1997 Q2 10-Q Q3 10-Q 1997

-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, GrRvy73xt+Lxm1JkBNRcZJ0sXAhLrJYbGHj+BBtZ07uhATwQ7LEZjXpZlTtZt9/m DhsVakd9orxm4X60geDqLg== 0000350750-05-000041.txt : 20051103 0000350750-05-000041.hdr.sgml : 20051103 20051103165618 ACCESSION NUMBER: 0000350750-05-000041 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20051001 FILED AS OF DATE: 20051103 DATE AS OF CHANGE: 20051103 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BAIRNCO CORP /DE/ CENTRAL INDEX KEY: 0000350750 STANDARD INDUSTRIAL CLASSIFICATION: PLASTICS, MATERIALS, SYNTH RESINS & NONVULCAN ELASTOMERS [2821] IRS NUMBER: 133057520 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-08120 FILM NUMBER: 051177614 BUSINESS ADDRESS: STREET 1: 300 PRIMERA BLVD STREET 2: STE 432 CITY: LAKE MARY STATE: FL ZIP: 32746 BUSINESS PHONE: 4078752222 MAIL ADDRESS: STREET 1: 300 PRIMERA BLVD STREET 2: STE 432 CITY: LAKE MARY STATE: FL ZIP: 32746 10-Q 1 q310q05.htm BAIRNCO CORPORATION 3RD QUARTER 10Q 1997 Q2 10-Q Q3 10-Q 1997

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

[X]	QUARTERLY EXCHANGE REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended October 1, 2005

[ ]	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number 1-8120

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 Boulevard, Suite 432, Lake Mary, FL 32746

(Address of principal executive offices) (Zip Code)

(407) 875-2222

(Registrant's telephone number, including area code)

(Former name, former address and former fiscal year, if changed since last report)

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

Indicate by check mark whether the Registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2). Yes __No X

(APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY

PROCEEDING DURING THE PRECEDING FIVE YEARS)

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13, or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.

Yes No X

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes __No X

(APPLICABLE ONLY TO CORPORATE ISSUERS)

Indicate the number of shares outstanding of each issuer's classes of common stock, as of the latest practicable date.

7,455,995 shares of Common Stock Outstanding as of October 21, 2005.

“Safe Harbor” Statement under the Private Securities Reform Act of 1995

Certain of the statements contained in this Quarterly Report (other than the financial statements and statements of historical fact), including, without limitation, statements as to management expectations and beliefs presented under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, 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, 2005 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 impact on production output and costs from the availability of energy sources and related pricing; changes in US or international economic or political conditions, such as the general level of economic activity, inflation or fluctuations in interest or foreign exchange rates; changes in the market for raw or packaging materials which could impact the Corporation’s manufacturing costs; changes in the pricing of the pro ducts of the Corporation or its competitors; changes in the product mix; production delays or inefficiencies; the ability to achieve anticipated revenue growth, synergies and other cost savings in connection with acquisitions or reorganizations; the market demand and acceptance of the Corporation’s existing and new products; the loss of a significant customer or supplier; the impact of competitive products; the costs and other effects of legal and administrative cases and proceedings, settlements and investigations; the costs and other effects of complying with environmental regulatory requirements; disruptions in operations due to labor disputes; and losses due to natural disasters where the Corporation is self-insured.

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 management’s discussion and analysis contained in its quarterly reports, the Corporation does not intend to review or revise any particular forward-looking statement referenced herein in light of future events.

PART I - FINANCIAL INFORMATION

Item 1:

FINANCIAL STATEMENTS

BAIRNCO CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

FOR THE QUARTERS ENDED OCTOBER 1, 2005 AND OCTOBER 2, 2004

(Unaudited)

	2005	2004
Net Sales	$ 39,668,000	$ 40,675,000
Cost of sales	29,111,000	29,142,000
Gross Profit	10,557,000	11,533,000
Selling and administrative expenses	10,189,000	10,156,000
Operating Profit	368,000	1,377,000
Interest expense, net	38,000	149,000
Income before income taxes	330,000	1,228,000
Provision for income taxes	115,000	368,000
Income from continuing operations	215,000	860,000
Income from spun off subsidiary	-	24,695,000
Net Income	$ 215,000	$ 25,555,000

Earnings per Share of Common Stock (Note 2):
Basic earnings per share from continuing operations	$ 0.03	$ 0.12
Basic earnings per share from spun off subsidiary	-	3.35
Basic earnings per share	$ 0.03	$ 3.47

Diluted earnings per share from continuing operations	$ 0.03	$ 0.11
Diluted earnings per share from spun off subsidiary	-	3.25
Diluted earnings per share	$ 0.03	$ 3.37

Weighted Average Number of Shares Outstanding:
Basic	7,346,000	7,368,000
Diluted	7,612,000	7,587,000

Dividends per Share of Common Stock	$ 0.06	$ 0.05

The accompanying notes are an integral part of these financial statements.

BAIRNCO CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

FOR THE NINE MONTHS ENDED OCTOBER 1, 2005 AND OCTOBER 2, 2004

(Unaudited)

	2005	2004
Net Sales	$123,878,000	$124,952,000
Cost of sales	88,039,000	88,678,000
Gross Profit	35,839,000	36,274,000
Selling and administrative expenses	31,549,000	30,829,000
Operating Profit	4,290,000	5,445,000
Interest expense, net	97,000	548,000
Income before income taxes	4,193,000	4,897,000
Provision for income taxes	1,467,000	1,652,000
Income from continuing operations	2,726,000	3,245,000
Income from spun off subsidiary	-	24,695,000
Net Income	$ 2,726,000	$ 27,940,000

Earnings per Share of Common Stock (Note 2):
Basic earnings per share from continuing operations	$ 0.37	$ 0.44
Basic earnings per share from spun off subsidiary	-	3.36
Basic earnings per share	$ 0.37	$ 3.80

Diluted earnings per share from continuing operations	$ 0.36	$ 0.43
Diluted earnings per share from spun off subsidiary	-	3.28
Diluted earnings per share	$ 0.36	$ 3.71

Weighted Average Number of Shares Outstanding:
Basic	7,379,000	7,355,000
Diluted	7,649,000	7,527,000

Dividends per Share of Common Stock	$ 0.18	$ 0.15

The accompanying notes are an integral part of these financial statements.

BAIRNCO CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

FOR THE QUARTERS ENDED OCTOBER 1, 2005 AND OCTOBER 2, 2004

(Unaudited)

(Note 3)

	2005	2004
Net income	$ 215,000	$25,555,000
Other comprehensive income:
Foreign currency translation adjustment	158,000	62,000
Comprehensive income	$ 373,000	$25,617,000

The accompanying notes are an integral part of these financial statements.

BAIRNCO CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

FOR THE NINE MONTHS ENDED OCTOBER 1, 2005 AND OCTOBER 2, 2004

(Unaudited)

(Note 3)

	2005	2004
Net income	$ 2,726,000	$27,940,000
Other comprehensive (loss):
Foreign currency translation adjustment	(875,000)	--
Comprehensive income	$ 1,851,000	$27,940,000

The accompanying notes are an integral part of these financial statements.

BAIRNCO CORPORATION AND SUBSIDIARIES

CONSOLIDATED CONDENSED BALANCE SHEETS

AS OF OCTOBER 1, 2005 AND DECEMBER 31, 2004

	2005 (Unaudited)	2004
ASSETS
Current Assets:
Cash and cash equivalents	$ 4,275,000	$ 3,451,000
Accounts receivable, less allowances of $1,435,000 and $1,546,000, respectively	25,357,000	24,912,000
Inventories	27,313,000	24,964,000
Deferred income taxes	4,418,000	3,518,000
Other current assets	3,612,000	4,184,000
Total current assets	64,975,000	61,029,000

Plant and equipment, at cost	118,962,000	117,234,000
Accumulated depreciation and amortization	(83,808,000)	(82,805,000)
Plant and equipment, net	35,154,000	34,429,000
Cost in excess of net assets of purchased businesses, net	14,454,000	14,542,000
Other assets	7,721,000	8,781,000
	$122,304,000	$ 118,781,000
LIABILITIES & STOCKHOLDERS' INVESTMENT
Current Liabilities:
Short-term debt	$ 3,598,000	$ 1,030,000
Current maturities of long-term debt	152,000	663,000
Accounts payable	10,887,000	10,601,000
Accrued expenses	9,757,000	10,515,000
Total current liabilities	24,394,000	22,809,000
Long-term debt	2,217,000	231,000
Deferred income taxes	10,115,000	9,741,000
Other liabilities	1,311,000	1,233,000
Commitments and contingencies (Notes 4 and 11)	--	--

Stockholders’ Investment (Note 8):
Preferred stock, par value $.01, 5,000,000 shares authorized, none issued	--	--
Common stock, par value $.01, authorized 30,000,000 shares; 11,610,432 and 11,562,682 shares issued, respectively; 7,455,995 and 7,524,813 shares outstanding, respectively	116,000	116,000
Paid-in capital	51,599,000	51,222,000
Retained earnings	66,357,000	64,984,000
Unearned Compensation	(550,000)	(442,000)
Accumulated Other Comprehensive Income (Loss)
Currency translation adjustment	2,818,000	3,693,000
Minimum pension liability adjustment, net of $3,500 tax	(61,000)	(61,000)
Treasury stock, at cost, 4,154,437 and 4,037,869 shares, respectively	(36,012,000)	(34,745,000)
Total stockholders’ investment	84,267,000	84,767,000
	$ 122,304,000	$ 118,781,000

The accompanying notes are an integral part of these financial statements.

BAIRNCO CORPORATION AND SUBSIDIARIES

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS

FOR THE NINE MONTHS ENDED OCTOBER 1, 2005 AND OCTOBER 2, 2004

(Unaudited)

	2005	2004
Cash Flows from Operating Activities:
Net Income	$ 2,726,000	$ 27,940,000
Adjustments to reconcile to net cash provided by
operating activities:
Depreciation and amortization	5,587,000	5,730,000
Loss on disposal of plant and equipment	46,000	142,000
Deferred income taxes	(555,000)	(670,000)
Change in current assets and liabilities, net of effect of acquisitions:
(Increase) in accounts receivable, net	(881,000)	(1,435,000)
(Increase) decrease in inventories	(2,860,000)	285,000
Decrease in other current assets	556,000	649,000
Increase in accounts payable	493,000	496,000
(Decrease) increase in accrued expenses	(159,000)	1,106,000
Other	793,000	934,000
Net cash provided by operating activities	5,746,000	35,177,000

Cash Flows from Investing Activities:
Capital expenditures	(6,209,000)	(3,794,000)
Proceeds from sale of plant and equipment	47,000	14,000
Payment for purchased businesses	(5,000)	(37,000)
Net cash (used in) investing activities	(6,167,000)	(3,817,000)

Cash Flows from Financing Activities:
Net increase (decrease) in short-term debt	2,672,000	(1,146,000)
Proceeds from long-term debt	3,500,000	4,500,000
Long-term debt repayments	(1,974,000)	(33,537,000)
Payment of dividends	(1,812,000)	(1,489,000)
Exercise of stock options	181,000	230,000
Repurchase treasury stock	(1,267,000)	--
Net cash provided by (used in) financing activities	1,300,000	(31,442,000)

Effect of foreign currency exchange rate changes on cash and cash equivalents	(55,000)	27,000
Net increase (decrease) in cash and cash equivalents	824,000	(55,000)
Cash and cash equivalents, beginning of period	3,451,000	796,000
Cash and cash equivalents, end of period	$ 4,275,000	$ 741,000

The accompanying notes are an integral part of these financial statements.

BAIRNCO CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

OCTOBER 1, 2005

(Unaudited)

(1)

Basis of Presentation

The accompanying consolidated condensed financial statements include the accounts of Bairnco Corporation and its subsidiaries (“Bairnco” or the “Corporation”) after the elimination of all material intercompany accounts and transactions.

The unaudited consolidated condensed financial statements included herein have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission for interim financial reporting. Certain financial information and note disclosures which are normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to those rules and regulations, although management believes that the disclosures made are adequate to make the information presented not misleading. Management believes the financial statements include all adjustments of a normal and recurring nature necessary to present fairly the results of operations for all interim periods present ed.

The quarterly financial statements should be read in conjunction with the December 31, 2004 audited consolidated financial statements. The consolidated results of operations for the quarter and nine month period ended October 1, 2005 are not necessarily indicative of the results of operations for the full year.

Reclassifications:

Certain reclassifications were made to prior year balances in order to conform to the current year presentation. These reclassifications had no effect on previously reported results of operations or stockholders’ investment.

New accounting pronouncements:

In November 2004, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards No. 151, Inventory Costs - an amendment of ARB No. 43, Chapter 4 (“SFAS 151”). SFAS 151 amends the guidance in ARB No. 43, Chapter 4, “Inventory Pricing,” to clarify the accounting for abnormal amounts of idle facility expense, freight, handling costs, and wasted material (spoilage). The statement was adopted effective January 1, 2005 and its provisions applied prospectively. The adoption of this statement had no impact on the Corporation’s financial position or results of operations for the quarter and nine month period ended October 1, 2005.

In December 2004, the FASB issued Statement of Financial Accounting Standards No. 123 (revised 2004), Share-Based Payment (“SFAS 123R”). This statement establishes standards for the accounting for transactions in which an entity exchanges its equity instruments for goods and services but focuses primarily on accounting for transactions in which an entity obtains employee services in share-based payment transactions. The statement, as issued, is effective as of the beginning of the first interim or annual reporting period that begins after June 15, 2005, although earlier adoption is encouraged. The SEC announced on April 14, 2005 that it would provide for a phased-in implementation process for SFAS 123R, allowing issuers to adopt the fair value provisions no later th an the beginning of the first fiscal year beginning after June 15, 2005. The Corporation has not yet determined what the impact on its financial position, results of operations or disclosures will be nor has it decided whether it will adopt the statement prior to the first quarter 2006.

In May 2005, the FASB issued Statement of Financial Accounting Standards No. 154, Accounting Changes and Error Corrections – a replacement of APB Opinion No. 20 and FASB Statement No. 3 (“SFAS 154”). SFAS 154 changes the requirements for the accounting for and reporting of a change in accounting principle. SFAS 154 applies to all voluntary changes in accounting principles, and applies to changes required by an accounting pronouncement in the unusual instance that the pronouncement does not include specific transition provisions. SFAS 154 requires retrospective application to prior period financial statements for a change in accounting principle. Previously, a change in accounting principle was recognized by including the change in net income in the period of the change. SFAS 154 is effective for fiscal years ending after December 15, 2005. We are currently reviewing SFAS 154, and at the current time do not believe that SFAS 154 will have a material impact on our financial position, results of operations or cash flows.

(2)

Earnings per Common Share

Earnings per share data is based on net income and not comprehensive income. Computations of earnings per share for the quarters and nine month periods ended October 1, 2005 and October 2, 2004 are included as Exhibit 11.1 and Exhibit 11.2 to this Quarterly Report on Form 10-Q.

Basic earnings per common share is computed by dividing net income by the weighted average number of common shares outstanding during the period. Diluted earnings per common share includes the effect of all dilutive stock options and restricted stock.

(3)

Comprehensive Income

Comprehensive income includes net income as well as certain other transactions shown as changes in stockholders’ investment. For the quarters and nine months ended October 1, 2005 and October 2, 2004, Bairnco's 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 U.S. dollars at varying exchange rates. Accumulated other comprehensive income consists of foreign currency translation adjustments and minimum pension liability adjustments. There are currently no tax expenses or benefits associated with the foreign currency translation adjustments.

(4)

Acquisitions

On January 10, 2001, Bairnco purchased selected net assets ("Viscor") of Viscor, Inc. The terms of Viscor's asset purchase agreement provide for additional consideration to be paid by Bairnco if Viscor's results of operations exceed certain targeted levels. Such additional consideration will be paid semi-annually in cash and is recorded when earned, by the achievement of certain targeted levels for the preceding six month period, as additional goodwill. The maximum amount of contingent consideration is approximately $4.5 million payable over the 5-year period ended December 31, 2005. The Corporation recorded additional goodwill of $5,000 as a result of contingent consideration earned during the nine months ended October 1, 2005. The cumulative additional consideration recor ded as goodwill is approximately $1.0 million through October 1, 2005.

(5)

Inventories

Inventories consisted of the following as of October 1, 2005 and December 31, 2004:

	2005	2004
Raw materials and supplies	$ 5,938,000	$ 5,210,000
Work in process	8,793,000	7,268,000
Finished goods	12,582,000	12,486,000
Total inventories	$ 27,313,000	$ 24,964,000

(6)

Accrued Expenses

Accrued expenses consisted of the following as of October 1, 2005 and December 31, 2004:

	2005	2004
Salaries and wages	$ 2,036,000	$ 2,404,000
Income taxes	175,000	624,000
Insurance	2,657,000	2,709,000
Other accrued expenses	4,889,000	4,778,000
Total accrued expenses	$ 9,757,000	$ 10,515,000

Accrued expenses-insurance: The Corporation's U.S. insurance programs for general liability, automobile liability, workers compensation and certain employee related health care benefits are effectively self-insured. Claims in excess of self-insurance levels are fully insured. Accrued expenses-insurance represents the estimated costs of known and anticipated claims under these insurance programs. 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.

(7)

Stock Incentive Plan

The Corporation accounts for stock options using the intrinsic value method of accounting in accordance with Accounting Principles Board Opinion No. 25 (“APB 25”). Accordingly, no compensation expense has been recognized for stock options granted under any of our stock plans as the exercise price of all options granted was equal to the current market value of our stock on the grant date. Statement of Financial Accounting Standards No. 123, Accounting for Stock-Based Compensation (“SFAS 123”), 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 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.

On December 31, 2002, the FASB issued Statement of Financial Accounting Standards No. 148, Accounting for Stock-Based Compensation-Transition and Disclosure (“SFAS 148”). SFAS 148 amends SFAS 123 to provide alternative methods of transition to SFAS 123’s fair value method of accounting for stock-based employee compensation. SFAS 148 also amends the disclosure provisions of SFAS 123 to require disclosure of the effects of an entity’s accounting policy with respect to stock-based employee compensation on reported earnings in interim financial statements. The disclosure provisions of SFAS 148 are applicable to all companies with stock-based employee compensation. SFAS 148 is effective for fiscal years ending after December 15, 2002.

The Corporation adopted the disclosure provisions of SFAS 148 as of December 31, 2002. In preparing these disclosures, the Corporation determined the values using the Black Scholes model based on the following assumptions:

	For the Quarter Ended
	October 1, 2005	October 2, 2004
Expected Life	5.0 years	6.4 years
Volatility	27.2%	28.1%
Risk-free interest rate	4.5%	4.5%
Dividend yield	2.18%	3.27%

Had SFAS 123 been implemented, the Corporation’s net income and earnings per share would have been reduced to the amounts indicated below for the quarters and nine months ended October 1, 2005 and October 2, 2004, respectively:

	Quarter Ended			Nine Months Ended
	Oct 1, 2005	Oct 2, 2004	Oct 1, 2005		Oct 2, 2004
Net Income, as reported	$215,000	$25,555,000	$2,726,000		$27,940,000
Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax effects	(12,000)	(10,000)	(31,000)		(29,000)
Net Income, pro forma	$203,000	$25,545,000	$2,695,000		$27,911,000
Basic Earnings per Share:
As reported	$ 0.03	$ 3.47	$ 0.37		$ 3.80
Pro forma	$ 0.03	$ 3.47	$ 0.37		$ 3.79
Diluted Earnings per Share:
As reported	$ 0.03	$ 3.37	$ 0.36		$ 3.71
Pro forma	$ 0.03	$ 3.37	$ 0.35		$ 3.71

(8)

Stockholders’ Investment

Pursuant to the January 2005 and prior authorizations of the Board of Directors, the Corporation had total funds available for stock repurchases at the beginning of 2005 of approximately $5.7 million to repurchase common stock in accordance with applicable securities regulations. The Corporation repurchased 86,568 shares of common stock for $938,000 plus commissions of $6,000 during the third quarter ended October 1, 2005. As of October 1, 2005, the Corporation’s cumulative repurchases for 2005 amounted to 116,568 shares of common stock. Total funds available for stock repurchases as of October 1, 2005 were approximately $4.4 million.

(9)

Pension Plans

Net periodic pension cost for the U.S. plans included the following for the quarters and nine months ended October 1, 2005 and October 2, 2004:

	Quarter Ended		Nine Months Ended
	Oct 1, 2005	Oct 2, 2004	Oct 1, 2005	Oct 2, 2004

Service cost-benefits earned during the year	$ 276,000	$ 255,000	$ 789,000	$ 765,000
Interest cost on projected benefit obligation	571,000	597,000	1,921,000	1,792,000
Expected return on plan assets	(757,000)	(764,000)	(2,493,000)	(2,292,000)
Amortization of net obligation at date of transition	--	8,000	--	24,000
Amortization of prior service cost	5,000	12,000	50,000	37,000
Amortization of accumulated losses	134,000	167,000	462,000	500,000
Curtailment loss	--	--	93,000	--
Net periodic pension cost	$ 229,000	$ 275,000	$ 822,000	$ 826,000

During the fourth quarter of 2005 the Corporation expects to contribute at a minimum its expected 2005 pension expense of $1.0 million although contributions could be as high as $3.0 million depending on the fluctuations in the plan’s discount rate for calculating benefit obligations and the actual return on assets through the measurement date.

(10)

Reportable Segment Data

Bairnco’s segment disclosures are prepared in accordance with Statement of Financial Accounting Standards No. 131, Disclosures about Segments of an Enterprise and Related Information (“SFAS 131”). There are no differences to the 2004 annual report in the basis of segmentation or in the basis of measurement of segment profit or loss included herein. Financial information about the Corporation’s operating segments for the quarters and nine months ended October 1, 2005 and October 2, 2004 as required under SFAS 131 is as follows:

	Quarters		Nine Month Periods
	Net Sales	Operating Profit (Loss)	Net Sales	Operating Profit (Loss)
October 1, 2005
Arlon Electronic Materials	$12,823,000	$1,414,000	$39,292,000	$4,758,000
Arlon Coated Materials	16,438,000	(33,000)	51,858,000	2,004,000
Kasco	10,407,000	(172,000)	32,728,000	86,000
Headquarters	--	(841,000)	--	(2,558,000)
	$39,668,000	$368,000	$123,878,000	$4,290,000

October 2, 2004
Arlon Electronic Materials	$11,874,000	$ 1,300,000	$39,314,000	$5,145,000
Arlon Coated Materials	18,367,000	539,000	54,303,000	2,177,000
Kasco	10,434,000	382,000	31,335,000	975,000
Headquarters	--	(844,000)	--	(2,852,000)
	$40,675,000	1,377,000	$124,952,000	$5,445,000

The total assets of the segments as of October 1, 2005 and December 31, 2004 are as follows:

	2005	2004

Arlon EM	$ 27,389,000	$ 24,283,000
Arlon CM	47,364,000	46,262,000
Kasco	31,919,000	30,290,000
Headquarters	15,632,000	17,946,000
	$ 122,304,000	$ 118,781,000

(11)

Income Taxes

The American Jobs Creation Act of 2004 (the “Act”) signed into law in October 2004 created an incentive for the Company to repatriate accumulated income earned outside the US at an effective tax rate of 5.25%. With respect to un-remitted earnings of foreign subsidiaries, management intends to distribute amounts to the extent possible under the Act, where it is advantageous from a tax standpoint.

During the fourth quarter of 2005, the Company intends to finalize its plan for repatriation of un-remitted foreign earnings under the Act. The Company is currently considering repatriating up to $1,000,000 of previously un-remitted earnings from its German and Canadian subsidiaries. The tax effects of such a dividend would be an increase in the tax provision of approximately $40,000 and an increase in deferred tax assets of approximately $60,000. The Company intends to provide the deferred taxes required under SFAS 109 related to any dividends repatriated during the fourth quarter of 2005 once the plan has been approved.

On October 6, 2005, the Company’s U.K. subsidiary paid a dividend of $615,800. During the first quarter of 2006, the Company intends to repatriate another $1,000,000 from its U.K. subsidiary. These amounts will not be distributed under the Act as they are being paid out of a pool of previously taxed income for which the related deferred taxes under SFAS 109 were recognized in prior periods.

Through October 1, 2005, the Company has not provided deferred taxes on any remaining undistributed foreign earnings (excludes amounts for the UK subsidiary discussed above) because such accumulated earnings are intended to be indefinitely reinvested outside the US. To the extent earnings of international subsidiaries were to become subject to additional US tax, the Company believes that US foreign tax credits would largely eliminate any US income tax incurred.

(12)

Contingencies

Bairnco Corporation and its subsidiaries are defendants in a limited number of pending actions. Management of Bairnco believes that the disposition of these actions will not have a material adverse effect on the consolidated results of operations or the financial position of Bairnco and its subsidiaries as of October 1, 2005.

Item 2:

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS

The following discussion should be read in conjunction with the accompanying Consolidated Condensed Financial Statements and related notes and with Bairnco's Audited Consolidated Financial Statements and related notes for the year ended December 31, 2004.

Bairnco Corporation is a diversified multinational company that operates two distinct businesses under the names Arlon and Kasco.

Arlon’s two segments are Electronic Materials and Coated Materials which design, manufacture and sell products under the Arlon brand identity to electronic, industrial and commercial markets. Arlon products are based on common technologies in coating, laminating, polymers and dispersion chemistry.

Replacement products and services are manufactured and distributed under the Kasco name principally to retail food stores, meat and deli operations, and meat, poultry and fish processing plants throughout the United States, Canada and Europe. The principal products include replacement band saw blades for cutting meat, fish, wood and metal, and on site maintenance services primarily in the meat and deli departments. In Canada and France, in addition to providing its replacement products, Kasco also sells equipment to the supermarket and food processing industries. These products are sold under a number of brand names including Kasco in the United States and Canada, Atlantic Service in the United Kingdom, and Bertram & Graf and Biro in Continental Europe.

Comparison of Third Quarter 2005 to Third Quarter 2004

Sales in the third quarter 2005 decreased 2.5% to $39,668,000 from $40,675,000 in 2004. Arlon's Electronic Materials sales increased 8.0% due primarily to increased activity in the wireless telecommunications markets. Arlon’s Coated Materials sales were lower by 10.5% as foreign sales and certain automotive and industrial markets have remained weak. Kasco's sales increased 0.7% from the third quarter 2004 due to continued growth in North American service and repair revenue as well as improved U.S. export markets. Kasco’s European sales were down 6.9%, primarily the result of weakness in the French market.

Gross profit decreased 8.5% to $10,557,000 from $11,533,000 on lower sales and production volumes, higher relocation and closing costs in the third quarter of 2005 versus 2004, and certain operating inefficiencies which continued at Arlon Coated Materials’ San Antonio facility. The gross profit margin as a percent of sales decreased to 26.6% from 28.4%. The third quarter 2005 gross profit was reduced by $457,000 related primarily to relocation costs of Kasco’s US manufacturing operations to Mexico. The third quarter 2004 gross profit was reduced by $263,000 from relocation and closing expenses related to the consolidation of Arlon’s Coated Material’s businesses.

Selling and administrative expenses increased slightly to $10,189,000 in 2005 as compared to $10,156,000 in 2004. As a percent of sales, selling and administrative expenses increased from 25.0% in 2004 to 25.7% in 2005. 2005 includes $83,000 of increased expenses related to the development of the new China plant.

Net interest expense was $38,000 in 2005 as compared to $149,000 in 2004 due to the reduced outstanding borrowings.

The effective tax rate for the third quarter 2005 was 35.0% compared to 30.0% in 2004. Income from continuing operations was $215,000 as compared to $860,000 in the third quarter of 2004. Diluted earnings per common share from continuing operations decreased to $.03 from $.11 in 2004.

Net income for the third quarter 2004 was $25,555,000 reflecting the impact of the $24,695,000 contingent asset settlement of the NOL Lawsuit. Diluted earnings per share of common stock from the settlement was $3.25 for the quarter ended October 2, 2004.

Comparison of First Nine Months 2005 to First Nine Months 2004

Sales for the first nine months of 2005 were down $1,074,000 to $123,878,000 from $124,952,000 in 2004 due primarily to the weak third quarter.

Gross profit decreased 1.2% to $35,839,000 from $36,274,000 due to lower third quarter sales and certain operating efficiencies at Arlon Coated Materials’ San Antonio facility. For the first nine months of 2005 gross profit was reduced by $1,019,000 related primarily to relocation costs of Kasco’s US manufacturing operations to Mexico. The first nine months of 2004 gross profit was reduced by $1,089,000 from relocation and closing expenses related to the consolidation of Arlon’s Coated Material’s businesses.

Selling and administrative expenses increased 2.3% to $31,549,000 from $30,829,000. As a percent of sales, selling and administrative expenses increased from 24.7% in 2004 to 25.5% in 2005. 2005 includes $316,000 of increased expenses related to the development of the new China plant.

Income from continuing operations decreased 16.0% to $2,726,000 from $3,245,000 and diluted earnings per share from continuing operations decreased 16.3% to $.36 from $.43 in 2004. Net income for the first nine months of 2004 was $27,940,000 reflecting the impact of the $24,695,000 settlement of the NOL Lawsuit.

Operation Developments

Kasco successfully completed the transition of the majority of its production and equipment to Mexico and was in full operation by the end of the third quarter. The costs of relocation in the third quarter were $435,000 versus the forecast of $400,000. These costs, which are included in cost of sales, bring the total project costs to $905,000 for the first nine months of 2005. Fourth quarter relocation costs are expected to be less than $100,000. Total capital expenditures related to the relocation were $84,000 in the third quarter bringing the total capital expenditures for Mexico to $852,000 through nine months. Fourth quarter capital expenditures are expected to be minimal.

The China manufacturing facility continued to progress although the majority of plant development costs will now be in early 2006 due to the delay in permitting and licensing. Organizational costs of $105,000 were incurred in the third quarter of which $22,000 is reflected in cost of sales and $83,000 in selling and administrative expenses. Organizational and start up expenses of $188,000 are estimated to be incurred in the fourth quarter 2005. Total organizational and start up expenses are estimated at $618,000 for 2005. Capital expenditures of $506,000 were incurred in the third quarter and are estimated at $1.7 million in the fourth quarter of 2005. Total capital expenditures for the new plant and equipment are at $2.0 million through nine months and are estimated at $3.8 million for 2005.

Arlon Coated Materials’ San Antonio facility remained substantially below expected performance levels. Plant level gross margin was a loss of approximately $300,000 versus an expected profit of $300,000 due to poor production scheduling, increased scrap, inefficient labor and increased raw material costs. Management was changed and signs of improvement were evident by the end of September and meaningful improvement is expected over the next six months.

Dividend and Stock Repurchases

The third quarter cash dividend of $.06 per share was paid on September 30, 2005 to stockholders of record on September 6, 2005. During the third quarter Bairnco repurchased 86,568 shares of its common stock at a total cost of $944,000 leaving approximately $4.4 million that has been approved but unused for stock repurchases.

Liquidity and Capital Resources

At October 1, 2005, Bairnco had working capital of $40.6 million compared to $38.2 million at December 31, 2004. Accounts receivable increased with the higher September 2005 sales versus December 2004 sales. The increase in inventory partially reflects a build for sales that did not materialize in the third quarter but also planned increases on certain scarce raw materials that became available.

During the first quarter the Board authorized an additional $5,000,000 as available for management to continue its stock repurchase program in 2005 subject to market conditions and the capital requirements of the business. The total available for stock repurchases in 2005 was $5.7 million. For the nine months ended October 1, 2005, net cash flows used by financing activities included the repurchase of 116,568 shares of stock for $1,267,000. No shares were repurchased during the nine month period ended October 2, 2004.

At October 1, 2005, Bairnco’s total debt outstanding was $5,967,000 compared to $1,924,000 at the end of 2004. At October 1, 2005, approximately $14.8 million was available for borrowing under the Corporation's Credit Agreement. Approximately $2.3 million was also available under various short-term domestic and foreign uncommitted credit facilities.

Bairnco made $1,329,000 and $6,209,000, respectively, of capital expenditures during the third quarter and first nine months of 2005. Total capital expenditures for 2005 are expected to approximate $10.1 million.

Business Outlook

Operating results for the fourth quarter are currently expected to be improved over the third quarter but below last year’s fourth quarter. Relocation, new plant and associated costs are estimated to be $300,000 versus a negligible amount in the same quarter last year. The demand for graphic material from foreign markets remains subdued and there is no evidence of a near term recovery in the fourth quarter. The weak economy in France combined with the drop in consumption of meat products and weak demand for equipment from food processors is expected to continue into the fourth quarter. Improvements are expected in San Antonio in the fourth quarter. Last year in the fourth quarter our tax rate was approximately 28% versus an expected 35% this year.

Continuous improvement programs are ongoing and new product development programs will be maintained to grow our business and meet the needs of our customers.

Cash generation from operations is expected to fund the majority of our operating and capital expenditures needs in the fourth quarter. Bairnco remains in strong financial condition.

We continue to actively look for sensible acquisitions that fit with our existing businesses.

Bairnco management is not aware of any adverse trends that would materially affect the Corporation’s financial position.

Item 3:

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Impact of Interest Rates

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 October 1, 2005 would change interest expense and hence change net income of the Corporation by approximately $39,000 per year.

The following table summarizes the principal cash outflows of the Corporation's financial instruments outstanding at October 1, 2005, categorized by type of instrument and by year of maturity. There have been no changes in market risk factors for the quarter ended October 1, 2005.

	2005	2006	2007	2008	2009	Total	Fair Value
Short Term Debt	3,598	-	-	-	-	3,598	3,598
Long Term Debt:
Long Term Debt - Revolving line of credit (interest @ 3.11% - 4.875%)	-	-	-	2,119	-	2,119	2,119
Note Payable	-	100	100	-	-	200	197
Foreign Loan Facility	18	35	-	-	-	53	53

Effect of Inflation

General inflation had minimal impact on Bairnco's operating results during 2003 and 2004. During the fourth quarter 2004, deflation stopped and material prices for 2005 began increasing. The trend has continued into 2005. In most instances Bairnco has been able to increase selling prices to offset these material cost increases. However, there are certain cases where the Company has not been able to pass along the material cost increases and retain the business. In these instances, selling prices, margins and volumes have been negatively impacted by the inflationary factors.

Impact of Foreign Currency Exchange Rates

The Corporation’s sales denominated in a currency other than U.S. dollars were approximately 19.5% and 18.4% of total sales for the quarter and nine month period ended October 1, 2005, respectively. Net assets maintained in a functional currency other than U.S. dollars at October 1, 2005 were approximately 13.4% of total net assets. The translation effect of changes in foreign currency exchange rates on the Corporation's revenues, earnings and net assets maintained in a functional currency other than U.S. dollars has not historically been significant. At October 1, 2005, a 10% weaker U.S. dollar against the currencies of all foreign countries in which the Corporation had operations would have increased revenues by $628,000 and $2,012,000 and increased operating profit by $ 26,000 and $100,000 for the quarter and nine month period ended October 1, 2005, respectively. A 10% stronger U.S. dollar would have resulted in similar decreases to revenues and operating profit.

Item 4:

CONTROLS AND PROCEDURES

Limitations on the Effectiveness of Controls

Our management, including our Chief Executive Officer, or CEO, and Chief Financial Officer, or CFO, does not expect that our Disclosure Controls or Internal Controls will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs.

Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within our company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people or by management override of the control. The design of any system of controls also is based partly on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.

Notwithstanding the foregoing limitations, we believe that our Disclosure Controls and Internal Controls provide reasonable assurances that the objectives of our control system are met.

Quarterly Evaluation of the Company’s Disclosure Controls and Internal Controls

As of the end of the fiscal quarter ended October 1, 2005, the Corporation carried out an evaluation, under the supervision and with the participation of the Corporation’s management, including the Corporation’s CEO and CFO, of the effectiveness of the design and operation of the Corporation’s disclosure controls and procedures (as defined in Rule 13a-15(e) of the Securities Exchange Act of 1934 (the “Exchange Act”)). Based upon that evaluation, the CEO and CFO concluded that the Corporation’s disclosure controls and procedures are effective in timely alerting them to material information relating to the Corporation (including its consolidated subsidiaries) required to be included in the Corporation’s Exchange Act filings.

There have been no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act) that occurred during the quarter ended October 1, 2005 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II - OTHER INFORMATION

Item 1:

LEGAL PROCEEDINGS

Item 2:

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

During the first quarter the Board authorized an additional $5,000,000 as available for management to continue its stock repurchase program in 2005 subject to market conditions and the capital requirements of the business. The total available for stock repurchases was approximately $5.3 million at the start of the third quarter. The table below provides information concerning our repurchase of shares of our common stock during the quarter ended October 1, 2005.

Period	Total Number of Shares Purchased (1)	Average Price Paid per Share	Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Maximum Number of Shares that May Yet be Purchased Under the Plans or Programs (2)
July 3, 2005 to July 30, 2005	-	-	-	485,713
July 31, 2005 to August 27, 2005	62,550	$10.74	62,550	409,357
August 28, 2005 to October 1, 2005	24,018	11.08	24,018	411,515
Total	86,568	$10.83	86,568	411,515

(1)

All of the shares purchased during the third quarter ended October 1, 2005 were purchased under the Board-approved repurchase program.

(2)

The maximum number of shares that may yet be purchased under the program was calculated as the remaining funds available for the repurchase at the end of each fiscal month divided by the closing stock price on the last day of the fiscal month.

Item 3:

DEFAULTS UPON SENIOR SECURITIES

None.

Item 4:

SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.

Item 5:

OTHER INFORMATION

None.

Item 6(a):

EXHIBITS

Exhibit 11.1 - Calculation of Basic and Diluted Earnings per Share for the Quarters ended October 1, 2005 and October 2, 2004.

Exhibit 11.2 – Calculation of Basic and Diluted Earnings per Share for the Nine Months ended October 1, 2005 and October 2, 2004.

Exhibit 31.1 – Certification of Luke E. Fichthorn III pursuant to Section 302 of the Sarbanes-Oxley act of 2002

Exhibit 31.2 – Certification of Kenneth L. Bayne pursuant to Section 302 of the Sarbanes-Oxley act of 2002

Exhibit 32.1 – Certification of Luke E. Fichthorn III pursuant to Section 906 of the Sarbanes-Oxley act of 2002

Exhibit 32.2 – Certification of Kenneth L. Bayne pursuant to Section 906 of the Sarbanes-Oxley act of 2002

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, Bairnco has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

BAIRNCO CORPORATION

Luke E. Fichthorn, III

Chairman &

Chief Executive Officer

Kenneth L. Bayne

VP of Finance &

Chief Financial Officer

DATE: November 3, 2005

EXHIBITS

TO FORM 10-Q

FOR QUARTER ENDED

OCTOBER 1, 2005

EX-11 3 exhibit11.htm EARNINGS PER SHARE 1997 Q2 10-Q Q3 10-Q 1997

EXHIBIT 11.1

BAIRNCO CORPORATION AND SUBSIDIARIES

CALCULATION OF BASIC AND DILUTED EARNINGS PER SHARE

FOR THE QUARTERS ENDED OCTOBER 1, 2005 AND OCTOBER 2, 2004

(Unaudited)

	2005	2004
BASIC EARNINGS PER COMMON SHARE:

Income from continuing operations	$ 215,000	$ 860,000
Income from spun off subsidiary, net of tax	-	24,695,000
Net income	$ 215,000	$ 25,555,000

Average common shares outstanding	7,346,000	7,368,000

Basic earnings per share from continuing operations	$ 0.03	$ 0.12
Basic earnings per share from spun off subsidiary	-	3.35
Basic earnings per share	$ 0.03	$ 3.47

DILUTED EARNINGS PER COMMON SHARE:

Income from continuing operations	$ 215,000	$ 860,000
Income from spun off subsidiary, net of tax	-	24,695,000
Net income	$ 215,000	$ 25,555,000

Average common shares outstanding	7,346,000	7,368,000
Dilutive effect of restricted stock	79,000	61,000
Common shares issuable in respect to options issued to employees with a dilutive effect	187,000	158,000
Total diluted common shares outstanding	7,612,000	7,587,000

Diluted earnings per share from continuing operations	$ 0.03	$ 0.11
Diluted earnings per share from spun off subsidiary	-	3.25
Diluted earnings per share	$ 0.03	$ 3.37

EXHIBIT 11.2

BAIRNCO CORPORATION AND SUBSIDIARIES

CALCULATION OF BASIC AND DILUTED EARNINGS PER SHARE

FOR THE NINE MONTHS ENDED OCTOBER 1, 2005 AND OCTOBER 2, 2004

(Unaudited)

	2005	2004
BASIC EARNINGS PER COMMON SHARE:

Income from continuing operations	$ 2,726,000	$ 3,245,000
Income from spun off subsidiary, net of tax	-	24,695,000
Net income	$ 2,726,000	$ 27,940,000

Average common shares outstanding	7,379,000	7,355,000

Basic earnings per share from continuing operations	$ 0.37	$ 0.44
Basic earnings per share from spun off subsidiary	-	3.36
Basic Earnings Per Common Share	$ 0.37	$ 3.80

DILUTED EARNINGS PER COMMON SHARE:

Income from continuing operations	$ 2,726,000	$ 3,245,000
Income from spun off subsidiary, net of tax	-	24,695,000
Net income	$ 2,726,000	$ 27,940,000

Average common shares outstanding	7,379,000	7,355,000
Dilutive effect of restricted stock	79,000	57,000
Common shares issuable in respect to options issued to employees with a dilutive effect	191,000	115,000
Total diluted common shares outstanding	7,649,000	7,527,000

Diluted earnings per share from continuing operations	$ 0.36	$ 0.43
Diluted earnings per share from spun off subsidiary	-	3.28
Diluted Earnings Per Common Share	$ 0.36	$ 3.71

EX-31 4 exhibit31.htm 302 CERTIFICATIONS 1997 Q2 10-Q Q3 10-Q 1997

EXHIBIT 31.1

CERTIFICATION

I, Luke E. Fichthorn, III, certify that:

I have reviewed this quarterly report on Form 10-Q of Bairnco Corporation;

Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the company as of, and for, the periods presented in this report;

The company's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the company and we have:

designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

[Reserved]

evaluated the effectiveness of the company's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

disclosed in this report any change in the company’s internal control over financial reporting that occurred during the company’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the company’s internal control over financial reporting; and

The company's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the company's auditors and the audit committee of the company's board of directors:

all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the company's ability to record, process, summarize and report financial information; and

any fraud, whether or not material, that involves management or other employees who have a significant role in the company's internal control over financial reporting.

Date:

November 3, 2005

/s/ Luke E. Fichthorn, III _

Luke E. Fichthorn, III

Chairman & Chief Executive Officer

EXHIBIT 31.2

CERTIFICATION

I, Kenneth L. Bayne, certify that:

I have reviewed this quarterly report on Form 10-Q of Bairnco Corporation;

[Reserved]

any fraud, whether or not material, that involves management or other employees who have a significant role in the company's internal control over financial reporting.

Date:

November 3, 2005

/s/ Kenneth L. Bayne

Kenneth L. Bayne

VP of Finance & Chief Financial Officer

EX-32 5 exhibit32.htm 906 CERTIFICATIONS 1997 Q2 10-Q Q3 10-Q 1997

EXHIBIT 32.1

CERTIFICATION PURSUANT TO SECTION 906

OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Bairnco Corporation (the “Corporation”) on Form 10-Q for the fiscal quarter ended October 1, 2005 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Luke E. Fichthorn III, Chairman & Chief Executive Officer of the Corporation, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that:

The Report fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934; and

The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

/s/ Luke E. Fichthorn, III

Luke E. Fichthorn, III

Chairman &

Chief Executive Officer

EXHIBIT 32.2

CERTIFICATION PURSUANT TO SECTION 906

OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Bairnco Corporation (the “Corporation”) on Form 10-Q for the fiscal quarter ended October 1, 2005 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Kenneth L. Bayne, VP of Finance & Chief Financial Officer of the Corporation, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that:

The Report fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934; and

The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

/s/ Kenneth L. Bayne

Kenneth L. Bayne

VP of Finance &

Chief Financial Officer

EX-99 6 exhibit99.htm AMENDED CREDIT AGREEMENTE <B>PROMISSORY NOTE

THIS ALTERNATIVE CURRENCY PROMISSORY NOTE RESTATES AND MODIFIES THE EVIDENCE OF INDEBTEDNESS PURSUANT TO THE THIRD AMENDED AND RESTATED CREDIT AGREEMENT AS AMENDED, AND THAT CERTAIN PROMISSORY NOTE IN THE ORIGINAL AMOUNT OF $10,000,000.00, EACH DATED AS OF MAY 20, 2005, UPON WHICH DOCUMENTARY STAMP TAX WAS PAID.

ALTERNATIVE CURRENCY PROMISSORY NOTE

SEPTEMBER 28, 2005

$1,200,000

FOR VALUE RECEIVED, the undersigned (the “Borrower”) hereby promises to pay to Wachovia Bank, National Association, or registered assigns (the “Lender”), in accordance with the provisions of the Agreement (as hereinafter defined), the principal amount of each Loan from time to time made by the Lender to the Borrower under that certain Third Amended and Restated Credit Agreement, dated as of May 20, 2005 (as amended, restated, extended, supplemented or otherwise modified in writing from time to time, the “Agreement;” the terms defined therein being used herein as therein defined), among Bairnco Corporation, certain of its Subsidiaries, the Lenders from time to time party thereto, and Bank of America, N.A., as Administrative Agent, L/C Issuer and Swing Line Lender.

The Borrower promises to pay interest on the unpaid principal amount of each Loan from the date of such Loan until such principal amount is paid in full, at such interest rates and at such times as provided in the Agreement. All payments of principal and interest shall be made to the Administrative Agent for the account of the Lender in the currency in which such Committed Loan was denominated and in Same Day Funds at the Administrative Agent’s Office for such currency. If any amount is not paid in full when due hereunder, such unpaid amount shall bear interest, to be paid upon demand, from the due date thereof until the date of actual payment (and before as well as after judgment) computed at the per annum rate set forth in the Agreement.

This Note is one of the Notes referred to in the Agreement, is entitled to the benefits thereof and may be prepaid in whole or in part subject to the terms and conditions provided therein. This Note is also entitled to the benefits of the Guaranties. Upon the occurrence and continuation of one or more of the Events of Default specified in the Agreement, all amounts then remaining unpaid on this Note shall become, or may be declared to be, immediately due and payable all as provided in the Agreement. Loans made by the Lender shall be evidenced by one or more loan accounts or records maintained by the Lender in the ordinary course of business. The Lender may also attach schedules to this Note and endorse thereon the date, amount, currency and maturity of its Loans and payments with respect thereto.

The Borrower, for itself, its successors and assigns, hereby waives diligence, presentment, protest and demand and notice of protest, demand, dishonor and non-payment of this Note.

THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF FLORIDA.

ATLANTIC SERVICE CO. (UK) LTD.

By:

Name: Lawrence C. Maingot

Title: Director

BERTRAM & GRAF GMBH

By:

Name: Luke E. Fichthorn III

Title: Director

EUROKASCO S.A.S.

By:

Name: Lawrence C. Maingot

Title: Assistant Treasurer

ATLANTIC SERVICE CO. LTD.

By:

Name: Lawrence C. Maingot

Title: Secretary

THIS PROMISSORY NOTE RESTATES AND MODIFIES THE EVIDENCE OF INDEBTEDNESS PURSUANT TO THE THIRD AMENDED AND RESTATED CREDIT AGREEMENT AS AMENDED, AND THAT CERTAIN PROMISSORY NOTE IN THE ORIGINAL AMOUNT OF $10,000,000.00, EACH DATED AS OF MAY 20, 2005, UPON WHICH DOCUMENTARY STAMP TAX WAS PAID.

PROMISSORY NOTE

SEPTEMBER 28, 2005

$8,800,000

The Borrower, for itself, its successors and assigns, hereby waives diligence, presentment, protest and demand and notice of protest, demand, dishonor and non-payment of this Note.

THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF FLORIDA.

BAIRNCO CORPORATION

By:

Name: Lawrence C. Maingot

Title: Assistant Secretary

ARLON, INC.

By:

Name: Lawrence C. Maingot

Title: Assistant Secretary

KASCO CORPORATION

By:

Name: Lawrence C. Maingot

Title: Vice President

THIS PROMISSORY NOTE RESTATES AND MODIFIES THE EVIDENCE OF INDEBTEDNESS PURSUANT TO THE THIRD AMENDED AND RESTATED CREDIT AGREEMENT, AS AMENDED, AND THAT CERTAIN PROMISSORY NOTE IN THE ORIGINAL PRINCIPAL AMOUNT OF $15,000,000, EACH DATED AS OF MAY 2005, UPON WHICH DOCUMENTARY STAMP TAX WAS PAID.

PROMISSORY NOTE

SEPTEMBER 28, 2005

$13,200,000

FOR VALUE RECEIVED, the undersigned (the “Borrower”) hereby promises to pay to Bank of America, N.A., a national banking association, or registered assigns (the “Lender”), in accordance with the provisions of the Agreement (as hereinafter defined), the principal amount of each Loan from time to time made by the Lender to the Borrower under that certain Third Amended and Restated Credit Agreement, dated as of May 20, 2005 (as amended, restated, extended, supplemented or otherwise modified in writing from time to time, the “Agreement;” the terms defined therein being used herein as therein defined), among Bairnco Corporation, certain of its Subsidiaries, the Lenders from time to time party thereto, and Bank of America, N.A., as Administrative Agent, L/C Issuer and Swing Line Lender.

The Borrower, for itself, its successors and assigns, hereby waives diligence, presentment, protest and demand and notice of protest, demand, dishonor and non-payment of this Note.

THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF FLORIDA.

BAIRNCO CORPORATION

By:

Name: Lawrence C. Maingot

Title: Assistant Secretary

ARLON, INC.

By:

Name: Lawrence C. Maingot

Title: Assistant Secretary

KASCO CORPORATION

By:

Name: Lawrence C. Maingot

Title: Vice President

THIS ALTERNATIVE CURRENCY PROMISSORY NOTE RESTATES AND MODIFIES THE EVIDENCE OF INDEBTEDNESS PURSUANT TO THE THIRD AMENDED AND RESTATED CREDIT AGREEMENT, AS AMENDED, AND THAT CERTAIN PROMISSORY NOTE IN THE ORIGINAL PRINCIPAL AMOUNT OF $15,000,000, EACH DATED AS OF MAY 20, 2005, UPON WHICH DOCUMENTARY STAMP TAX WAS PAID.

ALTERNATIVE CURRENCY PROMISSORY NOTE

SEPTEMBER 28, 2005

$1,800,000

The Borrower, for itself, its successors and assigns, hereby waives diligence, presentment, protest and demand and notice of protest, demand, dishonor and non-payment of this Note.

THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF FLORIDA.

ATLANTIC SERVICE CO. (UK) LTD.

By:

Name: Lawrence C. Maingot

Title: Director

BERTRAM & GRAF GMBH

By:

Name: Luke E. Fichthorn III

Title: Director

EUROKASCO S.A.S.

By:

Name: Lawrence C. Maingot

Title: Assistant Treasurer

ATLANTIC SERVICE CO. LTD.

By:

Name: Lawrence C. Maingot

Title: Secretary

FIRST AMENDMENT

THIRD AMENDED AND RESTATED CREDIT AGREEMENT

This FIRST AMENDMENT TO THIRD AMENDED AND RESTATED CREDIT AGREEMENT (“Amendment”) is entered into as of September 28, 2005, among BAIRNCO CORPORATION, a Delaware corporation (the “Company”), certain Subsidiaries of the Company party hereto pursuant to Section 2.14 (each a “Designated Borrower” or a “Foreign Subsidiary Designated Borrower” as defined in Section 2.14, and, together with the Company, the “Borrowers” and, each a “Borrower”), each lender from time to time party hereto (collectively, the “Lenders” and individually, a “Lender”), and BANK OF AMERICA, N.A., as Administrative Agent, Swing Line Lender and L/C Issuer.

WHEREAS, Lenders and Company executed that certain Third Amended and Restated Credit Agreement dated as of May 20, 2005 (the “Agreement”) which Agreement provided that, subject to the terms contained therein, Lender would extend to Borrower a credit facility in the amount of up to TWENTY FIVE MILLION AND NO/100 DOLLARS ($25,000,000.00); and

WHEREAS, Lenders and Company desire to modify the terms and conditions of the Agreement in the manner hereinafter set forth.

NOW, THEREFORE, in consideration of the mutual promises, conditions, representations and warranties hereinafter set forth and for other good and valuable considerations, the receipt and sufficiency of which are hereby acknowledged, the parties hereto have mutually agreed as follows:

The Agreement is hereby modified by adding the definition of “Alternative Currency Note” to Section 1.01 in its entirety as follows:

“Alternative Currency Note” means an alternative currency promissory note made by a Foreign Subsidiary Designated Borrower in favor of a Lender evidencing Loans made by such Lender to such Foreign Subsidiary Designated Borrower.

The definition of “Alternative Currency Sublimit” as listed in Section 1.01 of the Agreement is hereby modified and restated in its entirety as follows:

“Alternative Currency Sublimit” means an amount equal to the Alternative Currency Equivalent of $3,000,000 in Dollars. The Alternative Currency Sublimit is part of, and not in addition to, the Aggregate Commitment and will be funded under the Alternative Currency Notes.

The Agreement is hereby modified by adding the definition of “Foreign Subsidiary Designated Borrower” to Section 1.01 in its entirety as follows:

“Foreign Subsidiary Designated Borrower” has that meaning as set forth in Section 2.14.

The definition of “Loan Parties” as listed in Section 1.01 of the Agreement is hereby modified and restated in its entirety as follows:

“Loan Parties” means, collectively, the Company, each Designated Borrower, each Foreign Subsidiary Designated Borrower (as defined in Section 2.14(a)), and each Subsidiary Guarantor, except for purposes of Article V Loan Parties shall mean, collectively, the Company, Designated Borrower and Foreign Subsidiary Designated Borrower.

The Agreement is hereby modified by adding 2.01(a)(ix) in its entirety as follows:

(ix)

Arlon MED International, LLC, a Delaware limited liability company, Kasco Corporation, a Delaware corporation, and Kasco Mexico, LLC, a Delaware limited liability company, each shall grant a security interest to Lender of sixty-five percent (65%) of the equity interest in each Foreign Subsidiary owned by it to secure the obligations related to the Agreement and shall submit to Lender an interest pledge and security agreement in form and content satisfactory to Lender effectuating same together with other documents reasonably requested by Lender to perfect such pledge.

The Agreement is hereby modified by adding 2.01(c) in its entirety as follows:

(c)

Notwithstanding anything to the contrary contained herein, that portion of the Committed Loans which is equal to the Alternative Currency Sublimit is only available to the “Foreign Subsidiary Designated Borrowers” and not to the Borrowers who are not Foreign Subsidiary Designated Borrowers.

Section 2.14(a) of the Agreement is hereby modified and is restated in its entirety as follows:

(a) Effective as of the date hereof, Arlon, Inc. and Kasco Corporation shall be a “Designated Borrower” hereunder and may receive Loans for its account on the terms and conditions set forth in this Agreement. Atlantic Service Co. (UK) Ltd., Bertram & Graf GmbH, EuroKasco S.A.S. and Atlantic Service Co. Ltd. shall be a “Foreign Subsidiary Designated Borrower” and may receive Loans for its account on the terms and conditions set forth in this Agreement but only to the extent such Loans do not exceed the Alternative Currency Sublimit and are funded under the Alternative Currency Notes. The Foreign Subsidiary Designated Borrower shall be the only makers of the Alternative Currency Notes and amounts funded under such Notes shall only be available to the Foreign Subsidiary Designated Borrowers.

Section 4.01(a)(ii) of the Agreement is hereby modified and is restated in its entirety as follows:

(ii)

Notes executed by Borrowers other than the Foreign Subsidiary Designated Borrowers in favor of each Lender requesting Notes and Alternative Currency Promissory Notes executed by Foreign Subsidiary Designated Borrowers in favor of each Lender requesting Alternative Currency Promissory Notes.

Company acknowledges that as of the date of this Amendment, Lender is not in default of any of its obligations to Company and there exist no claims, causes of action, rights of setoff or other defense in favor of Company against Lender. Company waives and releases any such claim, cause of action, right of setoff or other defenses in favor of Company against Lender and hereby waives any right to trial by jury in regard to any litigation between any and all of the parties to this Amendment. This provision is a material inducement for the Lender to enter into this Amendment.

10.

Nothing herein invalidates or shall impair or release any covenant, condition, agreement or stipulation in the Agreement, and the same, except as herein modified, shall continue in full force and effect and Company further covenants and agrees to perform and comply with each and every of the covenants, agreements, conditions and stipulations of the Agreement which are not inconsistent herewith.

11.

Except as herein modified, the Agreement is confirmed in its entirety.

12.

In the case of conflict between the provisions of the Agreement, on the one hand, and this Amendment on the other hand, the provisions of this Amendment shall prevail.

13.

This Amendment may be executed in any number of counterparts and by the parties hereto on separate counterparts, each of which when so executed and delivered shall be an original, but all of which shall together constitute one and the same Amendment.

14.

This Amendment shall become effective upon the payment of Agent’s attorneys fees in regard to this matter and the execution and delivery of the following documents (together referred to as the “Amendment Documents”):

(a)

this Amendment;

(b)

the Third Amended and Restated Guaranty;

(c)

Promissory Note in favor of Bank of America, N.A. in the amount of $13,200,000.00;

(d)

Promissory Note in favor of Wachovia Bank, National Association in the amount of $8,800,000.00;

(e)

Alternative Currency Promissory Note in favor of Bank of America, N.A. in the amount of $1,800,000.00;

(f)

Alternative Currency Promissory Note in favor of Wachovia Bank, National Association in the amount of $1,200,000.00;

(g)

Interest Pledge and Security Agreement executed by Kasco Corporation in favor of Agent;

(h)

Interest Pledge and Security Agreement executed by Kasco Mexico, LLC in favor of Agent; and

(i)

Interest Pledge and Security Agreement executed by Arlon MED International, LLC in favor of Agent;

15.

In addition, the Loan Parties shall deliver to Agent on or before November 30, 2005:

(a)

the Board of Directors authorizing resolutions or other governing body resolutions in form and content reasonably acceptable to Lender, which resolutions will authorize and ratify the adoption of the Amendment Documents and the execution and delivery of the Amendment Documents by the representatives of the Loan Parties who executed the applicable Loan Document; and

(b)

opinion of counsel for the Loan Parties in form and content reasonably acceptable to Agent.

In the event such resolutions and opinion are not delivered to Agent on or before November 30, 2005, the Amendment Documents shall be null and void and the Loan Documents previously in effect, including but not limited to the Third Amended and Restated Credit Agreement and Second Amended and Restated Guaranty, shall be reinstated and shall remain in full force and effect.

IN WITNESS WHEREOF, the parties have executed this Amendment the day and year first above written.

BAIRNCO CORPORATION

By: ______________________________________

Name: Lawrence C. Maingot

Title: Assistant Secretary

ARLON, INC.

By: ______________________________________

Name: Lawrence C. Maingot

Title: Assistant Secretary

KASCO CORPORATION

By: ______________________________________

Name: Lawrence C. Maingot

Title: Vice President

ATLANTIC SERVICE CO. (UK) LTD.

By: ______________________________________

Name: Lawrence C. Maingot

Title: Director

BERTRAM & GRAF GMBH

By: ______________________________________

Name: Luke E. Fichthorn III

Title: Director

EUROKASCO S.A.S.

By: ______________________________________

Name: Lawrence C. Maingot

Title: Assistant Treasurer

ATLANTIC SERVICE CO. LTD.

By: ______________________________________

Name: Lawrence C. Maingot

Title: Secretary

BANK OF AMERICA, N.A., as

Administrative Agent

By: /s/ Anne M. Zeschke

Name: Anne M. Zeschke

Title: Assistant Vice President

BANK OF AMERICA, N.A., as a Lender, L/C Issuer and Swing Line Lender

By: /s/ Steven L. Gressel

Name: Steven L. Gressel

Title: Senior Vice President

WACHOVIA BANK, as a Lender

By: /s/ Todd A. Smith

Name: Todd A. Smith

Title: Vice President

THIRD AMENDED AND RESTATED GUARANTY

THIS THIRD AMENDED AND RESTATED GUARANTY (this “Guaranty”) dated as of September 28, 2005 is executed by Bairnco Corporation, a Delaware corporation (“Bairnco”), each of its undersigned Subsidiaries and each other Subsidiary of Bairnco that may become a party hereto in accordance with Section 13 hereof (Bairnco and each Subsidiary of Bairnco collectively hereinafter referred to as the “Guarantors” and individually as a “Guarantor”) in favor of BANK OF AMERICA, N.A., (“Bank of America”) as Agent (as hereinafter defined in the first recital below) and amends and restates in its entirety that certain Second Amended and Restated Guaranty dated as of May 20, 2005 (as amended, restated, supplemented or otherwise modified as of the date hereof, the “Existing Guaranty”), by Bairnco, Arlon, Inc., a Delaw are corporation (“Arlon”), Kasco Corporation, a Delaware corporation (“Kasco”), Arlon Adhesives & Films, Inc., a Texas corporation (“Arlon Adhesive”), Arlon Partners, Inc., a Delaware corporation (“Arlon Partners”), Arlon Signtech, Ltd., a Texas limited partnership (“Arlon Signtech”), Arlon Viscor, Ltd., a Texas limited partnership (“Arlon Viscor”), Arlon MED International, LLC, a Delaware limited liability company (“Arlon MED”), Atlantic Service Co. (UK) Ltd., a company organized under the laws of the United Kingdom (“Atlantic Service (UK)”), Bertram & Graf GmbH, an entity formed under the laws of Germany (“Bertram & Graf”), EuroKasco S.A.S., an entity formed under the laws of France (“EuroKasco”), Kasco Mexico, LLC, a Delaware limited liability company (“Kasco Mexico”), Arlon Materials for Electronics Co. Ltd., a limited liability company organized under the laws of China (“Arlon M aterials”), Arlon Material Technologies Co. Ltd., a limited liability company organized under the laws of China (“Arlon Material Technologies”), Atlantic Service Co. Ltd., a limited liability company organized under the laws of Canada (“Atlantic Service”), Kasco Ensambly S.A. de C.V., an entity formed under the laws of Mexico (“Kasco Ensambly”) and other subsidiaries of Bairnco party thereto as of the date hereof in favor of Bank of America, as agent, and releases Atlantic Service (UK), Bertram & Graf, EuroKasco, Arlon Materials, Arlon Material Technologies, Atlantic Service and Kasco Ensambly as Guarantors of the Existing Guaranty.

RECITALS

WHEREAS, Bairnco Corporation (“Bairnco”), certain of its Subsidiaries, certain lenders (the “Lenders”) and Bank of America, as agent for the Lenders (the “Agent”), have entered into that certain Third Amended and Restated Credit Agreement dated as of May 20, 2005 (as the same may be amended, restated, supplemented or other wise modified from time to time, hereinafter referred to as the “Credit Agreement”) pursuant to which the Lenders have extended credit to Bairnco and certain of its Subsidiaries (each capitalized term used but not defined herein shall have the meaning assigned thereto in the Credit Agreement);

WHEREAS, Guarantors have requested that Lenders and Agent amend the Credit Agreement and Existing Guaranty as herein provided; and

WHEREAS, Lenders and Agent hereby release Atlantic Service (UK), Bertram & Graf, EuroKasco, Arlon Materials, Arlon Material Technologies, Atlantic Service and Kasco Ensambly from the Existing Guaranty and none of such companies shall hereafter be a Guarantor for purposes of this Guaranty, the Credit Agreement or any of the Loan Documents contemplated by the Credit Agreement; and

WHEREAS, each Guarantor has received and will continue to receive substantial benefits from the extension of credit pursuant to the Credit Agreement;

NOW, THEREFORE, in order to induce the Lenders to enter into the Credit Agreement, each Guarantor hereby covenants as follows:

SECTION 1. Guaranty. (a) Subject to Section 1(b), each Guarantor (it being specifically agreed that none of Atlantic Service (UK), Bertram & Graf, EuroKasco, Arlon Materials, Arlon Material Technologies, Atlantic Service and Kasco Ensambly are Guarantors) hereby unconditionally guarantees the performance and the full and prompt payment when due, whether by acceleration or otherwise, and at all times thereafter, of all Obligations (except such Guarantor’s Obligations as a Borrower) under and in connection with the Loan Documents (all such obligations being hereinafter collectively called the “Guaranteed Liabilities”).

(b) The liability of each of the Guarantors under this Guaranty shall not exceed the maximum amount of liability that such Guarantor can hereby incur without rendering this Guaranty voidable under the applicable law relating to fraudulent conveyance or fraudulent transfer, and not for any greater amount. For purposes of determining such liability of each of the Guarantors, due consideration shall be given to the direct and indirect benefits received by each of the Guarantors as a result of the extension of credit under the Credit Agreement.

(c) This Guaranty shall in all respects be a continuing, absolute and unconditional guaranty, and shall remain in full force and effect notwithstanding the dissolution of any Guarantor or that at any time or from time to time all Guaranteed Liabilities may have been paid in full.

SECTION 2. Disgorged Payments. Each Guarantor further agrees that, if at any time all or any part of any payment theretofore applied by the Agent or the Lenders at any of the Guaranteed Liabilities is or must be rescinded or returned by the Agent or the Lenders for any reason whatsoever (including, without limitation, the insolvency, bankruptcy or reorganization of any Company), such Guaranteed Liabilities shall, for the purposes of this Guaranty, to the extent that such payment is or must be rescinded or returned, be deemed to have continued in existence, notwithstanding such application by the Agent or the Lenders, and this Guaranty shall continue to be effective or be reinstated, as the case may be, as to such Guaranteed Liabilities, all as though such application by the Agent or the Lenders had not been made.

SECTION 3. Certain Permitted Actions. To the extent permitted by law, each of the Agent and any Lender each may, from time to time, whether before or after any discontinuance of this Guaranty, at its sole discretion and without notice to any Guarantor or any other Person, take any or all of the following actions without impairing its rights arising hereunder: (a) retain or obtain a lien upon or a security interest in any property to secure any of the Guaranteed Liabilities, (b) retain or obtain the primary or secondary obligation of any obligor or obligors, in addition to such Guarantors’ obligations, with respect to any of the Guaranteed Liabilities, (c) extend or renew for one or more periods (whether or not longer than the original period), alter or exchange any of the Guaranteed Liabilities, or release or compromise any obliga tion of any Borrower under any Loan Document or any obligation of any nature of any other obligor with respect to any of the Guaranteed Liabilities, (d) release or fail to perfect its lien upon or security interest in, or impair, surrender, release or permit any substitution or exchange for, all or any part of any property securing any of the Guaranteed Liabilities, or extend or renew for one or more periods (whether or not longer than the original period) or release, compromise, alter or exchange any obligations of any nature of any obligor with respect to any such property, and (e) resort to any Guarantor for payment of any of the Guaranteed Liabilities, whether or not the Agent or the Lenders (i) shall have resorted to any property securing any of the Guaranteed Liabilities or (ii) shall have proceeded against any other obligor primarily or secondarily obligated with respect to any of the Guaranteed Liabilities (all of the actions referred to in preceding clauses (i) and (ii) being hereby expressly waived by each Guarantor).

SECTION 4. Application of Funds. Any amounts received by the Agent or the Lenders from whatsoever source on account of the Guaranteed Liabilities may be applied by it toward the payment of such of the Guaranteed Liabilities, and in such order of application, as the Agent and the Lenders may from time to time elect.

SECTION 5. Limit on Subrogation; Waivers. (a) No payment made by or for the account of any Guarantor pursuant to this Guaranty shall entitle any Guarantor by subrogation or otherwise to any payment by any Borrower or by any Guarantor or from or out of any property of any Borrower or any Guarantor, and no Guarantor shall exercise any right or remedy against any Borrower or any Guarantor or any property of any Borrower or any Guarantor by reason of any performance by such Guarantor of this Guaranty, all of which rights and remedies are hereby waived by such Guarantor to the fullest extent permitted by law.

(b) To the extent permitted by law, each Guarantor hereby expressly waives (i) notice of acceptance by the Agent or the Lenders of this Guaranty, (ii) notice of the existence or creation or non-payment of all or any of the Guaranteed Liabilities, (iii) presentment, demand, notice of dishonor, protest, and all other notices whatsoever, and (iv) all diligence in collection or protection of or realization upon the Guaranteed Liabilities or any security for or guaranty of any of the foregoing.

SECTION 6. Transfer of Obligations. Subject to the provisions of the Credit Agreement, the Agent and the Lenders may, from time to time, without notice to any Guarantor, assign or transfer, or cause to be assigned or transferred, any or all of the Guaranteed Liabilities or any interest therein and, notwithstanding any such assignment or transfer or any subsequent assignment or transfer thereof, such Guaranteed Liabilities shall be and remain Guaranteed Liabilities for the purposes of this Guaranty, and each and every immediate and successive assignee or transferee of any of the Guaranteed Liabilities or of any interest therein, to the extent of the interest of such assignee or transferee in the Guaranteed Liabilities, be entitled to the benefits of this Guaranty to the same extent as if such assignee or transferee were the Agent or a Lender.

SECTION 7. No Conditions to Effectiveness. No claim or defense by any Person as to the invalidity or unenforceability of any obligation under the Loan Documents shall affect or impair the obligations of the Guarantors under this Guaranty. The obligation of the Guarantors under this Guaranty shall be absolute and unconditional irrespective of any circumstance whatsoever which might constitute a legal or equitable discharge or defense of any Guarantor or any Borrower. Each Guarantor hereby acknowledges that there are no conditions to the effectiveness of this Guaranty.

SECTION 8. Warranties. Each Guarantor hereby warrants and represents to the Agent and the Lenders that (i) it now has and will continue to have independent means of obtaining information concerning the affairs, financial condition and business of each Borrower, and the Agent and the Lenders shall not have any duty or responsibility to provide such Guarantor with any credit or other information concerning the affairs, financial condition or business of any Borrower which may come into such Person’s possession; (ii) all things necessary to make this Guaranty the legal, valid and binding obligation of such Guarantor, enforceable in accordance with its terms, have been done and performed; (iii) the execution, delivery and performance of this Guaranty by such Guarantor are within its powers and do not (a) contravene any law, rule or re gulation presently in effect which affects or binds it or any of its properties, or (b) conflict with or result in a breach of any guaranty or loan or credit agreement or any other agreement or instrument to which it is a party in respect of indebtedness for money borrowed, except for such contraventions, conflicts and breaches that, in the aggregate, will not have a material adverse effect on Bairnco and its Subsidiaries on a consolidated basis; and (iv) any and all information heretofore or hereafter provided by such Guarantor to the Agent and the Lenders hereunder and certified by an Authorized Officer of such Guarantor is and shall be true and accurate in all respects as the date furnished and does not and shall not omit any material fact necessary to make the information not misleading.

SECTION 9. Modification of Guaranty. This Guaranty shall not be amended, supplemented or otherwise modified without the written consent of the Agent and the Required Lenders and the Guarantors.

SECTION 10. Notices. All notices or other communications given hereunder shall be in writing (including telex and facsimile communication) and mailed, telexed, telecopied or delivered: (a) if to a Guarantor, to it at its address set forth on the signature pages hereof or at such other address as shall have been or be designated by it in a written notice to the Agent; and (b) if to the Agent or any Lender, to such Person at its address set forth in the Credit Agreement or at such other address as shall have been or be designated by it in a written notice to the Guarantors.

All such notices and communications shall be deemed to have been duly made or give (i) when delivered by hand, (ii) five (5) Business Days after being deposited in the mail, postage prepaid, (iii) when telexed, answer back received, or (iv) when by facsimile communication, receipt acknowledged.

SECTION 11. GOVERNING LAW; CONSENT TO JURISDICTION AND SERVICE OF PROCESS; WAIVER OF JURY TRIAL. (a) THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF FLORIDA, WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES. ALL JUDICIAL PROCEEDINGS BROUGHT AGAINST ANY COMPANY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR ANY OBLIGATIONS THEREUNDER, MAY BE BROUGHT IN ANY STATE OR FEDERAL COURT OF COMPETENT JURISDICTION IN ORANGE COUNTY, FLORIDA; PROVIDED, HOWEVER, THAT ANY SUIT SEEKING ENFORCEMENT AGAINST ANY COLLATERAL OR OTHER PROPERTY MAY BE BROUGHT, AT THE AGENT’S OPTION, IN THE COURTS OF ANY JURISDICTION WHERE SUCH COLLATERAL OR OTHER PROPERTY MAY BE FOUND. BY EXECUTING AN D DELIVERING THIS AGREEMENT, EACH BORROWER, FOR ITSELF AND IN CONNECTION WITH ITS PROPERTIES, IRREVOCABLY

(I)

ACCEPTS GENERALLY AND UNCONDITIONALLY THE NONEXCLUSIVE JURISDICTION AND VENUE OF SUCH COURTS;

(II)

WAIVES ANY DEFENSE OF FORUM NON COVENIENS;

(III)

AGREES THAT SERVICE OF ALL PROCESS IN ANY SUCH PROCEEDING IN ANY SUCH COURT MAY BE MADE BY REGISTERED OR CERTIFIED MAIL, RETURN RECEIPT REQUESTED, TO IT AT ITS ADDRESS PROVIDED IN ACCORDANCE WITH THIS SECTION 11;

(IV)

AGREES THAT SERVICE AS PROVIDED IN CLAUSE (III) ABOVE IS SUFFICIENT TO CONFER PERSONAL JURISDICTION OVER ITSELF IN ANY SUCH PROCEEDING IN ANY SUCH COURT, AND OTHERWISE CONSTITUTES EFFECTIVE AND BINDING SERVICE IN EVERY RESPECT;

(V)

AGREES THAT LENDERS RETAIN THE RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO BRING PROCEEDINGS AGAINST COMPANY IN THE COURTS OF ANY OTHER JURISDICTION; AND

(VI)

AGREES THAT THE PROVISIONS OF THIS SECTION 11 RELATING TO JURISDICTION AND VENUE SHALL BE BINDING AND ENFORCEABLE TO THE FULLEST EXTENT PERMISSIBLE UNDER NEW YORK GENERAL OBLIGATIONS LAW SECTION 5-1402 OR OTHERWISE.

(b) EACH GUARANTOR HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHTS IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS GUARANTY OR ANY OTHER LOAN DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF THE AGENT, THE LENDERS, THE GUARANTORS OR THE BORROWERS. EACH GUARANTOR ACKNOWLEDGES AND AGREES THAT IT HAS RECEIVED FULL AND SUFFICIENT CONSIDERATION FOR THIS PROVISION (AND EACH OTHER PROVISION OF EACH OTHER LOAN DOCUMENT TO WHICH IT IS A PARTY) AND THAT THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE AGENT AND THE LENDERS ENTERING INTO THE CREDIT AGREEMENT AND EACH SUCH OTHER LOAN DOCUMENT.

SECTION 12. Resolution of Drafting Ambiguities. Each of the parties hereto acknowledge that it was represented by counsel in connection with the preparation, execution and delivery of this Guaranty, that its counsel reviewed the foregoing and participated in the negotiation thereof and any rule of construction under any applicable law to the effect that ambiguities are to be resolved against the drafting party shall not be employed in the interpretation of this Guaranty.

SECTION 13. Additional Guarantors. The initial Guarantors hereunder shall be Bairnco and such of the Subsidiaries of Bairnco as are signatories hereto on the date hereof. From time to time subsequent to the date hereof, additional Subsidiaries of Bairnco may become parties hereto, as additional Guarantors (each and “Additional Guarantor”) by executing a counterpart of this Guaranty. Upon delivery of any such counterpart to Agent, notice of which is hereby waived by Guarantors, each such Additional Guarantor shall be a Guarantor and shall be as fully a party hereto as if such Additional Guarantor were an original signatory hereof. Each Guarantor expressly agrees that its obligations arising hereunder shall not be affected or diminished by the addition or release of any other Guarantor hereunder, nor by any el ection of Agent not to cause and Subsidiary of Bairnco to become and Additional Guarantor hereunder. This Guaranty shall be fully effective as to any Guarantor that is or becomes a party hereto regardless of whether any other Person becomes or fails to become or ceases to be a Guarantor hereunder.

SECTION 14. Reaffirmation and Modification of Original Loan Documents. It is the intention of each of the parties hereto that the Existing Guaranty be amended and restated so as to preserve the perfection and priority of all security interests securing indebtedness under the Credit Agreement, the Existing Guaranty and the other Loan Documents (as defined in the Credit Agreement) and that all indebtedness and obligations of the Borrowers and the guarantors under the Credit Agreement, the Existing Guaranty and the other Loan Documents (as defined in the Credit Agreement) shall be secured by the Loan Documents and that this Agreement shall not constitute a novation of the obligations and liabilities existing under the Existing Guaranty. The parties hereto further acknowledge and agree that this Agreement constitutes an amendment of the Existing Guaranty made under the terms thereof.

IN WITNESS WHEREOF, the parties hereto have caused this Guaranty to be executed by their respective officers thereunder duly authorized as of the day and year first above written.

BAIRNCO CORPORATION

By:_________________________

Name:

Lawrence C. Maingot

Title:

Assistant Secretary

Address:

300 Primera Boulevard

Suite 432

Lake Mary, Florida 32746

KASCO CORPORATION

By:_________________________

Name:

Lawrence C. Maingot

Title:

Vice President

Address:

1569 Tower Grove Avenue

St. Louis, Missouri 63110

ARLON, INC.

By:_________________________

Name:

Lawrence C. Maingot

Title:

Assistant Secretary

Address:

300 Primera Boulevard

Suite 432

Lake Mary, Florida 32746

ARLON ADHESIVES & FILMS, INC.

By:_________________________

Name:

Lawrence C. Maingot

Title:

Vice President and Secretary

Address:

300 Primera Boulevard

Suite 432

Lake Mary, Florida 32746

ARLON PARTNERS, INC.

By:_________________________

Name:

Lawrence C. Maingot

Title:

Vice President

Address:

300 Primera Boulevard

Suite 432

Lake Mary, Florida 32746

ARLON SIGNTECH, LTD.

By:_________________________

Name:

Lawrence C. Maingot

Title:

Vice President

Address:

300 Primera Boulevard

Suite 432

Lake Mary, Florida 32746

ARLON VISCOR, LTD.

By:_________________________

Name:

Lawrence C. Maingot

Title:

Vice President

Address:

300 Primera Boulevard

Suite 432

Lake Mary, Florida 32746

ARLON MED INTERNATIONAL, LLC

By:_________________________

Name:

Lawrence C. Maingot

Title:

Treasurer

Address:

300 Primera Boulevard

Suite 432

Lake Mary, Florida 32746

KASCO MEXICO, LLC

By:_________________________

Name:

Lawrence C. Maingot

Title:

Treasurer

Address:

1569 Tower Grove Avenue

St. Louis, Missouri 63110

INTEREST PLEDGE AND SECURITY AGREEMENT

This Interest Pledge and Security Agreement is made and entered into as of the 28^th day of September, 2005, by and between Arlon MED International, LLC, a Delaware limited liability company, hereinafter referred to as “Arlon MED,” and Bank of America, N.A., a national banking association, as Administrative Agent on behalf of the Lender, hereinafter called "Agent,” as follows:

For value received, Arlon MED hereby grants to the Agent a security interest in the following described property, hereinafter referred to as the "Collateral", to-wit: certain units of the capital and voting interest of Arlon Material for Electronics Co. Ltd., a limited liability company organized under the laws of China, and certain units of the capital and voting interest of Arlon Material Technologies Co. Ltd., a limited liability company organized under the laws of China (together such interests are hereinafter referred to in the aggregate as the "Interests" and individually as an "Interest"), which Interests equal but do not exceed sixty-five percent (65%) of the outstanding equity ownership of such Subsidiary, together with all other assets which may at any time arise from such Interests (hereinafter collectively referr ed to as the "Interest Benefits" and individually as the "Interest Benefit"), to secure: (1) the obligations of any of the Loan Parties pursuant to that certain Third Amended and Restated Credit Agreement dated as of May 20, 2005, by and between Borrower and Agent (the "Credit Agreement"), (2) all reasonable costs and expenses incurred by the Agent in the enforcement of any of the Loan Parties’ obligations under the Credit Agreement; and (3) all liabilities of the Loan Parties to Agent now existing or hereafter incurred relating to the Credit Agreement, and any renewals and extensions thereof and substitutions therefor (with (1) through (3) together herein referred to as the "Obligations"). Arlon Material for Electronics Co. Ltd. and Arlon Material Technologies Co. Ltd. are hereinafter referred to as “Subsidiaries”. Each capitalized term used but not defined herein shall have the meaning thereto in the Credit Agreement.

ARLON MED WARRANTS, COVENANTS AND AGREES:

Title. Arlon MED warrants that it has good title and ownership of the Collateral and except for the security interest hereby granted, the Collateral is free from any lien, security interest, encumbrance or claim, and the Arlon MED will, at the Arlon MED's sole cost and expense, defend any action which may effect the Agent's interest herein, or the Arlon MED’s title to the Collateral.

Perfection of Security Interest and Protection of Collateral. In order to perfect the Agent’s security interest in the Interests and to protect such security interest in the Interests, Arlon MED represents and warrants to Agent and Lender and covenants with Agent and Lenders as follows:

(a)

Arlon MED hereby authorizes a Financing Statement on Form UCC-1 to be filed with the Secretary of State of Delaware listing Arlon MED as debtor and Agent as secured party and describing the Interests as the collateral covered by such Financing Statement. Continuation statements may be filed by the Agent from time to time.

(b)

Except for such Financing Statement in favor of Agent, no financing statement covering the interests is on file in any jurisdiction or shall be filed at any time before the Obligations are satisfied in full. Arlon MED has not granted possession or control of the Interests to any other person, and Arlon MED shall not grant possession or control of the Interests to any other person at any time before the Obligations are satisfied in full.

(c)

At the request of Agent, Arlon MED promptly will cause the Interests to be evidenced by investment securities and will deliver control of such Interests duly assigned to Agent to be held as collateral for the Obligations. Without limiting the generality of the foregoing, upon Agent’s request Arlon MED shall execute in blank such unit powers or other documents as Agent shall require, and such execution shall remain irrevocable during the term of this Agreement. In that case, the originals of such unit powers shall be held in escrow by the Agent.

Payment. Arlon MED shall repay immediately all sums expended by the Agent to protect its rights in accordance with the terms and provisions of this Agreement or incurred by Agent to protect, perfect or enforce its rights hereunder, including all reasonable attorneys' fees, including fees on appeal, whether suit be brought or not, provided, however, that the Agent shall bear any recording costs necessary to protect its rights hereunder.

Additional Pledge and Warranty. Arlon MED warrants that the Collateral constitutes sixty-five percent (65%) of the outstanding capital and voting interest of the Subsidiaries and in the event Subsidiaries authorize additional interest to be issued, Arlon MED will pledge additional interest in Subsidiaries to Agent so that at no time will the interest pledged to Agent be less than sixty-five percent (65%) of the outstanding capital and voting interest of Subsidiaries. In the event that the Collateral exceeds sixty-five percent (65%) of all outstanding Interest of each Subsidiary, then such excess Interest shall automatically be deemed released from the Collateral.

ARLON MED AND AGENT AGREE:

Attorney-in-Fact. Arlon MED hereby appoints Agent as Arlon MED’s attorney-in-fact to do any and every act which Arlon MED is obligated under this Agreement to do, and exercise all rights of the Arlon MED in the Collateral consistent herewith and to make collections and to execute any and all papers and instruments and to do other things necessary to preserve and protect the Collateral and the Agent's interest in the said Collateral.

Time of Performance and Waiver. In performing any act under this Agreement, time shall be of the essence. The failure of the Agent to exercise any right or remedy shall not be a waiver of any obligation of the Arlon MED or right of the Agent or constitute a waiver of any other similar default subsequently occurring.

Default. Any default as set forth in the Credit Agreement shall constitute a default hereunder, entitling Agent to the remedies set forth in the Credit Agreement.

Miscellaneous Provisions.

(a)

Parties Bound. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective heirs, personal representatives and assigns where permitted under this Agreement.

(b)

Legal Construction. In case any one or more of the provisions contained in this Agreement shall for any reason be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not effect any other provision thereof and this Agreement shall be construed as if such invalid, illegal or unenforceable provision had never been contained herein.

(c)

Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF FLORIDA.

(d)

Jurisdiction. ARLON MED AND EACH LOAN PARTY IRREVOCABLY AND UNCONDITIONALLY SUBMITS, FOR ITSELF AND ITS PROPERTY, TO THE NONEXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF FLORIDA SITTING IN ORANGE COUNTY AND OF THE UNITED STATES DISTRICT COURT OF THE MIDDLE DISTRICT, AND ANY APPELLATE COURT FROM ANY THEREOF, IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR FOR RECOGNITION OR ENFORCEMENT OF ANY JUDGMENT, AND EACH OF THE PARTIES HERETO IRREVOCABLY AND UNCONDITIONALLY AGREES THAT ALL CLAIMS IN RESPECT OF ANY SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH STATE COURT OR, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, IN SUCH FEDERAL COURT. EACH OF THE PARTIES HERETO AGREES THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW. NOTHING IN THIS AGREEMENT OR IN ANY OTHER LOAN DOCUMENT SHALL AFFECT ANY RIGHT THAT THE ADMINISTRATIVE AGENT, ANY LENDER OR THE L/C ISSUER MAY OTHERWISE HAVE TO BRING ANY ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AGAINST ANY BORROWER OR ANY OTHER LOAN PARTY OR ITS PROPERTIES IN THE COURTS OF ANY JURISDICTION.

(e)

Waiver of Venue. ARLON MED AND EACH LOAN PARTY IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT IN ANY COURT REFERRED TO IN PARAGRAPH (C) OF THIS SECTION. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, THE DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH ACTION OR PROCEEDING IN ANY SUCH COURT.

INTEREST PLEDGE AND SECURITY AGREEMENT

This Interest Pledge and Security Agreement is made and entered into as of the 28^th day of September, 2005, by and between Kasco Mexico, LLC, a Delaware limited liability company, hereinafter referred to as “Shareholder” and Bank of America, N.A., a national banking association, as Administrative Agent on behalf of the Lender, hereinafter called "Agent,” as follows:

For value received, Shareholder hereby grants to the Agent a security interest in the following described property, hereinafter referred to as the "Collateral", to-wit: certain units of the capital and voting interest of Kasco Ensambly S.A. de C.V. (the “Subsidiary”), a corporation formed under the laws of Mexico (together such interests are hereinafter referred to in the aggregate as the "Interests" and individually as an "Interest"), which Interests equal but do not exceed sixty-five percent (65%) of the outstanding equity ownership of such Subsidiary, together with all other assets which may at any time arise from such Interests (hereinafter collectively referred to as the "Interest Benefits" and individually as the "Interest Benefit"), to secure: (1) the obligations of any of the Loan Partie s pursuant to that certain Third Amended and Restated Credit Agreement dated as of May 20, 2005, by and between Borrower and Agent as may be amended from time to time (the "Credit Agreement"), (2) all reasonable costs and expenses incurred by the Agent in the enforcement of any of the Loan Parties’ obligations under the Credit Agreement; and (3) all liabilities of the Loan Parties to Agent now existing or hereafter incurred relating to the Credit Agreement, and any renewals and extensions thereof and substitutions therefor (with (1) through (3) together herein referred to as the "Obligations"). Each capitalized term used but not defined herein shall have the meaning thereto in the Credit Agreement.

SHAREHOLDER WARRANTS, COVENANTS AND AGREES:

Title. Shareholder warrants that it has good title and ownership of the Collateral and except for the security interest hereby granted, the Collateral is free from any lien, security interest, encumbrance or claim, and the Shareholder will, at the Shareholder's sole cost and expense, defend any action which may effect the Agent's interest herein, or the Shareholder’s title to the Collateral.

Perfection of Security Interest and Protection of Collateral. In order to perfect the Agent’s security interest in the Interests and to protect such security interest in the Interests, Shareholder represents and warrants to Agent and Lender and covenants with Agent and Lenders as follows:

(a)

Shareholder hereby authorizes a Financing Statement on Form UCC-1 to be filed with the Secretary of State of Delaware listing Shareholder as debtor and Agent as secured party and describing the Interests as the collateral covered by such Financing Statement. Continuation statements may be filed by the Agent from time to time.

(b)

Except for such Financing Statement in favor of Agent, no financing statement covering the interests is on file in any jurisdiction or shall be filed at any time before the Obligations are satisfied in full. Shareholder has not granted possession or control of the Interests to any other person, and Shareholder shall not grant possession or control of the Interests to any other person at any time before the Obligations are satisfied in full.

(c)

At the request of Agent, Shareholder promptly will cause the Interests to be evidenced by investment securities and will deliver control of such Interests duly assigned to Agent to be held as collateral for the Obligations. Without limiting the generality of the foregoing, upon Agent’s request Shareholder shall execute in blank such unit powers or other documents as Agent shall require, and such execution shall remain irrevocable during the term of this Agreement. In that case, the originals of such unit powers shall be held in escrow by the Agent.

Payment. Shareholder shall repay immediately all sums expended by the Agent to protect its rights in accordance with the terms and provisions of this Agreement or incurred by Agent to protect, perfect or enforce its rights hereunder, including all reasonable attorneys' fees, including fees on appeal, whether suit be brought or not, provided, however, that the Agent shall bear any recording costs necessary to protect its rights hereunder.

Additional Pledge and Warranty. Shareholder warrants that the Collateral constitutes sixty-five percent (65%) of the outstanding capital and voting interest of the Subsidiary and in the event Subsidiary authorizes additional interest to be issued, Shareholder will pledge additional interest in Subsidiary to Agent so that at no time will the interest pledged to Agent be less than sixty-five percent (65%) of the outstanding capital and voting interest of Subsidiary. In the event that the Collateral exceeds sixty-five percent (65%) of all outstanding Interest of Subsidiary, then such excess Interest shall automatically be deemed released from the Collateral.

SHAREHOLDER AND AGENT AGREE:

Attorney-in-Fact. Shareholder hereby appoints Agent as Shareholder’s attorney-in-fact to do any and every act which Shareholder is obligated under this Agreement to do, and exercise all rights of the Shareholder in the Collateral consistent herewith and to make collections and to execute any and all papers and instruments and to do other things necessary to preserve and protect the Collateral and the Agent's interest in the said Collateral.

Time of Performance and Waiver. In performing any act under this Agreement, time shall be of the essence. The failure of the Agent to exercise any right or remedy shall not be a waiver of any obligation of the Shareholder or right of the Agent or constitute a waiver of any other similar default subsequently occurring.

Default. Any default as set forth in the Credit Agreement shall constitute a default hereunder, entitling Agent to the remedies set forth in the Credit Agreement.

Miscellaneous Provisions.

(a)

(b)

(c)

Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF FLORIDA.

(d)

Jurisdiction. SHAREHOLDER AND EACH LOAN PARTY IRREVOCABLY AND UNCONDITIONALLY SUBMITS, FOR ITSELF AND ITS PROPERTY, TO THE NONEXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF FLORIDA SITTING IN ORANGE COUNTY AND OF THE UNITED STATES DISTRICT COURT OF THE MIDDLE DISTRICT, AND ANY APPELLATE COURT FROM ANY THEREOF, IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR FOR RECOGNITION OR ENFORCEMENT OF ANY JUDGMENT, AND EACH OF THE PARTIES HERETO IRREVOCABLY AND UNCONDITIONALLY AGREES THAT ALL CLAIMS IN RESPECT OF ANY SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH STATE COURT OR, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, IN SUCH FEDERAL COURT. EACH OF THE PARTIES HERETO AGREES THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND M AY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW. NOTHING IN THIS AGREEMENT OR IN ANY OTHER LOAN DOCUMENT SHALL AFFECT ANY RIGHT THAT THE ADMINISTRATIVE AGENT, ANY LENDER OR THE L/C ISSUER MAY OTHERWISE HAVE TO BRING ANY ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AGAINST ANY BORROWER OR ANY OTHER LOAN PARTY OR ITS PROPERTIES IN THE COURTS OF ANY JURISDICTION.

(e)

Waiver of Venue. SHAREHOLDER AND EACH LOAN PARTY IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT IN ANY COURT REFERRED TO IN PARAGRAPH (C) OF THIS SECTION. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, THE DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH ACTION OR PROCEEDING IN ANY SUCH COURT.

INTEREST PLEDGE AND SECURITY AGREEMENT

This Interest Pledge and Security Agreement is made and entered into as of the 28^th day of September, 2005, by and between Kasco Corporation, a Delaware corporation, hereinafter referred to as “Shareholder” and Bank of America, N.A., a national banking association, as Administrative Agent on behalf of the Lender, hereinafter called "Agent,” as follows:

For value received, Shareholder hereby grants to the Agent a security interest in the following described property, hereinafter referred to as the "Collateral", to-wit: certain units of the capital and voting interest of Atlantic Service Co. Ltd., a limited liability company organized under the laws of Canada (“Atlantic Service”), Atlantic Service Co. (UK) Ltd., a company organized under the laws of the United Kingdom (“Atlantic Service (UK)”), Bertram & Graf GmbH, an entity formed under the laws of Germany (“Bertram & Graf”), and EuroKasco S.A.S., an entity formed under the laws of France (“EuroKasco”) (together such interests are hereinafter referred to in the aggregate as the "Interests" and individually as an "Interest") which Interests equal but do not exceed sixty-five pe rcent (65%) of the outstanding equity ownership of such Subsidiary, together with all other assets which may at any time arise from such Interests (hereinafter collectively referred to as the "Interest Benefits" and individually as the "Interest Benefit"), to secure: (1) the obligations of any of the Loan Parties pursuant to that certain Third Amended and Restated Credit Agreement dated as of May 20, 2005, by and between Borrower and Agent as may be amended from time to time (the "Credit Agreement"), (2) all reasonable costs and expenses incurred by the Agent in the enforcement of any of the Loan Parties’ obligations under the Credit Agreement; and (3) all liabilities of the Loan Parties to Agent now existing or hereafter incurred relating to the Credit Agreement, and any renewals and extensions thereof and substitutions therefor (with (1) through (3) together herein referred to as the "Obligations"). Atlantic Service, Atlantic Service (UK), Bertram & Gr af and EuroKasco S.A.S. are jointly and severally referred to as “Subsidiary.” Each capitalized term used but not defined herein shall have the meaning thereto in the Credit Agreement.

SHAREHOLDER WARRANTS, COVENANTS AND AGREES:

Perfection of Security Interest and Protection of Collateral. In order to perfect the Agent’s security interest in the Interests and to protect such security interest in the Interests, Shareholder represents and warrants to Agent and Lender and covenants with Agent and Lenders as follows:

(a)

(b)

Except for such Financing Statement in favor of Agent, no financing statement covering the interests is on file in any jurisdiction or shall be filed at any time before the Obligations are satisfied in full. Shareholder has not granted possession or control of the Interests to any other person, and Shareholder shall not grant possession or control of the Interests to any other person at any time before the Obligations are satisfied in full.

(c)

Additional Pledge and Warranty. Shareholder warrants that the Collateral constitutes sixty-five percent (65%) of the outstanding capital and voting interest of the Subsidiary and in the event Subsidiary authorizes additional interest to be issued, Shareholder will pledge additional interest in Subsidiary to Agent so that at no time will the interest pledged to Agent be less than sixty-five percent (65%) of the outstanding capital and voting interest of each Subsidiary. In the event that the Collateral exceeds sixty-five percent (65%) of all outstanding Interest of each Subsidiary, then such excess Interest shall automatically be deemed released from the Collateral.

SHAREHOLDER AND AGENT AGREE:

Time of Performance and Waiver. In performing any act under this Agreement, time shall be of the essence. The failure of the Agent to exercise any right or remedy shall not be a waiver of any obligation of the Shareholder or right of the Agent or constitute a waiver of any other similar default subsequently occurring.

Default. Any default as set forth in the Credit Agreement shall constitute a default hereunder, entitling Agent to the remedies set forth in the Credit Agreement.

Miscellaneous Provisions.

(a)

(b)

(c)

Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF FLORIDA.

(d)

Jurisdiction. SHAREHOLDER AND EACH LOAN PARTY IRREVOCABLY AND UNCONDITIONALLY SUBMITS, FOR ITSELF AND ITS PROPERTY, TO THE NONEXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF FLORIDA SITTING IN ORANGE COUNTY AND OF THE UNITED STATES DISTRICT COURT OF THE MIDDLE DISTRICT, AND ANY APPELLATE COURT FROM ANY THEREOF, IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR FOR RECOGNITION OR ENFORCEMENT OF ANY JUDGMENT, AND EACH OF THE PARTIES HERETO IRREVOCABLY AND UNCONDITIONALLY AGREES THAT ALL CLAIMS IN RESPECT OF ANY SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH STATE COURT OR, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, IN SUCH FEDERAL COURT. EACH OF THE PARTIES HERETO AGREES THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCE D IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW. NOTHING IN THIS AGREEMENT OR IN ANY OTHER LOAN DOCUMENT SHALL AFFECT ANY RIGHT THAT THE ADMINISTRATIVE AGENT, ANY LENDER OR THE L/C ISSUER MAY OTHERWISE HAVE TO BRING ANY ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AGAINST ANY BORROWER OR ANY OTHER LOAN PARTY OR ITS PROPERTIES IN THE COURTS OF ANY JURISDICTION.

(e)

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