Subletting 15
20. Liens 17
21. Property Insurance 17
22. Liability Insurance 18
23. Indemnities 18
24. Waiver and Waiver of Subrogation Rights 18
25. Casualty Damage 19
26. Condemnation 19
27. Damages from Certain Causes 20
28. Events of Default/Remedies 20
29. Security Deposit 22
30. Peaceful Enjoyment 22
31. Holding Over 22
32. Subordination to Mortgage 23
33. Estoppel Certificate 23
34. Attorneys' Fees 23
35. No Implied Waiver 24
36. Personal Liability 24
37. Notices 24
38. Severability 25
39. Recordation 25
40. Governing Law 25
41. Force Majeure 25
42. Time of Performance 26
43. Transfers by Landlord 26
44. Commissions 26
45. Effect of Delivery of this Lease 26
46. Real Estate Investment Trust 26
47. Hazardous Materials 27
48. Landlord's Right of Relocation 27
49. Evidence of Authority 27
50. Survival of Obligations 28
51. Confidentiality 28
52. Contractual Landlord's Lien 28
53. Rent a Separate Covenant 28
54. Radon 28
55. Miscellaneous Provisions 28
56. Special Stipulations 29
57. Waiver of Jury Trial 29
EXHIBITS
A Description of Land
B Designation of Premises
C Construction of Improvements
D Cleaning and Janitorial Services
E Rules and Regulations
F Special Stipulations - Not Applicable.
G Guaranty of Lease - Not Applicable.
H Commencement Date Stipulation
I Preliminary Tenant Improvements Plans and
Specifications
LEASE AGREEMENT
THIS LEASE AGREEMENT (this "Lease") is made and entered into
on the date and between the Landlord and Tenant identified in the
Lease Summary.
WITNESSETH:
1. Definitions.
Capitalized terms appearing in this Lease, unless defined
elsewhere in this Lease or in the Lease Summary, shall have these
definitions:
(a) "Additional Rent" shall mean all sums of money in
addition to Base Rental which shall become due from Tenant under
this Lease, including, without limitation, Tenant's Proportionate
Share of Basic Costs in excess of the Basic Costs Expense Stop,
as set forth in Paragraph 7 herein.
(b) "Adjustment Date" is not applicable.
(c) "Advance Base Rental Payment" shall have the meaning
set forth in the Lease Summary.
(d) "Base Rental" during the Lease Term shall be the amount
so designated in the Lease Summary, as same may be adjusted
pursuant to the terms of this Lease, together with all taxes
(excise, sales, use or other) levied or assessed by any
governmental entity on Base Rental, Additional Rent or any other
sums payable by Tenant under this Lease.
(e) "Basic Costs" shall mean and include: all expenses
relating to the Building and the Building Exterior Common Areas,
including all costs of operation, maintenance and management
thereof and assessments for public betterments or improvements,
any and all assessments or charges that are charged by any
property owners association applicable to the Land, ad valorem
real estate taxes and any other tax on real estate as such, ad
valorem taxes on furniture, fixtures, equipment or other property
used in connection with the operation, maintenance or management
of the Building and the Building Exterior Common Areas and the
costs, including, without limitation, legal and consulting fees,
of contesting or attempting to reduce any of the aforesaid taxes,
reasonable amortization of capital improvements which are
required by applicable law or which will improve the efficiency
of operating, managing or maintaining the Building or which will
reduce Basic Costs or the rate of increase thereof, the cost of
labor, materials, repairs, insurance, utilities and services and
such other expenses with respect to the operation, maintenance
and management of the Building and the Building Exterior Common
Areas, all of which expenses shall be incurred or paid by or on
behalf of Landlord or are properly chargeable to Landlord's
operating expenses in accordance with generally accepted
accounting principles as applied to the operation, maintenance
and management of a first class office building.
Notwithstanding the foregoing, it is agreed that the Basic
Costs shall not include: any leasing or marketing or brokerage
costs, fees, or commissions; any cost of upfitting space for
occupancy by tenants; any amortization of principal or interest
on account of any indebtedness; any legal expenses arising out of
any misconduct or negligence of Landlord or any person for which
Landlord is responsible or arising out of dealings between any
principals constituting Landlord or arising out of any leasing,
sale or financing of the Building or the Land or any part of
either of them; or, except as expressly permitted above, any
amortization or depreciation.
(f) "Basic Costs Expense Stop" shall be the amount so
designated in the Lease Summary.
(g) "Broker" shall be the party or parties so designated in
the Lease Summary.
(h) "Building" shall have the meaning set forth in the
Lease Summary.
(i) "Building Exterior Common Areas" shall mean (A) the
exterior of the Building and all of the improvements and real
property on the Land, including, without limitation, all parking
areas, enclosed or otherwise, and all streets, sidewalks, signs
and landscaped areas located on or within the Land; and (B) all
signs and landscaped areas located in public rights-of-way
directly contiguous to the Land if and to the extent Landlord
maintains such signs and landscaped areas from time to time.
(j) "Building Net Rentable Area" shall have the meaning set
forth in the Lease Summary.
(k) "Building Shell Improvements" shall mean the Building
improvements constructed or to be constructed by Landlord, at
Landlord's sole cost and expense and without applying any of the
Tenant Improvements Allowance. The Building Shell Improvements
are more particularly described in Exhibit C attached hereto and
incorporated herein by reference.
(l) "Commencement Date" shall mean that date set forth in
the Lease Summary, as same may be adjusted pursuant to the
provisions of Paragraph 3 herein.
(m) "Common Areas" shall mean those areas within the
Building devoted to corridors, elevator foyers, restrooms,
mechanical rooms, janitorial closets, electrical and telephone
closets, vending areas and other similar facilities provided for
the common use or benefit of tenants generally and/or the public,
including any columns and/or projections located within said
areas.
(n) "Premises Electrical Expense Stop" shall have the
meaning set forth in the Lease Summary. The Premises Electrical
Expense Stop covers the annual cost of electricity to be supplied
to the Premises (i) to operate lights and light fixture therein,
(ii) to operate equipment and fixtures that are connected to
electrical outlets therein and (iii) to operate any HVAC system
or unit that exclusively serves the Premises (or any portion
thereof).
(o) Intentionally deleted.
(p) "Force Majeure Matters" is defined in Paragraph 41
herein.
(q) "Land" shall mean the real property upon which the
Building is situated as more particularly described on Exhibit A
hereto.
(r) "Lease Term" shall mean the term of this Lease as set
forth in the Lease Summary.
(s) "Premises" shall have the meaning set forth in the
Lease Summary.
(t) "Premises Net Rentable Area" shall have the meaning set
forth in the Lease Summary.
(u) "Premises Net Usable Area" shall have the meaning set
forth in the Lease Summary.
(v) "Tenant Improvements" shall mean the improvements to be
constructed and installed in the Premises (beyond the Building
Shell Improvements) in accordance with the Tenant Improvements
Plans and Specifications, the terms of Paragraph 9 herein and
Exhibit C attached hereto.
(w) "Tenant Improvements Allowance" shall mean the
allowance to be provided by Landlord to Tenant for the
construction of the Tenant Improvements. The amount of the Tenant
Improvements Allowance is set forth in the Lease Summary.
(x) "Tenant Improvements Plans and Specifications" shall
mean the plans and Specifications" for the construction of the
Tenant Improvements, which plans and specifications shall be
prepared pursuant to Exhibit C attached hereto.
(y) "Tenant's Proportionate Share" means that fraction, the
numerator of which is the Premises Net Rentable Area and the
denominator of which is the Building Net Rentable Area.
2. Lease Grant.
Landlord hereby leases to Tenant, and Tenant hereby leases
from Landlord, upon and subject to the covenants, agreements,
provisions and conditions of this Lease, the Premises located in
the Building.
3. Lease Term.
This Lease shall continue in force during a period beginning
on the Commencement Date and continuing until the expiration of
the Lease Term, unless this Lease is sooner terminated or
extended to a later date under any other term or provision
herein. Subject to delays resulting from Force Majeure Matters or
delays caused by Tenant or Tenant's agents, employees,
contractors, subcontractors or licensees, including, without
limitation, change orders to the Tenant Improvements Plans and
Specifications ("Tenant Delay Factors"), Landlord will deliver
the Premises to Tenant not later than the Commencement Date set
forth in the Lease Summary or 120 days after issuance of a
building permit for the Tenant Improvements, whichever is later,
(the "Target Commencement Date"), with the Tenant Improvements
substantially completed in accordance with the Tenant
Improvements Plans and Specifications, as evidenced by a
certificate of occupancy issued for the Premises by appropriate
local government and by a certificate of substantial completion
issued by Landlord's architect or other designated engineering
representative. If Landlord for any reason whatsoever cannot
deliver possession of the Premises to Tenant (with the Tenant
Improvements substantially completed in accordance with the
Tenant Improvements Plans and Specifications) not later than the
Target Commencement Date, this Lease shall not be void or
voidable nor shall Landlord be liable to Tenant for any loss or
damage resulting therefrom except as described below; but in that
event, Landlord shall act diligently and in good faith to
complete the work that is necessary to allow Landlord to deliver
the Premises to Tenant as specified above. In such case, (a) if
Landlord's failure to deliver possession of the Premises to
Tenant (with the Tenant Improvements substantially completed in
accordance with the Tenant Improvements Plans and Specifications)
by the Target Commencement Date is not the result, in whole or in
part, of one or more Tenant Delay Factors, the Commencement Date
shall be adjusted to be the date when Landlord does in fact
deliver possession of the Premises to Tenant as described above
and Landlord shall pay delay damages to Tenant as described
below, and (b) if Landlord's failure to deliver possession of the
Premises to Tenant (with the Tenant Improvements substantially
completed in accordance with the Tenant Improvements Plans and
Specifications) by the Target Commencement Date is the result, in
whole or in part, of one or more Tenant Delay Factors, the
Commencement Date shall be the later of (i) the Target
Commencement Date or (ii) the date the Tenant Improvements would
have been substantially completed in the absence of such Tenant
Delay Factors(s) and no delay damages shall be payable to Tenant.
Landlord shall have one hundred twenty (120) days after the Lease
Date to obtain a building permit for the Tenant Improvements.
Thereafter, Landlord shall have an additional one hundred twenty
(120) days to complete construction of the Tenant Improvements.
If Landlord cannot complete construction of the Tenant
Improvements and deliver possession of the Premises to Tenant
within two hundred forty (240) days after the Lease Date (the
"Delivery Deadline"), which Delivery Deadline shall be extended
by Force Majeure Matters and by Tenant Delay Factors, then
Landlord shall pay delay damages to Tenant equal to one day of
Base Rental for each one day of delay for the period from the
Delivery Deadline through the date that possession of the
Premises is delivered to Tenant with the Tenant Improvements
completed. Such delay damages shall, at Landlord's election,
either be paid in cash to Tenant or as a credit against monthly
payments of Base Rental otherwise due hereunder.
Within five (5) days following Tenant's occupancy of the
Premises, Tenant shall execute and deliver to Landlord duplicate
originals of a stipulation in the form attached to this Lease as
Exhibit H (with the blanks properly completed). Subject to
Landlord's approval of the information inserted by Tenant in the
blanks, Landlord shall execute the duplicate originals of the
stipulation and shall promptly return one (1) fully executed
original to Tenant. Punchlist items identified by agreement of
Landlord and Tenant shall be completed by Landlord within thirty
(30) days after the Commencement Date.
4. Use.
The Premises shall be used for office purposes and for no
other purposes. Tenant agrees not to use or permit the use of the
Premises for any purpose that is illegal or is in violation of
any applicable legal, governmental or quasi-governmental
requirement, ordinance or rule, or that, in Landlord's opinion,
creates a nuisance, disturbs any other tenant of the Building or
injures the reputation of the Building.
5. Base Rental.
(a) Tenant agrees to pay during the Lease Term to Landlord,
without any setoff or deduction, except as provided herein, the
Base Rental, and all such other sums of money as shall become due
hereunder as Additional Rent, all of which are sometimes herein
collectively called "rent" or "Rent." Base Rental for each
calendar year or portion thereof during the Lease Term, together
with any applicable adjustment thereto pursuant to Paragraph 6
herein, shall be due and payable in advance, in twelve (12) equal
installments on the first day of each calendar month during the
Lease Term; provided, however, as set forth in the Lease Summary
and Paragraph 5(b) herein, Base Rental for the fifth full
calendar month during the Lease Term (i.e., the Advance Base
Rental Payment) shall be due and payable upon occupancy of the
Premises by Tenant. Tenant hereby agrees to pay such Base Rental
and any adjustments thereto to Landlord at Landlord's address
provided herein (or such other address as may be designated by
Landlord in writing from time to time) monthly, in advance, and
without demand. If the Lease Term commences on a day other than
the first day of a month or terminates on a day other than the
last day of a month, then the installments of Base Rental and any
adjustments thereto for such month or months shall be prorated,
based on the number of days in such month or months.
(b) Upon occupancy of the Premises, Tenant shall pay to
Landlord the Advance Base Rental Payment as additional security
for Tenant's performance of its obligations under this Lease. If
Tenant is not then in default under this Lease, Landlord shall
apply the Advance Base Rental Payment to the payment of the
monthly installment of Base Rental due relative to the fifth full
calendar month during the Lease Term. If Tenant is then in
default under this Lease, Landlord may, at its option, apply all
or any part of the Advance Base Rental Payment to cure the
default. With regard to any partial calendar month (if any)
preceding the first full calendar month during the Lease Term,
Tenant shall pay the applicable prorata portion of the monthly
installment of Base Rental in a timely manner pursuant to
Paragraph 5(a) herein.
6. Adjustments to Base Rental. Base Rental shall be
adjusted annually on the anniversary of the Commencement Date as
provided in the Lease Summary.
7. Adjustments for Increases in Basic Costs.
With respect to each calendar year or portion thereof during
the Lease Term (and any renewal or extension thereof), Tenant
shall pay Landlord as Additional Rent, in the manner hereafter
provided, Tenant's Proportionate Share of the amount by which
Basic Costs paid or incurred by Landlord during such period
(grossed up, if necessary, to reflect occupancy of ninety-five
percent (95%) of the rentable space in the Building) exceeded the
Basic Costs Expense Stop. References in this Paragraph 7 to
"Basic Costs" shall be deemed and construed to refer to Basic
Costs as grossed up pursuant to the immediately preceding
sentence. If Tenant shall be obligated to make payments as
aforesaid with regard to any partial calendar year during the
Lease Term, Basic Costs in excess of the Basic Costs Expense Stop
shall be prorated on the basis of the number of days during such
calendar year for which Tenant is obligated to make such
payments.
It is acknowledged and agreed that it will not be possible
to determine the actual amount of the excess (if any) of Basic
Costs over the Basic Costs Expense Stop for a given calendar year
until after the end of such calendar year. Therefore, until
Tenant's liability for Tenant's Proportionate Share of Basic
Costs in excess of the Basic Costs Expense Stop shall have been
finally determined for a particular calendar year, Tenant shall
make payment on account of excess Basic Costs as follows:
(a) Commencing as of the Commencement Date and continuing
throughout the Lease Term (and any renewal or extension thereof),
and subject to the limitation expressed above, Landlord shall
make a good faith estimate of Basic Costs for such calendar year
and Tenant's Proportionate Share thereof (hereinafter "Estimated
Basic Costs" and "Tenant's Estimated Proportionate Share"), and
Tenant shall pay to Landlord, as Additional Rent with each
monthly installment of Base Rental, an amount equal to one-
twelfth (1/12) of Tenant's Estimated Proportionate Share of the
amount by which Estimated Basic Costs for the current calendar
year are estimated to exceed the Basic Costs Expense Stop. Such
payments for any partial month shall be paid in advance at the
daily rate equal to the monthly payment divided by the number of
days in the month for which the same is due. On or about January
1 of each calendar year in respect of which Tenant shall be
obligated to make payments on account of excess Basic Costs
during the Lease Term (and any renewal or extension thereof),
Landlord shall furnish to Tenant a statement for such calendar
year of Tenant's Estimated Proportionate Share and of Estimated
Basic Costs and thereupon, subject to the limitations expressed
above, as of such January 1, Tenant shall make payments under
this Paragraph 7(a) in accordance with such statement.
(b) On or before April 1 in the year following the year in
which the Commencement Date occurs and each April 1 thereafter
during the Lease Term (and any renewal or extension thereof),
Landlord shall furnish Tenant with an itemized statement setting
forth the total amount of Basic Costs and Tenant's Proportionate
Share of the amount by which Basic Costs for the preceding
calendar year exceeded the Basic Costs Expense Stop. If any such
statement shall show an overpayment or underpayment of Tenant's
Proportionate Share of excess Basic Costs for the preceding
calendar year, any overpayment shall be refunded to Tenant or
credited against payments due from Tenant under this Lease, and
the full amount of any underpayment shall be paid to Landlord by
Tenant not later than the first day of the first calendar month
after such statement shall have been delivered to Tenant.
(c) In the event Tenant is required to pay Tenant's
Proportionate Share of Basic Costs pursuant to this Paragraph 7,
Tenant shall have the right, at Tenant's expense and no more
frequently than once per calendar year, to inspect Landlord's
books and records showing Basic Costs of the Building for the
calendar year in question; provided, however, Tenant shall not
have the right to withhold any payments of Tenant's Proportionate
Share of Basic Costs due and payable hereunder the amount of
which may be in dispute, and Tenant must pay the entire amount
due and payable hereunder prior to reviewing Landlord's books and
records. In the event an inspection of Landlord's books and
records by any tenant of the Building reveals a verifiable error
in Landlord's computation of Basic Costs or Tenant's
Proportionate Share of excess Basic Costs resulting in an
overpayment by Tenant of Tenant's Proportionate Share of excess
Basic Costs (after allowing for any adjustment pursuant to
Paragraph 7(b) herein), Landlord shall promptly reimburse the
amount of such overpayment to Tenant, together with interest
thereon from the date of overpayment until the date of
reimbursement at a rate per annum equal to one percent (1%) plus
the Prime Rate (as defined herein) in effect as of the date of
overpayment. As used in this Lease, the "Prime Rate" shall be
deemed to be that rate of interest announced by Nations Bank,
N.A., or any successor thereto, from time to time as its "prime
rate," and Landlord and Tenant acknowledge and understand that
Nations Bank, N.A., lends at rates of interest both above and
below the Prime Rate. Landlord's statement setting forth the
total amount of Tenant's Proportionate Share of excess Basic
Costs furnished to Tenant in accordance with the provisions of
this Paragraph 7 shall be deemed to have been approved by Tenant
unless protested by Tenant in writing within ninety (90) days
after delivery of such statement to Tenant at the Premises. If
the results of Tenant's inspection of Landlord's books and
records indicate that the statement for any calendar year over-
stated Basic Costs for such calendar year by more than five
percent (5%), Landlord shall pay Tenant the reasonable cost of
such inspection.
8. Services to Be Furnished by Landlord.
Landlord agrees to furnish Tenant the following services:
(a) Hot and cold water at those points of supply identified
on the Tenant Improvements Plans and Specifications.
(b) Except with regard to any HVAC system or unit that
exclusively serves the Premises (or any portion thereof), which
shall be Tenant's responsibility pursuant to Paragraph 11(b)
herein, Landlord shall furnish central heat and air conditioning
sufficient for the comfortable occupancy of the Premises.
Provided, however, central heating and air conditioning service
at times other than for "Normal Business Hours" for the Building
(which are 8:00 a.m. to 6:00 p.m. on Mondays through Fridays and
8:00 a.m. to 1:00 p.m. on Saturdays, exclusive of normal business
holidays identified as New Year's Day, Memorial Day, Independence
Day, Labor Day, Thanksgiving Day and Christmas Day), shall be
furnished only on the written request of Tenant delivered to
Landlord on the following schedule:
(1) For evenings Monday through Friday - prior to 3:00
p.m. on the day when such service is required;
(2) For Saturday afternoon, Saturday evening and
Sunday - prior to 3:00 p.m. on Friday; and
(3) For normal business holidays - prior to the times
set forth above for the last day prior to such holiday.
The above notwithstanding, upon written request and authorization
from Tenant, Landlord shall program the energy management system
for the Building to give Tenant the ability to control heating
and air conditioning services to the Premises after Normal
Business Hours without the need for daily notice to Landlord.
Tenant shall bear the entire cost (as Additional Rent) of such
additional heating and air conditioning furnished to the Premises
at times other than Normal Business Hours, and Tenant shall pay
such costs within ten (10) days following demand by Landlord. The
cost to be charged by Landlord to Tenant hereunder for heating
and air conditioning service used by Tenant during times other
than Normal Business Hours shall be $30.00 per hour per floor of
the Building. Such hourly rate may be increased from time to
time during the Lease Term only to reimburse Landlord for
increases in the cost to Landlord of electricity consumed in
providing the heating and air conditioning service. If more than
one tenant on the same floor requests heating and air
conditioning services after Normal Business Hours, the hourly
charge shall be apportioned among all such tenants.
If heat-generating machines or equipment shall be used in
the Premises by Tenant which affect the temperature otherwise
maintained by the Building HVAC system, Landlord shall have the
right (at Landlord's option) to install (or to require Tenant to
install) one or more HVAC systems or units that exclusively serve
the Premises (or the portion thereof where such heat-generating
machines or equipment are located). As set forth in Paragraph
11(b) herein, the cost of any such separate HVAC systems or units
that exclusively serve the Premises, including the cost of
installation and the cost of operation and maintenance thereof,
shall be borne by Tenant.
(c) Electrical service to serve the Common Areas and the
Premises, subject to the terms of Paragraph 13 herein.
(d) Routine maintenance and electric lighting service for
all Common Areas of the Building in the manner and to the extent
deemed by Landlord to be standard.
(e) Janitorial service, in accordance with the schedule
attached hereto as Exhibit D, Mondays through Fridays, exclusive
of normal business holidays as described in subparagraph (b)
above; provided, however, if Tenant's floor covering or other
improvements require special treatment, Tenant shall pay the
additional cleaning cost attributable thereto as Additional Rent
upon presentation of a statement therefor by Landlord.
(f) All Building standard fluorescent and incandescent
light bulb replacement in the Common Areas and all light bulb
replacement in the Premises. Provided, however, Tenant shall
promptly pay to Landlord, as Additional Rent, costs incurred by
Landlord in replacing light bulbs in the Premises (including the
cost of purchasing such light bulbs) if and to the extent such
replacement cost exceeds the replacement cost for Building
standard light bulbs. As used herein, "Building standard light
bulbs" shall be deemed to refer to 2' x 4', 3 lamp F40/CW with
energy saving ballasts.
(g) Tenant, its employees, and its invitees who have been
registered with Landlord shall have access to the Premises
(including elevator service) by a code or card access system
seven (7) days a week, twenty-four (24) hours a day. Tenant shall
receive an allotment of codes or cards for all of its employees
and for its invitees who are registered with Landlord. Landlord
shall bear the cost of each such code or card initially issued,
provided Tenant shall pay to Landlord (as Additional Rent, within
thirty (30) days after Tenant receives an invoice therefor) the
actual costs incurred by Landlord in obtaining and issuing
replacement codes or cards for codes or cards previously issued.
Landlord, however, shall have no liability to Tenant, its
employees, agents, invitees or licensees for losses due to theft
or burglary or for damages done by unauthorized persons on the
Premises, and Landlord shall not be required to insure against
any such losses. Tenant shall cooperate fully with Landlord's
efforts to maintain controlled access to and in the Building
during times other than Normal Business Hours and shall follow
all regulations promulgated by Landlord with respect thereto.
The failure by Landlord to any extent to furnish, or the
interruption or termination of these defined services in whole or
in part, resulting from any Force Majeure Matters or from any
other causes beyond the reasonable control of Landlord shall not
(i) render Landlord liable in any respect, (ii) be construed as
an eviction of Tenant, (iii) work an abatement of rent, or (iv)
relieve Tenant from the obligation to fulfill any covenant or
agreement in this Lease. Should any of the equipment or machinery
used in the provision of such services for any cause cease to
function properly, Tenant shall have no claim for offset or
abatement of rent or damages on account of an interruption in
service resulting therefrom. Landlord shall use its best
commercial efforts to restore any interrupted services. If such
services are not restored within three (3) business days after
such interruption, Tenant may take such action as is necessary to
restore the interrupted services and Landlord shall thereafter
reimburse Tenant for the reasonable costs of such restoration,
and Tenant may pursue other legal or equitable remedies not
otherwise prohibited hereunder. Amounts payable pursuant to this
Paragraph 8 shall be deemed to be Additional Rent due from Tenant
to Landlord, and any default in the payment thereof shall entitle
Landlord to all remedies provided for herein at law or in equity
on account of Tenant's failure to pay Base Rental.
9. Construction of Improvements.
(a) Subject to Force Majeure Matters and consistent with
the terms of Paragraph 3 herein and Exhibit C hereto, Landlord
shall pursue diligently and in good faith the completion of the
Building Shell Improvements and the Tenant Improvements.
(b) The Tenant Improvements Allowance shall be applied by
Landlord against the costs of designing, planning and
constructing the Tenant Improvements. In the event the costs
incurred in connection with the design, planning and construction
of the Tenant Improvements exceed the Tenant Improvements
Allowance, Tenant shall be responsible for bearing and paying
such excess costs (the "Excess Costs"), as follows:
(1) Tenant shall pay to Landlord, prior to the
commencement of construction of the Tenant Improvements, an
amount equal to fifty percent (50%) of such Excess Costs (as
then estimated by Landlord).
(2) After issuance of a Certificate of Occupancy for
the Tenant Improvements but prior to occupancy of the
Premises by Tenant, Tenant shall pay to Landlord an amount
equal to ninety percent (90%) of the Excess Costs (as then
estimated by Landlord), less payments received by Landlord
pursuant to Paragraph 9(b)(1) herein.
(3) As soon as the final accounting is prepared and
submitted by Landlord to Tenant and punchlist items are
completed by Landlord, Tenant shall pay to Landlord the
entire unpaid balance of the actual Excess Costs based on
the final costs to Landlord.
The Excess Costs (if any) payable by Tenant under this Paragraph
9(b) shall constitute Additional Rent due hereunder at the time
specified herein, and failure to make any such payment when due
shall constitute a default of Tenant under Paragraph 28 herein.
(c) Except as otherwise provided above in this Paragraph 9,
all installations and improvements now or hereafter placed on or
in the Premises shall be for Tenant's account and at Tenant's
cost. Tenant shall also pay increased ad valorem taxes (as
determined by local taxing authority) and increased insurance (as
determined by insurance company) on or attributable to the Tenant
Improvements (to the extent of the cost of the Tenant
Improvements is in excess of the Tenant Improvements Allowance),
which cost shall be payable by Tenant to Landlord as Additional
Rent.
10. Maintenance and Repair by Landlord.
Except to the extent any such repairs or replacements are
the responsibility of Tenant pursuant to the terms of Paragraph
11 or Paragraph 12 herein or any other provision in this Lease,
Landlord shall be responsible for maintaining, repairing and
replacing:
(a) the roof, foundations, exterior walls, and all
structural parts of the Building;
(b) all portions of the Premises affected by structural
conditions whose source lies outside the Premises;
(c) all Common Areas and Building Exterior Common Areas;
(d) all utility, sprinkler service, electrical and plumbing
lines and HVAC systems outside the Premises but which serve the
Premises on a non-exclusive basis; and
(e) all utility, sprinkler service, electrical and plumbing
lines and HVAC systems within the Premises but which serve other
space within the Building.
Except as expressly provided herein, Landlord shall not be
required to make any repairs to the Premises or the Building, but
Landlord shall maintain the Building to the same quality and
standards as originally constructed.
11. Maintenance and Repair by Tenant.
In addition to any other provisions in this Lease which
obligate Tenant to perform maintenance, repair and replacement
duties relative to the Premises and/or the Building, Tenant shall
be responsible for the following maintenance, repair and
replacement responsibilities:
(a) Tenant shall, at its expense, keep and maintain the
Premises in good order and repair and not commit or allow any
waste to be committed on any portion of the Premises; and at the
termination of this Lease, Tenant agrees to deliver up the
Premises to Landlord in as good of a condition as existed on the
Commencement Date, excepting only ordinary wear and tear, acts of
God and repairs required to be made by Landlord pursuant to the
terms of this Lease.
(b) Tenant shall, at its expense, keep and maintain all
HVAC systems and units, appliances and equipment that exclusively
serve the Premises (or any portion thereof). In the event the
Premises (or any portion thereof) is exclusively served by an
HVAC system or unit, Tenant shall contract with a qualified
heating and air conditioning service company approved by Landlord
for the monthly maintenance and the repair and replacement, as
necessary, of such HVAC system or unit. Tenant shall provide
Landlord with a copy of any contract required under this
Paragraph 11(b) within ten (10) days after the Commencement Date
and a copy of any subsequent contracts (or any renewal contracts)
within ten (10) days after their execution. The cost of all
contracts which Tenant is required to maintain under this
Paragraph 11(b) shall be borne by Tenant.
(c) Tenant shall, at Tenant's own cost and expense, repair
or replace any damage done to the Common Areas, the Building
Exterior Common Areas, the Building, or any part thereof
(including the Premises), caused by Tenant or Tenant's agents,
employees, invitees, or visitors, and such repairs shall restore
the damaged area to as good of a condition as existed prior to
such damage and shall be effected in compliance with all
applicable laws; provided, however, if, within a reasonable
period following written notice from Landlord of the need for
such repairs or replacements, Tenant fails to make such repairs
or replacements promptly, Landlord may, at its option, make the
repairs or replacements, and Tenant shall pay the cost thereof to
Landlord on demand as Additional Rent.
12. Alterations by Tenant.
Tenant shall not make or allow to be made any alterations to
the Premises or install any vending machines in the Premises,
without first obtaining the written consent of Landlord in each
such instance, such consent not to be unreasonably withheld,
delayed or qualified. Any and all alterations to the Premises,
including, without limitation the Tenant Improvements, shall
become the property of Landlord upon the termination of this
Lease (except for personal property and furniture owned by
Tenant). Landlord may, by written notice to Tenant not later than
sixty (60) days prior to termination, require Tenant, upon the
expiration or earlier termination of this Lease, to remove any
and all fixtures, equipment and other improvements installed in
the Premises by Tenant. In the event that Landlord so elects and
Tenant fails to remove such improvements, Landlord may remove
such improvements at Tenant's cost, and Tenant shall pay Landlord
on demand the cost of restoring any damage to the Premises
resulting from such removal, excepting only ordinary wear and
tear and acts of God.
13. Use of Electrical Services by Tenant.
Landlord shall install an electrical check meter (a "Check
Meter ") for the Premises as part of the Tenant Improvements. The
Check Meter will measure all electricity supplied to the Premises
(i) to operate lights and light fixtures therein, (ii) to operate
equipment and fixtures that are connected to electrical outlets
therein and (iii) to operate any HVAC system or unit that
exclusively serves the Premises (or any portion thereof). As
contemplated in Paragraph 8(c) herein, Landlord shall pay the
local electrical utility company prior to delinquency for the
electricity supplied to the Premises through the Check Meter.
Provided, however, in the event the amount paid by Landlord to
the local electrical utility company for electricity supplied to
the Premises (as measured by the Check Meter) for any given
period of time is greater than the allocable portion of the
Premises Electrical Expense Stop (allocated to the Premises for
the relevant period of time), Landlord may submit an invoice to
Tenant periodically for the cost of such excess electricity
supplied to the Premises and Tenant shall pay the full invoiced
amount (as Additional Rent) to Landlord within ten (10) days
after Tenant's receipt of each such invoice. The following
formula shall be used to determine the invoice amount for
Tenant's excess electrical usage in the Premises:
Invoice Amount =Total Electrical Costs Per Check Meter -
[(Premises Electrical Expense
Stop) x (Number of Days in Period Number
of Days in Year)]
For example, presuming (for purposes of this illustration only)
that the Premises Net Rentable Area is 10,000 square feet, that
the Check Meter indicates $2,000.00 of electricity was supplied
to the Premises during a given 90-day period and that the
calendar year in which such 90-day period falls contains 365
days, Landlord shall be entitled hereunder to send an invoice to
Tenant in the amount of $520.40 for excess electrical usage in
the Premises during such 90-day period, computed as follows:
Invoice Amount =$2,000.00 - [($6,000.00) x (90/365)]
= $2,000.00 -[$6,000.00 x .2466]
= $2,000.00 - $1,479.60
= $520.40
In computing invoices to be sent to Tenant for electricity
supplied to the Premises through the Check Meter, Landlord shall
use the same billing rate per kilowatt hour as is charged to the
overall Building by the local electrical utility company.
Additionally, with regard to any period of time that Landlord
elects to use a Check Meter to bill Tenant for excess electricity
supplied to the Premises, Landlord also shall use a Check Meter
to bill other tenants in the Building for excess electricity
supplied to their respective premises; and in such case, the cost
of electricity supplied to the Premises and to other premises in
the Building for which Landlord separately bills Tenant and other
tenants in the Building (i.e. such electrical costs that exceed
the Premises Electrical Expense Stop) shall not be included in
Basic Costs hereunder. Landlord shall be entitled to bill Tenant
pursuant to this Paragraph 13 for excess electrical usage in the
Premises monthly, quarterly, annually or otherwise, as determined
by Landlord from time to time during the Lease Term.
14. Graphics and Signage.
All letters and numerals on doors or other signs on the
Premises shall be in the standard form of graphics for the
Building, and no others shall be used or permitted without
Landlord's prior written consent. Furthermore, Tenant shall not
place signs on or in the Premises which are visible from outside
the Premises. Tenant's name and suite number shall be included by
Landlord on the lobby directory for the Building and at the main
entry for the Premises.
15. Parking.
During the Lease Term, Tenant shall have, without charge,
the non-exclusive right to use, in common with Landlord, other
tenants of the Building, and their respective guests and
invitees, the automobile parking areas, driveways, and footways
located on the Land. Notwithstanding the terms and provisions in
the immediately preceding sentence, (i) Tenant and Tenant's
guests and invitees shall not, at any given time, be entitled to
use more than five (5) parking spaces for each 1,000 square feet
of Premises Net Usable Area, and (ii) Landlord shall have the
right during the Lease Term to reserve parking spaces on the Land
for the exclusive use of other tenants in the Building, provided
the reservation of such spaces for the exclusive use of other
tenants in the Building does not have the effect of denying
Tenant the non-exclusive use of five (5) parking spaces for each
1,000 square feet of Premises Net Usable Area. If Landlord
provides reserved parking spaces to another tenant of the
Building, then Tenant shall also be entitled to reserved parking
spaces and the number of such parking spaces reserved for Tenant
shall be in the same ratio to Tenant's Premises Net Usable Area
as the number of reserved spaces provided to such other tenant
bears to such other tenant's Premises Net Usable Area. To the
extent spaces are existing and available, Tenant's reserved
spaces shall be located in the same general proximity to the
Building as the reserved spaces for such other tenant or within
fifty (50) feet of such other reserved spaces. Such reserved
parking spaces are included in and are not in addition to the
total number of parking spaces made available to Tenant pursuant
to this Paragraph 15.
16. Compliance with Laws.
Tenant agrees to comply with all applicable laws,
ordinances, rules and regulations of any governmental entity or
agency having jurisdiction over the Premises. Without limiting
the generality of the foregoing, in the event the Premises must
be modified or any other action relating to the Premises must be
undertaken in the future to comply with the Americans With
Disabilities Act or any similar federal, state or local statute,
law, or ordinance, the responsibility for such modification or
action (including the payment of all costs incurred in connection
therewith) shall belong to Tenant. If the Common Areas or the
Building Exterior Common Areas must be modified or any other
action relating to the Common Areas or the Building Exterior
Common Areas must be undertaken in the future to comply with the
Americans With Disabilities Act or any similar federal, state or
local statute, law, or ordinance and if such modification or
action is required because of (i) any special or unique use or
activity in the Premises or (ii) the performance of any
alterations within the Premises, the responsibility for such
modification or action (including the payment of all costs
incurred in connection therewith) shall belong to Tenant. Except
as provided in the immediately preceding sentence, in the event
the Common Areas or the Building Exterior Common Areas must be
modified or any other action relating to the Common Areas or the
Building Exterior Common Areas must be undertaken in the future
to comply with the Americans With Disabilities Act or any similar
federal, state or local statute, law, or ordinance, the
responsibility for such modification or action (including the
payment of all costs incurred in connection therewith, subject to
the terms and provisions of this Lease relating to the pass-
through of Basic Costs) shall belong to Landlord. Any such
expenses included in Basic Costs shall be amortized over the
useful life of the improvement. Landlord covenants that the
Building and the Premises shall be designed and constructed to be
in compliance with the Americans With Disabilities Act and other
applicable laws, codes and regulations effective as of the date a
building permit is issued for the Building and the Premises.
17. Building Rules and Regulations.
Tenant shall comply with the rules and regulations
applicable to the Building and the Building Exterior Common Areas
(the "Rules and Regulations") adopted and altered by Landlord
from time to time and shall cause all of its agents, employees,
invitees and visitors to do so; all changes to the Rules and
Regulations will be sent by Landlord to Tenant in writing. The
initial Rules and Regulations, which have been reviewed and
approved by Tenant, are attached hereto as Exhibit E. The
provisions of this Lease shall control any conflicting provisions
of the Rules and Regulations.
18. Entry by Landlord.
Tenant agrees to permit Landlord and Landlord's agents and
representatives to enter into and upon any part of the Premises
at all reasonable hours upon 24 hours notice (and in emergencies
at all times and without notice) to inspect the same, to show the
Premises to prospective purchasers, mortgagees, tenants or
insurers, to install or maintain Check Meters and other devices
to determine if Tenant's electrical usage is in excess of design
loads and capacities, and to clean or make repairs, alterations
or additions thereto, and Tenant shall not be entitled to any
abatement or reduction of rent by reason thereof. Such repairs,
alterations and additions shall be scheduled and handled so as
not to unreasonably interfere with Tenant's use of the Premises.
19. Assignment and Subletting.
(a) Tenant shall not assign this Lease or sublet all or any
part of the Premises or make any other transfer of its interest
in the whole or any portion thereof, directly or indirectly, at
any time during the Lease Term without the prior written consent
of Landlord, which such consent shall not be unreasonably
withheld or delayed. Any attempted assignments, subleases or
other transfers by Tenant in violation of the terms and
conditions of this Paragraph 19(a) shall be null and void. The
above notwithstanding, Landlord's consent shall not be required
in connection with an assignment or sublet of the Premises or any
part thereof to any successor of Bairnco Corporation resulting
from a merger, consolidation, sale or acquisition of the entire
business of Bairnco Corporation or to an entity which is a
subsidiary or parent of Bairnco Corporation or is otherwise
affiliated with Bairnco Corporation (a "Special Transfer"),
provided notice of same is furnished to Landlord and information
regarding such merger, consolidation, sale or acquisition
reasonably requested by Landlord is furnished, and provided
further that the then current use of the Premises shall continue
with no major demolition of improvements to the Premises. In the
event that Tenant desires at any time to assign this Lease or
sublet all or any part of the Premises, Tenant shall submit to
Landlord at least fifteen (15) business days prior to the
proposed effective date of the assignment or sublease, in
writing, (i) a request for permission to assign or sublet setting
forth the proposed effective date which shall be no less than
thirty days after the sending of such notice; (ii) the name of
the proposed subtenant or assignee or other party; (iii) the
nature of the business to be carried on in the Premises after the
assignment or sublet; (iv) the terms and provisions of the
proposed assignment or sublet; and (v) current financial
statements of the proposed subtenant or assignee; and such
additional information that Landlord may reasonably request in
order to make a reasoned judgment.
(b) If Tenant requests Landlord's consent to an assignment
of this Lease or subletting of all or part of the Premises, or
any other transfer of its interest(s), Landlord shall have the
option (without limiting Landlord's other rights hereunder) of
terminating this Lease with respect to the portion of the
Premises subject to the proposed assignment, subletting or
transfer upon fifteen (15) business days' notice and of dealing
directly with the proposed assignee, subtenant or transferee. If
Landlord should fail to notify Tenant in writing of its decision
within a fifteen (15) business day period after Landlord is
notified in writing of the proposed assignment, sublease or other
transfer, Landlord shall be deemed to have refused to consent to
such assignment, sublease or transfer and to have elected to keep
this Lease in full force and effect. If Landlord notifies Tenant
that Landlord has refused to consent to such assignment or
sublease and that Landlord intends to terminate this Lease with
respect to the portion of the Premises subject to the proposed
assignment or sublease, then Tenant shall have the right to be
exercised within ten (10) days thereafter to withdraw its
proposed assignment or sublease in which event the Lease shall
not be terminated as to such portion of the Premises. This
subparagraph (b) shall not apply to a Special Transfer as
described above.
(c) Landlord hereby reserves the right to condition
Landlord's consent to any assignment or sublet upon Landlord's
receipt from Tenant of a written agreement, in form and substance
acceptable to Landlord, pursuant to which Tenant shall pay over
to Landlord fifty percent (50%) of all rent or other
consideration received by Tenant from any such subtenant or
assignee, either initially or over the term of the assignment or
sublease, in excess of the Rent called for hereunder, or, in case
of the sublease of a portion of the Premises, in excess of such
rent fairly allocable to such portion, after appropriate
adjustments to assure that all other payments called for
hereunder are taken into account, and after taking into account
Tenant's reasonable expenses incurred in connection with such
subletting or assignment. This subparagraph (c) shall not apply
to a Special Transfer as described above.
(d) If Tenant assigns, sublets or makes any other transfer
of all or any portion of its interest(s) hereunder, Tenant named
in this Lease shall remain directly and primarily responsible for
the faithful performance and observance of all of the covenants
and obligations on Tenant's part to be performed in this Lease.
No assignment or subletting shall affect the continuing primary
liability of Tenant hereunder (which, following any assignment or
sublet, shall be joint and several with the assignee or
subtenant), and Tenant shall not be released from performing any
of the terms, covenants and conditions of this Lease.
(e) Any assignee or subtenant hereunder shall be bound by
and shall comply with all of the terms and provisions in this
Lease, including, without limitation, the use restriction set
forth in Paragraph 4 herein. As a condition to the effectiveness
of any assignment that is permitted hereunder, the assignee
shall, by an instrument in writing, assume and agree to perform
(for the express benefit of Landlord) the terms hereof; and as a
condition to the effectiveness of any sublease that is permitted
hereunder, the subtenant shall acknowledge in writing (for the
express benefit of Landlord) the existence of this Lease and
shall covenant not to do or permit to be done anything that would
constitute a breach hereof.
(f) Landlord's consent to any one assignment, sublease or
other transfer hereunder shall not waive the requirement of its
consent to any subsequent assignment, sublease or other transfer
as required herein.
20. Liens.
Tenant will not permit any mechanic's lien(s) or other liens
to be placed upon the Premises, the Building or the Land and
nothing in this Lease shall be deemed or construed in any way as
constituting the consent or request of Landlord, express or
implied, by inference or otherwise, to any person for the
performance of any labor or the furnishing of any materials to
the Premises, or any part thereof, nor as giving Tenant any
right, power or authority to contract for or permit the rendering
of any services or the furnishing of any materials that would
give rise to any mechanics' or other liens against the Premises,
the Building or the Land. In the event any such lien is attached
to the Premises, the Building or the Land, then, in addition to
any other right or remedy of Landlord, Landlord may, but shall
not be obliged to, discharge the same. Any amount paid by
Landlord for any of the aforesaid purposes shall be reimbursed by
Tenant to Landlord on demand as Additional Rent.
The interest of Landlord shall not be subject to liens for
improvements made by Tenant in and to the Premises. Tenant shall
notify every contractor making such improvements of the
provisions set forth in the preceding sentence of this paragraph.
The parties agree, should Landlord so request, to execute,
acknowledge and deliver without charge to Tenant, a Short Form
Lease in recordable form in accordance with Chapter 713, Florida
Statutes containing a confirmation that the interest of Landlord
shall not be subject to liens for improvements made by Tenant to
the Premises.
21. Property Insurance.
Landlord shall maintain fire and extended coverage insurance
on the Building and the Premises, such policy(ies) to cover
Landlord's interest in the Building and Premises for not less
than the full replacement value thereof. Such insurance shall be
maintained at the expense of Landlord (as a part of Basic Costs),
and payments for losses thereunder shall be made solely to
Landlord or the mortgagees of Landlord relative to the Land and
the Building (collectively, "Mortgagees"; each, a "Mortgagee"),
as their respective interests shall appear. Tenant shall
maintain, at its expense, in an amount equal to full replacement
cost, fire and extended coverage insurance on all of its personal
property, including removable trade fixtures, located in the
Premises. Tenant shall, at Landlord's request from time to time,
provide Landlord with current certificates of insurance
evidencing Tenant's compliance with the terms and requirements of
this Paragraph 21 and Paragraph 22 herein. All policies required
to be maintained by Tenant under this Paragraph 21 and Paragraph
22 herein shall contain a provision whereby the insurer is not
allowed to cancel, fail to renew or change materially the
coverage without first giving thirty (30) days prior written
notice to Landlord. Tenant shall also obtain the agreement of
Tenant's insurers to notify Landlord that a policy is due to
expire at least thirty (30) days prior to such expiration.
22. Liability Insurance.
Tenant and Landlord shall, each at its own expense, maintain
a policy or policies of comprehensive general liability insurance
(occurrence coverage) with respect to the respective activities
of each on the Land and in the Building with the premiums thereon
fully paid on or before the due date, issued by and binding upon
an insurance company authorized to conduct such business in the
State of Florida. Such comprehensive general liability insurance
to be maintained by Tenant and Landlord under this Paragraph 22
shall afford minimum protection of not less than $1,000,000
combined single limit coverage of bodily injury, property damage
or combination thereof; and such comprehensive general liability
insurance to be maintained by Tenant shall name Landlord as an
additional insured. Such insurance coverage maintained by Tenant
also shall include, without limitation, personal injury and
contractual liability coverage for the performance by Tenant of
the indemnity agreements set forth in this Lease. Landlord shall
not be required to maintain insurance against thefts within the
Premises or the Building or on the Land.
23. Indemnities.
Landlord shall not be liable to Tenant, or to Tenant's
agents, servants, employees, customers, or invitees for any
injury to person or damage to property caused by any act,
omission, or neglect of Tenant, its agents, servants, employees,
invitees, licensees or any other person entering the Land, the
Building Exterior Common Areas, the Building or the Premises
under the invitation of Tenant or arising out of a default by
Tenant in the performance of its obligations hereunder. Tenant
hereby indemnifies and holds Landlord harmless from all liability
and claims for any such damage or injury. Landlord hereby
indemnifies and holds Tenant harmless from all liability and
claims for any damage or injury resulting from any act or
omission of Landlord that constitutes negligence or willful
misconduct.
24. Waiver and Waiver of Subrogation Rights.
Anything in this Lease to the contrary notwithstanding
(including, without limitation, Paragraph 23 herein), Landlord
and Tenant each hereby waive any and all rights of recovery,
claim, action, or cause of action, against the other, its agents,
officers, or employees, for any loss or damage that may occur to
the Premises or a part thereof, or any improvements thereto, or
any personal property of such party therein, by reason of fire,
the elements, or any other cause(s) which are insured against
under the terms of the standard fire and extended coverage
insurance policies referred to in Paragraph 21 herein, regardless
of cause or origin, including negligence of the other party
hereto, its agents, officers, or employees. All insurance
policies carried with respect to Paragraph 21 herein, if
permitted under applicable law, shall contain a provision whereby
the insurer waives, prior to loss, all rights of subrogation
against Landlord and Tenant.
25. Casualty Damage.
If the Premises or any part thereof shall be damaged by fire
or other casualty, Tenant shall give prompt written notice
thereof to Landlord. In case the Building shall be so damaged
that substantial alteration or reconstruction of the Building
shall be required (whether or not the Premises shall have been
damaged by such casualty) or in the event any Mortgagee should
require that the insurance proceeds payable as a result of a
casualty be applied to the payment of the mortgage debt or in the
event of any material uninsured loss to the Building, Landlord
may, at its option, terminate this Lease by notifying Tenant in
writing of such termination within ninety (90) days after the
date of such casualty. If, by reason of such casualty, the
Premises are rendered untenantable in some material portion, and
the amount of time required to repair the damage is reasonably
determined by Landlord to be in excess of one hundred eighty
(180) days from the date upon which Landlord is required to
determine whether to terminate this Lease, then Tenant shall have
the right to terminate this Lease by giving Landlord written
notice of termination within thirty (30) days after the date
Landlord delivers Tenant notice that the amount of time required
to repair the damage has been determined by Landlord to be in
excess of one hundred eighty (180) days. If Landlord (or Tenant,
if applicable) does not thus elect to terminate this Lease,
Landlord shall commence and proceed with reasonable diligence to
restore the Building to substantially the same condition as
existed immediately prior to the occurrence of the casualty,
except that Landlord's obligation to restore shall not exceed the
scope of the work required to be done by Landlord in originally
constructing the Building Shell Improvements and installing the
Tenant Improvements in the Premises. Landlord shall not be
obligated to restore the Building Shell Improvements or the
Premises if the cost of the restoration work required under this
Lease and all other leases of space in the Building exceeds the
insurance proceeds actually received by Landlord as a result of
the casualty, in which event Tenant shall have the right to
terminate this Lease. When the Tenant Improvements have been
restored by Landlord, Tenant shall restore Tenant's furniture and
equipment. Landlord shall not be liable for any inconvenience or
annoyance to Tenant or injury to the business of Tenant resulting
in any way from such damage or the repair thereof, except that,
subject to the provisions of the next sentence, Landlord shall
allow Tenant a fair diminution of Rent during the time and to the
extent the Premises are untenantable and until a Certificate of
Occupancy is issued following repair of the Premises. If the
Premises or any other portion of the Building is damaged by fire
or other casualty resulting from the fault or negligence of
Tenant or any of Tenant's agents, employees, or invitees, the
rent hereunder shall not be diminished during the repair of such
damage and Tenant shall be liable to Landlord for the cost of the
repair and restoration of the Building caused thereby to the
extent such cost and expense are not covered by insurance
proceeds.
26. Condemnation.
If the whole or substantially the whole of the Building or
the Premises should be taken for any public or quasi-public use,
by right of eminent domain or otherwise or should be sold in lieu
of condemnation, then this Lease shall terminate as of the date
when physical possession of the Building or the Premises is taken
by the condemning authority. If less than the whole or
substantially the whole of the Building or Premises is thus taken
or sold and the remaining portion of the Building can no longer
be operated as a multi-tenant office building on a financially
sound basis, in Landlord's sole opinion, or if any Mortgagee
should require that the condemnation proceeds payable as a result
of such taking or sale be applied to the payment of the mortgage
debt, Landlord (whether or not the Premises are affected by the
taking or sale) may terminate this Lease by giving written notice
thereof to Tenant, in which event this Lease shall terminate as
of the date when physical possession of such portion of the
Building or Premises is taken by the condemning authority. If
this Lease is not so terminated upon any such taking or sale and
if a portion of the Premises is affected thereby, the Base Rental
payable hereunder shall be diminished by an equitable amount, and
Landlord shall, restore the Building and the Premises to
substantially their former condition, except Landlord's
obligation to restore shall not exceed the scope of the work
required to be done by Landlord in originally constructing the
Building Shell Improvements and installing the Tenant
Improvements. Landlord shall not be obligated to restore the
Building Shell Improvements or the Tenant Improvements if the
cost of the restoration work required under this Lease and all
other leases of space in the Building exceeds the amount received
by Landlord for such taking, in which event Tenant shall have the
right to terminate this Lease. All amounts awarded upon a taking
of any part or all of the Building or the Premises shall belong
to Landlord, and Tenant shall not be entitled to and expressly
waives all claims to any such compensation, but Tenant shall not
be barred from making its own claim to the condemning authority
provided such claim does not reduce the compensation payable to
Landlord.
27. Damages from Certain Causes.
Landlord shall not be liable to Tenant for any loss or
damage to any property or person occasioned by theft, fire, act
of God, public enemy, injunction, riot, strike, insurrection,
war, court order, requisition, or order of governmental body or
authority or by any other Force Majeure Matter. Nor shall
Landlord be liable for any damage or inconvenience which may
arise through repair or alteration of any part of the Building or
Premises, except as is the result of Landlord's negligence or
willful misconduct.
28. Events of Default/Remedies.
(a) The following events shall be deemed to be events of
default by Tenant under this Lease: (i) Tenant fails to pay any
installment of Base Rental or Additional Rent when due and such
failure continues for more than five (5) days after Tenant is
given written notice of such failure (provided, however, Tenant
shall not be entitled to such notice and cure period more than
twice in any calendar year during the Lease Term); (ii) Tenant
fails to comply with any provision of this Lease (other than
clauses (iii), (iv), (v), (vi) and (vii) in this Paragraph
28(a)), all of which terms, provisions and covenants shall be
deemed material and such failure continues for more than thirty
(30) days after Tenant is given written notice of such failure or
Tenant fails to commence to cure the default within said thirty
(30) day period and diligently pursue the cure to completion
(provided such 30-day notice and cure period for non-monetary
defaults shall be decreased or dispensed with, as reasonably
required, in cases of emergency or in circumstances where such
failure will result in a default by Landlord under other leases
of space in the Building); (iii) the leasehold estate of Tenant
is taken on execution or other process of law in any action
against Tenant; (iv) Tenant abandons any substantial portion of
the Premises and fails to pay Rent for the Premises; (v) Tenant
becomes insolvent or unable to pay its debts as they become due,
or Tenant notifies Landlord that it anticipates either condition;
(vi) Tenant takes any action to or notifies Landlord that Tenant
intends to file a petition under any section or chapter of the
United States Bankruptcy Code, as amended from time to time, or
under any similar law or statute of the United States or any
State thereof; or a petition shall be filed against Tenant under
any such statute or Tenant or any creditor of Tenant's notifies
Landlord that it knows such a petition will be filed or Tenant
notifies Landlord that it expects such a petition to be filed; or
(vii) a receiver or trustee is appointed for Tenant's leasehold
interest in the Premises or for all or a substantial part of the
assets of Tenant. Provided, however, and notwithstanding the
foregoing provisions in this Paragraph 28(a), Tenant shall not be
entitled to any notice and cure period in connection with
Tenant's obligation to vacate the Premises at the end of the
Lease Term.
(b) Upon the occurrence under this Lease of any event or
events of default by Tenant, whether enumerated in Paragraph
28(a) herein or not, Landlord shall have the option to pursue any
one or more of the following remedies: (i) terminate this Lease,
in which event Tenant shall immediately surrender the Premises to
Landlord; (ii) terminate Tenant's right to occupy the Premises
and re-enter and take possession of the Premises (without
terminating this Lease) and relet or attempt to relet the
Premises for the account of Tenant and Landlord shall not be
deemed to have thereby accepted a surrender of the Premises, and
Tenant shall remain liable for all Base Rental, Additional Rent
or other sums due under this Lease and for all damages suffered
by Landlord because of Tenant's breach of any provision of this
Lease; (iii) enter upon the Premises and do whatever Tenant is
obligated to do under the terms of this Lease, and Tenant agrees
to reimburse Landlord on demand for any expense which Landlord
may incur in effecting compliance with Tenant's obligations under
this Lease, and Tenant further agrees that Landlord shall not be
liable for any damages resulting to Tenant from such action; (iv)
accelerate and declare the entire remaining unpaid Base Rental
and Additional Rent for the balance of the Lease Term (reduced to
present value) to be immediately due and payable forthwith, and
may, at once, take legal action to recover and collect the same;
and (v) exercise all other remedies and seek all damages
available to Landlord at law or in equity, including, without
limitation, injunctive relief of all varieties.
In the event Landlord elects to re-enter or take possession
of the Premises after Tenant's default, Tenant hereby waives
notice of such re-entry or repossession and of Landlord's intent
to re-enter or take possession. Landlord may, without prejudice
to any other remedy which it may have for possession or
arrearages in rent, expel or remove Tenant and any other person
who may be occupying said Premises or any part thereof. In
addition, the provisions of Paragraph 31 herein shall apply with
respect to the period from and after the giving of notice of such
termination to Tenant. All of Landlord's remedies under this
Lease shall be cumulative and not exclusive. Forbearance by
Landlord to enforce one or more of the remedies herein provided
upon an event of default shall not be deemed or construed to
constitute a waiver of such default or an election of remedies.
(c) Any installment of Base Rental and any Additional Rent
not paid within ten (10) days following the date when due and
payable shall bear interest from the date due until paid at the
lesser of (i) eighteen percent (18%) per annum or (ii) the
maximum lawful contract rate per annum.
(d) This Paragraph 28 shall be enforceable to the maximum
extent not prohibited by applicable law, and the unenforceability
of any portion thereof shall not thereby render unenforceable any
other portion. To the extent any provision of applicable law
requires some action by Landlord to evidence or effect the
termination of this Lease or to evidence the termination of
Tenant's right of occupancy, Tenant and Landlord hereby agree
that notice, in writing only and delivered in accordance with
Paragraph 37 herein, shall be sufficient to evidence and effect
the termination therein provided for.
(e) Landlord shall be in default hereunder in the event
Landlord has not begun and pursued with reasonable diligence the
cure of any failure of Landlord to meet its obligations hereunder
within thirty (30) days of receipt by Landlord of written notice
from Tenant of the alleged failure to perform. Except as
otherwise provided in Paragraph 3 herein, in no event shall
Tenant have the right to terminate or rescind this Lease or
otherwise withhold or abate Base Rental or Additional Rent as a
result of Landlord's default as to any covenant or agreement
contained in this Lease or as a result of the breach of any
promise or inducement hereof, whether in this Lease or elsewhere.
Tenant hereby waives such remedies for default hereunder and
Tenant's remedies for default by Landlord hereunder shall be
limited to a proceeding for damages and/or injunction. In
addition, Tenant hereby covenants that, prior to the exercise of
any such remedies, it will give the Mortgagee(s) who then hold(s)
a mortgage on the Building (if Landlord has notified Tenant of
the name and address of such Mortgagee) the same notice and time
period as Landlord to cure any default by Landlord under this
Lease.
29. Security Deposit. - Intentionally Deleted.
30. Peaceful Enjoyment.
Tenant shall, and may peacefully have, hold, and enjoy the
Premises against Landlord and all persons claiming by and through
or under Landlord for the Lease Term, subject to the other terms
hereof, provided Tenant pays the rent and other sums herein
recited to be paid by Tenant and performs all of Tenant's
covenants and agreements herein contained. This covenant and any
and all other covenants of Landlord shall be binding upon
Landlord and its successors only with respect to breaches
occurring during its or their respective periods of ownership of
Landlord's interest hereunder.
31. Holding Over.
If Tenant remains in possession of the Premises or any part
thereof after the expiration or earlier termination of this
Lease, whether with or without Landlord's acquiescence, Tenant
shall be deemed a tenant at will. In the event of any such
holding over by Tenant after the expiration or other termination
of this Lease or in the event Tenant continues to occupy the
Premises after the termination of Tenant's right of possession
pursuant to Paragraph 28(b) herein, Tenant shall, throughout the
entire holdover period, pay Base Rental equal to 150% of the Base
Rental in effect immediately before the holdover period began,
together with all applicable Additional Rent which would have
been applicable had the Lease Term continued through the period
of such holding over by Tenant. Tenant shall also remain liable
for any and actual damages suffered by Landlord as a result of
any holdover without Landlord's unequivocal written acquiescence.
No holding over by Tenant after the expiration of the Lease Term
shall be construed to extend the Lease Term.
32. Subordination to Mortgage.
Tenant accepts this Lease subject and subordinate to any
mortgage, deed of trust, or other lien presently existing or
hereafter arising upon the Premises, the Building and/or the
Land, and to any renewals, modifications, refinancings and
extensions thereof, but Tenant agrees that any such Mortgagee
shall have the right (without seeking or obtaining Tenant's
consent) at any time to subordinate such mortgage, deed of trust
or other lien to this Lease. Tenant agrees to cooperate and
execute and deliver such further instruments subordinating this
Lease or attorning to the holder of any such liens as Landlord
may request within fifteen (15) days of the date of such request.
Landlord shall provide a non-disturbance agreement from Mortgagee
to Tenant if a mortgage is placed on the Building.
33. Estoppel Certificate.
Tenant agrees that it will, from time to time upon request
by Landlord and within fifteen ( 15) days of such request,
cooperate and execute and deliver to such persons as Landlord
shall request an estoppel certificate in recordable form
certifying that this Lease is unmodified and in full force and
effect (or if there have been modifications, that this Lease is
in full force and effect as so modified), stating the dates to
which rent and other charges payable under this Lease have been
paid, stating that, to the best knowledge of Tenant, Landlord is
not in default hereunder (or if Tenant alleges a default, stating
the nature of such alleged default) and further stating such
other matters as Landlord shall reasonably require. In the event
that Tenant should fail to execute any such estoppel certificate
promptly as requested, Tenant hereby irrevocably constitutes
Landlord as its attorney-in-fact to execute such estoppel
certificate in Tenant's name, place and stead, it being agreed
that such power is one coupled with an interest. Landlord shall
likewise provide an estoppel certificate if requested by Tenant.
34. Attorneys' Fees.
In the event either party defaults in the performance of any
of the terms of this Lease and the other party employs
attorney(s) in connection therewith, the defaulting party agrees
to pay the prevailing party's reasonable attorneys' and
paralegals' fees (calculated at such attorneys' reasonable and
customary hourly rates and without regard to the amount in
controversy) and costs of litigation, whether at the trial level,
on appeal or in any bankruptcy or administrative proceedings.
35. No Implied Waiver.
The failure of Landlord to insist at any time upon the
strict performance of any covenant or agreement herein or to
exercise any option, right, power or remedy contained in this
Lease shall not be construed as a waiver or a relinquishment
thereof for the future. No payment by Tenant or receipt by
Landlord of a lesser amount than the monthly installment of rent
due under this Lease shall be deemed to be other than on account
of the earliest rent due hereunder, nor shall any endorsement or
statement on any check or any letter accompanying any check or
payment as rent be deemed an accord and satisfaction, and
Landlord may accept such check or payment without prejudice to
Landlord's right to recover the balance of such rent or to pursue
any other remedy in this Lease provided.
36. Personal Liability.
The liability of Landlord to Tenant for any default by
Landlord under the terms of this Lease shall be limited to the
equity of Landlord in the Building and the Land, and Tenant
agrees to look solely to Landlord's equity in the Building and
the Land for recovery of any judgment from Landlord, it being
intended that neither Landlord nor the shareholders, parents,
affiliates, partners, members, or owners of Landlord shall be
personally liable for any judgment or deficiency.
37. Notices.
Any notice in this Lease provided for must, unless otherwise
expressly provided herein, be in writing, and may, unless
otherwise in this Lease expressly provided, be given or be served
by depositing the same in the United States mail, postpaid and
certified or registered and addressed to the party to be
notified, with return receipt requested, or by delivering the
same in person to an officer of such party, or by prepaid
telegram or overnight delivery service (e.g., Federal Express),
or by sending the same by facsimile (with the original being sent
by one of the other permitted means), addressed to the party to
be notified at the applicable address stated in the Lease Summary
or such other address, notice of which has been given to the
other party pursuant to this Paragraph 37. Notice deposited in
the mail in the manner hereinabove described shall be effective
from and after the expiration of three (3) calendar days after it
is so deposited. Notice by personal delivery shall be effective
on the day of personal delivery. Notice by prepaid telegram or
overnight delivery service shall be effective on the first
business day after said notice is sent. Notice by facsimile shall
be effective on the day sent by facsimile (provided the original
is sent by one of the other permitted means).
38. Severability.
If any term or provision of this Lease, or the application
thereof to any person or circumstance shall, to any extent, be
invalid or unenforceable, the remainder of this Lease, or the
application of such term or provision to persons or circumstances
other than those as to which it is held invalid or unenforceable,
shall not be affected thereby, and each term and provision of
this Lease shall be valid and enforced to the fullest extent
permitted by law, notwithstanding the invalidity of any other
term or provision hereof.
39. Recordation.
Tenant agrees not to record this Lease; provided, however,
Landlord shall execute and deliver a memorandum of this Lease, in
recordable form, and suitable to provide record notice of this
Lease, if so requested by Tenant.
40. Governing Law and Venue.
This Lease and the rights and obligations of the parties
hereto shall be interpreted, construed, and enforced in
accordance with the laws of the State of Florida and venue for
any actions initiated by Landlord or Tenant shall be in Seminole
County.
41. Force Majeure.
Whenever a period of time is herein prescribed for the
taking of any action by Landlord or Tenant, such party shall not
be liable or responsible for, and there shall be excluded from
the computation of such period of time, any delays due to any
condition, matter or circumstance beyond the reasonable control
of such party (collectively, "Force Majeure Matters"; each, a
"Force Majeure Matter"), including, without limitation, the
following: strikes; defaults or failures to perform by
contractors or subcontractors; unavailability of materials;
lockouts; acts of God; governmental restrictions, war or enemy
action or invasion; civil commotion; insurrection; riot; mob
violence; malicious mischief or sabotage; fire or any other
casualty; adverse weather conditions or unusual inclement
weather; a condemnation; failure of a governmental
instrumentality to act in a timely fashion; any litigation or
other legal proceeding which delays the approval of plans or the
issuance of any grading or building permit for construction,
including, without limitation, the issuance of an injunction
enjoining such approval and/or issuance, as the case may be; any
law, order or regulation of any governmental, quasi-governmental,
judicial or military authority; or other similar cause. Force
Majeure Matters shall not excuse or delay payment due hereunder.
Without limiting the generality of the foregoing, in the event a
Force Majeure Matter affects Landlord's construction and delivery
obligation(s) relative to the Premises under this Lease, at
Landlord's option, the Commencement Date shall be extended by the
same number of days as the number of days of delay caused by such
Force Majeure Matter on the critical path of completing such
construction and delivery obligation(s).
42. Time of Performance.
Except as expressly otherwise herein provided, with respect
to all required acts of Tenant, time is of the essence of this
Lease.
43. Transfers by Landlord.
Landlord shall have the right to transfer and assign, in
whole or in part, all its rights and obligations hereunder and in
the Building and property referred to herein, and in such event
and upon such transfer Landlord shall be released from any
further obligations hereunder, and Tenant agrees to look solely
to such successor in interest of Landlord for the performance of
such obligations, except those obligations of Landlord with
respect to which a default exists as of the effective date of
such transfer or assignment.
44. Commissions.
Landlord warrants and represents to Tenant that Landlord has
not engaged or contracted with any person, firm or entity to
serve or act as a broker, agent or finder, other than Broker (if
any), for the purpose of leasing the Premises or in regard to
this Lease. Tenant warrants and represents to Landlord that
Tenant has not engaged, contracted with or dealt with any person,
firm or entity (other than Broker, if any) to serve or act as a
broker, agent or finder, for the purpose of leasing the Premises
or in regard to this Lease. Landlord agrees to be solely
responsible for the payment of any commission to Broker (if any)
relating to this Lease pursuant to a separate agreement between
Landlord and Broker (if any). Tenant shall and does hereby
indemnify and hold harmless Landlord from and against any claim
for any consulting fee, finder's fee, commission, or like
compensation, including reasonable attorneys' fees in defense
thereof, payable in connection with this Lease and asserted by
any party arising out of any act or agreement by Tenant,
excluding the commission payable by Landlord to Broker (if any)
as described above.
45. Effect of Delivery of this Lease.
Landlord has delivered a copy of this Lease to Tenant for
Tenant's review only, and such delivery does not constitute an
offer to Tenant or an option in favor of Tenant. This Lease shall
not be effective until an original executed by both Landlord and
Tenant is delivered to and accepted by Landlord.
46. Real Estate Investment Trust.
During the Lease Term, should a real estate investment trust
become Landlord hereunder, all provisions of this Lease shall
remain in full force and effect except as modified by this
Paragraph 46. If Landlord in good faith determines that its
status as a real estate investment trust under the provisions of
the Internal Revenue Code of 1986, as heretofore or hereafter
amended, will be jeopardized because of any provision of this
Lease, Landlord may request reasonable amendments to this Lease
and Tenant will not unreasonably withhold, delay or defer its
consent thereto, provided that such amendments do not (a)
increase the monetary obligations of Tenant pursuant to this
Lease or (b) in any other manner adversely affect Tenant's
interest in the Premises.
47. Hazardous Materials.
(a) Throughout the Lease Term, Tenant shall not
knowingly cause, permit or allow any Hazardous Materials to be
placed, stored, dumped, dispensed, released, discharged, used,
sold, transported, or located on or within any portion of the
Premises, the Building or the Land by itself or its servants,
agents, employees, contractors, subcontractors, licensees,
assignees or subtenants; provided, however, minor quantities of
Hazardous Materials may be used or stored in the Premises for
cleaning purposes only or in connection with the use of office
equipment and the normal operation of Tenant's office only, so
long as such quantities and the use thereof are permitted by or
are exempt from applicable governmental regulation. Tenant agrees
to give Landlord prompt written notice of any discovery,
discharge, release or threatened discharge or threatened release
of any Hazardous Materials on or about the Premises, the Building
or the Land. Tenant agrees to promptly clean up any Hazardous
Materials which are placed in the Premises or on the Land by
Tenant or its servants, agents, employees, contractors,
subcontractors, licensees, assignees or subtenants and to
remediate and remove any such contamination relating to the
Premises, the Building and/or the Land, as appropriate, at
Tenant's cost and expense, in compliance with all applicable
laws, ordinances, rules and regulations then in effect and to
Landlord's satisfaction, at no cost or expense to Landlord.
Additionally, Tenant hereby agrees to indemnify and hold harmless
Landlord and Landlord's partners, officers, directors, members,
affiliates, employees and agents from and against all loss, cost,
damage, liability and expense (including attorneys' fees and
expenses) arising from or relating to any Hazardous Materials
(other than those permitted above) which are placed in the
Premises or the Building or on the Land by Tenant or its
servants, agents, employees, contractors, subcontractors,
licensees, assignees or subtenants. For purposes of this Lease,
the term "Hazardous Materials" means such substances as give rise
to remediation requirements, duties or obligations under the
Clean Air Act, the Clean Water Act, the Federal Water Pollution
Control Act of 1976, the Comprehensive Environmental Response,
Compensation Liability Act of 1980, the Toxic Substances Control
Act and any other state or federal environmental statutes,
ordinances, rules or regulations.
(b) The terms and provisions in this Paragraph 47 shall
survive the termination or earlier expiration of this Lease.
48. Landlord's Right of Relocation. Intentionally deleted.
49. Evidence of Authority.
If requested by Landlord, Tenant shall furnish appropriate
legal documentation evidencing the valid existence and good
standing of Tenant and the authority of any parties signing this
Lease to act for Tenant. By signing this Lease on Tenant's
behalf, the signatory for Tenant hereby represents the truth of
such facts to Landlord.
50. Survival of Obligations.
Notwithstanding any term or provision in this Lease to the
contrary, any liability or obligation of Landlord or Tenant
arising during or accruing with respect to the Lease Term shall
survive the expiration or earlier termination of this Lease,
including, without limitation, obligations and liabilities
relating to (i) rent payments, (ii) the condition of the Premises
and the removal of Tenant's property, and (ii) indemnity and hold
harmless provisions in this Lease.
51. Confidentiality.
Tenant agrees, on behalf of Tenant and Tenant's employees,
agents, contractors, consultants, partners, affiliates, assignees
and subtenants, not to disclose the terms of this Lease or the
results of any audit of Landlord's books and records under this
Lease to any third party except (i) legal counsel to Tenant, (ii)
any assignee of Tenant's interest in this Lease or any subtenant
of Tenant relative to the Premises (or any portion thereof),
(iii) as required by applicable law or by subpoena or other
similar legal process, or (iv) for financial reporting purposes.
52. Contractual Landlord's Lien. - Intentionally deleted.
53. Rent a Separate Covenant. Tenant shall not for any
reason withhold or reduce Tenant's required payments of Basic
Rent and other charges provided in this Lease, it being expressly
understood and agreed contractually by the parties that the
payment of Basic Rent, Additional Rent, and other charges
provided under this Lease is a contractual covenant by Tenant
that is independent of the other covenants of the parties under
this Lease.
54. Radon.
As required by Florida Statutes, 404.056(6) 1995, Landlord
notifies Tenant as follows:
"RADON GAS: Radon is a naturally occurring radioactive gas,
that when it has accumulated in a building in sufficient
quantities, it may present health risk to persons who are exposed
to it over time. Levels of Radon that exceed federal and state
guidelines have been found in buildings in Florida. Additional
information regarding Radon and Radon testing may be obtained
from your county public health unit."
55. Miscellaneous Provisions.
The entire agreement, intent and understanding between
Landlord and Tenant is contained in the provisions of this Lease
and the exhibits attached hereto and any stipulations,
representations, promises or agreements, written or oral, made
prior to or contemporaneously with this Lease shall have no legal
or equitable effect or consequence unless reduced to writing
herein or in the exhibits attached hereto. This Lease may not be
modified except by a written instrument by the parties hereto.
The terms "Landlord" and "Tenant" and all pronouns relating
thereto shall be deemed to mean and include corporations,
partnerships and individuals as may fit the context, and the
masculine gender shall be deemed to include the feminine and the
neuter, and the singular number, the plural.
56. Renewal Option.
Tenant shall have the option to renew this Lease for one
Renewal Term of five (5) years at the then current market rental
rate for renewal leases of tenants having uses and improvement
requirements similar to Tenant in comparable office buildings in
the northern suburbs of Orlando, Florida, as such market rental
rate is reasonably determined by agreement between Landlord and
Tenant. Tenant shall exercise such renewal option by written
notice to Landlord given not less than nine (9) months prior to
the end of the initial Lease Term. If Landlord and Tenant,
acting in good faith, have not, within thirty (30) days after
such exercise, executed a renewal amendment to this Lease which
amendment states, inter alia, the rental rate applicable during
the Renewal Term, then such renewal exercise shall be deemed
cancelled and withdrawn unless Tenant agrees to use the three
appraiser method described below. In such event, Landlord and
Tenant shall each select an MAI appraiser, who, in turn, shall
select a third MAI appraiser. The three appraisers shall
determine by majority action the market rental rate for renewal
leases of tenants having uses and improvement requirements
similar to Tenant in comparable office buildings in the northern
suburbs of Orlando, Florida. The determination of the three
appraisers shall be binding on Landlord and Tenant and shall
establish the rental rate during the Renewal Term. Landlord and
Tenant shall each bear the cost of the appraiser they selected
and shall share equally the cost of the third appraiser. Tenant
may exercise its option to renew and Tenant's exercise of that
option shall be effective only if, at the time of Tenant's
exercise and on the commencement date of Renewal Term, this Lease
is in full force and effect and Tenant is not in default under
this Lease beyond any applicable cure period; provided that
Tenant must, in any event, cure any then existing default within
its applicable cure period or such exercise shall, at Landlord's
option, be deemed ineffective and null and void in its entirety.
Upon exercise of the renewal option and determination of the
rental rate, the Lease shall be extended for the Renewal Term.
57. WAIVER OF JURY TRIAL.
THE PARTIES HERETO SHALL, AND THEY HEREBY DO, WAIVE TRIAL BY
JURY IN ANY ACTION, PROCEEDING, OR COUNTERCLAIM BROUGHT BY EITHER
OF THE PARTIES HERETO AGAINST THE OTHER ON ANY MATTERS WHATSOEVER
ARISING OUT OF, OR IN ANY WAY CONNECTED WITH, THIS LEASE, THE
RELATIONSHIP OF LANDLORD AND TENANT, TENANT'S USE OR OCCUPANCY OF
THE PREMISES AND/OR BUILDING AND/OR CLAIM OR INJURY OR DAMAGE.
IN THE EVENT LANDLORD COMMENCES ANY PROCEEDINGS TO ENFORCE THIS
LEASE OR THE LANDLORD/TENANT RELATIONSHIP BETWEEN THE PARTIES OR
FOR NON-PAYMENT OF BASIC RENT OF ANY NATURE WHATSOEVER, OR
ADDITIONAL MONIES DUE LANDLORD FROM TENANT UNDER THIS LEASE,
TENANT WILL NOT INTERPOSE ANY COUNTERCLAIM OF WHATEVER NATURE OR
DESCRIPTION IN ANY SUCH PROCEEDINGS. IN THE EVENT TENANT MUST,
BECAUSE OF APPLICABLE COURT RULES, INTERPOSE ANY COUNTERCLAIM OR
OTHER CLAIM AGAINST SUCH PROCEEDING THE LANDLORD AND TENANT
COVENANT AND AGREE THAT, IN ADDITION TO ANY OTHER LAWFUL REMEDY
OF LANDLORD UPON MOTION OF LANDLORD, SUCH COUNTERCLAIM OR OTHER
CLAIM ASSERTED BY TENANT SHALL BE SEVERED OUT OF THE PROCEEDINGS
INSTITUTED BY LANDLORD AND, IF NECESSARY, TRANSFERRED TO A COURT
OF DIFFERENT JURISDICTION, AND THE PROCEEDINGS INSTITUTED BY
LANDLORD MAY PROCEED TO FINAL JUDGMENT SEPARATELY AND APART FROM
AND WITHOUT CONSOLIDATION WITH OR REFERENCE TO THE STATUS OF EACH
COUNTERCLAIM OR ANY CLAIM ASSERTED BY TENANT.
IN WITNESS WHEREOF, Landlord and Tenant have executed this
Lease in multiple original counterparts as of the day and year
first above written.
Signed, sealed and delivered LANDLORD
in the presence of:
CRESCENT RESOURCES, INC.,
a South Carolina corporation
/s/ Brandee Barnhill By: /s/ Robert J. Holmes, Jr.
Print Name: Brandee Barnhill Name: Robert J. Holmes
/s/ Donna Hughes Title: Regional Vice President
Print Name: Donna Hughes
TENANT:
BAIRNCO CORPORATION,
a Delaware corporation
/s/ Paula H. Godbee By: /s/ James W. Lambert
Print Name: Paula H. Godbee Name: James W. Lambert
/s/ Larry C. Maingot Title: Corporate Controller
Print Name: Larry C. Maingot
EXHIBIT A
Description of Land
All that certain tract or parcel of land lying and being in
the City of Lake Mary, Seminole County, Florida, and being more
particularly described as follows:
SECTION 7, TOWNSHIP 20 SOUTH, RANGE 30 EAST
THE CITY OF LAKE MARY, SEMINOLE COUNTY, FLORIDA
A PORTION OF SECTION 7, TOWNSHIP 20 SOUTH, RANGE 30 EAST,
SEMINOLE COUNTY, FLORIDA, BEING MORE PARTICULARLY DESCRIBED AS
FOLLOWS: BEGIN AT THE CENTER OF SECTION 7, TOWNSHIP 20 SOUTH,
RANGE 30 EAST, SEMINOLE COUNTY, FLORIDA AND RUN N 8940'59"E,
213.49 FEET TO A POINT ON THE WESTERLY RIGHT-OF-WAY LINE OF
PRIMERA BOULEVARD, PRIMERA PHASE II, ACCORDING TO THE PLAT
THEREOF AS RECORDED IN PLAT BOOK 53, PAGES 52 THROUGH 54 OF THE
PUBLIC RECORDS OF SEMINOLE COUNTY, FLORIDA, SAID POINT BEING ON A
CURVE CONCAVE NORTHWESTERLY HAVING A RADIUS OF 773.02 FEET, A
CHORD OF 142.57 FEET AND A CHORD BEARING OF S 0650'37"W; THENCE
RUN SOUTHWESTERLY ALONG SAID CURVE AND WESTERLY RIGHT-OF-WAY LINE
142.77 FEET THROUGH A CENTRAL ANGLE OF 1034'55" TO THE END OF
SAID WESTERLY RIGHT-OF-WAY LINE AND THE BEGINNING OF THE WESTERLY
RIGHT-OF-WAY LINE OF PRIMERA BOULEVARD, PRIMERA PHASE I,
ACCORDING TO THE PLAT THEREOF AS RECORDED IN PLAT BOOK 49, PAGES
88 THROUGH 91 OF THE PUBLIC RECORDS OF SEMINOLE COUNTY, FLORIDA,
SAID POINT BEING ON A CURVE CONCAVE NORTHWESTERLY HAVING A RADIUS
OF 773.02 FEET, A CHORD OF 59.92 FEET AND A CHORD BEARING OF
S 1421'20"W; THENCE RUN SOUTHWESTERLY ALONG SAID CURVE AND
WESTERLY RIGHT-OF-WAY LINE 59.94 FEET THROUGH A CENTRAL ANGLE OF
426'33" TO A POINT OF COMPOUND CURVATURE OF A CURVE CONCAVE
NORTHWESTERLY HAVING A RADIUS OF 346.19 FEET, A CHORD OF 280.92
FEET AND A CHORD BEARING OF S 4030'50"W; THENCE RUN SOUTHWESTERLY
ALONG SAID CURVE AND WESTERLY RIGHT-OF-WAY LINE 289.26 FEET
THROUGH A CENTRAL ANGLE OF 4752'27" TO A POINT OF TANGENCY;
THENCE RUN S 6427'07"W ALONG SAID WESTERLY RIGHT-OF-WAY LINE,
32.40 FEET TO THE POINT OF CURVATURE OF A CURVE CONCAVE
NORTHWESTERLY HAVING A RADIUS OF 805.02 FEET, A CHORD OF 167.68
FEET AND A CHORD BEARING OF S 7613'03"W; THENCE RUN SOUTHWESTERLY
ALONG SAID CURVE AND WESTERLY RIGHT-OF-WAY LINE 330.63 FEET
THROUGH A CENTRAL ANGLE OF 2331'55" TO A POINT OF REVERSE
CURVATURE ON A CURVE CONCAVE SOUTHEASTERLY HAVING A RADIUS OF
519.98 FEET, A CHORD OF 167.54 FEET AND A CHORD BEARING OF
S 7842'51"W; THENCE RUN SOUTHWESTERLY ALONG SAID CURVE AND
WESTERLY RIGHT-OF-WAY LINE 168.27 FEET THROUGH A CENTRAL ANGLE OF
1832'30"; THENCE LEAVING SAID WESTERLY RIGHT-OF-WAY LINE RUN
N 0912'05"W, 505.18 FEET; THENCE RUN S 8940'59"W, 559.42 FEET;
THENCE RUN N 0019'01"W, 35.00 FEET TO A POINT ON THE NORTH LINE
OF THE SOUTHWEST 1/4 OF SAID SECTION 7; THENCE RUN N 8940'59"E
ALONG THE NORTH LINE OF THE SOUTHWEST 1/4 OF SAID SECTION 7,
1153.66 FEET TO THE POINT OF BEGINNING CONTAINING 356347.77
SQUARE FEET (8.1806 ACRES).
A-1
EXHIBIT B
Designation of Premises
Graphic display of property
B-1
EXHIBIT C
Construction of Improvements
1. Building Shell Improvements. Landlord, at Landlord's sole
cost, shall complete or has completed the following as part
of the Building Shell Improvements:
2' x 2' ceiling grid installed at 9' above the
finished floor
2' x 2' tegular acoustical ceiling tile (to be
stacked on the floor in the Premises)
columns wrapped with drywall
high efficiency 2' x 4, 3 lamp fixtures with 18-
cell parabolic lenses and lights at a ratio of one
fixture per 75 square feet of Premises Net Usable Area
(to be stacked on the floor in the Premises)
low pressure and medium pressure duct work
interior VAV boxes installed with thermostats at
the rate of approximately one (1) per 2,665 usable
square feet
perimeter VAV boxes installed to perimeter slot
diffusers at the rate of approximately one (1) per
2,190 usable square feet
Building standard fire sprinkler system (in
accordance with applicable code requirements), with
heads turned up
demising walls: Landlord shall pay for the cost of
the demising walls between the Premises and the Common
Areas and Tenant shall pay for one-half of the cost of
the demising walls between the Premises and other
tenant space in the Building
blinds for exterior windows
2. Preparation and Approval of Tenant Improvements Plans and
Specifications. As soon as reasonably practicable following the
Lease Date, Landlord shall proceed to have Landlord's architect
prepare a draft of the Tenant Improvements Plans and
Specifications and shall deliver a complete copy of the Tenant
Improvements Plans and Specifications together with an itemized
construction cost proposal (the "Budget") to Tenant for Tenant's
review and approval. Tenant shall review the draft of the Tenant
Improvements Plans and Specifications and Budget and shall notify
Landlord in writing within five (5) business days after Tenant's
receipt of same as to whether Tenant approves the Tenant
Improvements Plans and Specifications and Budget; and if Tenant
does not approve the Tenant Improvements Plans and Specifications
and Budget, such written notice from Tenant to Landlord shall
provide Tenant's specific and detailed comments and suggestions
which, if incorporated in the Tenant Improvements Plans and
Specifications would render the Tenant Improvements Plans and
Specifications and Budget acceptable to Tenant. Landlord and
Tenant shall cooperate with one another in good faith to reach
agreement regarding the Tenant Improvements Plans and
Specifications and Budget as soon as practicable, and in any
event Tenant shall approve the Tenant Improvements Plans and
Specifications if they are prepared in accordance with and
consistent with the preliminary plans and specifications which
are attached as Exhibit I to the Lease. Within fifteen (15) days
after the parties approve Tenant Improvement Plans and
Specifications, Landlord shall submit such plans to the City of
Lake Mary for issuance of a building permit. Any changes to the
approved Tenant Improvement Plans and Specifications and Budget
shall be documented by change order approved by Landlord and
Tenant. In the event Landlord and Tenant are unable, after
complying with the foregoing terms and provisions in this
Paragraph 2, to reach agreement regarding the Tenant Improvements
Plans and Specifications and Budget within fifteen (15) business
days after the date on which
C-1
Landlord initially delivers the draft of the Tenant Improvements
Plans and Specifications and
Budget to Tenant pursuant to this Paragraph 2 and until such time
as Landlord and Tenant succeed in reaching agreement relative to
the Tenant Improvements Plans and Specifications and Budget,
Landlord may terminate the Lease by giving written notice of such
action to Tenant.
EXHIBIT D
Cleaning and Janitorial Services
LANDLORD SHALL FURNISH CLEANING AND JANITORIAL SERVICES TO THE
PREMISES AS DESCRIBED BELOW:
DAILY (Monday - Friday):
Sweep, dry mop or vacuum, as appropriate, all
floor areas; remove material such as gum and tar which
has adhered to the floor.
Empty and damp wipe all ash trays, waste baskets
and containers, remove all trash from the leased
premises.
Dust all cleared horizontal surfaces with treated
dust cloth, including furniture, files, telephones,
equipment that can be reached without a ladder.
Spot wash to remove smudges, marks and
fingerprints from such areas that can be reached
without a ladder.
Clean water fountains, cafeteria tables and
chairs.
Damp mop all non-resilient floors such as terrazzo
and ceramic tile.
Clean freight and passenger elevator cabs and
landing doors.
Clean mirrors, soap dispensers, shelves, wash
basins, exposed plumbing, dispenser and disposal
container exteriors, damp wipe all ledges, toilet
stalls and toilet doors.
Clean toilets and urinals with detergent
disinfectants.
Furnish and refill all soap, toilet, sanitary
napkin and towel dispensers.
Spot clean carpet stains.
Wash glass in Building directory, entrance doors
and frames.
Remove all litter from the parking lot and
grounds.
WEEKLY:
Dust vertical blinds and louvers.
Spot wash interior partition glass and door glass
to remove smudge marks.
Sweep all stairs areas.
D-1
Dust all baseboards.
Vacuum or brush all fabric covered chairs.
MONTHLY:
Scrub and recondition resilient floor areas.
Wash all stairwell landings and treads.
Wash all interior glass both sides.
QUARTERLY:
High dust all horizontal and vertical surfaces not
reached by nightly cleaning.
Vacuum all ceiling and wall air supply and exhaust
diffusers and grills.
Wash and polish vertical terrazzo and marble
surfaces.
Spot clean carpeted areas.
SEMI-ANNUALLY:
Vacuum drapes, cornices and wall hangings.
Dust all storage areas and shelves and contents.
Damp wash diffusers, grills, and other such items.
ANNUALLY:
Strip and refinish all resilient floors.
Wash all building exterior glass both sides.
Clean light fixtures, reflectors, globes, diffusers and
trim.
Wash walls in corridors, lounges, classrooms,
demonstration areas, cafeterias, break rooms,
washrooms.
Clean all vertical surfaces not attended to during
nightly, weekly, quarterly or semi-annually cleaning.
Landlord will provide a day porter for use throughout the
Building on business days, Monday through Friday.
D-2
EXHIBIT E
Rules and Regulations
1. Sidewalks, doorways, vestibules, halls, stairways, and
similar areas shall not be obstructed nor shall refuse,
furniture, boxes or other items be placed therein by any tenant
or its officers, agents, servants, and employees, or be used for
any purpose other than ingress and egress to and from premises in
the Building, or for going from one part of the Building to
another part of the Building. Canvassing, soliciting and peddling
in the Building are prohibited.
2. Plumbing, fixtures and appliances shall be used only
for the purposes for which constructed, and no unsuitable
material shall be placed therein.
3. No signs, directories, posters, advertisements, or
notices shall be painted or affixed on or to any of the windows
or doors, or in corridors or other parts of the Building, except
in such color, size, and style, and in such places, as shall be
first approved in writing by Landlord in its discretion. However,
the prohibition in the immediately preceding sentence shall not
limit or restrict any tenant's right to maintain within the
premises occupied by such tenant any signs, directories, posters,
advertisements, or notices so long as such items are not visible
from the exterior of the premises occupied by such tenant or from
the Common Areas of the Building. Building standard suite
identification signs will be prepared by Landlord at each
tenant's expense. Landlord shall have the right to remove all
unapproved signs without notice to any tenant, at the expense of
the responsible tenant.
4. No tenant shall do, or permit anything to be done, in
or about the Building, or bring or keep anything therein, that
will in any way increase the rate of fire or other insurance on
the Building, or on property kept therein or otherwise increase
the possibility of fire or other casualty.
5. Landlord shall have the power to prescribe the weight
and position of heavy equipment or objects which may overstress
any portion of the floor. All damage done to the Building by the
improper placing of such heavy items will be repaired at the sole
expense of the responsible tenant.
6. Each tenant shall notify the Building manager when
safes or other heavy equipment are to be taken in or out of the
Building, and the moving shall be done after written permission
is obtained from Landlord on such conditions as Landlord shall
require.
7. All deliveries must be made via the service entrance
and service elevator, when provided, during normal working hours.
Landlord's written approval must be obtained for any delivery
after normal working hours.
8. Each tenant shall cooperate with Landlord's employees
in keeping such tenant's premises neat and clean.
9. Each tenant shall not cause or permit any improper
noises in the Building, allow any unpleasant odors to emanate
from the Premises, or otherwise interfere, injure or annoy in
E-1
any way other tenants or persons having business with them.
However, Landlord acknowledges that, if permitted by the
applicable lease, a tenant may operate a food services facility
within the premises of such tenant for the sole use and benefit
of the occupants of such premises and that such food services
facility may emit odors normally associated with the operation of
such on-site food services facilities.
10. No animals shall be brought into or kept in or about
the Building.
11. When conditions are such that a tenant must dispose of
crates, boxes, etc. on the sidewalk, it will be the
responsibility of such tenant to dispose of same prior to 7:30
a.m. or after 5:30 p.m.
12. No machinery of any kind, other than ordinary office
machines such as typewriters, information processing systems,
copy machines, communications equipment and calculators, shall be
operated in any premises in the Building without the prior
written consent of Landlord, nor shall any tenant use or keep in
the Building any inflammable or explosive fluid or substance
(including Christmas trees and ornaments), or any illuminating
materials. No space heaters or fans shall be operated in the
Building.
13. No motorcycles or similar vehicles will be allowed in
the Building.
14. No nails, hooks, or screws shall be driven into or
inserted in any part of the Building, except as approved by
Building maintenance personnel. Notwithstanding the foregoing, a
tenant may decorate the interior of such tenant's premises at
such tenant's sole discretion provided such decorations do not
impact the structural integrity of the Building and cannot be
seen from the exterior of the Building or from any Common Areas
of the Building.
15. Landlord has the right to evacuate the Building in the
event of an emergency or catastrophe.
16. No food and/or beverages shall be distributed from any
tenant's office without the prior written approval of the
Building manager. But a tenant may prepare coffee and similar
beverages and warm typical luncheon items for the consumption of
such tenant's employees and invitees. Furthermore, Landlord
acknowledges that, if permitted by the applicable lease, a tenant
may operate a food services facility within the premises of such
tenant for the sole use and benefit of the occupants of such
premises.
17. No additional locks shall be placed upon any doors
without the prior written consent of Landlord. All necessary keys
or access cards or codes shall be furnished by Landlord, and the
same shall be surrendered upon termination of the applicable
lease, and each tenant shall then give Landlord or Landlord's
agent an explanation of the combination of all locks on the doors
or vaults. Replacement keys or access cards or codes (i.e.,
replacements for keys or access cards or codes previously issued
by Landlord) shall be obtained only from Landlord, and Tenant
shall pay to Landlord (as Additional Rent, within thirty (30)
days after Tenant receives an invoice therefor) the actual costs
incurred by Landlord in obtaining and issuing replacement keys or
access cards or codes for keys or access cards or codes
previously issued.
E-2
18. Tenants will not locate furnishings or cabinets
adjacent to mechanical or electrical access panels or over air
conditioning outlets so as to prevent operating personnel from
servicing such units as routine or emergency access may require.
Cost of moving such furnishings for Landlord's access will be for
the responsible tenant's account. The lighting and air
conditioning equipment of the Building will remain the exclusive
charge of the Building designated personnel.
19. Each tenant shall comply with reasonable parking rules
and regulations as may be posted and distributed by Landlord from
time to time.
20. No portion of the Building shall be used for the
purpose of lodging rooms.
21. Prior written approval, which shall be at Landlord's
sole discretion, must be obtained for installation of window
shades, blinds, drapes, or any other window treatment of any kind
whatsoever. Landlord will control all internal lighting that may
be visible from the exterior of the Building and shall have the
right to change any unapproved lighting, without notice to the
responsible tenant, at the responsible tenant's expense.
22. No tenant shall make any changes or alterations to any
portion of the Building without Landlord's prior written
approval, which may be given on such conditions as Landlord may
elect. All such work shall be done by Landlord or by licensed
contractors and/or workmen.
E-3
EXHIBIT F
Special Stipulations
[NOT APPLICABLE]
The foregoing Special Stipulations are hereby incorporated into
and made a part of the Lease Agreement. In the event, however,
of a conflict between the terms of the Special Stipulations and
the terms of the Lease Agreement, the Special Stipulations shall
control.
Initial: RJH_______ (For Landlord)
Initial: JWL______ (For Tenant)
F-1
EXHIBIT G
GUARANTY OF LEASE AGREEMENT
[NOT APPLICABLE]
G-1
EXHIBIT H
Commencement Date Stipulation
Pursuant to that certain Lease Agreement (the "Lease)
between CRESCENT RESOURCES, INC. (the "Landlord") and Bairnco
Corporation (the "Tenant") dated as of May 17, 1999, for certain
premises in The Crescent at Primera, Building Four located at 300
Primera Boulevard, Lake Mary, Florida 32746, Landlord and Tenant
hereby stipulate and certify that:
1. The Commencement Date under the Lease is September,
and the expiration date of the Lease Term is August
31, 2009.
2. Tenant's obligation to pay Rent under the Lease
commenced on January 1, 2000.
The terms and provisions of this Commencement Date
Stipulation are hereby incorporated into the Lease and modify any
and all provisions to the contrary contained therein.
Executed under seal as of the 25th day of January, 2000.
TENANT:
BAIRNCO CORPORATION
a Delaware corporation
By: /s/ James W. Lambert
Name: James W. Lambert
Title: VP Finance
LANDLORD:
CRESCENT RESOURCES, INC.,
a South Carolina corporation
By: /s/ Robert J. Holmes, Jr.
Name: Robert J. Holmes, Jr.
Title: Vice President
H-1
EXHIBIT I
Preliminary Tenant Improvements Plans and Specifications
[TO BE PROVIDED]
I-1
FIRST AMENDMENT TO LEASE
THIS FIRST AMENDMENT TO LEASE (the "First Amendment") is
dated as of the 31 day of May, 1999, by and between CRESCENT
RESOURCES, INC., a South Carolina corporation (the "Landlord")
and BAIRNCO CORPORATION, a Delaware corporation (the "Tenant").
RECITALS
A. Landlord and Tenant entered into a certain Lease dated
as of May 17, 1999 (the "Lease") with respect to certain space
described therein as Suite 432 and located on the fourth floor of
the Crescent at Primera, Building Four.
B. The parties wish to change the Commencement Date
described in the Lease Summary to provide more time to obtain
bids for construction of the Tenant Improvements.
AMENDMENT
NOW, THEREFORE, in consideration of the premises and the
mutual covenants contained herein, Landlord and Tenant do hereby
agree as follows:
1. Defined Terms; Recitals. Except as otherwise set
forth herein, all terms contained in this First Amendment shall
have the same meaning ascribed to them in the Lease. The
Recitals set forth above are true and correct.
2. Commencement Date. The Commencement Date
identified in the Lease Summary is hereby amended to September 1,
1999. The parties acknowledge that such Commencement Date is a
target date and that the actual Commencement Date of the Lease
shall be determined pursuant to Paragraph 3 of the Lease.
3. Binding Effect. The Lease, as modified by this
First Amendment, and all covenants, agreements, exhibits, terms
and conditions contained therein, shall remain in full force and
effect and is hereby ratified and confirmed. The provisions of
this First Amendment shall control any conflicting provisions of
the Lease.
IN WITNESS WHEREOF, Landlord and Tenant have executed this
First Amendment as of the day and year first above written.
LANDLORD
CRESCENT RESOURCES, INC.
/s/ Brandee Barnhill By: /s/ Robert J. Holmes, Jr.
Witness Name: Robert J. Holmes
Title: Regional Vice President
TENANT
BAIRNCO CORPORATION
/s/ Paula H. Godbee By: /s/ James W. Lambert
Witness Name: James W. Lambert
Title: Corporate Controller
/s/ Larry C. Maingot
Witness
SECOND AMENDMENT TO LEASE
THIS SECOND AMENDMENT TO LEASE (the "Second Amendment") is
dated as of the 31 day of August, 1999, by and between CRESCENT
RESOURCES, INC., a South Carolina corporation (the "Landlord")
and BAIRNCO CORPORATION, a Delaware corporation (the "Tenant").
RECITALS
A. Landlord and Tenant entered into a certain Lease dated
as of May 17, 1999 as amended by First Amendment dated May 31,
1999, (the "Lease") with respect to certain space described
therein as Suite 432 and located on the fourth floor of the
Crescent at Primera, Building Four.
B. Tenant desires to install two satellite communication
dishes on the Building and Landlord is willing to permit such
installation in accordance with the terms and conditions
described in this Second Amendment.
AMENDMENT
NOW, THEREFORE, in consideration of the premises and the
mutual covenants contained herein, Landlord and Tenant do hereby
agree as follows:
1. Defined Terms; Recitals. Except as otherwise set
forth herein, all terms contained in this Second Amendment shall
have the same meaning ascribed to them in the Lease. The
Recitals set forth above are true and correct.
2. Telecommunications Equipment. Tenant shall have
the right to install and maintain on the roof of the Building or
in another location approved by Landlord two (2) satellite/
microwave communication antenna and related cabling (the
"Equipment") for the purpose of transmitting and receiving
telecommunication signals. The location, size, design, color and
style of the Equipment shall be subject to reasonable approval of
Landlord. Tenant shall comply with all ordinances, codes and
regulations regarding the Equipment and shall obtain all permits
required therefore. The cost of installation (including the cost
of Landlord's roofer or engineer to supervise roof penetrations),
operation, maintenance and removal of the Equipment shall be the
obligation of Tenant including the cost of repair for damage to
any portion of the Building caused by such installation,
operation, maintenance or removal. Upon the expiration of the
Lease Term or the earlier termination of this Lease, Tenant shall
promptly remove the Equipment and repair any portion of the
Building which was altered or damaged in any way in connection
with the installation, operation, maintenance or removal of the
Equipment. Tenant shall indemnify and hold Landlord harmless
from any and all damages, injury, loss, liability, costs or
claims resulting from the installation, operation, maintenance or
removal of the equipment, including any injury to person or
damage to the roof or any other part of the Building.
3. Binding Effect. The Lease, as modified by this
Second Amendment, and all covenants, agreements, exhibits, terms
and conditions contained therein, shall remain in full force and
effect and is hereby ratified and confirmed. The provisions of
this Second Amendment shall control any conflicting provisions of
the Lease.
IN WITNESS WHEREOF, Landlord and Tenant have executed this
Second Amendment as of the day and year first above written.
LANDLORD
CRESCENT RESOURCES, INC.
/s/ Brandee L. Barnhill By: /s/Robert J. Holmes, Jr.
Witness Name: Robert J. Holmes, Jr.
Title: Vice President
TENANT
BAIRNCO CORPORATION
/s/ Larry C. Maingot By: /s/ James W. Lambert
Witness Name: James W. Lambert
Title: Corporate Controller
/s/ Paula H. Godbee
Witness
18
LEASE AGREEMENT
THIS LEASE AGREEMENT (as hereinafter defined, this "Lease")
made this the 16th day of February, 2000 by and between SIGNTECH
USA, LTD., a Texas limited partnership (as hereinafter defined,
"Landlord"), and ARLON SIGNTECH, LTD., a Texas limited
partnership (as hereinafter defined, "Tenant").
W I T N E S S E T H:
1. Definitions. When used in this Lease and not otherwise
defined, the following capitalized terms shall have the
respective meanings as follows:
"ADA" shall have the meaning set forth in Paragraph 16
of this Lease.
"Affiliate" shall mean, with respect to any person, any
other person controlling, controlled by, or under common control
with such person.
"Base CPI" shall mean the CPI for the most recent month
before the beginning of the initial term of this Lease, it being
agreed that such CPI was ______.
"Base Rent" shall have the meaning set forth in
Paragraph 5 of this Lease.
"Building" shall mean the building located on the real
property described in Exhibit A and containing the interior
portions of the Premises, it being acknowledged by the parties
that Landlord or others claiming through Landlord may use the
remaining portions of the Building.
"CPI" shall mean the "Consumer Price Index-Seasonally
Adjusted U.S. City Average For All Items For All Urban Consumers,
(1982-84=100)," published monthly in the "Monthly Labor Review"
of the Bureau of Labor Statistics of the United States Department
of Labor. If such CPI is discontinued, the "Consumer Price Index-
Seasonally Adjusted U.S. City Average For All Items For Urban
Wage Earners and Clerical Workers (1982-84=100)," published
monthly in the "Monthly Labor Review" of the Bureau of Labor
Statistics of the United States Department of Labor (the "CPI-
W"), will be used instead of such CPI for making the computation
set forth above. If the CPI-W is discontinued, comparable
statistics on the purchasing power of the consumer dollar
published by the Bureau of Labor Statistics of the United States
Department of Labor will be used for making the computation set
forth above. If the Bureau of Labor Statistics will no longer
maintain statistics on the purchasing power of the consumer
dollar, comparable statistics published by a responsible
financial periodical or recognized authority agreeable to the
parties will be used for making the computation set forth above.
If the base year "(1982-84=100)" or other base year used in
computing the CPI is changed, the figures used in making the
computation above will be changed accordingly, so that all
increases in such price index are taken into account
notwithstanding any such change in the base year.
"Environmental, Health and Safety Laws" shall mean the
Comprehensive Environmental Response, Compensation and Liability
Act of 1980, the Resource Conservation and Recovery Act of 1976,
the Clean Air Act, the Federal Water Pollution Control Act, the
Hazardous Materials Transportation Act, the Safe Drinking Water
Act, the Toxic Substances Control Act, the Medical Waste Tracking
Act, the Occupational Safety and Health Act of 1970, as amended,
together with all other laws (including rules, regulations,
codes, injunctions, judgments, orders, decrees, and rulings
thereunder) of federal, state, local, and foreign governments
(and all agencies thereof) concerning pollution or protection of
the environment, public health and safety, or employee health and
safety (specifically including the Occupational Safety and Health
Administration), all as the same now exist or hereafter may be
amended.
"Hazardous Materials" shall mean any waste or other
substance that is listed, defined, designated, or classified as,
or otherwise determined to be, hazardous, radioactive, or toxic
or a pollutant or a contaminant under or pursuant to any of the
Environmental, Health, and Safety Laws, including but not limited
to any admixture or solution thereof, and specifically including
but not limited to waste oil, petroleum and all derivatives
thereof or synthetic substitutes therefor and friable asbestos.
"Landlord" shall mean Signtech USA, Ltd., a Texas
limited partnership that soon will change its name to "Salsa" or
some other appropriate name not including the word "Signtech,"
the owner of the Premises and the landlord under this Lease,
together with its successors and permitted assigns.
"Lease" shall mean this Lease Agreement and all written
amendments hereto that hereafter shall be executed and delivered
by Landlord and Tenant.
"New CPI" shall mean, with respect to determination of
Base Rent for either renewal term, the CPI for the most recent
month before the beginning of such renewal term.
"Premises" shall mean the real property to be leased by
Tenant from Landlord under this Lease, consisting of certain
portions of the real property and improvements located at 4669
Highway 90 West, San Antonio, Texas and more particularly
described in Exhibit A hereto, including, without limitation, (a)
approximately 90,470 square feet of manufacturing space located
within the Building, (b) 7,792 square feet of office space
located within the Building, and (c) the right to use the
exterior portions of the real property described in Exhibit A
hereto, including a Proportionate Share of the parking spaces.
The portions of the Building to be occupied by Tenant are
described in the drawing of the Building attached hereto as
Exhibit B.
"Proportionate Share" shall mean, with respect to
either Landlord or Tenant, a share based upon the size of that
portion of the Building allocated to such party, it being agreed
that:
(a) the Proportionate Share of Tenant shall be
that fraction of the whole of which (1) the numerator is the
number of square feet located in the Building and leased by
Tenant under this Lease, and (2) the denominator is the total
number of square feet in the Building, and
(b) the share of Landlord shall be the entire
balance of the whole.
"Tenant" shall mean Arlon-Signtech, Ltd., a Texas
limited partnership, the lessee of the Premises under this Lease,
and if this Lease shall be validly assigned, or if the Premises
shall be validly sublet, then "Tenant" shall include the Tenant's
assignees or sub-Tenants as to the particular portions of the
Premises covered by such assignment or sub-lease.
2. Leasing of Premises. Landlord, for and in
consideration of the rents, covenants, agreements, and
stipulations hereinafter mentioned, reserved and contained, to be
paid, kept and performed by Tenant, has leased and rented, and by
these presents does lease and rent, unto said Tenant, and said
Tenant hereby agrees to lease and take upon the terms and
conditions which hereinafter appear, the Premises. Landlord
covenants that Tenant, provided it performs all of its
obligations under this Lease, will peaceably and quietly enjoy
the Premises during the Lease term without any disturbance from
Landlord, anyone claiming by, through or under Landlord, or any
other party, except as otherwise specifically provided in this
Lease.
3. Term. Unless renewed by Tenant in its discretion in
the manner hereinafter provided, the term of this Lease shall be
for a period of three (3) years, with such term to begin on the
_____ day of February, 2000 and to end on the ______ day of
February, 2003.
4. Renewal Options. Provided it is not then in default
under the Lease, Tenant may renew the term of this Lease up to
two (2) consecutive times for five (5) additional years per
renewal by written notice of its election to do so given to
Landlord at least one hundred eighty (180) days prior to the
expiration date of the initial term or the expiration date of the
first renewal term, as applicable. With the exception of rent,
the renewal term will be on all of the terms and conditions of
this Lease. The rent for each renewal term shall be increased as
follows:
(a) For the first renewal term, the annual rental
shall be the amount determined by multiplying the Base Rent by a
fraction of which:
(1) the numerator is New CPI; and
(2) the denominator is the Base CPI.
(b) For the second renewal term, the annual rental
shall be the amount determined by multiplying the Base Rent by a
fraction of which:
(1) the numerator is the New CPI; and
(2) the denominator is the Base CPI.
(c) In no event shall the annual rental for any
renewal term be reduced by operation of the formula set forth in
this Paragraph.
5. Rental. For the initial term of this Lease, Tenant
will pay an annual rental of Four Hundred Twelve Thousand Seven
Hundred and 40/100 Dollars ($412,700.40) (the "Base Rent") per
year. The annual rental for each year of the initial term of
this Lease will be due and payable in twelve equal monthly
installments of Thirty Four Thousand Three Hundred Ninety-One and
70/100 Dollars ($34,391.70) in advance on the first day of each
and every calendar month during the initial term of this Lease.
The first payment of such annual rental is to be made on the
_____ day of February, 2000, pro-rated if the term begins on a
day other than the first day of the month. The parties
acknowledge that the Base Rent during the initial term is based
on an agreed rental amount of four dollars and twenty cents
($4.20) per square foot and a gross square footage of the
interior portions of the Premises of 98,262 square feet,
consisting of 90,470 square feet of manufacturing space and 7,792
square feet of office space. If the actual square footage of the
Premises is less than as set forth above, the annual rental (and
monthly payments) shall abate proportionately.
The annual rental for each year of any renewal term of this
Lease will be due and payable in twelve equal monthly
installments in advance on the first day of each and every
calendar month during the renewal term.
6. Utility Bills.
(a) For any utilities that are separately metered,
Tenant will pay all utility bills of all types, including, but
not limited to, water and sewer, natural gas, electricity and
sanitary pick up bills for the Premises, or used by Tenant in
connection therewith. If Tenant does not pay same, Landlord may
pay the same, and such payment will be added to the next due
monthly installment of rental of the Premises.
(b) For any utilities that are not separately metered,
Tenant will pay to Landlord its Proportionate Share of utility
costs no later than the date such utility costs are due and
payable to the utility provider. If Landlord does not then pay
same, Tenant may pay such utility costs, and Tenant's rent will
be abated by such amount so paid by Tenant.
7. Ad Valorem Taxes.
(a) Tenant shall pay as additional rent its
Proportionate Share of any and all ad valorem real estate taxes
assessed and levied against the real property described in
Exhibit A to this Lease and the improvements thereto. Tenant's
proportionate share shall be payable to Landlord no later than
the date such taxes may be paid without penalty or interest.
(b) Tenant shall pay its fair share of any special
assessment imposed upon the Property, it being agreed that
Tenant's fair share shall be based on both (1) Tenant's
Proportionate Share of the Building, and (2) the ratio of the
then remaining term of this Lease to the useful life of the
improvement to which the special assessment pertains. Tenant's
fair share shall be payable to Landlord no later than the date
such taxes may be paid without penalty or interest.
(c) Tenant will pay timely any and all ad valorem
taxes assessed against the personal property of Tenant located on
the Premises, during the entire term thereof.
(d) Tenant shall have the right, at Tenant's sole
expense, to appeal any and all taxes applicable to the Premises
and Landlord agrees that Landlord will cooperate with Tenant
reasonably and sign all documents reasonably required in
connection with any such appeal. Provided that an appeal or
protest of a tax assessment will operate to suspend the
collection of assessed taxes and the enforcement of the lien for
the assessed tax, Tenant may delay payment of any portion of such
taxes which are the subject of an appeal or protest until the
resolution of such appeal or protest, in which event Tenant shall
be solely responsible for the payment of any penalties, interest,
or additional taxes which result from such delay.
Notwithstanding the foregoing, Tenant shall not permit the filing
of a tax lien against the Premises.
8. Insurance.
(a) Landlord will carry "All Risk" Insurance Coverage
on the demised Premises in an amount not less than the full
insurable value. The term "full insurable value" will mean the
actual replacement cost, excluding foundation and excavation
costs, as reasonably determined by Landlord. Such policies will
name Tenant as an additional named insured. Tenant will
reimburse Landlord for its Proportionate Share of the "All Risk"
Insurance Coverage no later than the date the premium on the
coverage is due and payable to the insurance carrier. If
Landlord fails in its obligations to obtain or maintain said
insurance, Tenant may, at its option, either (1) make the
requisite payments for Landlord's insurance and have its rent
abated by said amount, or (2) obtain its own insurance, for which
Landlord will be liable to Tenant for its Proportionate Share of
the costs thereof.
(b) Tenant will carry at Tenant's own expense
insurance coverage on all equipment, fixtures and appliances.
Landlord acknowledges that consistent with the practices of
Tenant's ultimate parent entity, certain perils that are insured
by many businesses are self-insured by Tenant up to the parent
entity's prescribed excess insurance attachment point.
(c) Landlord and Tenant waive all rights to recover
against each other or against any other Tenant or occupant of the
Building, or against the officers, directors, shareholders,
partners, joint venturers, employees, agents, customers,
invitees, or business visitors of each other or of any other
Tenant or occupant of the Building, for any loss or damage
arising from any cause covered by any insurance required to be
carried by each of them pursuant to this Paragraph or any other
insurance actually carried by each of them. Landlord and Tenant
will cause their respective insurers to issue appropriate waiver
of subrogation rights endorsements to all policies of insurance
carried in connection with the Building or the Premises or the
contents of either of them to the extent such waivers are
available.
9. Maintenance and Repairs by Tenant. Landlord warrants
as of the commencement date of this Lease that the Premises are
structurally sound and that all electrical, lighting, utility,
fire safety, HVAC, and all operating systems are in good working
condition and are not in need of repair. Except as set forth in
Paragraph 10, Tenant will, at its own expense, keep and maintain
the interior of the Premises, including all systems pertaining to
electrical, lighting, and HVAC; provided, however, if the HVAC
system serves both Landlord and Tenant, Landlord shall be
responsible for its maintenance and repair, and Tenant shall
reimburse Landlord for its Proportionate Share of the costs of
said repair no later than the date the cost of the maintenance
and repairs is due and payable by Landlord. It is the intent of
the parties that Tenant will only be required to make repairs or
replacements which are not structural in nature.
10. Repairs by Landlord. Landlord agrees to maintain and
keep in good repair the roof, exterior walls, structural supports
(including foundations), exterior doors of any and all buildings
located on the Premises, and all water or sewer pipes located
underground or in the slab, sidewalks, parking lots, driveways
and other vehicular access and maneuvering areas. Landlord will
also be responsible for any repairs or replacements which are
structural in nature, which are extraordinary or capital in
nature, which will increase the value of the Premises subsequent
to the end of the then term, and any other repairs not expressly
delegated to Tenant in this Lease. Landlord will also promptly
clean up and dispose of any Hazardous Materials found on, in or
under any portion of the Premises, remediate the Premises to
comply with any and all environmental laws applicable thereto,
and pay for all clean up and disposal costs at no cost to Tenant,
unless directly caused by Tenant, its employees, agents or
contractors.
11. Destruction of or Damage to the Premises. If the
Premises are totally destroyed by storm, fire, lightning,
earthquake or other casualty, this Lease will terminate as of the
date of such destruction, and rental will be accounted for as
between Landlord and Tenant as of that date. If the Premises are
damaged but not wholly destroyed by any of such casualties,
rental will abate in such proportion as use of the Premises has
been destroyed, and Landlord will restore the Premises to
substantially the same condition as before the damage as speedily
as practicable, whereupon full rental will recommence; however,
if the damage will be so extensive the same cannot be reasonably
repaired and restored within _______ (__) months' time from the
date of the casualty, then either Landlord or Tenant may cancel
this Lease by giving written notice to the other party within
thirty (30) days from the date of such casualty. In such event,
rental will be apportioned and paid up to the date of such
casualty.
12. Modifications and Alterations to the Premises. No
modifications, alterations, or improvements to the Building or
openings cut through the roof are allowed without the prior
written consent of Landlord, which consent will not be
unreasonably withheld or delayed.
13. Removal of Fixtures. Tenant may (if not in default
hereunder) prior to the expiration of this Lease, or any renewal
or extension thereof, remove all personal property, fixtures and
equipment which Tenant has placed in the Premises, provided that
during such removal Tenant will make all reasonable repairs
necessary to return the Premises to its original condition,
reasonable wear and tear excepted.
14. Return of the Premises. Tenant agrees to return the
Premises to Landlord at the expiration or prior termination of
this Lease in same condition and repair, reasonable wear and
tear, damage by storm, fire, lightning, earthquake or other
casualty alone excepted.
15. Condemnation.
(a) If the whole of the Premises, or such portion
thereof as will make the Premises unusable for the purpose herein
leased, shall be condemned by any legally constituted authority
for any public use or purpose or if Landlord shall sell the
Premises under threat of condemnation, then in either such case
the term of this Lease will end at the time when possession
thereof is taken by public authorities, and rental will be
accounted for as between Landlord and Tenant as of that date.
Such termination, however, will be without prejudice to the
rights of Landlord to recover compensation and damage caused by
condemnation from the condemnor or the rights of Tenant to
recover from the condemnor compensation for its costs of
relocation (including for any business disadvantage or increased
rent resulting from such relocation) and for the unamortized
value of leasehold improvements made by Tenant. It is further
understood and agreed that neither Tenant nor Landlord will have
any rights in any award made to the other by any condemning
authority.
(b) If there is a partial taking of the Premises by
condemnation and if it is not so extensive as to render the
remaining portion (after restorations) unsuitable for the
business of Tenant, then this Lease will continue in effect and
Landlord, upon receipt of the award in condemnation, will
expeditiously commence and complete all necessary repairs and
restorations to the Premises so as to constitute the portion of
the Building not taken a complete architectural unit and restore
the Premises as nearly as practicable to its prior condition;
provided, however, that such work does not exceed the scope of
the original construction, and Landlord will not be under any
duty to expend amounts in excess of the award received by
Landlord. Rent, taxes and other charges payable by Tenant will
equitably abate while Landlord's repairs and restorations are in
process. If a partial taking consists only of a street widening
or utility easement which, at Tenant's reasonable judgment, is
determined not to materially affect Tenant's use of the Premises,
this Lease will continue in full force and effect without
abatement of rent, taxes or other charges.
16. Governmental Orders. Tenant agrees, at its own
expense and solely in relation to those portions of the Premises
which Tenant is required to maintain or repair under Paragraph 9,
to promptly comply with all requirements of any legally
constituted public authority made necessary by reason of Tenant's
specific use of said Premises. Notwithstanding the foregoing,
the Tenant will not be liable for: (a) repairs, alterations,
replacements or retrofitting required by the accessibility or
path of travel requirements set forth in Title III of the
Americans With Disabilities Act of 1990, 42 USC 12101, et seq.
and regulations and guidelines promulgated thereunder, as amended
from time to time (collectively referred to as "ADA"); (b)
repairs, alterations or replacements required to comply with
federal, state or local indoor air quality laws, rules or
regulations (separate and apart from any such laws, rules or
regulations that are specific to Tenant's industry); or (c)
repairs, alterations or replacements described in Paragraph 10.
Landlord agrees to promptly comply with any other governmental or
regulatory requirements if not made necessary by reason of
Tenant's occupancy of the Premises or relating to those portions
of the Premises which Landlord is required to maintain or repair
under Paragraph 10.
17. Assignment. Tenant may assign this Lease or sublet all
or part of the Premises to (a) any Affiliate of Tenant, and (b)
any entity that is not an Affiliate of Tenant that succeeds to
the entire business of Tenant through purchase, merger,
consolidation or reorganization. Any other subletting of all or
any portion of the Premises or assignment in whole or in part of
this Lease shall be prohibited without the prior written consent
of Landlord, which shall not be withheld unreasonably.
Subtenants or assignees will become liable directly to Landlord
for all obligations of Tenant hereunder, without relieving
Tenant's liability.
18. Mortgagee's Rights. Tenant's rights will be subject to
any bona fide mortgage or deed to secure debt which is now, or
may hereafter be, placed upon the Premises by Landlord, and
Tenant agrees, at Landlord's cost, to execute and deliver such
documentation as may be reasonably required by any such mortgagee
to effect any subordination. Provided, however, as a condition to
such subordination, Landlord must secure from each mortgagee a
nondisturbance agreement acceptable to Tenant providing that in
the event of a foreclosure the mortgagee will recognize the
validity of this Lease and, provided that Tenant is not in
default, will not disturb Tenant's possession or its rights under
this Lease. Landlord and Tenant specifically approve the form of
Subordination, Nondisturbance and Attornment Agreement attached
hereto as Exhibit C.
19. Use of the Premises. The Tenant may use the Premises
for the manufacturing of plastics or other products,
warehousing, storage, and related office purposes, for engaging
in the flexible signage materials, screen-printing, heat transfer
and related products businesses, or for any other lawful purpose.
The Premises will not be used for any illegal purposes, nor in
any manner to create any nuisance or trespass; nor in any manner
to vitiate the insurance, based on the above purposes for which
the Premises are leased.
20. Signs. Tenant will have the right to erect at Tenant's
sole expense signage at the entrance to and upon the Premises,
including but not limited to a customary trade sign identifying
the business of Tenant. The erection of signage by Tenant will
be subject to and in conformity with all applicable laws, zoning
ordinances and building restrictions or covenants of record. On
or before termination of this Lease, Tenant will remove the
signage thus erected, and will repair any damage or
disfigurement, caused by such removal. All signage proposed by
Tenant shall be subject to Landlord's review and approval, which
approval shall not be unreasonably withheld, conditioned or
delayed.
21. Tenant's Right of First Refusal to Purchase. Landlord
will have the right to sell the real property described in
Exhibit A and all improvements thereto, but such right shall be
subject to the following conditions:
(a) Landlord shall give notice of each proposed sale,
including the purchase price and all other terms and conditions,
to Tenant;
(b) Tenant will have the right to purchase such real
property at the purchase price and on the other terms and
conditions offered by Landlord or offered to Landlord by the
third party (which offer Landlord wishes to accept), by giving
notice to Landlord within twenty (20) business days after
Landlord has notified Tenant of the terms of Landlord's proposed
sale; and
(c) if Tenant does not give notice of the exercise of
its option within such time, Landlord will have the right to sell
such real property upon the terms stated in the offer made or
received by Landlord, but not upon terms more favorable to the
purchaser, unless Landlord again gives notice pursuant to
Subparagraph (a) above, and Tenant does not exercise its option
based upon the new terms. Notwithstanding the foregoing,
Tenant's right of first refusal to purchase such real property
shall not apply to Landlord's sale of such real property as part
of the sale by Landlord of a portfolio of properties that
includes such real property and at least two other properties of
equal or greater value.
22. Entry for Carding, etc. Landlord may card the Premises
"For Rent" ninety (90) days before the termination of this Lease.
Landlord may enter the Premises at reasonable hours during the
term of this Lease to exhibit the same to prospective purchasers
and to make repairs required of Landlord under the terms hereof.
Landlord may card the real property described on Exhibit "A" "For
sale" or any portion of the real property other than the Premises
"For Rent" at any time.
23. Indemnity.
(a) Landlord agrees to indemnify and save harmless
Tenant and its parents, subsidiaries, Affiliates, directors,
officers, employees, agents, servants, attorneys and
representatives from any and all claims, causes of action,
damages, fines, judgments, penalties, costs (including
environmental clean-up costs and response costs), liabilities,
expenses or losses (including without limitation, reasonable
attorneys' fees and expenses of litigation) arising during or
after the Lease term: (1) as a result of any violation by
Landlord or prior owners or occupants of the Premises of any
applicable federal, state or local environmental laws or
regulations, as now or hereinafter in effect, regulating,
relating to or imposing liability or imposing standards of
conduct concerning any Hazardous Materials; or (2) as a result of
the presence, disturbance, discharge, release, removal or cleanup
of Hazardous Materials or as a result of environmental
contamination or other similar conditions which existed prior to
commencement of the Lease term, including the matters referenced
in the Asset Purchase Agreement between Landlord, as Seller, and
Tenant, as Buyer, under which Landlord has undertaken
responsibility for certain corrective environmental measures; or
(3) as a result of any violation of the accessibility or path of
travel requirements imposed by ADA; or (4) as a result of any of
Landlord's representations and warranties being untrue. These
indemnities will survive the expiration, cancellation or
termination of the Lease. Notwithstanding the foregoing,
Landlord's indemnities shall not apply or extend to claims
arising from or caused by Tenant.
(b) Tenant agrees to indemnify and save harmless
Landlord and its parents, subsidiaries, Affiliates, directors,
officers, employees, agents, servants, attorneys and
representatives from any and all claims, causes of action,
damages, fines, judgments, penalties, costs (including
environmental clean-up costs and response costs), liabilities,
expenses or losses (including without limitation, reasonable
attorneys' fees and expenses of litigation) arising during or
after the Lease term: (1) as a result of any violation by Tenant
of any applicable federal, state or local environmental laws or
regulations, as now or hereinafter in effect, regulating,
relating to or imposing liability or imposing standards of
conduct concerning any Hazardous Materials; or (2) as a result of
the presence, disturbance, discharge, release, removal or cleanup
of Hazardous Materials or as a result of environmental
contamination or other similar conditions which existed after
commencement of the Lease term and which was caused by or brought
onto the Premises by Tenant or Tenant's agents, contractors,
employees, licensees and invitees; or (3) as a result of any
violation by Tenant of the accessibility or path of travel
requirements imposed by ADA; or (4) as a result of any of
Tenant's representations and warranties being untrue. These
indemnities will survive the expiration, cancellation or
termination of the Lease; provided, however, that Tenant will not
be liable for the acts of Landlord or of any other tenants of
said property.
24. Default of Tenant.
(a) It shall be a default by Tenant if: (1) the rent
herein required is not paid at the time and place when and where
due and Tenant fails to pay said rent within ten (10) days after
written demand from Landlord; or (2) Tenant fails to comply with
any material term, provision, condition, or covenant of this
Lease, other than the payment of rent, and will not cure such
failure within thirty (30) days after notice to Tenant of such
failure to comply or such additional time period as may
reasonably be necessary to effect a cure of the default provided
that Tenant commences and diligently pursues a cure of the
default; or (3) Tenant causes any lien to be placed against the
Premises and does not cure the same within thirty (30) days after
notice from Landlord to Tenant demanding cure.
(b) Upon any default by Tenant referenced in
Subparagraph (a) above, Landlord may, in addition to, and not in
limitation of any other remedy permitted by law or by this Lease:
(1) terminate this Lease, in which case Tenant
shall (A) immediately surrender the Premises to Landlord, and (B)
indemnify Landlord for all loss and damage that Landlord may
suffer by reason of such termination, whether through inability
to relet the Premises, or through decrease in rent, or otherwise;
or
(2) acting as Tenant's agent, without terminating
this Lease, may terminate Tenant's right of possession, and, at
Landlord's option, enter upon and rent the Premises at the best
price obtainable by reasonable effort, without advertisement and
by private negotiations and for any term Landlord deems proper,
in which case Tenant will be liable to Landlord for the
deficiency, if any, between Tenant's rent hereunder and the price
obtained by Landlord on reletting.
Pursuit of any of the foregoing remedies will not preclude
pursuit of any of the other remedies herein provided or any other
remedies provided by law. In any case, Landlord will use
reasonable efforts to mitigate Tenant's damages. Any notice in
this provision may be given by Landlord or its attorney. No
termination of this Lease prior to the normal ending thereof, by
lapse of time or otherwise, will affect Landlord's right to
collect rent for the period prior to the termination thereof.
25. Default of Landlord. It shall be a default by Landlord
if Landlord fails to comply with any material term, provision,
condition or covenant of this Lease and will not cure such
failure within thirty (30) days after notice to Landlord of such
failure to comply or such additional time period as may
reasonably be necessary to effect a cure of the default provided
that Landlord commence and diligently pursues a cure of the
default. Upon any default by Landlord, Tenant may, at its
option, elect to: (a) terminate this Lease upon thirty (30) days
written notice to Landlord; (b) bring an action to require
specific performance of Landlord's obligations; (c) provide
Landlord with an additional period of time within which to effect
that cure; (d) commence such cure itself, and Tenant may either,
at its option, offset any expenses it incurs in effecting such
cure against the rent and other charges due and payable by Tenant
hereunder, or require that Landlord immediately reimburse Tenant
for its expenses; provided, however, in the event of an
emergency, Tenant may immediately effect a cure of Landlord's
failure should Landlord fail to act immediately to do so, without
the requirement of any notice by Tenant to Landlord; and/or (e)
pursue any other remedies provided herein or provided by law.
26. Warranties of Landlord. Landlord warrants that:
(a) Landlord owns the Premises in fee simple and has
the right to enter into this Lease. The Premises are free from
liens and encumbrances, except for utility easements, unviolated
restrictive covenants which do not materially adversely affect
Tenant's intended use of the Premises, and other title matters to
which the conveyance of the Premises by Landlord to Tenant was
subject, including a mortgage for which the mortgagee, Landlord
and Tenant have executed a subordination, nondisturbance and
attornment agreement. The Premises have legal, direct,
pedestrian and vehicular access to and from and abuts one or more
publicly dedicated roads;
(b) Except for the corrective environmental work
called for by the Asset Purchase Agreement between Landlord, as
Seller, and Tenant, as Buyer, to Landlord's knowledge the
Premises are in compliance with all Environmental, Health and
Safety Laws.
(c) Except for the citations that Landlord has
separately disclosed to Tenant, Landlord has not received a
citation from any regulatory agency for noncompliance with
Environmental, Health and Safety Laws. Landlord alone shall be
responsible for fines, penalties, and all other damages arising
out of any such citation with respect to occurrences or
conditions at the Premises prior to the date hereof and for any
such items in the portions of the Building other than the
Premises or resulting from Landlord's use of such land at any
time subsequent to the date hereof.
27. Holding Over. If Tenant remains in possession of the
Premises after expiration of the term hereof with Landlord's
acquiescence, Tenant shall be a month to month tenant on the
terms that were in effect immediately prior to expiration of the
term of this Lease. If Tenant remains in possession of the
Premises after expiration of the term hereof without Landlord's
acquiescence and after Landlord's written demand for return of
the Premises, Tenant will be a tenant-at-sufferance at 150% of
the rental rate in effect at end of the Lease. In neither case
shall there be deemed to be a renewal of this Lease (other than
to a month-to-month basis, as stated above) by operation of law.
28. Notices. Any notice given pursuant to this Lease will
be in writing and sent by certified mail to:
If to Landlord: Signtech USA, LTD.
4669 Highway 90 West
San Antonio, TX 78237
Attn: Mr. James Gandy
Copy to: Deven N. Dixon, P.C.
Law Office, Trinity Plaza
745 East Mulberry Street, Suite 870
San Antonio, TX 78212
If to Tenant: Arlon Signtech, Ltd.
c/o Arlon, Inc.
Adhesives and Films Division
2811 South Harbor Boulevard
Santa Ana, CA 92704
Attn: Mr. Elmer G. Pruim, III
Division President
Copies to: Mr. James W. Lambert
Vice President
Arlon, Inc.
300 Primera Blvd., Suite 432
Lake Mary, FL 32746
Holland & Knight LLP
200 South Orange Avenue, Suite 2600
Orlando, Florida 32801
Attn: Leighton D. Yates, Jr.
29. Construction of Lease Terms. Irrespective of which
party was responsible for the preparation and drafting of this
Lease, the terms of this Lease will not be construed more
strictly against such party than against any other party.
30. Waiver of Rights. No failure of Landlord to exercise
any power given Landlord hereunder, or to insist upon strict
compliance by Tenant with its obligations hereunder, and no
custom or practice of the parties at variance with the terms
hereof will constitute a waiver of Landlord's right to demand
exact compliance with the terms hereof.
31. Rights Cumulative. All rights, powers and privileges
conferred hereunder upon the parties hereto will be cumulative
but not restrictive to those given by law.
32. Time of Essence. Time is of the essence of this
Lease.
33. Entire Agreement. This Lease contains the entire
agreement of the parties hereto, and no representations,
inducements, promises or agreements, oral or otherwise, between
the parties, not embodied herein, will be of any force or effect.
34. Severability and Governing Law. If any term, covenant
or condition of this Lease or the application thereof to any
person, entity or circumstance will, to any extent, be invalid or
unenforceable, the remainder of this Lease, or the application of
such term, covenant, or condition to persons, entities or
circumstances other than those which or to which sued may be held
invalid or unenforceable, will not be affected thereby, and each
term, covenant or condition of this Lease will be valid and
enforceable to the fullest extent permitted by law. This Lease
shall be governed by and construed in accordance with the law of
the state in which the Premises are located.
35. Brokerage. Each of Landlord and Tenant warrants to
the other that no commissions are payable or due to any broker
or finder in connection with this Lease and each of Landlord and
Tenant agrees to indemnify, defend and hold the other harmless
from and against any commissions or fees or claims for
commissions or fees arising under the indemnifying party, which
indemnification will expressly survive the termination of this
Lease.
36. No Recording; Memorandum of Lease. This Lease shall
not be recorded, but a written Memorandum of Lease in the form of
Exhibit D hereto shall be placed of record in the public records
of Bexar County, Texas. Such Memorandum of Lease makes specific
reference to the term of this Lease, including renewals, and to
the right of first refusal granted to Tenant under Paragraph 21
of this Lease.
IN WITNESS WHEREOF, the parties herein have executed this
Lease on the day and year first above written.
"LANDLORD"
SIGNTECH USA, LTD., a Texas
limited partnership
By: GANDY GROUP, INC.,
General Partner
Witnesses:
_____________________________
By:____________________________
Printed:_______________________
Name:_________________________
Its:____________________________
______________________________
Printed:________________________
"TENANT"
ARLON SIGNTECH, LTD., a
Texas limited partnership
By: ARLON ADHESIVES &
FILMS, INC.,
General Partner
Witnesses:
_____________________________
By:___________________________
Printed:_______________________
Name:________________________
Its:___________________________
______________________________
Printed:________________________
ORL1 #534655 v7
EXHIBIT LIST FOR LEASE AGREEMENT
Exhibit A Legal Description of Real Property
Including the Premises
Exhibit B Drawing of Building Identifying
Interior Portions of Premises
Leased by Tenant
Exhibit C Approved Form of Subordination,
Nondisturbance and Attornment Agreement
Exhibit D Form of Memorandum of Lease
EXHIBIT A
(Legal Description of the Real Property Including the Premises)
EXHIBIT 11
BAIRNCO CORPORATION AND SUBSIDIARIES
CALCULATION OF BASIC AND DILUTED EARNINGS PER SHARE
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
1999 1998 1997
BASIC EARNINGS PER COMMON SHARE:
Net Income $ 8,641,000 $ 1,594,000 $ 8,771,000
Average common shares outstanding 7,965,000 8,655,000 9,151,000
Basic Earnings Per Common Share $ 1.08 $ 0.18 $ 0.96
DILUTED EARNINGS PER COMMON SHARE:
Net Income $ 8,641,000 $ 1,594,000 $ 8,771,000
Average common shares outstanding 7,965,000 8,655,000 9,151,000
Common shares issuable in respect
to options issued to employees
with a dilutive effect 73,000 163,000 199,000
Total common shares assuming full
dilution 8,038,000 8,818,000 9,350,000
Diluted Earnings Per Common Share $ 1.08 $ 0.18 $ 0.94
Basic earnings per common share were computed by dividing
net income by the weighted average number of shares of
common stock outstanding during each year. Diluted
earnings per common share include the effect of all
dilutive stock options.
BAIRNCO CORPORATION
1999 ANNUAL REPORT
Our mission
Bairnco is an organization of people committed to providing value-added
industrial and commercial products and services to niche markets which meet
or exceed our customers' requirements leading to the creation of
stockholder and employee value.
Our strategy
Bairnco strives to develop true partnership relationships with its
customers in selected markets through close cooperation in developing value-
added solutions to their needs. Bairnco seeks to identify and participate
in those markets that will provide growth opportunities due to either
technical developments or the changing needs of customers.
Bairnco implements this mission and strategy through two business segments:
Engineered materials and components are designed, manufactured and sold
under the Arlon brand identity.
Replacement products and services are manufactured and distributed under
the Kasco brand identity.
Our objectives
Bairnco believes that concentrating its resources in selected market niches
can provide the basis to achieve both superior profitability and growth.
Management's long term objectives are to achieve:
15% compound rate of earnings growth
20% return on stockholders' investment
15% return on total capital employed.
Our values
Values are the core of Bairnco's corporate culture. They are the basis for
the decisions made regarding the development and deployment of people, the
improvement and investment in processes, and the manufacture and
distribution of products.
Bairnco's values are:
Personal and corporate integrity
The inevitability and opportunity of change
Continuous improvement and development
Total customer satisfaction
Decentralized organization and empowered employees
Superior rewards for superior performance
Have fun - enjoy your work and your life.
CONTENTS
Financial Highlights 1
Letter to Our Stockholders 2
Engineered Materials & Components (Arlon) 4
Replacement Products & Services (Kasco) 7
Directors and Management 8
Financial History 9
Management's Discussion and Analysis 10
Quarterly Results of Operations 13
Report of Independent Certified Public Accountants 14
Consolidated Financial Statements 15
Notes to Consolidated Financial Statements 19
FINANCIAL HIGHLIGHTS
Percent Change
(In thousands except per share data) 1999 1998 1997 99/98 98/97
Net Sales $168,881 $156,456 $158,708 8% (1%)
Operating Profit $ 15,002 $ 4,529 $ 15,592 231% (71%)
Net Income $ 8,641 $ 1,594 $ 8,771 442% (82%)
Diluted Earnings per Share $ 1.08 $ 0.18 $ 0.94 500% (81%)
Cash Dividends per Share $ 0.20 $ 0.20 $ 0.20 0% 0%
Stockholders' Investment per
Average Diluted Common Share
Outstanding $ 6.24 $ 5.27 $ 5.61 18% (6%)
Total Assets $119,145 $118,555 $109,286 0% 8%
Stockholders' Investment $ 50,167 $ 46,438 $ 52,469 8% (11%)
Average Diluted Common Shares
Outstanding 8,038 8,818 9,350 (9%) (6%)
(Data for Bar Charts for Five Years 1995 to 1999; in 000's)
Year Net Sales Operating Profit Net Income Diluted Earnings
per Share
1995 $150,507 $14,633 $7,781 $0.75
1996 $150,234 $14,956 $8,335 $0.85
1997 $158,708 $15,592 $8,771 $0.94
1998 $156,456 $ 4,529 $1,594 $0.18
1998(a) $156,456 $12,029 $6,320 $0.72
1999 $168,881 $15,002 $8,641 $1.08
(a) Prior to impact on operating profit, net income and diluted earnings
per share of $7.5 million (pre-tax) provision for litigation costs in the
fourth quarter of 1998.
LETTER TO OUR STOCKHOLDERS
1999 was a good year for Bairnco. Sales and earnings increased.
Productivity improved. Our management team was further strengthened and
deepened. The MII acquisition made at the end of 1998 was smoothly
integrated into Arlon. Subsequent to year-end, we acquired Signtech and
increased Bairnco's credit facility to $75 million. We continue to
repurchase our stock. Bairnco's financial condition remains strong. 2000 is
expected to be a year of continued growth in sales and earnings.
FINANCIAL RESULTS
1999 consolidated sales increased 7.9% to $168,881,000. Sales from new
products developed in the past five years accounted for 12.8% of total
sales in 1999 compared to 8.0% of sales in 1998. Bairnco's goal is to have
25% of annual sales from new products developed and acquired within the
last five years.
In 1999, gross profit increased 9.0% to $55,147,000 with gross profit
margins improving to 32.7% from 32.3% last year. A number of our
operational teams made significant improvements. Productivity improved 8.2%
as measured by sales per employee which increased to $205,950 from
$190,340. This accomplishment was due to the efforts of all our employees.
Selling and administrative expenses increased 4.1% to $40,145,000 in 1999
compared to $38,554,000 in 1998, excluding the $7,500,000 provision for
litigation costs taken in 1998. As a percent of sales, these expenses were
reduced to 23.8% from 24.6% in 1998. Research and development expenses
increased 19.3% as Bairnco invested in the development of new products and
improved quality.
Earnings before interest and taxes were $15,002,000, up 24.7% from
$12,029,000 excluding the provisions for litigation costs in 1998. The
growth is primarily attributable to increased gross profit and controlled
expenses.
Income before taxes increased to $12,898,000 from $2,531,000 in 1998.
Net income increased to $8,641,000 or $1.08 per share from $1,594,000 or
$.18 per share in 1998. The provision for litigation costs reduced net
income in 1998 by $4,726,000, or approximately $.54 diluted earnings per
common share. The diluted average number of shares outstanding in 1999 was
8,038,000 an 8.8% decrease from 8,818,000 diluted average shares
outstanding in 1998.
ACQUISITION
On February 16, 2000, Bairnco purchased certain assets of the materials
business ("Signtech") of Signtech USA, Ltd. for approximately $14.5
million. Signtech's sales for the year ended December 31, 1999 were
approximately $16.0 million.
Signtech manufactures and distributes flexible reinforced vinyl materials
used as the substrate in flexible faced sign systems. Signtech's products
are sold primarily on a specification basis for corporate specified
programs using various striping, heat transfer and screen print
applications. Signtech has a strong presence in international markets.
The acquisition will complement Arlon's graphic films and industrial
products with product line extensions, additional brand recognition,
product development synergies, and penetration into new customer segments
and markets. The acquisition will also expand Arlon's coating and
converting capacity.
FINANCIAL MANAGEMENT
Return on capital employed increased to 11.9% from 8.9% last year and
return on stockholders' investment in 1999 increased to 18% compared to
12.4% last year. The 1998 returns exclude the impact of the provision for
litigation costs.
In 1999, Bairnco's Board of Directors authorized the repurchase of up to
$5,000,000 of its common stock. This was in addition to still unused prior
authorizations of $2.6 million as of January 1, 1999. During the year the
company repurchased 497,900 shares for $2.9 million. The Board has
authorized management to continue its stock repurchase program in 2000
subject to market conditions and capital requirements of the business. At
year-end $4.7 million was available for additional stock repurchases. The
Board may consider additional authorizations if appropriate during the
year.
Subsequent to year-end, Bairnco amended its secured reducing revolving
credit agreement. The amendment effectively extended the expiration date
from December 31, 2003 to February 22, 2005, and increased the credit
facility from $50 million at December 31, 1999 to $75 million. After the
Signtech acquisition approximately $27 million was unused and available
under the credit agreement.
Working capital management improved during the year. Working capital as a
percent of sales decreased from 21.3% to 19.7%.
Net cash flows provided by operating activities were $15,668,000. These
cash flows were more than sufficient to cover operating requirements, fund
Bairnco's capital expenditure program, pay dividends, purchase treasury
stock, while still permitting us to reduce debt by $6,391,000. Consequently
1999 total debt decreased to $31,283,000 from $37,844,000 at the end of
1998. Debt as a percent of equity decreased to 62.4% from 81.5% in 1998.
Bairnco made $5,670,000 of capital expenditures in 1999 as compared to its
plan of approximately $8.2 million. Capital expenditures were focused on
cost reduction projects, equipment replacements, and new information
systems software and hardware that were installed during the year.
Total capital expenditures in 2000 are expected to be approximately $8.9
million. Depreciation and amortization is estimated to be approximately
$8.0 million. The planned capital expenditures include quality
improvements, cost reduction projects replacements, new product
developments, new processing equipment, information systems hardware and
software, and limited capacity additions.
DIVIDEND
The quarterly $.05 per share cash dividend was maintained during the year.
MANAGEMENT
There were significant positive additions and changes in the Bairnco
management team.
Larry D. Smith became Vice President of Administration and Secretary of
Bairnco on April 26, 1999. He is responsible for our human resources
functions, coordination of the Six-Sigma program, and administration. Larry
came to Bairnco from Emerson Electric where he most recently was Vice
President, Human Resources, Therm-o-Disc, Inc. He previously was Corporate
Director, Employee Relations and Communications, with Emerson Electric
Company at the corporate headquarters in St. Louis, MO.
J. Robert Wilkinson, Vice President Finance and Treasurer, made the
decision to retire from Bairnco effective March 31, 2000. Bob assumed the
title Chief Financial Officer Emeritus effective December 31, 1999. Bob
has been with Bairnco fourteen years. He has made many contributions to the
Company. We all will miss him and wish him many happy years in retirement.
Bob developed a strong financial team at Bairnco which has resulted in a
seamless transition. Consequently, effective December 31, 1999, Jim
Lambert, Controller, was promoted to Vice President Finance and Treasurer
of Bairnco Corporation, and Larry Maingot, Assistant Controller, was
promoted to Controller of Bairnco Corporation.
Brian E. Turner became President of Kasco on November 10, 1999. Brian came
to Kasco from Allied Signal, Inc. where he was a Director of Marketing. His
experience includes an overseas assignment as the Managing Director of an
operation in the Netherlands.
During 1999 the management development program, which is one of the keys to
our future success, continued to make progress in all operations. Further
additions and changes were made to continue to strengthen operations
management which has lead to continuous improvement in efficiencies. We
have strengthened our sales and marketing teams to further penetrate
certain market segments. The development of management talent is an
essential ingredient to both internal and acquisition growth. The ongoing
improvement and development of all our employees remains a critical and
never-ending element for Bairnco's success.
During 1999, the Six-Sigma program was expanded to most of our operations
as part of our continuous improvement program. The initial training is
complete and we began to see the benefits from specific programs. For
2000, additional projects have been selected and training will be expanded.
We expect this program to accelerate the yields from our continuous
improvement program.
OUTLOOK
In 2000 we expect "GDP" type growth in most of our industrial markets
served assuming the Federal Reserve negotiates a gentle slowing of the
economy. Additional growth is expected from continued penetration in
certain market segments, new products and the Signtech acquisition.
Earnings are expected to grow both from improved sales and improved
productivity.
The continuing dedication and excellent performance of our teammates
remains the key to our past and future success. We are all dedicated to
making 2000 a year of continuing improvement.
Respectfully yours,
Luke E. Fichthorn III
Chairman and CEO
Arlon Engineered Materials and Components
Bairnco designs, manufactures, and sells engineered materials and
components for the electronic, industrial and commercial markets under the
Arlon brand identity. These products are based on common technologies in
coating, laminating, polymers, and dispersion chemistry.
Arlon Materials for Electronics has an international reputation as the
premier supplier of high technology materials for the printed circuit board
industry. These products are marketed principally to printed circuit board
manufacturers and OEM's by strong technical sales representatives in the
U.S. and through distributors and manufacturers representatives in Europe,
the Far East, and South America, supported by direct technical sales
specialists in Europe and Asia.
Our Electronic Substrates product line includes high temperature, high
performance thermoset laminates and prepreg bonding plies used in circuit
boards for sophisticated commercial applications and military electronics.
These applications require materials that are highly reliable, withstand
high continuous or widely varying operating temperatures, provide ease of
field repairability, and improve board fabrication yields. Other specialty
laminates, many of which are based on specialized resin-coated substrates
provide improved product reliability and ease of manufacture for wireless
and high density interconnect (HDI) applications at a lower cost than
alternative technologies. Electronic Substrates also offers a very broad
line of specialized prepregs for heat sink bonding, use in flex-rigid
boards, for metal core board hole-filling, and other specialized printed
wire board applications. These materials can be tailored to the specific
applications for which they are used.
The Microwave Materials product line offers application-matched, reinforced
PTFE and other resin based laminates providing high yields and high
performance for low signal-loss and frequency-dependent microwave
applications. These PTFE laminates are also offered with bonding plies for
multi-layer applications. The applications for this product line include
microwave antennas, digital cordless telephones, cellular phone handsets,
cellular phone base stations, direct broadcast satellite TV systems,
personal communications networks, global positioning satellites, local area
networks, collision avoidance systems, and radar detection systems. With
the continuing proliferation of wireless applications there will be
continued aggressive growth opportunities for the Microwave product line.
Progress continued both in new PTFE product line extensions and further
commercialization of recently developed products serving the wireless
market:
Arlon's 25N series, a laminate system based on aromatic polyolefin resin
that offers many of the performance advantages of PTFE materials with
the cost and processing advantages of traditional thermoset materials,
is targeted for commercial electronics. This product is currently being
used in cellular phones, Direct Broadcast Satellite TV, and cellular
antennas.
Arlon's Thermount nonwoven, aramid reinforced materials offer many
advantages for specialty applications at a more attractive cost-
performance ratio than woven aramids or buried metal cores.
Applications include cellular phones and other telecom uses, as well as
military and commercial avionics and missile systems.
Arlon's AD Series substrate materials, a specialized PTFE based laminate
family that offers all the performance characteristics of PTFE with
lower cost, is targeted for higher volume commercial applications.
Arlon's 33N and 35N polyimide laminate systems provide high temperature
capability for applications involving extreme environments. These products
are used in military hardware boards and semiconductor burn-in circuit
boards.
PHOTO - Advances in printed circuit boards are requiring higher quality
materials. In order to meet these demands, Arlon must continuously improve
its clean room technology. Lay-up operators at the Rancho Cucamonga, CA
facility assemble Arlon's polyimide laminates for pressing using a newly
installed tacking machine which removes minute particles of contamination
from the press plates used in the manufacturing process.
Arlon manufactures and markets, under the Calon brand name, cast and
calendered vinyl films in a wide variety of colors, face stocks and
adhesive systems. These vinyl films are used in commercial and electrical
signage, point of purchase displays, highway signage, fleet markings, and
other commercial advertising applications.
PHOTO - Arlon's 22T Series films, manufactured at the Northbrook, Illinois
facility, are designed for easy removal after up to 2 years of rugged
outdoor use. The films are ideal for markings on leased fleets and
containers, advertisements on motor and railway coaches, billboards,
signage, and point-of-purchase displays.
We have continued to invest in new product development and to improve the
quality of our current product line. During 1999 we developed an improved
adhesive system for our cast translucent vinyl which improves efficiencies
to our customers when manufacturing sign faces. Arlon also undertook a
significant program to expand the range of available colors and specialty
face stocks to broaden our product offering to meet the needs of several
new customers.
PHOTO - With its equipment and product upgrades, and its material
compatability programs, Arlon has begun penetrating the corporate
specification markets as evidenced by the KFC program observed above.
Arlon's translucent vinyl films manufactured at the Santa Ana, CA facility,
were written into the KFC program specifications along with Cooley's
flexface material.
In February of 2000 Arlon announced it had purchased certain assets of the
materials business ("Signtech") of Signtech USA, Ltd., a manufacturer of
laminated vinyl fabrics designated for use in the commercial graphics
market. Signtech's product lines complement Arlon's current vinyl product
lines, and will provide product line extensions, additional brand
recognition, product development synergies, and penetration into new
customer segments and markets.
Arlon also manufactures and markets custom-engineered laminates and coated
products. Typical applications include insulating foam tapes for thermopane
windows, specialty flexible circuit materials, electrical insulation
materials for motors and transformers, thermal insulation panels for
appliances and cars, identification cards and labels, durable printing
stock, and other custom engineered laminates for specific industrial
applications.
The keys to Arlon's success in custom-engineered laminates and coated
products are our knowledge base of materials and adhesives technology and
our understanding of customer applications. Our sales engineers and
product managers are dedicated to understanding customer requirements and
developing product specifications that meet those customer needs.
PHOTO - The newly installed automatic windup on the silicone calender at
the Bear, DE plant has increased throughput while significantly improving
the quality of the product. The automatic windup senses changes in tension
and automatically makes continuous adjustments throughout the run.
PHOTO - New semi-automatic barrel-feeding equipment allows the operator to
concentrate on in-line inspection to ensure quality product from the
silicone tape extruding line at the Bear, DE plant.
Arlon manufactures a line of silicone rubber materials used in a broad
range of consumer, industrial and commercial products. Typical
applications and products include:
Silicone sheet rubber for producing composite parts
Silicone rubber insulating tapes for electric traction motor coil windings
Insulation for industrial and commercial flexible heaters
Silicone products for high temperature hose and duct markets
Insulating tape for medium and high voltage electrical splices and
terminations
Compliant, thermally or electrically conductive silicone sheet adhesive
known as ThermabondT
In 2000 we will focus application development efforts on a new high
temperature UL approved compound, foil laminated heater products, high
performance hose and duct materials and retail opportunities for fusible
tape applications.
Kasco Replacement Products and Services
Kasco is a leading manufacturer and distributor of products and services to
the meat, deli and seafood departments of supermarkets; to meat, poultry
and fish processing plants; and to manufacturers and distributors of
electrical saws and cutting equipment throughout the United States, Canada
and Europe. These products and services include:
Band saw blades for cutting meat and fish
Saw blades for cutting wood and metal
Chopper plates and knives for grinding meat
Electrical saws and cutting machines
Seasoning products
Preventive maintenance for equipment in meat and deli operations
Other related butcher supply products.
Kasco has manufacturing operations in St. Louis, Missouri; Gwent, Wales,
United Kingdom; and Pansdorf, Germany. In addition, there are distribution
facilities in Montreal, Canada and Paris, France.
Kasco has a significant distribution network that reaches over 30,000
retail grocery stores, restaurants, delis, and processing plants in the US,
Canada, Europe, Latin America and Asia. Kasco's distribution network is
made up of Territory Managers and Distributors who have in-depth knowledge
of the local markets and the customer's needs. Kasco has an extensive
training program for its Territory Managers so that each is proficient in
the installation, repair, and service of meat, deli and seafood department
equipment.
Within our extensive market coverage of retail grocery stores, Kasco also
offers a unique product offering of seasoning blends, recipes and
instructions under the tradename Mealtime SolutionsT, which allows a
supermarket to present value-added products in their meat, deli and seafood
departments. The Mealtime SolutionsT seasoning program continues to be a
success as sales for home meal replacement items within supermarkets
increase.
PHOTO - Kasco's Mealtime SolutionsT seasoning program offers a package of
seasoning blends, recipes and instructions which allows a supermarket to
present an attractive, ready-to-cook home meal to its customers.
Directors
1.Luke E. Fichthorn III
Chairman and CEO
Bairnco Corporation
2.Charles T. Foley *
President
Estabrook Capital Management, Inc.
3.Richard A. Shantz *
Private Investor
4.William F. Yelverton *
CEO
LiveInsurance.com
* Audit Committee member
Management:
1.Robert M. Carini
Vice President
Arlon, Inc.
2.James W. Lambert
Vice President Finance & Treasurer
Bairnco Corporation
3.Lawrence C. Maingot
Controller
Bairnco Corporation
4.Elmer G. Pruim
Vice President
Arlon, Inc.
5.Larry D. Smith
Vice President Administration & Secretary
Bairnco Corporation
6.Brian E. Turner
President
Kasco Corporation
FINANCIAL HISTORY
1999 1998 1997 1996 1995
Summary of Operations
($ in thousands)
Net sales $168,881 156,456 158,708 150,234 150,507
Gross profit $ 55,147 50,583 53,996 52,536 53,317
Operating profit $ 15,002 4,529 15,592 14,956 14,633
Interest expense, net $ 2,104 1,998 1,834 1,725 2,026
Income before income taxes $ 12,898 2,531 13,758 13,231 12,607
Provision for income taxes $ 4,257 937 4,987 4,896 4,826
Net income $ 8,641 1,594 8,771 8,335 7,781
Return from operations on:
Net sales % 5.1 1.0 5.5 5.5 5.2
Stockholders' investment % 18.0 3.1 17.4 17.2 16.7
Capital employed % 11.9 3.3 12.2 12.3 11.9
Year-End Position
($ in thousands)
Working capital $ 33,256 33,259 35,712 30,341 28,350
Plant and equipment, net $ 39,682 41,402 39,913 38,276 34,449
Total assets $119,145 118,555 109,286 102,600 98,196
Total debt $ 31,283 37,844 30,318 28,179 24,578
Stockholders' investment $ 50,167 46,438 52,469 49,464 48,024
Capital employed $ 81,450 84,282 82,787 77,643 72,602
Per Common Share Data
Income from continuing
operations - Basic $ 1.08 0.18 0.96 0.85 0.75
- Diluted $ 1.08 0.18 0.94 0.85 0.75
Cash dividend $ 0.20 0.20 0.20 0.20 0.20
Stockholders' investment $ 6.43 5.61 5.83 5.25 4.74
Market price:
High $ 8 11-3/8 11-1/4 8-1/2 6
Low $ 4-5/8 5-9/16 6-3/8 5-1/2 3-7/8
Other Data (in thousands)
Depreciation and amortization $ 7,365 6,688 6,516 6,305 6,314
Capital expenditures $ 5,670 5,976 8,789 10,131 4,831
Average common shares outstanding 7,965 8,655 9,151 9,753 10,433
Diluted common shares outstanding 8,038 8,818 9,350 9,851 10,440
Current ratio 2.1 2.2 2.6 2.4 2.2
Number of common stockholders 1,356 1,436 1,574 1,773 1,967
Average number of employees 820 822 850 825 874
Sales per employee $205,950 190,340 186,710 182,100 172,200
MANAGEMENT'S DISCUSSION AND ANALYSIS
The following discussion should be read in conjunction with the
Consolidated Financial Statements and related notes which begin on page 15.
Results of Operations: 1999 Compared to 1998
1999 consolidated sales increased 7.9% to $168,881,000 from $156,456,000 in
1998. Arlon's sales increased 12.0%, due to the full year effect of the
acquisition made late in 1998, the rebound in most markets from the
depressed conditions due to the Asian crisis in 1998, and further
penetration in new market segments. Kasco's sales declined 1.0% due to
competitive pressures in the North American base business, the currency
translation effect of the strong dollar and lower demand in the European
markets for selected products.
In 1999, gross profit increased 9.0% to $55,147,000 from $50,583,000 in the
prior year with gross profit margins improving to 32.7% from 32.3% last
year. Gross profit increased at Arlon as the result of the 1998
acquisition and improved sales and manufacturing efficiencies. Kasco's
gross profit improved slightly as better manufacturing cost performance
offset the sales decline.
Selling and administrative expenses increased 4.1% to $40,145,000 in 1999
compared to $38,554,000 in 1998, excluding the $7,500,000 provision for
litigation costs taken in 1998. As a percent of sales, these expenses
declined to 23.8% from 24.6% in 1998. Research and development expenses
increased 19.3% as Bairnco invested in the development of new products and
improved quality. The average number of employees was essentially
unchanged from last year. Productivity as measured by sales per employee
increased 8.2%.
Earnings before interest and taxes were $15,002,000, up significantly from
$4,529,000 in 1998. The improvement is attributable to higher gross profit
and the effect of the $7,500,000 provision for litigation costs on 1998
results.
Net interest expense increased to $2,104,000 from $1,998,000 in 1998. The
increase was due to increased average debt outstanding primarily resulting
from the acquisition in the fourth quarter of 1998.
Income before income taxes increased to $12,898,000 as compared to
$2,531,000 in 1998. The effective tax rate was 33% compared to 37% in 1998
due to the implementation of tax planning strategies and increase in the
Foreign Sales Corporation tax benefit. The provision for income taxes in
both years includes all applicable federal, state, local and foreign income
taxes.
Net income increased to $8,641,000 from $1,594,000 in 1998. The provision
for litigation costs reduced net income in 1998 by $4,726,000, or
approximately $.54 diluted earnings per common share. Diluted earnings per
common share increased to $1.08 from $.18 in 1998 as a result of the
increase in operating income and reduced number of shares outstanding.
Results of Operations: 1998 Compared to 1997
1998 consolidated sales of $156,456,000 decreased 1.4% from $158,708,000 in
1997. Arlon's sales decreased 3.8%, as all markets served declined during
the year after a strong first quarter. The electrical and electronic
markets were the most depressed. The drop in the electronic market due to
the Asian crisis adversely affected many of the end users of Arlon's
products, as did low-priced competition from Asian competitors. Further
penetration in new market segments offset some of the decline. Kasco's
sales increased 4.4% through growth in the U.S. base business and seasoning
programs for in-store meal preparation and in the European operations.
In 1998, gross profit decreased 6.3% to $50,583,000 from $53,996,000 in the
prior year with gross profit margins declining to 32.3% from 34% in 1997.
Gross profit decreased at Arlon as the combined result of lower sales,
lower prices, and a continuing change in mix to lower margin commercial
products to serve the electronic/communication markets. Kasco's gross
profit decreased slightly due to the costs from discontinued products and
services.
In 1998 the court in the Transactions Lawsuit (refer to Note 10 to the
Consolidated Financial Statements) issued a series of opinions that
eliminated certain claims and parties from the case and set the stage for
discovery and trial as to the claims and parties that remain. In
particular, the court dismissed the RICO claims; all claims against third-
party professionals, including lawyers, accountants and investment bankers;
and all claims against individuals with the exception of Bairnco's former
chairman and president. The court also narrowed the scope of certain
claims against Bairnco and the other corporate defendants. With the
initial motions phase of the case complete, Bairnco is prepared to mount a
vigorous defense on the merits. Toward that end, a $7,500,000 provision
for litigation costs was taken in the fourth quarter of 1998 (refer to Note
2 to the Consolidated Financial Statements).
Selling and administrative expenses, excluding the provision for litigation
costs, increased 0.4% to $38,554,000 from $38,404,000 in 1997. As a
percent of sales, these expenses increased to 24.6% in 1998 from 24.2% in
1997. Research and development expenses increased 4.8% as Bairnco
continued to invest in the development of new products and improved
quality. Based on sharp swings in order input throughout 1998 and
management's continuing belief in the future of the Corporation's key
markets, the decision was made to cut costs but not to impair the core
management competencies that have been developed. The average number of
employees was reduced by 3.3% from 1997. Productivity as measured by sales
per employee increased 1.9%.
Earnings before interest, the provision for litigation costs and taxes were
$12,029,000 down 22.9% from $15,592,000 in 1997. The decline is primarily
attributable to reduced gross profit.
In the fourth quarter of 1998 Bairnco recorded the $7,500,000 pre-tax
provision for anticipated litigation costs.
Net interest expense increased from $1,834,000 to $1,998,000. The increase
was due to increased average debt outstanding primarily resulting form the
acquisition in the fourth quarter.
Income before income taxes decreased to $2,531,000 in 1998 as compared to
$13,758,000 in 1997. The effective tax rate was 37% as compared to 36.2% in
1997.
Net income decreased to $1,594,000 from $8,771,000. Diluted earnings per
common share fell sharply to $.18 from $.94 in 1997 as a result of the
decreased operating income and the provision for litigation costs. The
provision for litigation costs reduced net income in 1998 by $4,726,000 or
$.54 per share.
Liquidity and Capital Resources
At December 31, 1999, Bairnco had working capital of $33.3 million,
essentially the same level as December 31, 1998. The increase in accounts
receivable relates primarily to the growth in sales. Other current assets
increased due primarily to a tax refund expected to be received during the
first quarter 2000. The increase in accounts payable is due primarily to a
higher level of purchases in support of the higher levels of sales and
production.
At December 31, 1999, $31.3 million of total debt was outstanding compared
to $37.8 million at the end of 1998. As of December 31, 1999,
approximately $17.4 million was available for borrowing under the
Corporation's secured reducing revolving credit agreement. In addition,
approximately $4.1 million was available under various short-term domestic
and foreign uncommitted credit facilities. Debt as a percent of equity was
reduced to 62.4% at the end of 1999 from 81.5% at the end of 1998. The
reduction was due to the repayments of debt during the course of 1999.
On February 15, 2000, the Corporation's Credit Agreement was amended. The
amendment effectively increased the credit facility from $50 million at
December 31, 1999 to $75 million, including a five-year term loan credit
facility of $20 million subject to quarterly amortization of principal of
$500,000 in 2000, $750,000 in 2001, $1,000,000 in 2002, $1,250,000 in 2003
and $1,500,000 in 2004. The amended credit facility also includes a letter
of credit facility for $9 million which may be increased up to $15 million
or decreased to $5 million with a corresponding change in the loan
commitment under the revolving credit facility. The amendment extended the
expiration date of the Credit Agreement from December 31, 2003 to February
22, 2005, although the term loan expires on December 31, 2004.
Bairnco made $5,670,000 of capital expenditures in 1999 as compared to its
plan of approximately $8.2 million. Capital expenditures were focused on
cost reduction projects, equipment replacements, and new information
systems software and hardware that were installed during the year. Total
capital expenditures in 2000 are expected to be approximately $8.9 million.
Depreciation and amortization is estimated to be approximately $8.0
million. The planned capital expenditures include quality improvements,
cost reduction projects, replacements, new product developments, new
processing equipment, information systems hardware and software, and
limited capacity additions.
In 1999, Bairnco's Board of Directors authorized an additional $5,000,000
to be available for the ongoing repurchase of its common stock. This was
in addition to still unused prior authorizations of $2.6 million as of
January 1, 1999. During 1999, Bairnco repurchased 497,900 shares of its
common stock for $2.9 million. The diluted average number of shares
outstanding in 1999 was 8,038,000 an 8.8% decrease from the 8,818,000
diluted average shares outstanding in 1998. The Board has authorized
management to continue its stock repurchase program in 2000 subject to
market conditions and the capital requirements of the business.
Cash provided by operating activities plus the amounts available under
Bairnco's credit facilities (refer to Note 7 and Note 12 to the
Consolidated Financial Statements) are expected to be sufficient to fulfill
Bairnco's anticipated cash requirements in 2000.
Year 2000 Date Conversion
In January of 1998 Bairnco adopted a formal plan to address the Year 2000
issue and thus maintain the integrity of its financial systems and ensure
the reliability of its operating systems. The implementation and
validation of the system upgrades was completed during the fourth quarter
of 1999 at a total cost of approximately $250,000.
The Corporation did not experience any disruption in its operations due to
Year 2000 issues with its computer software programs and operating systems
or its interface with key suppliers and vendors.
Other Matters
Bairnco Corporation and its subsidiaries are defendants in a number of
legal actions and proceedings that are discussed in more detail in Note 11
to the Consolidated Financial Statements. Management of Bairnco believes
that the disposition of these actions and proceedings will not have a
material adverse effect on the consolidated results of operations or the
financial position of Bairnco Corporation and its subsidiaries as of
December 31, 1999.
Outlook
Management is not aware of any adverse trends that would materially affect
the Company's financial position. The outlook for 2000 is for improved
sales and earnings. It is expected that the combination of growth from new
products, higher growth in certain niche markets and the results of the
acquisition will result in increased sales. Improved earnings are expected
both from increased sales and from ongoing productivity improvement
programs.
<TABLE>
Quarterly Results of Operations (Unaudited)
(In thousands except per share data)
<CAPTION>
1st 2nd 3rd 4th Total
1999 1998 1999 1998 1999 1998 1999 1998 1999 1998
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Sales $42,662 $42,125 $42,653 $37,651 $42,130 $37,747 $41,436 $38,933 $168,881 $156,456
Cost of sales 28,410 28,442 28,171 24,905 28,945 25,922 28,208 26,604 113,734 105,873
Gross Profit 14,252 13,683 14,482 12,746 13,185 11,825 13,228 12,329 55,147 50,583
Selling and
administrative
expenses 10,245 9,716 10,461 9,717 9,768 9,461 9,671 9,660 40,145 38,554
Provision for
litigation costs -- -- -- -- -- -- -- 7,500 -- 7,500
Operating Profit 4,007 3,967 4,021 3,029 3,417 2,364 3,557 (4,831) 15,002 4,529
Interest expense, net 567 481 515 508 516 502 506 507 2,104 1,998
Income before income
taxes 3,440 3,486 3,506 2,521 2,901 1,862 3,051 (5,338) 12,898 2,531
Provision for income
taxes 1,170 1,290 1,192 933 888 689 1,007 (1,975) 4,257 937
Net Income $ 2,270 $ 2,196 $ 2,314 $ 1,588 $ 2,013 $ 1,173 $ 2,044 $(3,363) $ 8,641 $ 1,594
Basic Earnings
per Share $ 0.28 $ 0.25 $ 0.29 $ 0.18 $ 0.25 $ 0.14 $ 0.26 $ (0.40) $ 1.08 $ 0.18
Diluted Earnings
per Share $ 0.28 $ 0.24 $ 0.29 $ 0.18 $ 0.25 $ 0.14 $ 0.26 $ -- $ 1.08 $ 0.18
Market Price:
High $7-5/16 $11-3/8 $7-5/8 $11-3/8 $ 8 $ 9-1/8 $ 7-1/2 $11-1/4 $ 8 $ 11-3/8
Low 4-5/8 9-13/16 5 8-7/8 6-7/8 5-9/16 5-7/8 6-11/16 4-5/8 5-9/16
</TABLE>
"Safe Harbor" Statement under the Private Securities Reform Act of 1995
Certain of the statements contained in this annual report (other than the
financial statements and statements of historical fact), including, without
limitation, statements as to management's expectations and belief presented
under the captions "Letter to Our Stockholders" and "Management's
Discussion and Analysis", are forward-looking statements. Forward-looking
statements are made based upon management's expectations and belief
concerning future developments and their potential effect upon the
Corporation. There can be no assurance that future developments will be in
accordance with management's expectations or that the effect of future
developments on the Corporation will be those anticipated by management.
The Corporation wishes to caution readers that the assumptions which form
the basis for forward-looking statements with respect to or that may impact
earnings for the year ended December 31, 2000 and thereafter include many
factors that are beyond the Corporation's ability to control or estimate
precisely. These risks and uncertainties include, but are not limited to,
the market demand and acceptance of the Corporation's existing and new
products; the impact of competitive products; changes in the market for
raw or packaging materials which could impact the Corporation's
manufacturing costs; changes in product mix; changes in the pricing of the
products of the Corporation or its competitors; the loss of a significant
customer or supplier; production delays or inefficiencies; disruptions in
operations due to labor disputes; the costs and other effects of complying
with environmental regulatory requirements; losses due to natural disasters
where the Corporation is self-insured, the costs and other effects of legal
and administrative cases and proceedings, settlements and investigations;
and changes in US or international economic or political conditions, such
as inflation or deflation, or fluctuations in interest or foreign exchange
rates.
While the Corporation periodically reassesses material trends and
uncertainties affecting the Corporation's results of operations and
financial condition in connection with its preparation of the stockholders'
letter and management's discussion and analysis contained in its annual
reports, the Corporation does not intend to review or revise any particular
forward-looking statement referenced herein in light of future events.
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Stockholders of Bairnco Corporation:
We have audited the accompanying consolidated balance sheets of
Bairnco Corporation (a Delaware corporation) and subsidiaries as of
December 31, 1999 and 1998, and the related consolidated statements of
income, comprehensive income, stockholders' investment and cash flows
for each of the three years in the period ended December 31, 1999.
These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial position
of Bairnco Corporation and subsidiaries as of December 31, 1999 and
1998, and the results of their operations and their cash flows for
each of the three years in the period ended December 31, 1999, in
conformity with generally accepted accounting principles.
Orlando, Florida
January 21, 2000
(except with respect to the matters discussed in Note 12,
as to which the date is February 16, 2000)
Arthur Andersen LLP
CONSOLIDATED STATEMENTS OF INCOME
For the years ended December 31, 1999, 1998 and 1997
Bairnco Corporation and Subsidiaries
1999 1998 1997
Net Sales $168,881,000 $156,456,000 $158,708,000
Cost of sales 113,734,000 105,873,000 104,712,000
Gross Profit 55,147,000 50,583,000 53,996,000
Selling and administrative expenses 40,145,000 38,554,000 38,404,000
Provision for litigation costs
(Note 2) -- 7,500,000 --
Operating Profit 15,002,000 4,529,000 15,592,000
Interest expense, net 2,104,000 1,998,000 1,834,000
Income before Income Taxes 12,898,000 2,531,000 13,758,000
Provision for income taxes (Note 5) 4,257,000 937,000 4,987,000
Net Income $ 8,641,000 $ 1,594,000 $ 8,771,000
Basic Earnings per Share of Common
Stock (Note 4) $ 1.08 $ 0.18 $ 0.96
Diluted Earnings per Share of Common
Stock (Note 4) $ 1.08 $ 0.18 $ 0.94
Dividends per Share of Common Stock $ 0.20 $ 0.20 $ 0.20
The accompanying notes are an integral part of these consolidated financial
statements.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
For the years ended December 31, 1999, 1998 and 1997
Bairnco Corporation and Subsidiaries
1999 1998 1997
Net Income $8,641,000 $1,594,000 $8,771,000
Other comprehensive income, net of tax:
Foreign currency translation
adjustment (Note 1) (516,000) 173,000 (710,000)
Comprehensive Income $8,125,000 $1,767,000 $8,061,000
The accompanying notes are an integral part of these consolidated financial
statements.
CONSOLIDATED BALANCE SHEETS
December 31, 1999 and 1998
Bairnco Corporation and Subsidiaries
1999 1998
Assets
Current Assets:
Cash and cash equivalents $ 660,000 $ 822,000
Accounts receivable, less allowances
of $1,136,000 and $1,224,000, respectively 29,107,000 27,999,000
Inventories:
Raw materials and supplies 5,986,000 5,701,000
Work in process 8,574,000 6,604,000
Finished goods 10,644,000 13,874,000
25,204,000 26,179,000
Deferred income taxes (Note 5) 4,598,000 4,137,000
Other current assets 3,640,000 1,709,000
Total current assets 63,209,000 60,846,000
Plant and Equipment, at cost:
Land 1,826,000 1,846,000
Buildings and leasehold interests
and improvements 17,873,000 18,115,000
Machinery and equipment 81,973,000 77,330,000
101,672,000 97,291,000
Less - Accumulated depreciation and amortization (61,990,000) (55,889,000)
39,682,000 41,402,000
Cost in Excess of Net Assets of Purchased
Businesses (Note 1) 11,822,000 11,840,000
Other Assets (Note 1) 4,432,000 4,467,000
$119,145,000 $118,555,000
Liabilities and Stockholders' Investment
Current Liabilities:
Short-term debt (Note 7) $ 4,692,000 $ 4,373,000
Accounts payable 10,719,000 9,022,000
Accrued expenses (Note 6) 14,542,000 14,192,000
Total current liabilities 29,953,000 27,587,000
Long-Term Debt (Notes 7 and 12) 26,591,000 33,471,000
Deferred Income Taxes (Note 5) 5,459,000 2,912,000
Other Liabilities 6,975,000 8,147,000
Stockholders' Investment (Notes 4, 7 and 8):
Preferred stock, par value $.01, 5,000,000
shares authorized, none issued -- --
Common stock, par value $.01, 30,000,000 shares
authorized, 11,198,849 and 11,187,224 issued,
respectively 112,000 112,000
Paid-in capital 49,235,000 49,165,000
Retained earnings 29,719,000 22,670,000
Currency translation adjustment (Note 1) 1,229,000 1,745,000
Treasury stock, at cost, 3,402,065 and 2,904,165
shares, respectively (30,128,000) (27,254,000)
Total stockholders' investment 50,167,000 46,438,000
$119,145,000 $118,555,000
The accompanying notes are an integral part of these consolidated financial
statements.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended December 31, 1999, 1998 and 1997
Bairnco Corporation and Subsidiaries
1999 1998 1997
Cash Flows from Operating Activities:
Net income $ 8,641,000 $ 1,594,000 $ 8,771,000
Adjustments to reconcile to net cash
provided by operating activities:
Depreciation and amortization 7,365,000 6,688,000 6,516,000
(Gain) loss on disposal of plant and
equipment 12,000 (13,000) 34,000
Deferred income taxes 2,086,000 (2,751,000) 1,265,000
Change in operating assets and
liabilities:
(Increase) in accounts receivable,
net (1,553,000) (1,033,000) (3,874,000)
Decrease (increase) in inventories 544,000 2,117,000 (3,406,000)
(Increase) decrease in other current
assets (1,960,000) 1,125,000 956,000
Increase (decrease) in accounts
payable 1,749,000 (38,000) 1,510,000
(Decrease) increase in accrued
expenses 376,000 2,204,000 (480,000)
Other (1,592,000) 4,223,000 472,000
Net cash provided by
operating activities 15,668,000 14,116,000 11,764,000
Cash Flows from Investing Activities:
Capital expenditures (5,670,000) (5,976,000) (8,789,000)
Payment for purchased businesses, net
of cash acquired -- (8,423,000) --
Proceeds from sale of plant and
equipment 309,000 123,000 219,000
Net cash (used in)
investing activities (5,361,000) (14,276,000) (8,570,000)
Cash Flows from Financing Activities:
Net (repayments) borrowings of
external debt (6,391,000) 7,746,000 2,434,000
Payment of dividends (1,592,000) (1,726,000) (1,827,000)
Purchase of treasury stock (2,874,000) (6,207,000) (3,255,000)
Exercise of stock options 70,000 135,000 26,000
Net cash (used in)
financing activities (10,787,000) (52,000) (2,622,000)
Effect of foreign currency exchange
rate changes on cash and cash
equivalents 318,000 (183,000) (210,000)
Net (decrease) increase in cash and
cash equivalents (162,000) (395,000) 362,000
Cash and cash equivalents, beginning
of year 822,000 1,217,000 855,000
Cash and cash equivalents, end of year $ 660,000 $ 822,000 $ 1,217,000
Supplemental Disclosures of Cash Flow
Information:
Cash paid during the year for:
Interest $ 2,100,000 $ 2,008,000 $ 1,824,000
Income taxes $ 4,976,000 $ 2,402,000 $ 2,805,000
The accompanying notes are an integral part of these consolidated
financial statements.
<TABLE>
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' INVESTMENT
For the years ended December 31, 1999, 1998 and 1997
Bairnco Corporation and Subsidiaries
<CAPTION>
Currency
Common Paid-in Retained Translation Treasury
Stock Capital Earnings Adjustment Stock
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1996 $112,000 $49,004,000 $15,858,000 $2,282,000 $(17,792,000)
Net income -- -- 8,771,000 -- --
Cash dividends ($.20 per
share) -- -- (1,827,000) -- --
Issuance of 5,275 shares
pursuant to exercise of
stock options -- 26,000 -- -- --
Acquisition of treasury
stock (424,800 shares
at cost) -- -- -- -- (3,255,000)
Currency translation
adjustment (Note 1) -- -- -- (710,000) --
Balance, December 31, 1997 112,000 49,030,000 22,802,000 1,572,000 (21,047,000)
Net income -- -- 1,594,000 -- --
Cash dividends ($.20 per
share) -- -- (1,726,000) -- --
Issuance of 26,450 shares
pursuant to exercise of
stock options -- 135,000 -- -- --
Acquisition of treasury
stock (737,400 shares
at cost) -- -- -- -- (6,207,000)
Currency translation
adjustment (Note 1) -- -- -- 173,000 --
Balance, December 31, 1998 112,000 49,165,000 22,670,000 1,745,000 (27,254,000)
Net income -- -- 8,641,000 -- --
Cash dividends ($.20 per
share) -- -- (1,592,000) -- --
Issuance of 11,625 shares
pursuant to exercise of
stock options -- 70,000 -- -- --
Acquisition of treasury
stock (497,900 shares
at cost) -- -- -- -- (2,874,000)
Currency translation
adjustment (Note 1) -- -- -- (516,000) --
Balance, December 31, 1999 $112,000 $49,235,000 $29,719,000 $1,229,000 $(30,128,000)
The accompanying notes are an integral part of these consolidated
financial statements.
</TABLE>
(1) Nature of Operations and Summary of Significant Accounting Policies
Nature of operations:
Bairnco Corporation is a diversified multinational company that operates
two business sectors: Engineered Materials and Components which are
designed, manufactured and sold under the Arlon brand identity to
electronic, industrial and commercial markets worldwide; and, Replacement
Products and Services which are manufactured and distributed under the
Kasco brand identity principally to retail food stores and meat, poultry
and fish processing plants throughout the United States, Canada and Europe.
Arlon's products are based on a common technology in coating, laminating
and dispersion chemistry. Arlon's principal products include high
performance materials for the printed circuit board industry, cast and
calendered vinyl film systems, custom engineered laminates and pressure
sensitive adhesive systems, and calendered and extruded silicone rubber
insulation products used in a broad range of industrial, consumer and
commercial products.
Kasco's principal products include replacement band saw blades for
cutting meat, fish, wood and metal, on-site maintenance services and
seasonings for ready-to-cook foods for the retail food industry primarily
in the meat and deli departments. Kasco also distributes equipment to the
food industry in Canada and France.
Principles of consolidation:
The accompanying consolidated financial statements include the accounts
of Bairnco Corporation and its subsidiaries (Bairnco or the Corporation)
after the elimination of all material inter-company accounts and
transactions.
The preparation of consolidated financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date
of the consolidated financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could
differ from those estimates.
Consolidated statements of cash flows:
The Corporation considers cash in banks, commercial paper, demand notes
and similar investments with a maturity of less than three months as cash
and cash equivalents for the purposes of the consolidated statements of
cash flows.
Certain reclassifications were made to prior year balances in order to
conform to the current year presentation.
Inventories:
Inventories are stated at cost, which is not in excess of market.
Inventory costs include material, labor and overhead. Inventories are
stated principally on a first-in, first-out (FIFO) basis.
Plant and equipment:
The Corporation provides for depreciation of plant and equipment
principally on a straight-line basis by charges to income in amounts
estimated to allocate the cost of these assets over their useful lives.
Rates of depreciation vary among the several classifications as well as
among the constituent items in each classification, but generally fall
within the following ranges:
Years
Buildings and leasehold interests and improvements 5 - 40
Machinery and equipment 3 - 20
When property is sold or otherwise disposed of, the asset cost and
accumulated depreciation are removed from the accounts and any resulting
gain or loss is included in the statement of income.
Leasehold interests and improvements are amortized over the terms of the
respective leases, or over their estimated useful lives, whichever is
shorter.
Maintenance and repairs are charged to operations. Renewals and
betterments are capitalized.
Accelerated methods of depreciation are used for income tax purposes,
and appropriate provisions are made for the related deferred income taxes.
Depreciation expense of $6,992,000, $6,509,000 and $6,333,000 was
recognized during 1999, 1998 and 1997, respectively.
Cost in excess of net assets of purchased businesses:
Cost in excess of net assets of purchased businesses acquired prior to
1971 of approximately $3.5 million is not being amortized since, in the
opinion of management, there has been no diminution in value. For
businesses acquired subsequent to 1970, the cost in excess of net assets of
purchased businesses, aggregating $10,298,000 and $10,020,000 at December
31, 1999 and 1998, respectively, is being amortized over 40 years.
Accumulated amortization at December 31, 1999 and 1998, was $1,964,000 and
$1,665,000, respectively. Amortization expense of $335,000, $147,000 and
$146,000 was recognized during 1999, 1998 and 1997, respectively.
At each balance sheet date, the Corporation evaluates the realizability
of its cost in excess of net assets of purchased businesses based upon
expectations of non-discounted cash flows and operating income for each
division having a material cost in excess of net assets of purchased
businesses balance. Based upon its most recent analysis, the Corporation
believes that no material impairment of its cost in excess of net assets of
purchased businesses exists at December 31, 1999.
Intangibles:
Intangible assets of purchased businesses, net of amortization, are
included in other assets and totaled $85,000 and $123,000 at December 31,
1999 and 1998, respectively. These items are amortized over their
estimated lives, which generally range from three to twenty years.
Amortization expense recognized was $38,000 during 1999, $32,000 during
1998 and $37,000 during 1997.
Revenue recognition:
Revenues are recognized when products are shipped or when services are
rendered.
Income taxes:
The Corporation accounts for income taxes using an asset and liability
approach that requires the recognition of deferred tax assets and
liabilities for the expected future tax consequences of events that have
been recognized in the Corporation's financial statements or tax returns.
In estimating future tax consequences, the Corporation generally considers
all expected future events other than enactment of changes in the tax law
or changes in tax rates. Changes in tax laws or rates will be recognized
in the future years in which they occur. Temporary differences between
income for financial reporting and income tax purposes arise primarily from
the timing of the deduction of certain accruals and from the use of
accelerated methods of depreciation for income tax reporting purposes
compared to the method of depreciation used for financial reporting
purposes.
Accrued expenses-insurance:
Accrued expenses-insurance represents the estimated costs of known and
anticipated claims under the Corporation's general liability, automobile
liability, property and workers compensation insurance policies for all of
its US operations. The Corporation provides reserves on reported claims
and claims incurred but not reported at each balance sheet date based upon
the estimated amount of the probable claim or the amount of the deductible,
whichever is lower. Such estimates are reviewed and evaluated in light of
emerging claim experience and existing circumstances. Any changes in
estimates from this review process are reflected in operations currently.
Stock options:
The Corporation accounts for stock options under Accounting Principles
Board Opinion No. 25 ("APB 25"), under which no compensation expense has
been recognized. In October 1995, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation" ("SFAS 123"), which is effective for years
beginning after December 15, 1995. SFAS 123 established financial
accounting and reporting standards for stock-based employee compensation
plans. The statement defines a fair value based method of accounting for
an employee stock option or similar equity instrument and encourages all
entities to adopt that method of accounting for all of their stock
compensation plans. However, it also allows an entity to continue to
measure compensation costs for those plans using the intrinsic value based
method of accounting prescribed by APB 25, but requires pro-forma
disclosure of net income and earnings per share for the effects on
compensation expense had the accounting guidance for SFAS 123 been adopted.
Had SFAS 123 been implemented, the Corporation's net income and earnings
per share would have been reduced to the amounts indicated below:
1999 1998 1997
Net income (in thousands):
As reported $8,641 $1,594 $8,771
Pro forma $8,529 $1,529 $8,733
Diluted earnings per share:
As reported $ 1.08 $ 0.18 $ 0.94
Pro forma $ 1.06 $ 0.17 $ 0.93
In preparing these disclosures, the Corporation determined the values using
the Black Scholes model based on the following assumptions: expected lives
of 7 years, volatility of 38.0%, a risk-free rate of 7.0% and a dividend
yield of 3.1%.
Translation of foreign currencies:
Balance sheet accounts of foreign subsidiaries are translated at the
rates of exchange in effect at the balance sheet date while income and
expenses are translated at the monthly average rates of exchange in effect
during the year.
Fair value of financial instruments:
The carrying values of cash and cash equivalents, accounts receivable,
accounts payable and accrued liabilities, approximate fair value due to the
short-term maturities of these assets and liabilities.
The carrying amount of the Corporation's short-term and long-term debt
approximates fair value, since the debt is at floating rates or rates
approximating rates currently offered to the Corporation for debt of the
same remaining maturities.
Comprehensive income:
In June 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 130, "Reporting Comprehensive Income"
("SFAS 130"), which is effective for years beginning after December 15,
1997. SFAS 130 established standards for reporting and displaying
comprehensive income and its components in a full set of general-purpose
financial statements. This statement requires that all items of
comprehensive income are classified by their nature in a financial
statement and that the accumulated balance of other comprehensive income be
displayed separately from retained earnings and additional paid-in capital
in the equity section of a statement of financial position. Bairnco
adopted SFAS 130 effective January 1, 1998. The comparative prior period
financial statements have been reclassified to conform to the current
period presentation.
Comprehensive income includes net income as well as certain other
transactions shown as changes in stockholders' investment. For Bairnco,
comprehensive income includes net income plus the change in net asset
values of foreign divisions as a result of translating the local currency
values of net assets to US dollars at varying exchange rates. Accumulated
other comprehensive income consists solely of foreign currency translation
adjustments. There are currently no tax expenses or benefits associated
with the foreign currency translation adjustments.
Reportable segments:
In June 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 131, "Disclosures about Segments of
an Enterprise and Related Information" ("SFAS 131"), which is effective for
fiscal years beginning after December 15, 1997. SFAS 131 introduces a new
model for segment reporting called the management approach. The management
approach is based on the way the chief operating decision-maker organizes
segments within a company for making operating decisions and assessing
performance.
SFAS 131 requires disclosures for each segment that are similar to those
required under previous standards with the addition of quarterly disclosure
requirements and a finer partitioning of geographic disclosures. It
requires limited segment data on a quarterly basis. It also requires
geographic data by country, as opposed to broader geographic regions
permitted under previous standards.
Bairnco adopted SFAS 131 effective January 1, 1998 and prior year
segment information and disclosures have been restated, where applicable,
to conform to the current year presentation.
Pension Accounting:
In February 1998, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 132, "Employers'
Disclosures about Pensions and other Postretirement Benefits" ("SFAS 132"),
which is effective for fiscal years beginning after December 15, 1997.
SFAS 132 standardizes the disclosure requirements for pensions and other
postretirement benefits and requires additional information on changes in
the benefit obligations and fair value of plan assets while eliminating
certain prior disclosures that are no longer considered useful.
Bairnco adopted SFAS 132 effective January 1, 1998 and prior year
pension disclosures have been restated, where applicable, to conform to the
current year presentation.
(2) Provision for Litigation Costs
In the fourth quarter of 1998, Bairnco recorded a $7,500,000 pre-tax
provision for litigation costs. The litigation provision added to the
existing reserves for asbestos-related litigation expenditures due to a
change in the estimate to defend the Transaction Lawsuit (refer to
Management's Discussion and Analysis and Note 11 to Consolidated Financial
Statements). $2.5 million of this provision for litigation costs is
included in accrued expenses with the remaining $5.0 million included in
other liabilities in the Corporation's consolidated balance sheet for the
year ended December 31, 1998. As of December 31, 1999, $1.5 million of the
provision was included in accrued expenses and $4.0 million was included in
other liabilities.
After recognition of related tax benefits, the litigation provision
reduced net income in 1998 by $4.7 million or approximately $.54 diluted
earnings per common share.
(3) Acquisition
On October 31, 1998, Bairnco purchased MII International, Inc. ("MII")
for approximately $8.3 million including the repayment of its debt. MII
manufactures adhesive coated films for use in the graphics and industrial
markets. The transaction was accounted for as a purchase and was financed
with long-term debt. The purchase price exceeded the fair value of net
assets acquired by approximately $4.0 million which is being amortized on a
straight-line basis over 40 years. The results of operations of MII are
included in the accompanying consolidated financial statements from the
date of acquisition.
The following summarized unaudited pro forma financial information
assumes the acquisition had occurred on January 1 of each year:
Pro Forma Information
(in thousands, except per share data) 1998 1997
Net sales $167,865 $174,184
Net income $ 1,782 $ 9,053
Basic earnings per share $ 0.21 $ 0.99
Diluted earnings per share $ 0.20 $ 0.97
These amounts include MII's actual results in 1997 and for the first ten
months of 1998 prior to acquisition and actual results for the two months
in 1998 after acquisition. The amounts are based upon certain assumptions
and estimates, and do not reflect any benefit from economies which might be
achieved from combined operations. The pro forma results do not
necessarily represent results which would have occurred if the acquisition
had taken place on the basis assumed above, nor are they indicative of the
results of future combined operations.
(4)Earnings per Share
The Corporation accounts for earnings per share ("EPS") under Financial
Accounting Standards No. 128, "Earnings Per Share" ("SFAS 128"). The
following disclosures comply with the requirements of SFAS 128.
1999 1998 1997
Basic Earnings per Common Share:
Net Income $ 8,641,000 $ 1,594,000 $ 8,771,000
Average common shares outstanding 7,965,000 8,655,000 9,151,000
Basic Earnings Per Common Share $ 1.08 $ 0.18 $ 0.96
Diluted Earnings per Common Share:
Net Income $ 8,641,000 $ 1,594,000 $ 8,771,000
Average common shares outstanding 7,965,000 8,655,000 9,151,000
Common shares issuable in respect
to options issued to employees,
with a dilutive effect 73,000 163,000 199,000
Total diluted common shares
outstanding 8,038,000 8,818,000 9,350,000
Diluted Earnings Per Common Share $ 1.08 $ 0.18 $ 0.94
Basic earnings per common share were computed by dividing net income by
the weighted average number of shares of common stock outstanding during
the year. Diluted earnings per common share includes the effect of all
dilutive stock options.
(5) Income Taxes
The components of income before income taxes and the provisions for
domestic and foreign income taxes are as follows:
1999 1998 1997
Income before Income Taxes:
Domestic $11,002,000 $ 1,187,000 $12,765,000
Foreign 1,896,000 1,344,000 993,000
Total Income before
Income Taxes $12,898,000 $ 2,531,000 $13,758,000
Provision for Income Taxes:
Domestic:
Currently payable $ 2,145,000 $ 3,266,000 $ 3,616,000
Deferred 1,359,000 (2,688,000) 1,102,000
Foreign:
Currently payable 618,000 422,000 106,000
Deferred 135,000 (63,000) 163,000
Total Provision for
Income Taxes $ 4,257,000 $ 937,000 $ 4,987,000
Bairnco's net current and non-current deferred tax assets (liabilities)
include the following at December 31:
1999 1998 1997
Current Deferred Tax Items:
Accrued Expenses $ 3,002,000 $ 2,840,000 $ 1,584,000
Inventories 1,458,000 977,000 847,000
Other 138,000 320,000 210,000
Net Current Deferred
Tax Asset 4,598,000 4,137,000 2,641,000
Non-Current Deferred Tax Items:
Fixed Assets (5,086,000) (3,539,000) (3,291,000)
Pensions (1,386,000) (1,273,000) (1,051,000)
Intangible Assets (6,000) (13,000) 21,000
Provision for litigation costs 1,360,000 1,700,000 --
Other (341,000) 213,000 223,000
Net Non-Current Deferred
Tax Liability (5,459,000) (2,912,000) (4,098,000)
Net Deferred Tax Asset
(Liability) $ (861,000) $ 1,225,000 $(1,457,000)
Management expects that future operations will generate sufficient
taxable income to realize the existing net temporary differences. As a
result, the Corporation has not recorded any valuation allowances against
its deferred tax assets.
In 1999, 1998 and 1997 the Corporation's effective tax rates were 33.0%,
37.0% and 36.2%, respectively, of income before income taxes. An analysis
of the differences between these rates and the US federal statutory income
tax rate is as follows:
1999 1998 1997
Computed income taxes at
statutory rate $ 4,385,000 $ 861,000 $ 4,678,000
State and local taxes,
net of federal tax benefit 283,000 64,000 368,000
Dividend income -- -- 1,303,000
Amortization of goodwill 51,000 9,000 9,000
Foreign income taxed at
different rates 107,000 (98,000) (69,000)
Tax credits (13,000) (31,000) (1,182,000)
Benefit of Foreign Sales
Corporation (473,000) (270,000) (289,000)
Other, net (83,000) 402,000 169,000
Provision for income taxes $ 4,257,000 $ 937,000 $ 4,987,000
Provision has not been made for US income taxes on approximately
$3.7 million of undistributed earnings of international subsidiaries.
These earnings could become subject to additional tax if they were remitted
as dividends or if the Corporation should sell its stock in the
subsidiaries. It is not practicable to estimate the amount of additional
tax that might be payable on the foreign earnings; however, the Corporation
believes that US foreign tax credits would largely eliminate any US income
tax incurred.
(6) Accrued Expenses
Accrued expenses consisted of the following as of December 31, 1999 and
1998, respectively:
1999 1998
Salaries and wages $ 3,114,000 $ 2,669,000
Income taxes 550,000 633,000
Insurance 3,581,000 2,462,000
Litigation 2,588,000 3,580,000
Other accrued expenses 4,709,000 4,848,000
Total accrued expenses $14,542,000 $14,192,000
(7) Debt
Long-term debt consisted of the following as of December 31, 1999 and
1998, respectively:
1999 1998
Revolving Credit Notes $23,591,000 $30,471,000
Industrial Revenue Bonds 3,000,000 3,000,000
Total $26,591,000 $33,471,000
The Corporation's has a credit agreement (the "Credit Agreement") with a
consortium of four banks led by Bank of America, N.A., and including
SunTrust Bank, First Union National Bank, N.A., and Allfirst Bank. The
Credit Agreement provides a secured, reducing revolving credit facility for
a maximum loan commitment at December 31, 1999 of $43 million and a letter
of credit facility of $7 million, although the letter of credit facility
may be increased up to $20 million with a corresponding decrease in the
revolving credit facility. Effective December 31, 1998, the letter of
credit facility was increased by $2.0 million to $9.0 million with a
corresponding decrease in the revolving credit facility. At December 31,
1999, $23.6 million of revolving credit was outstanding and payable from
2001 through 2003. In addition, approximately $7.5 million of irrevocable
standby letters of credit were outstanding under the Credit Agreement,
which are not reflected in the accompanying consolidated financial
statements. $4.5 million of the letters of credit guarantee various
insurance activities. An outstanding $3.0 million letter of credit
supports the Industrial Revenue Bonds. Interest rates vary on the revolving
credit and are set at the time of borrowing in relationship to one of
several reference rates, as selected by the Corporation at the time of the
borrowing. Interest rates on the revolving credit outstanding at December
31, 1999, were approximately 7.4% on US borrowings and 4.4% on European
borrowings. A commitment fee is paid on the unused portion of the total
credit. The interest rate on the Industrial Revenue Bonds was
approximately 4.7% at December 31, 1999.
Substantially all of the assets of the Corporation and its US
subsidiaries are pledged as collateral under the Credit Agreement, which
expires on December 31, 2003.
The Credit Agreement contains covenants, which require the Corporation
to meet minimum interest coverage ratios, and which limit the ratio of
total debt to capital employed as defined in the Credit Agreement. In
addition, minimum levels of stockholders' investment must be maintained.
At December 31, 1999 the Corporation was in compliance with all covenants
contained in the Credit Agreement.
The Corporation has other short-term debt outstanding at rates of 6.1%
to 6.5% due in 2000.
The annual maturity requirements for long-term debt due after December
31, 1999, are summarized as follows:
Year Ended December 31,
2000 $ --
2001 1,000,000
2002 1,500,000
2003 24,091,000
Total Long-term Debt $ 26,591,000
(8) Stock Options
The Corporation has a stock incentive plan which was established in 1990
("1990 Plan"). The 1990 Plan permits the grant of options to purchase not
more than 2,500,000 shares of common stock. The 1990 Plan provides for the
grant of non-qualified options and options qualifying as incentive stock
options under the Internal Revenue Code to key employees and each outside
Director of the Corporation at an option price equal to the fair market
value on the date of grant. Non-qualified stock options may also be
granted at book value. The term of each option may not exceed 10 years
from the date the option becomes exercisable (or, in the case of an
incentive stock option, 10 years from the date of grant).
A senior executive of the Corporation presently holds performance based,
non-qualified stock options granted under the 1990 Plan to purchase a total
of 250,000 shares of common stock at option prices equal to the fair market
value on the date of grant. Two-thirds of these performance options became
exercisable as a result of the Corporation's earnings performance in 1992
and 1995 with the remaining one-third becoming fully exercisable on the
tenth anniversary of the date of grant if the executive is still employed
by the Corporation. These options remain exercisable for ten years from
the date they first become exercisable.
Changes in the stock options granted under the 1990 Plan during 1999,
1998 and 1997 were as follows:
1999 1998 1997
Wtd Avg Wtd Avg Wtd Avg
Exercise Exercise Exercise
Options Price Options Price Options Price
Outstanding at
beginning of
year 646,950 $6.09 633,750 $5.89 684,225 $5.71
Granted 96,500 6.62 52,625 8.20 33,400 8.24
Exercised (11,625) 6.04 (26,450) 5.13 (5,275) 4.93
Canceled (43,600) 6.83 (12,975) 6.75 (78,600) 5.39
Outstanding at
end of year 688,225 $6.12 646,950 $6.09 633,750 $5.89
Exercisable at
end of year 465,964 $5.86 461,813 $5.79 465,563 $5.70
At December 31, 1999, 1998 and 1997, 1,397,925, 1,450,825 and 1,490,475
shares, respectively, were available for option grants under the 1990 Plan.
The weighted average contractual life of the 688,225 options outstanding at
December 31, 1999 was 2.83 years. There were no charges to income in
connection with stock option grants or exercises during 1999, 1998 and
1997.
(9) Pension Plans
The Corporation has several pension plans which cover substantially all
of its employees. The benefits paid under these plans generally are based
on employees' years of service and compensation during the last years of
employment. Annual contributions made to the US plans are determined in
compliance with the minimum funding requirements of ERISA using a different
actuarial cost method and actuarial assumptions than are used for
determining pension expense for financial reporting purposes. Plan assets
consist primarily of publicly traded equity and debt securities. The
Corporation maintains unfunded supplemental plans in the United States to
provide retirement benefits in excess of levels provided under the
Corporation's other plans. The Corporation's foreign subsidiaries provide
retirement benefits for employees consistent with local practices. The
foreign plans are not significant in the aggregate and therefore are not
included in the following disclosures.
The following table describes the funded status of US pension plans:
1999 1998
Change in Benefit Obligation:
Benefit obligation at
September 30, 1998 and 1997,
respectively $ 28,903,000 $ 25,638,000
Service cost 867,000 756,000
Interest cost 1,935,000 1,895,000
Actuarial (gain) loss (2,390,000) 2,071,000
Benefits paid (1,525,000) (1,457,000)
Benefit obligation at
September 30, 1999 and 1998,
respectively 27,790,000 28,903,000
Change in Plan Assets:
Fair value of plan assets at
September 30, 1998 and 1997,
respectively 30,806,000 30,433,000
Actual return on plan assets 4,340,000 1,142,000
Employer contributions 216,000 667,000
Benefits paid (1,504,000) (1,436,000)
Fair value of plan assets at
September 30, 1999 and 1998,
respectively 33,858,000 30,806,000
Funded status 6,068,000 1,903,000
Unrecognized net transition
obligation 250,000 349,000
Unrecognized prior service cost 211,000 266,000
Unrecognized net actuarial
(gain) loss (3,032,000) 744,000
Prepaid pension costs at
September 30, 1999 and 1998,
respectively 3,497,000 3,262,000
Fourth quarter accruals 8,000 (26,000)
Fourth quarter contributions 58,000 52,000
Prepaid pension costs at
yearend $ 3,563,000 $ 3,288,000
The projected benefit obligation, accumulated benefit obligation and
fair value of plan assets for the pension plan with plan assets in excess
of accumulated benefit obligations were $25,013,000, $22,879,000 and
$31,622,000, respectively, at September 30, 1999, and $25,448,000,
$22,705,000 and $28,380,000, respectively, at September 30, 1998. The
projected benefit obligation, accumulated benefit obligation and fair value
of plan assets for the pension plans with accumulated benefit obligations
in excess of plan assets were $2,777,000, $2,734,000 and $2,235,000,
respectively, at September 30, 1999, and $3,455,000, $3,396,000 and
$2,426,000, respectively, at September 30, 1998.
The discount rate used in determining the actuarial present value of the
projected benefit obligations in the table above was 7.5% at September 30,
1999 and 7.0% at September 30, 1998. The rate of projected pay increases,
where applicable, was 5% at both September 30, 1999 and 1998. The expected
long-term rate of return on retirement plan assets was 9% at both September
30, 1999 and 1998.
Amounts recognized in the consolidated balance sheets of the Corporation
consist of the following:
1999 1998
Prepaid benefit cost $ 3,620,000 $ 3,382,000
Accrued benefit liability (499,000) (969,000)
Intangible asset 376,000 849,000
Net amount recognized at
September 30 3,497,000 3,262,000
Fourth quarter accruals 8,000 (26,000)
Fourth quarter contributions 58,000 52,000
Net amount recognized at
December 31 $ 3,563,000 $ 3,288,000
Net periodic pension cost for the US plans included the following:
1999 1998 1997
Service cost-benefits earned
during the year $ 905,000 $ 752,000 $ 771,000
Interest cost on projected
benefit obligation 1,940,000 1,918,000 1,823,000
Expected return on plan assets (3,027,000) (2,722,000) (2,252,000)
Amortization of net obligation
at date of transition 99,000 99,000 99,000
Amortization of prior service
cost 53,000 56,000 61,000
Net periodic pension cost $ (30,000) $ 103,000 $ 502,000
(10) Reportable Segment Data
Operating segments are components of an enterprise that:
a.Engage in business activities from which they may earn revenues and
incur expenses,
b.Whose operating results are regularly reviewed by the company's chief
operating decision-maker to make decisions about resources to be allocated
to the segment and assess its performance, and
c.For which discrete financial information is available.
Operating segments with similar products and services, production
processes, types of customers, and sales channels are combined into
reportable segments for disclosure purposes. Bairnco has two reportable
segments - the Arlon Engineered Materials and Components segment and the
Kasco Replacement Products and Services segment.
The Arlon Engineered Materials and Components segment designs, manufactures
and sells laminated and coated materials to the electronic, industrial and
commercial markets under the Arlon and Calon brand names. These products
are based on common technologies in coating, laminating, polymers, and
dispersion chemistry. Among the products included in this segment are high
technology materials for the printed circuit board industry, vinyl films
for graphics art applications, foam tapes used in window glazing,
electrical and thermal insulation products, and silicone rubber products
for insulating tapes and flexible heaters.
The Kasco Replacement Products and Services segment manufactures, sells and
services products and equipment used in supermarkets, meat and deli
operations, and meat, poultry, and fish processing plants throughout the
United States, Canada and Europe. It also manufactures and sells small
band saw blades for cutting wood and metal, and large band saw blades for
use at lumber mills.
Bairnco evaluates segment performance based on income before interest and
taxes and excluding allocation of headquarters expense. Segment income and
assets are measured on a basis that is consistent with the methods
described in the summary of significant accounting policies. Segment
assets exclude US deferred income taxes and assets attributable to US
employee benefit programs. Inter-segment transactions are not material.
No customer accounts for 10% or more of consolidated revenue.
Financial information about the Corporation's operating segments for the
years ended December 31, 1999, 1998 and 1997 is as follows:
<TABLE>
<CAPTION>
Operating Capital Depreciation/
Net Sales Profit (Loss) Assets Expenditures Amortization
<S> <C> <C> <C> <C> <C>
1999
Arlon $120,640,000 $ 15,815,000 $ 69,915,000 $1,761,000 $4,407,000
Kasco 48,241,000 3,319,000 39,294,000 3,719,000 2,871,000
Headquarters -- (4,132,000) 9,936,000 190,000 87,000
Total $168,881,000 $ 15,002,000 $119,145,000 $5,670,000 $7,365,000
1998
Arlon $107,736,000 $ 12,698,000 $ 72,880,000 $2,925,000 $3,952,000
Kasco 48,720,000 3,085,000 38,215,000 3,022,000 2,676,000
Headquarters -- (11,254,000)(a) 7,460,000 29,000 60,000
Total $156,456,000 $ 4,529,000 $118,555,000 $5,976,000 $6,688,000
1997
Arlon $112,036,000 $ 15,873,000 $ 64,530,000 $5,438,000 $3,665,000
Kasco 46,672,000 3,495,000 37,703,000 3,252,000 2,791,000
Headquarters -- (3,776,000) 7,053,000 99,000 60,000
Total $158,708,000 $ 15,592,000 $109,286,000 $8,789,000 $6,516,000
(a) Includes impact of $7.5 million (pre-tax) provision for litigation
costs.
The Corporation has operations in Canada and several European countries.
Information about the Corporation's operations by geographical area for the
years ended December 31, 1999, 1998 and 1997 is as follows:
Sales to External Long-lived Segment
Customers Assets
1999
United States $145,454,000 $46,815,000
France 13,125,000 253,000
Other Foreign 10,302,000 4,370,000
1998
United States $133,005,000 $48,109,000
France 12,821,000 218,000
Other Foreign 10,630,000 4,997,000
1997
United States $136,010,000 $42,478,000
France 12,238,000 209,000
Other Foreign 10,460,000 5,169,000
(11)Contingencies
Bairnco and its subsidiaries are among the defendants in a lawsuit
pending in the U.S. District Court for the Southern District of New
York (the "Transactions Lawsuit") in which it is alleged that
Bairnco and others are derivatively liable for the asbestos-related
claims against its former subsidiary, Keene Corporation ("Keene").
The plaintiffs in the Transactions Lawsuit are the trustees of
Keene Creditors Trust ("KCT"), a successor in interest to Keene.
In the Transactions Lawsuit complaint, the KCT alleges that certain
sales of assets by Keene to other subsidiaries of Bairnco were
fraudulent conveyances and otherwise violative of state law, as
well as being violative of the civil RICO statute, 18 U.S.C.
Section 1964. The complaint seeks compensatory damages of $700
million, interest, punitive damages, and trebling of the
compensatory damages pursuant to civil RICO. In a series of
decisions that remain subject to appeal, the court has dismissed
plaintiff's civil RICO claims; dismissed 14 of the 21 defendants
named in the complaint; and partially granted defendants' motions
for summary judgment on statute of limitations grounds. Discovery
is now underway as to the remaining claims and defendants. The
court has entered a scheduling order requiring the completion of
all discovery (including expert discovery) by May 11, 2001. A
trial date has not been set, but the Court has scheduled a
conference for June 19, 2001, to determine dates for filing a
pretrial order, for trial, and/or for any pretrial motions.
Keene was spun off in 1990, filed for relief under Chapter 11 of
the Bankruptcy Code in 1993, and emerged from Chapter 11 pursuant
to a plan of reorganization approved in 1996 (the "Keene Plan").
The Keene Plan provided for the creation of the KCT, and
transferred the authority to prosecute the Transactions Lawsuit
from the Official Committee of Unsecured Creditors of Keene (which
initiated the lawsuit in the Bankruptcy Court in 1995) to the KCT.
The Keene Plan further provided that only the KCT, and no other
entity, can sue Bairnco in connection with the claims in the
Transactions Lawsuit complaint. Therefore, although a number of
other asbestos-related personal injury and property damage cases
against Bairnco nominally remain pending in courts around the
country, it is expected that the resolution of the Transactions
Lawsuit in substance will resolve all such claims.
Bairnco also is the defendant in a separate action by the KCT (the
"NOL Lawsuit"), also pending in the United States District Court
for the Southern District of New York, in which the KCT seeks the
exclusive benefit of tax refunds attributable to the carryback by
Keene of certain net operating losses ("NOL Refunds"),
notwithstanding certain provisions of applicable tax sharing
agreements between Keene and Bairnco. (As with the Transactions
Lawsuit, the NOL Lawsuit was commenced during Keene's Chapter 11
case and, pursuant to the Keene Plan, the KCT became the plaintiff
in the lawsuit and the lawsuit was moved from the Bankruptcy Court
to the District Court.) Pending resolution of the NOL Lawsuit, any
refunds actually received are to be placed in escrow. Through
December 31, 1999, approximately $28.5 million of NOL Refunds had
been received and placed in escrow. There can be no assurance
whatsoever that resolution of the NOL Lawsuit will result in the
release of any portion of the NOL Refunds to Bairnco.
Bairnco and its Arlon subsidiary ("Arlon") also are among the
defendants in a third action by the KCT (the "Properties Lawsuit"),
commenced December 8, 1998 and pending in the United States
District Court for the Southern District of New York. In the
Properties Lawsuit complaint, the KCT seeks a declaratory judgment
that it owns certain patents and real property purchased by Arlon
from Keene in 1989, based on the allegations that technical title
to these assets was not conveyed at the time of the sale and that
no proof of claim specifically referencing these assets was filed
during Keene's Chapter 11 case. In an answer and counterclaims,
Bairnco and Arlon have denied the KCT's claims and have requested a
declaratory judgment that full title to the patents and real
property in question in fact was transferred to Arlon at the time
of the 1989 asset sale. The Properties Lawsuit has been
transferred to the Transactions Lawsuit Judge for consolidated
discovery and other proceedings.
Management believes that Bairnco has meritorious defenses to all
claims or liability purportedly derived from Keene and that it is
not liable, as an alter ego, successor, fraudulent transferee or
otherwise, for the asbestos-related claims against Keene or with
respect to Keene products.
Bairnco Corporation and its subsidiaries are defendants in a number
of other actions. Management of Bairnco believes that the
disposition of these other actions, as well as the actions and
proceedings described above, will not have a material adverse
effect on the consolidated results of operations or the financial
position of Bairnco Corporation and its subsidiaries as of December
31, 1999.
(12) Subsequent Events
Amendment to Credit Agreement:
On February 15, 2000, the Corporation's Credit Agreement was amended.
The amendment effectively increased the credit facility from $50
million at December 31, 1999 to $75 million, including a five-year
term loan credit facility of $20 million subject to quarterly
amortization of principal of $500,000 in 2000, $750,000 in 2001,
$1,000,000 in 2002, $1,250,000 in 2003 and $1,500,000 in 2004. The
amended credit facility also includes a letter of credit facility for
$9 million which may be increased up to $15 million or decreased to $5
million with a corresponding change in the loan commitment under the
revolving credit facility. The amendment extended the expiration date
of the Credit Agreement from December 31, 2003 to February 22, 2005,
although the term loan expires on December 31, 2004.
Acquisition:
On February 16, 2000, Bairnco purchased certain assets of the
materials business ("Signtech") of Signtech USA, Ltd. for
approximately $14.5 million. Signtech manufactures and distributes
flexible reinforced vinyl materials used as the substrate in flexible
faced sign systems. Signtech's products are sold primarily on a
specification basis for corporate specified programs using various
striping, heat transfer and screen print applications. Signtech's
sales for the year ended December 31, 1999 were approximately $16.0
million. The transaction was accounted for as a purchase and was
financed with long-term debt. The purchase price was allocated to the
assets acquired based on their estimated fair values.
CORPORATE INFORMATION
Corporate Office
300 Primera Boulevard, Suite 432
Lake Mary, Florida 32746
(407) 875-2222
www.bairnco.com
Principal Facilities
Bear, Delaware
East Providence, Rhode Island
Northbrook, Illinois
Rancho Cucamonga, California
St. Louis, Missouri
San Antonio, Texas
Santa Ana, California
Gwent, Wales, United Kingdom
Paris, France
Pansdorf, Germany
Transfer Agent and Registrar
Trust Company Bank
P.O. Box 4625
Atlanta, Georgia 30302
(404) 588-7815
Independent Certified Public Accountants
Arthur Andersen LLP
200 South Orange Avenue, Suite 2100
Orlando, Florida 32801
(407) 841-4601
Stock Listing
Bairnco common stock is listed on the New York Stock Exchange.
Symbol - BZ.
Annual Meeting
The annual stockholders meeting will be held at Bairnco's Corporate Office
on April 21, 2000 at 9:00 a.m.
Form 10-K
Stockholders may obtain without charge a copy of Bairnco's Form 10-K filed
with the Securities and Exchange Commission by writing to Investor
Relations at the Corporate Office address.
Investor Relations Information
Contact James W. Lambert, Vice President Finance and Treasurer, Bairnco
Corporation
(407) 875-2222, extension 227.
BAIRNCO CORPORATION
300 Primera Boulevard, Suite 432
Lake Mary, Florida 32746
407-875-2222
FAX 407-875-3398
www.bairnco.com
</TABLE>
EXHIBIT 21
BAIRNCO CORPORATION AND SUBSIDIARIES
Subsidiaries of Registrant
as of March 27, 2000
Percentage State/Country of
Ownership Incorporation
Arlon, Inc. 100% Delaware
Kasco Corporation 100% Delaware
Bairnco Foreign Sales Corporation 100% Barbados
MII International, Inc. (1) 100% Delaware
Arlon Adhesives & Films, Inc. (1) 100% Texas
Arlon Partners, Inc. (1) 100% Delaware
Arlon Signtech, Ltd. (1) 100% Texas
Bertram & Graf Gmbh (1) 100% Germany
Atlantic Service Co. Ltd. (1) 100% Canada
Atlantic Service Co. (UK) Ltd. (1) 100% United Kingdom
EuroKasco S.A. (1) 100% France
(1) Indirect wholly-owned subsidiary of Bairnco Corporation.
EXHIBIT 23
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
TO BAIRNCO CORPORATION:
As independent certified public accountants, we hereby consent to
the incorporation of our reports included and incorporated by
reference in this Form 10-K, into the Company's previously filed
Registration Statements on Form S-8 (Files 33-36330 and 33-
41313).
Orlando, Florida
March 27, 2000
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION FROM BAIRNCO'S ANNUAL
REPORT TO SHAREHOLDERS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C> <C>
<PERIOD-TYPE> 3-MOS YEAR
<FISCAL-YEAR-END> DEC-31-1999 DEC-31-1999
<PERIOD-END> DEC-31-1999 DEC-31-1999
<CASH> 660,000 660,000
<SECURITIES> 0 0
<RECEIVABLES> 30,243,000 30,243,000
<ALLOWANCES> 1,136,000 1,136,000
<INVENTORY> 25,204,000 25,204,000
<CURRENT-ASSETS> 63,209,000 63,209,000
<PP&E> 101,672,000 101,672,000
<DEPRECIATION> 61,990,000 61,990,000
<TOTAL-ASSETS> 119,145,000 119,145,000
<CURRENT-LIABILITIES> 29,953,000 29,953,000
<BONDS> 26,591,000 26,591,000
0 0
0 0
<COMMON> 112,000 112,000
<OTHER-SE> 50,055,000 50,055,000
<TOTAL-LIABILITY-AND-EQUITY> 119,145,000 119,145,000
<SALES> 41,436,000 168,881,000
<TOTAL-REVENUES> 41,436,000 168,881,000
<CGS> 28,208,000 113,734,000
<TOTAL-COSTS> 28,208,000 113,734,000
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 506,000 2,104,000
<INCOME-PRETAX> 3,051,000 12,898,000
<INCOME-TAX> 1,007,000 4,257,000
<INCOME-CONTINUING> 2,044,000 8,641,000
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 2,044,000 8,641,000
<EPS-BASIC> 0.26 1.08
<EPS-DILUTED> 0.26 1.08
</TABLE>
SECURITIES 1AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 11-K
FOR ANNUAL REPORT OF EMPLOYEE STOCK PURCHASE, SAVINGS
AND SIMILAR PLANS PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
[X] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Commission file number: 33-41313
A. Full title of the plan and the address of the plan,
if different from that of the issuer named below:
Bairnco Corporation 401(k)
Savings Plan and Trust
B. Name of issuer of the securities held pursuant to
the plan and the address of its principal executive office:
Bairnco Corporation
300 Primera Boulevard, Suite 432
Lake Mary, Florida 32746
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Advisory Committee of
Bairnco Corporation 401(k) Savings Plan and Trust:
We have audited the accompanying statements of net assets available
for benefits of Bairnco Corporation 401(k) Savings Plan and Trust as
of December 31, 1999 and 1998, and the related statement of changes in
net assets available for benefits for the year ended December 31,
1999. These financial statements and the supplemental schedules
referred to below are the responsibility of the Plan's management.
Our responsibility is to express an opinion on these financial
statements and supplemental schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the net assets available for
benefits of the Plan as of December 31, 1999 and 1998, and the changes
in its net assets available for benefits for the year ended December
31, 1999, in conformity with generally accepted accounting principles.
Our audits were made for the purpose of forming an opinion on the
basic financial statements taken as a whole. The supplemental
schedules of reportable transactions, assets held for investment and
transactions with parties in interest are presented for purposes of
additional analysis and are not a required part of the basic financial
statements but are supplementary information required by the
Department of Labor's Rules and Regulations for Reporting and
Disclosure under the Employee Retirement Income Security Act of 1974.
The supplemental schedules have been subjected to the auditing
procedures applied in the audits of the basic financial statements
and, in our opinion, are fairly stated, in all material respects, in
relation to the basic financial statements taken as a whole.
/s/Arthur Andersen LLP
Orlando, Florida,
March 3, 2000
BAIRNCO CORPORATION
401(k) SAVINGS PLAN AND TRUST
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
AS OF DECEMBER 31, 1999 AND 1998
1999 1998
ASSETS
CASH $ 300,000 $ --
INVESTMENTS, at fair market value
(Notes 2 & 3)
Bairnco Corporation common stock fund 179,432 194,962
Mutual funds 8,698,207 5,131,997
Participant notes receivable 482,552 193,146
TOTAL INVESTMENTS 9,360,191 5,520,105
PARTICIPANTS' CONTRIBUTIONS RECEIVABLE 92,387 71,745
TOTAL ASSETS 9,752,578 5,591,850
NET ASSETS AVAILABLE FOR BENEFITS $ 9,752,578 $ 5,591,850
The accompanying notes are an integral part of these financial
statements.
BAIRNCO CORPORATION
401(k) SAVINGS PLAN AND TRUST
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
FOR THE YEAR ENDED DECEMBER 31, 1999
1999
NET ASSETS AVAILABLE FOR BENEFITS, beginning of year $ 5,591,850
ADDITIONS:
Participants' contributions (Note 1) 1,170,312
Interest and dividends 491,177
Net realized and unrealized appreciation on
investments (Note 2) 1,518,546
3,180,035
DEDUCTIONS:
Distributions 1,276,579
Administrative expenses 7,715
1,284,294
TRANSFER OF ASSETS FROM MERGED PLAN 2,264,987
NET INCREASE 4,160,728
NET ASSETS AVAILABLE FOR BENEFITS, end of year $ 9,752,578
The accompanying notes are an integral part of this financial
statement.
BAIRNCO CORPORATION
401(k) SAVINGS PLAN AND TRUST
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
1. PLAN DESCRIPTION:
The following description of the Bairnco Corporation 401(k)
Savings Plan and Trust (the "Plan") provides only general information.
Participants of the Plan should refer to the Plan document for a
complete description of the Plan's provisions. The Plan document is
available from Bairnco Corporation ("Bairnco" or the "Corporation") at
its offices in Lake Mary, Florida.
General
Bairnco established the Plan effective July 1, 1991. The Plan is
a defined contribution plan under which all full-time employees become
eligible for participation on the first day of the month following
completion of thirty days of service. Once an employee becomes
eligible for participation, salary deferrals (contributions) may
commence on any subsequent date. The Plan excludes non-resident
aliens, leased employees and independent contractors from
participating in the Plan. Union employees of the Corporation are
permitted to participate in the Plan. The Plan is subject to the
Department of Labor's Rules and Regulations for Reporting and
Disclosure under the Employee Retirement Income Security Act of 1974
("ERISA").
Effective October 31, 1998, Bairnco purchased MII International,
Inc. ("MII"). On December 11, 1998, Bairnco's Board of Directors
elected to merge the MII 401(k) plan into the Plan effective
January 1, 1999, at which time the employees of MII began
participating in the Plan. In February 1999, the MII 401(k) plan
assets were transferred to the Plan, resulting in an increase of
investments by $2,264,987.
Contributions
Under the terms of the Plan, allowable contributions are outlined
as follows:
Participant Contributions - The participants may elect to
defer a minimum of 1 percent and a maximum of 20 percent of
compensation, as defined in the Plan, not to exceed $10,000
for 1999. The maximum dollar amount that may be deferred is
adjusted annually by the Internal Revenue Service. The amount
of the compensation which is deferred, plus any earnings or
losses on that amount, is not subject to federal income tax
until the funds are actually distributed to the participant by
the Plan. However, contributions are subject to FICA (Social
Security and Medicare Taxes).
Employer Contributions - The Corporation does not match
elective deferrals pursuant to the Plan.
Participant Accounts
Each participant's account is credited with the participant's
contribution and allocations of Plan earnings or losses, and charged
with an allocation of administrative expenses. Allocations are based
on participant account balances, as defined in the Plan. The benefit
to which a participant is entitled is the amount that can be provided
from the participant's vested account.
Vesting
A participant shall at all times have a 100 percent
nonforfeitable interest in the value of his/her account attributable
to all contributions made plus or minus investment earnings and losses
thereon and related administrative costs.
Transfers From Other Qualified Plans
Participants who have an interest in any other qualified employee
benefit plan (as described in Section 401(a) of the Internal Revenue
Code) may transfer the distributions from these plans directly into
the Plan at the discretion of the Administrative Committee (see Note
4).
Distributions
A participant who has attained age 59-1/2 may elect, by filing a
written application with the Administrative Committee, to withdraw any
amount up to 100 percent of the vested portion of his/her account, for
any reason. For participants who have not attained age 59-1/2, the
reasons for such withdrawals are restricted to those defined in the
Plan.
Upon termination of employment, a participant can elect to have
the balance in the participant's account distributed to the
participant in a single lump sum cash distribution or a partial
distribution, if requested in writing by the participant. As an
alternative, the participant may also elect to leave the related funds
in the Plan or transfer the related funds into another qualified plan.
Participant Notes Receivable
An active participant may borrow from his/her account a minimum
of $1,000 up to a maximum equal to the lesser of (1) a total of
$50,000 of borrowings within one year or (2) 50 percent of the
participant's account balance.
Loan transactions are treated as transfers between the investment
fund and the participant notes receivable account. Loan terms range
from 1-5 years or up to 15 years for the purchase of a primary
residence. The loans are secured by the balance in the participant's
account and bear interest at the prime rate at the time of borrowing
plus 2 percent. During 1999, interest rates ranged from 9.75 percent
to 10.5 percent. Principal and interest are paid quarterly through
payroll deductions. As of December 31, 1999 and 1998, there were 84
and 61 loans outstanding, respectively.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Use of Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of
additions to and deductions from the net assets available for benefits
during the reporting period. Actual results could differ from those
estimates.
Basis Of Accounting
For the year ended December 31, 1999, the accounting records of
the Plan and the Plan's assets were maintained by Schwab Retirement
Plan Services, Inc. ("Schwab"), a subsidiary of the Charles Schwab
Corporation. The participants' account balances are determined on the
cash basis of accounting; however, the Plan's financial statements
contained herein are presented on the accrual basis.
Investment Valuation and Income Recognition
Investments are stated at fair market value. Securities which
are traded on a national securities exchange are valued at the last
reported sales price on the last business day of the year. Any
unlisted securities are valued at the bid price next preceding the
close of business on the valuation date. Participant notes receivable
are valued at cost, which approximates fair market value.
Any unrealized appreciation/depreciation on investments
represents the difference between fair market value of investments at
the beginning of the Plan year or when acquired, whichever is later,
and the fair market value of investments at the end of the Plan year.
Interest income is recognized on the accrual basis of accounting.
Administrative Expenses
Certain administrative expenses of the Plan are paid directly by
Bairnco on behalf of the Plan. During the year ended December 31,
1999, Bairnco paid administrative expenses of approximately $22,400.
Benefit Payments
Benefits are recorded when paid.
New Accounting Pronouncement
The Accounting Standards Executive Committee issued Statement of
Position 99-3, "Accounting For and Reporting of Certain Defined
Contribution Plan Investments and Other Disclosure Matters" (SOP 99-
3), which eliminates the requirement for a defined contribution plan
to disclose participant-directed investment options. SOP 99-3 was
adopted for the 1999 financial statements and, as such, the 1998
financial statements have been reclassified to eliminate the
participant-directed investment option disclosures.
3. INVESTMENTS:
There are currently eight investment options into which
participants may direct the investment of their accounts. These are
Invesco Strategic Technology Fund, Founders Growth Fund, Schwab 1000
Equity Fund, Strong Government Securities Fund, Schwab Retirement
Money Fund, Neuberger & Berman Partners Fund and Neuberger & Berman
Guardian Fund (collectively the "mutual funds"), and Bairnco
Corporation Common Stock Fund. Participants invest in units of
participation of the fund which represents an undivided interest in
the underlying assets of the fund. Participants may separately direct
the investment of future deferrals and existing account balances into
these eight investment options in increments of 5 percent.
Participants are permitted to modify their elections for future
deferrals and existing account balances between investment funds on a
daily basis.
Investments that represent 5 percent or more of the Plan's net assets
available for benefits, as of December 31, 1999 and 1998, are as
follows:
December 31,
1999 1998
Invesco Strategic Technology Fund $1,619,941 $ 476,615
Founders Growth Fund 1,950,554 844,891
Schwab 1000 Equity Fund 3,399,751 2,379,812
Strong Government Securities Fund 730,935 758,197
Schwab Retirement Money Fund 826,741 637,965
During 1999, the Plan's investments (including gains and losses on
investments bought, sold and held during the year) appreciated in
value $1,518,546, as follows:
Amount
Mutual Funds $1,544,469
Bairnco Corporation Common Stock Fund (25,923)
$1,518,546
4. TRUST AGREEMENT:
Schwab is the Plan's Trustee pursuant to the Plan document which is
signed by the Corporation and Plan Trustee. Schwab manages the Plan
assets and makes distributions to participants as directed by the
Administrative Committee of the Corporation (the "Plan
Administrator"). Expenses incurred by the Plan Trustee or the Plan
Administrator in the performance of their duties may be paid by the
Plan or the Corporation at the Corporation's discretion. During 1999,
all investment managers' fees were paid directly by the Plan.
5. PLAN TERMINATION:
Although it has not expressed any intent to do so, the Corporation
reserves the right under the Plan to terminate the Plan, in whole or
in part, at any time. In the event of the Plan's termination, the
Plan assets will be distributed to the participants in lump sum
distributions or transferred to another qualified plan at the
direction of the participant.
6. TRANSACTIONS WITH PARTIES IN INTEREST:
Under ERISA, the Plan is required to report investment
transactions with and compensation paid to a "party in interest". The
term "party in interest" is broadly defined but includes Bairnco as
the Plan's sponsor, Schwab, as Plan Trustee, and any person or
corporation which renders services to the Plan. Certain fees for
legal and accounting services provided in connection with the Plan
were paid by the Plan sponsor on behalf of the Plan during these years
and are not included in the accompanying financial statements.
Additional fees paid by the Plan during 1999 for services rendered by
parties in interest were based on rates which the Plan's Administrator
believes were customary and reasonable.
7. INCOME TAX STATUS:
The Plan obtained its latest determination letter on April 29,
1997, in which the Internal Revenue Service stated that the Plan, as
then designed, was in compliance with the applicable requirements of
the Internal Revenue Code. The plan administrator and legal counsel
believe that the Plan is currently being operated in compliance with
the applicable requirements of the Internal Revenue Code.
8. SUPPLEMENTAL SCHEDULES:
Supplemental Schedule I lists the reportable transactions of the Plan
for the year ended December 31, 1999. Purchases and sales are made at
fair market value on the date of transaction.
Supplemental Schedule II lists the Plan assets held for investment as
of December 31, 1999.
Supplemental Schedule III lists transactions with parties in interest
of the Plan for the year ended December 31, 1999.
SCHEDULE I
BAIRNCO CORPORATION
401(k) SAVINGS PLAN AND TRUST
SCHEDULE OF REPORTABLE TRANSACTIONS
FOR THE YEAR ENDED DECEMBER 31, 1999
Series of Transactions in excess
of 5 percent of the fair value Sales
of plan assets at the beginning Sales Sales Gain
of the year Purchases Cost Proceeds (Loss)
Invesco Strategic Technology Fund $ 656,092 $ 241,226 $ 318,299 $ 77,073
Founders Growth Fund 2,045,901 1,106,940 1,189,156 82,216
Schwab 1000 Equity Fund 1,554,323 842,662 1,100,007 257,345
Strong Government Securities Fund 374,849 358,821 354,485 (4,336)
Schwab Retirement Money Fund 1,120,240 931,464 931,464 --
Neuberger & Berman Guardian Fund 239,401 116,212 115,356 (856)
Participant Notes Receivable 399,098 109,692 109,692 --
Individual Transactions in excess
of 5 percent of the fair value
of plan assets at the beginning
of the year
Founders Growth Fund $1,089,174 $ 344,258 $ 381,956 $ 37,698
Schwab 1000 Equity Fund 708,012 233,313 254,883 21,570
Schwab Retirement Money Fund 639,820 300,000 300,000 --
The preceding notes are an integral part of this schedule.
SCHEDULE II
BAIRNCO CORPORATION
401(k) SAVINGS PLAN AND TRUST
SCHEDULE OF ASSETS HELD FOR INVESTMENT
AS OF DECEMBER 31, 1999
Fair Market
Description Value (Note 2) Cost
Bairnco Corporation Common Stock Fund:
Schwab Money Market Fund $ 764 $ 764
Bairnco Corporation Common Stock 178,668 192,439
Total Bairnco Corporation
Common Stock Fund 179,432 193,203
Mutual Funds:
Invesco Strategic Technology Fund 1,619,941 833,908
Founders Growth Fund 1,950,554 1,699,924
Schwab 1000 Equity Fund 3,399,751 2,232,997
Strong Government Securities Fund 730,935 757,985
Schwab Retirement Money Fund 826,741 826,741
Neuberger & Berman Partners Fund 61,778 69,167
Neuberger & Berman Guardian Fund 108,507 130,681
Total Mutual Funds 8,698,207 6,551,403
Other Investments:
Participant Notes Receivable 482,552 482,552
Total $9,360,191 $7,227,158
The preceding notes are an integral part of this schedule.
SCHEDULE III
BAIRNCO CORPORATION
401(k) SAVINGS PLAN AND TRUST
SCHEDULE OF TRANSACTIONS WITH PARTIES IN INTEREST
FOR THE YEAR ENDED DECEMBER 31, 1999
Description Amount
Sold 10,438.924 units of Bairnco Corporation Common
Stock between $2.435 and $7.50 per unit $ 71,714
Purchased 13,051.924 units of Bairnco Corporation Common
Stock between $5.0599 and $7.9239 per unit $ 82,755
The preceding notes are an integral part of this schedule.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Administrative Committee has duly caused this annual report to be
signed on its behalf by the undersigned hereunto duly authorized.
BAIRNCO CORPORATION 401(K)
SAVINGS PLAN AND TRUST
(Name of Plan)
Date: March 10, 2000 By: /s/ JAMES W. LAMBERT
JAMES W. LAMBERT
Administrative Committee Member
