Item 1. Business
(a)	General Development of Business. The Registrant, (also referred to as the "Company") organized under the Iowa Business Corporation Act, is engaged principally in the development of commercial real estate for lease to tenants under net lease arrangements. The Registrant also derives revenues from its portfolio of investment securities.
Sale of QuikTrip Property
In July 2004, the Company executed a 20-year lease with Git-N-Go Convenience Stores, Inc. ("Git-N-Go") for one of its QuikTrip store properties located in Des Moines, Iowa. The lease with Git-N-Go was effective December 1, 2004. On December 28, 2004, the Company sold this convenience store property along with an office building at the same location that had been leased to QuikTrip, for $1,250,000 realizing a gain of $1,030,000 on the sales. Proceeds from the sale were placed in escrow with a qualified intermediary pending an Internal Revenue Code Section 1031 tax-free exchange.
Termination of Pizza Hut Agreement
The Company reported in its third quarter 2004 Form 10-Q, that it had entered into a sale-leaseback agreement in September 2004 with NPC International ("Pizza Hut"), pursuant to which the Company agreed to pay up to $600,000 for a building constructed by Pizza Hut on the Company's one remaining lot in Ankeny, Iowa. Pizza Hut in turn would have leased the property from the Company for an initial term of 20 years. The agreement further provided that if the building costs exceeded $600,000, Pizza Hut would have the option of paying the excess costs or terminating the agreement. In December 2005, Pizza Hut decided to terminate the agreement when it received construction cost estimates exceeding the $600,000 portion payable by the Company.
Merger
On January 14, 2005, the Company's board of directors gave approval and adopted a definitive agreement and plan of merger for the Company to merge with and into a wholly owned subsidiary of Commercial Net Lease Realty, Inc. ("Commercial"). Commercial invests in high quality, single-tenant retail and office properties subject to long term, net leases with established tenants. As of January 2005, Commercial owned 362 investment properties in 38 states which were leased to 152 corporations in 56 industry classifications.
The merger agreement provides for shareholders of the Company to receive four shares of Commercial common stock for each share of stock in the Company owned by them. Further, as a condition to Commercial's obligation to close the merger, the Company must pay a dividend to its shareholders of $20.8 million, or approximately $50.84 per share. This special dividend will be paid out prior to closing only if all other conditions to the merger have been satisfied or waived prior to the closing of the merger.
Completion of the merger is subject to customary closing conditions, including the approval of the holders of a majority of the Company's outstanding common stock. Company shareholders holding approximately 53% of the Company's outstanding common stock have entered into a shareholder agreement with Commercial to vote in favor of the merger. However, Commercial may terminate the merger agreement if a majority of the Company's shareholders who are not bound by the shareholders agreement do no approve the merger. The Company anticipates that the merger will be completed not later than the second quarter of 2005.
Declaration and Payment of 2004 Dividend
At the Company's annual meeting of stockholders held May 21, 2004, the Company declared a dividend of $0.18 per share to be paid July 31, 2004 to stockholders of record on June 30, 2004. The dividend totaled $73,644.
(b)	Financial Information About Industry Segments. The Company operates in a single industry segment.
(c)	Narrative Description of Business.
Real Estate Held For Investment
The Company seeks to acquire or develop improved real estate properties suitable for lease to commercial tenants. It is the Company's policy to invest in properties that are fully leased to a single tenant which is responsible for payment of real estate taxes, insurance, utilities and repairs. Under such circumstances, the Company has limited management responsibilities for such properties once they are constructed and leased. In most cases, properties are constructed by the tenant and conveyed to the Company under a sale and leaseback arrangement. It is not the policy of the Company to invest in multiple-tenant office buildings or residential facilities. Primary factors considered by the Company in developing a property for lease are the use to be made of the property, its location, the nature and credit standing of the tenant, the rental income to be derived under the lease, and the ability of the Company to utilize the property or dispose of it upon termination of the lease.
All of the investment properties now owned by the Company are located in Arizona, Colorado, Georgia, Iowa, Kansas, Missouri, Nebraska, North Carolina, Oklahoma, South Dakota, Tennessee and Texas. The Company has placed no limitations, however, on the locations in which it is willing to own or develop properties in the future.
The commercial real estate acquired by the Company is normally purchased with funds drawn on the Company's line of credit. The Company gives careful consideration to the rate of return which it will receive from an investment based on the original cost thereof to the Company without regard to possible mortgage financing. While the rate of return varies, it has ranged generally from 7.25% to 13%.
Real estate investments acquired or developed by the Company are not held for resale, but are held as productive assets. The Company may, however, dispose of properties depending upon the circumstances then existing.
Virtually all of the Company's development activity is handled by its President, including lease negotiations, site acquisitions, construction activities, and financing.
The real estate investment activity engaged in by the Company is highly competitive, with numerous investors seeking to develop properties for lease to qualified tenants. These competitors include numerous major national financial institutions with resources and abilities to attract tenants which are far greater than those of the Company, as well as many other types of full-time and part-time real estate investors.
At December 31, 2004, the Company owned 40 leased properties having an aggregate cost of $46,476,631. The rental income for 2004 on these leased properties amounted to $5,911,032. Ten of the properties are leased to five restaurant operators, and those ten properties account for 21.9% of rental income. Seventeen QuikTrip, two Gate Petroleum and one Kum & Go convenience store properties account in the aggregate for 45.4% of rental income. Two office buildings, three retail sports buildings, and a Walgreen drug store building account in the aggregate for 26.4% of rental income. Two telephone service center buildings and one Goodyear Tire Center building account for 4.3% of rental income. Other properties held for future development account for 2.0% of rental income.
As of December, 2004, the tenants of all 40 leased properties were in compliance with the terms of their respective leases.
Leases of real property to QuikTrip Corporation represent, in the aggregate, a significant portion of the Company's business in terms of revenues and real estate portfolio. The Company has done business with QuikTrip Corporation since 1980, during which time QuikTrip Corporation has made all of its lease payments to the Company on a timely basis. QuikTrip Corporation is a private company which operates convenience stores in seven southern and midwestern states. For its fiscal year ending April 25, 2004, the estimated revenues of QuikTrip Corporation were $2,815,000,000, as reported in Forbes magazine.
Other Investments
The Company has a portion of its assets invested in marketable securities which had a market value of $1,286,898 as of December 31, 2004.
Employees
The Company currently employs 6 persons: 3 full-time employees and 3 part- time employees.
Item 2.
Item 2. Properties
The following table sets forth by category the properties owned by the Company, the identities of the tenants, the locations of the properties and information concerning the properties and the lease terms pertaining to the properties.
a Mortgaged to Lender - See Note 4 of Notes to Financial Statements. b 50% used by Registrant; 50% held for lease but vacant 12-31-2004.
Other Properties
The following unencumbered properties are held for future development by the Company.
(1) Real Estate, S. E. Delaware and Oralabor Road, Ankeny, Iowa.
This commercially zoned property is located in Ankeny, Iowa, at the Industrial Exit of Interstate 35. It contains one platted lot totaling 1.5 acres.
(2) Real Estate, 4745 - 2nd Avenue, Des Moines, Iowa.
106,000 sq. ft. of land and 3,200 sq. ft. building leased for $4,500 per month, the lease expires July 1, 2010. 56,000 sq. ft. of the 106,000 sq. ft. is unused land and available for development.
(3) Real Estate, 845 Sixth Avenue, Des Moines, Iowa.
6,000 square foot concrete block building and lot. This building is rented for $1,500 per month. The lease expires May 1, 2005.
Item 3.
Item 3. Legal Proceedings.
The Company is not engaged in any material legal proceedings.
Item 4.
Item 4. Submission of Matters to a Vote of Security Holders.
Not Applicable
PART II
Item 5.
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
The common stock of the Company (symbol NAPE) is traded on the over-the- counter bulletin board (a product of the National Association of Security Dealers, Inc., sponsored by market makers). Quotations are inter-dealer prices, without retail mark-up, or mark-down, or commission and may not necessarily represent actual transactions. The prices shown below are by calendar quarters for 2004 and 2003.
There was a cash dividend of eighteen cents a share paid in 2004. Future dividend declarations will be dependent upon the earnings of the Company, its financial condition, its capital requirements and general business conditions.
There were approximately 550 stockholders of record as of March 1, 2005.
(1) Gross revenues include revenues from the Company's continuing and discontinued operations. The Financial Accounting Standard Board issued Statement of Financial Accounting Standards ("SFAS") Statement No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets". This Statement, effective for years beginning in 2002, addresses financial accounting and reporting for the impairment or disposal of long-lived assets and broadens the presentation of discontinued operations in the income statement to include a component of an entity. Accordingly, the results of operations related to the properties sold by the Company in 2004 have been reclassified to earnings from discontinued operations.
Item 7.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion should be read in conjunction with Item 1 (Business) and the Company's Financial Statements and accompanying Notes thereto included elsewhere herein.
The Company's primary business is leasing commercial real estate to tenants under net lease arrangements. The Company currently owns commercial real estate in Arizona, Colorado, Georgia, Iowa, Kansas, Missouri, Nebraska, North Carolina, Oklahoma, South Dakota, Tennessee and Texas. The Company generates most of its revenue in the form of rents from its tenants. The Company also generates some revenue from its portfolio of investment securities.
The Company policy is to invest in properties that are fully leased to a single tenant, and the tenants to which the Company has leased its properties have performed well in spite of the recent recession. The Company believes that its tenants will continue to perform well and will continue to comply fully with the terms of their leases with the Company. The Company will continue to pursue relationships with tenants whose business is not heavily dependent on the performance of the national economy as a whole.
Leases of real property to QuikTrip Corporation represent, in the aggregate, a significant portion of the Company's business in terms of revenues and real estate portfolio. Each lease pertains to an individual convenience store. Rent payments to be made by QuikTrip Corporation under the leases are payable irrespective of the performance of the convenience store location under lease, except that one of the leases provides for additional rent based on a percentage of merchandise and fuel sales at that location in excess of a fixed amount. The terms of the leases are triple-net. The leases have expiration dates and renewal options as shown in the table included as part of Item 2. QuikTrip Corporation is a private company which operates convenience stores in seven southern and midwestern states. The percentage of the Company's business conducted with QuikTrip Corporation has materially increased in recent years. Management considers this increased concentration of the Company's business with QuikTrip Corporation to be a favorable development and does not believe it represents an unacceptable risk. Management considers QuikTrip Corporation to be a highly desirable commercial tenant. During the course of the Company's dealings with QuikTrip Corporation over more than 20 years, QuikTrip Corporation has made all of its lease payments to the Company on a timely basis. Management has concluded, following its review of the current audited financial statements of the QuikTrip Corporation, that the financial position, operating results and cash flows of QuikTrip Corporation continue to justify confidence in its ability to meet all of its obligations under its leases with the Company.
Results of Operations 2004 vs. 2003 - ----------------------------------- Net income in 2004 totaled $3,160,000 or $7.72 per share, an increase of $900,000 from last year's, $2,260,000 or $5.51 per share.
Lease revenues in 2004 were $6,095,000, a net increase of $515,000 or 9.2% over 2003. The increase in the lease revenue relative to 2003 was attributable to the net positive effect of the following factors: (1) the acquisition of a restaurant-convenience store property in August 2003 and a drug store property in November 2003, which in the aggregate increased lease revenues by $445,000 in 2004; (2) a decrease in lease revenues of $119,000 due to the disposition of two garden center properties in 2003; (3) a decline of $19,000 in contingent rents based on sales overages, (4) an increase in lease revenues of $24,000 due to escalation clauses in the leases of several tenants , and (5) an increase of $184,000 in accrued rental income.
The Company recorded an increase in gain on sale of securities of $44,000 in 2004 over 2003, while other investment income declined approximately $9,000 due mainly to the $16,000 of interest income earned on cash deposits in escrow accounts in 2003 that was not repeated in 2004. See Results of Operations 2003 vs. 2002 for a discussion of interest income earned on such cash deposits.
The Company recorded a gain of $1 million from the sale of a QuikTrip property in 2004 compared to $40,000 earned in 2003 from the sale of a property easement.
Operating expenses were $2,203,000 in 2004, an increase of $122,000 or 7.8% from a total of $2,081,000 for 2003. The increase was primarily the results of increases in depreciation and professional fees expense.
Depreciation expense increased a net $83,000 in 2004 over 2003. Property acquisitions in 2003 and property improvements in 2004 increased depreciation expense $126,000, while the combination of the disposition of the Company's garden center property in 2003 and reduced depreciation on properties reaching the end of their economic lives for depreciation purposes during 2004 reduced depreciation expense by $43,000.
Interest expense for 2004 increased slightly over 2003 as the interest rate on the Company's bank line of credit increased from 3.25% to 4.5% in 2004 in response to hikes in the prime rate by the Federal Reserve Board. The Company repaid $3,175,000 on its credit line in 2004 and had no new borrowings. The average outstanding loan balance in 2004 was $10,317,000 compared to $10,896,000 in 2003. The average interest rate paid in 2004 was 3.64% compared to 3.44% in 2003.
Other general and administrative expenses (G & A) include personnel cost, real estate taxes, repairs, and cost of corporate functions including legal, accounting and directors. G & A expenses increased $39,000 in 2004 and primarily reflected increases over 2003 in professional fees, compensation costs, and state franchise fees. G & A expenses decreasing from their 2003 level included property taxes on the Company's Ankeny, Iowa land, insurance and travel expenses.
The effective income tax rate was 37.2% for 2004 and 37.5% in 2003.
Results of Operations 2003 vs. 2002 - -----------------------------------
Net income in 2003 totaled $2,260,000 or $5.51 per share, an increase of 8.3% from 2002's net income of $2,087,000 or $5.06 per share. The increase in net income resulted primarily from an increase in net lease rental income and a decrease in interest expense and real estate taxes.
Lease revenues in 2003 were $5,580,000, a net increase of $216,000 or 4.0% over 2002. The increase in the lease revenue relative to 2002 was attributable to: (1) the acquisition of a restaurant-convenience store property in August 2003 and a drug store property in November 2003, and a sporting goods store property and a restaurant property in 2002, which in the aggregate added $369,000 to lease revenues in 2003; (2) a decrease in lease revenues of $151,000 due to the disposition of two garden center properties in 2003; (3) a decrease of $9,000 in contingent rents based on sales overages, and (4) an increase in lease revenues of $7,000 due to escalation clauses in the leases of several tenants.
The Company recorded gains of $31,000 from the sale of marketable securities in 2003 compared to $36,000 in 2002. Other investment income of $43,000 was comparable to 2002 and included $27,000 from dividends on its marketable securities portfolio and $16,000 in interest earned on deposits held in escrow accounts of qualified intermediaries who handled the I.R.C. Section 1031 exchange of three properties for the Company in 2003. (See discussion of real estate exchange in Part I).
The Company recorded a gain of $40,000 in 2003 from the sale of an easement on property adjacent to Company owned property in Arlington, Texas.
Operating expenses totaled $2,081,000 in 2003 compared to $2,116,000 in 2002, a decline of $35,000. The decrease was primarily the result of a decline in interest cost and real estate taxes.
Interest expense decreased $47,000 in 2003 primarily due to a lower average borrowing rate. The Company borrowed $3,950,000 on its credit line and repaid $3,225,000 during 2003 resulting in a $725,000 increase in outstanding debt over 2002. The average outstanding borrowing in 2003 was $10,896,000 compared to $10,550,000 in 2002. The higher average debt in 2003 was more than offset by a decline in the interest rate on the Company's line of credit from 3.5% to 3.25% on July 1, 2003. The average interest rate paid by the Company in 2003 was 3.44% compared to 3.99% for 2002.
Depreciation expense increased a net $22,000 in 2003 over 2002. Depreciation increased approximately $98,000 in 2003 from new property acquisitions in 2003 and 2002, and decreased approximately $76,000 from the disposition of the Company's two garden centers in 2003 and as a result of other properties becoming fully depreciated.
Other general and administrative expenses (G & A) include personnel cost, real estate taxes, repairs and cost of corporate functions including legal, accounting and directors. G & A expenses declined $11,000 from 2002 primarily due to a decrease in real estate taxes on the Company's Ankeny, Iowa property of $51,000 due to commencement of a lease with IHOP of one lot in 2002 and exchanging one lot for another rental property in 2003. The Company experienced increases over 2002 in personnel cost, directors fees, insurance and certain filing costs in states it conducts business.
The effective income tax rate was 37.5% in 2003 compared to 37.3% in 2002. The increase was due to higher state income taxes resulting from increased income.
Financial Condition, Liquidity and Capital Resource
The Company's cash position increased $1,212,000 in 2004 over its year end position in 2003 as a result of selling two properties at the end of 2004 that netted the Company $1,245,000 cash. The cash from the sales was placed in escrow to be used for the purchase of another property in an Internal Revenue Code Section 1031 tax-fee exchange. Otherwise the Company continued its practice of applying all cash in excess of current operating needs to reduce bank debt.
The Company generated cash from operating activities of $3.5 million for 2004, $3.3 million for 2003 and $3.4 million in 2002. The primary sources of cash from operating activities have been net income, as adjusted to exclude the effects of non-cash charges and changes in other current assets and liabilities.
The Company generated $1.0 million of cash from investing activities in 2004 primarily from the sale of a QuikTrip property, while using $3.9 million of cash in 2003 and $4.2 million in 2002. Capital expenditures to acquire new commercial properties for lease or make improvements to existing properties were the primary use of such cash in 2003 and 2002. Capital expenditures were $0.3 million in 2004, $5.5 million in 2003 ($3.87 million in cash), and $4.5 million in 2002. Some property acquisitions involved an exchange of property owned by the Company. The following table summarizes the Company's cost of commercial properties acquired during the three years ended December 31, 2004 and the lease income to be derived from those properties on an annual basis.
The Company used $3.2 million cash in financing activities in 2004 while generating cash of $0.5 million in 2003 and $0.8 million in 2002, primarily due to bank borrowing, net of repayments on the Company's line of credit. Borrowings on this line of credit are used to fund property acquisitions.
Other financing activities involved the Company repurchasing limited amounts of its common stock and the payment of dividends. Each year the Company has reacquired a limited amount of its common stock in open market and negotiated transactions with the exception of 2004 during which no Company shares were repurchased. In 2003, the Company repurchased 2,090 shares at a cost of $103,242 and in 2002 repurchased 1,850 shares at a cost of $86,850. In addition to stock repurchases, the Company continued its long-standing tradition of paying its stockholders a cash dividend. Dividends paid during the past three years were $73,644 in 2004; $69,765 in 2003 and $65,988 in 2002.
The Company's only source of outside financing is its $15 million long-term bank line of credit with a local bank. The Company has no off-balance sheet arrangements. At December 31, 2004, the Company's primary sources of liquidity were $1,538,000 in cash; marketable securities with a market value of approximately $1,287,000; and a $6,200,000 remaining loan balance available on a $15,000,000 revolving line of credit with a local bank. (See Note 4 of the Notes to Financial Statements.) In addition, the Company owns unencumbered real estate having an aggregate depreciated cost of approximately $27,000,000. Management believes that its cash flow from operations and these other potential sources of cash will be sufficient to finance current and projected operations.
The company intends to obtain debt financing in order to fund the $20.8 million cash dividend contemplated in connection with the merger (see Item 1 - - Merger).
Summary of Critical Accounting Policies
Management strives to report the financial results of the Company in a clear and understandable manner, even though in some cases accounting and disclosure rules are complex and require us to use technical terminology. We follow generally accepted accounting principles in the U.S. in preparing our financial statements. These principles require us to make certain estimates and apply judgments that affect our financial position and results of operations. Management continually reviews its accounting policies, how they are applied and how they are reported and disclosed in our financial statements. Following is a summary of our more significant accounting policies and how they are applied in preparation of the financial statements.
Exchange of Nonmonetary Assets: Real estate investments acquired or developed by the Company are not held for resale, but are held as productive assets. When the Company disposes of a property, it will generally exchange that property for another productive property. The Company accounts for these nonmonetary transactions in accordance with Accounting Principles Board Opinion 29 "Accounting for Nonmonetary Transactions", by recording the property received in the exchange at the recorded amount of the property surrendered plus any cash paid in the transaction. Therefore, no gain or loss is recognized on the disposed property. However, see New Accounting Standard below, regarding an amendment to APB 29.
Impairment of Long-Lived Assets: The Company evaluates its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets or intangibles may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future net cash flows expected to be generated by the asset. If such asset is considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the asset exceeds the fair value of the asset. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell. During 2004 and 2003, the Company determined that none of its long-lived assets had been impaired, and therefore the Company did not adjust the carrying amounts of such assets.
Marketable Securities: The Company classifies its existing marketable equity securities as available-for-sale in accordance with the provisions of Statement of Financial Standards No. 115, "Accounting for Certain Investments in Debt and Equity Securities". These securities are carried at fair market value, with the increase or decrease in unrealized gains and losses reported as other comprehensive income or losses in the statement of income and comprehensive income. Gains or losses on securities sold are based on the specific identification method.
Property and Equipment: Property and equipment are recorded at cost and depreciated on a straight-line basis over the estimated useful lives of 15 to 39 years for buildings and 5 to 7 years for equipment.
Lease Rentals - Commercial Real Estate: Lease rentals received on commercial real estate are accounted for under the operating method, under which rentals, including contingent rents, are included in income as earned over the term of the lease. When scheduled rentals vary during the lease term, income is recognized on a straight-line basis so as to produce a constant periodic rent over the term of the lease. Accrued rental income is the aggregate difference between the scheduled rents which vary during the lease term and the income recognized on a straight-line basis.
Estimates: The preparation of the financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could vary from the estimates that were used.
New Accounting Standard: In December 2004, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards (SFAS) Statement No. 153, Exchanges of Nonmonetary Assets-an amendment to APB Opinion 29. SFAS No. 153 eliminates the exception in APB 29 that permits the exchange of productive assets not held for sale in the ordinary course of business to be accounted for based on the recorded amount of the nonmonetary asset relinquished rather than fair value. Therefore, under APB 29, gain or loss was generally not recognized on the exchange of productive assets. Real estate investments acquired by the Company are not held for resale but are held as productive assets. When the Company disposes of a property, it will generally exchange that property for another productive property and historically had accounted for such exchange in accordance with APB 29. Although the provisions of SFAS Statement No. 153 are effective for years beginning after June 15, 2005, earlier application is permitted from the date of issuance. The Company has adopted SFAS Statement No. 153 and applied its provisions to the QuikTrip and Git-N-Go properties it sold in December 2004. The provisions of SFAS No. 153 are to be applied prospectively.
Contractual Obligations
The Company's only contractual obligation at December 31, 2004, was under a revolving credit facility with Wells Fargo Bank, N.A. At December 31, 2004, the Company had outstanding borrowings of $8,800,000 on the facility and commitment to pay a user fee of 1/8 of 1% (payable quarterly) on the unused portion of the $15,000,000 revolving credit line. The credit facility has been extended to mature April 30, 2006.
Off Balance Sheet Arrangements
The Company has no off-balance sheet arrangements.
Earnings from Discontinued Operations
The Company has classified its sale of a QuikTrip and Git-n-Go property in 2004 as discontinued operations in accordance with SFAS No. 144, "Accounting for the Impairment or Disposal of Long-lived Assets". Accordingly, the results of operations for 2004, 2003 and 2002 related to those properties have been reclassified to earnings from discontinued operations. During the years ended December 31, 2004, 2003 and 2002, the Company recognized earnings from discontinued operations of $688,964, $39,746 and $39,874 respectively. The Company occasionally sells properties and will reinvest the proceeds of the sales to purchase new properties. The sale of a property easement in 2003 did not meet the criteria of SFAS No. 144 for classification as a discontinued property.
Item 7A.
Item 7A.	Quantitative and Qualitative Disclosure About Market Risk
The Company is exposed to price fluctuation on its available for sale marketable equity securities portfolio. These investments are generally in companies with large capitalizations. The Company does not attempt to reduce or eliminate the market exposure on these securities. The Company reports the results of price fluctuations on its marketable equity securities portfolio as unrealized holding gains and losses in its Statement of Income and Comprehensive Income.
Item 8.
Item 8. Financial Statements and Supplementary Data.
Financial statements filed herewith:
Report of Independent Auditors.
Balance Sheets as of December 31, 2004 and December 31, 2003.
Statements of Income and Comprehensive Income for the years ended December 31, 2004, December 31, 2003 and December 31, 2002.
Statements of Stockholders' Equity for the years ended December 31, 2004, December 31, 2003 and December 31, 2002.
Statements of Cash Flows for the years ended December 31, 2004, December 31, 2003 and December 31, 2002.
Notes to Financial Statements.
Item 9.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosures.
None
Item 9A.
Item 9A. Controls and Procedures.
(a) The Chief Executive Officer and the Secretary-Treasurer of the Company have evaluated the effectiveness of the design and operation of the Company's disclosure controls and procedures pursuant to Securities Exchange Act Rule 13a-15 as of the end of the period covered by this report. Based on that evaluation, the Chief Executive Officer and Secretary-Treasurer have concluded that these disclosure controls and procedures are effective.
(b) There were no changes in our internal control over financial reporting during the quarter ended December 31, 2004 that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.
Item 9B.
Item 9B. Other Information
None.
PART III
Item 10.
Item 10. Directors and Executive Officers of the Registrant.
The following table sets forth information concerning the directors and executive officers of the Registrant:
Director Shares Percentage Since/ Benefi- of Name, Age Principal Occupation Term cially outstanding and Position During Past Five Years Expires Owned(1) Shares - ------------ ---------------------- ----- -------- ------ - -
Raymond Di Paglia, 75 President of the Company 1960 217,000(2) 53.04% President 2006 and Director(3)
Robert H. Jamerson, 72 Retired Architect 1965 1,460 0.36% Director(4) Since June, 2001 2005
Kristine M. Fasano, 53 Vice President, 1979 3,000 0.73% Vice President, Secretary, Treasurer 2005 Secretary, Treasurer, and Company Attorney Director(3)
Tim Lynch, 42 Private Law Practice, 2002 100 0.02% Director(4) Des Moines, IA 2007 Since 1999, Lease Admin US Cellular, Cedar Rapids, IA
All executive officers and directors as a group (4 persons) 221,560 54.15%
(1) As of March 1, 2005.
(2) Includes 1,000 shares which were purchased and are owned by his wife, and 85,000 shares which are held as trustee of a testamentary trust created under his father's will. Mr. Di Paglia disclaims beneficial ownership and control of these shares, except to the extent of his beneficial interest in the testamentary trust.
(3) Kristine M. Fasano is the daughter of Raymond Di Paglia.
(4) Member of the Audit Committee of the Board of Directors.
In 2004, Robert H. Jamerson and Tim Lynch were members of the Audit Committee. Robert H. Jamerson served as Chairman of the committee. The Company's board of directors has determined that Audit Committee members have no financial or personal ties to the Company (other than director compensation and equity ownership as described above and are independent as defined under the rules of the NASDAQ Stock Market. The board of directors has determined that neither director is an "audit committee financial expert", as that term is defined in Item 401(h) of Regulation S-K for purposes of current adopted Section 10A(m)(3) of the Securities Exchange Act of 1934. The two directors, an architect and an attorney, have extensive experience in building and leasing properties. In the view of the Company's board of directors, the Company's operations and accounting do not justify a financial expert on the audit committee.
The duties of the Audit Committee, which met three times during 2004, are to recommend to the Board of Directors the selection of the independent auditors; consult with the auditors prior to and at the conclusion of the annual audit with respect to matters of interest to the Committee; review with the auditors the adequacy of internal controls, accounting personnel and proposed changes in accounting policies; review with the auditors and management any comments or recommendations from the auditors with respect to accounting procedures; and approve the type, scope and costs of services to be performed by the auditors. During its 2004 meetings, the Audit Committee, approved in accordance with its policy of pre-approving all such services, the type, scope and costs of services to be performed by the auditors. The Board of Directors has not adopted a written charter for the Audit Committee.
The Registrant has adopted a Code of Ethics that applies to its executive officers. A copy of the Code of Ethics was filed as Exhibit 14 to the Registrant's Form 10-K for the fiscal year ended December 31, 2003.
Item 11.
Item 11. Executive Compensation.
The following table sets forth the annual compensation of the President and Chief Executive Officer of the Registrant for each year of the 3-year period ended December 31, 2003.
Summary Compensation Table
Name and Position Year Salary - ------------------- ---- ------- Raymond Di Paglia 2004 $156,113 President & Chief 2003 151,262 Executive Officer 2002 137,781
Mr. Di Paglia is employed by NAPE under an employment agreement entered into and approved by NAPE's board of directors on November 20, 1998. The employment agreement has an effective date of January 1, 1999 and has a 10- year term expiring on December 21, 2008; provided, however, that the 10-year term is automatically extended for an additional year each December in the absence of action to the contrary by the board of directors of NAPE. As a result, the employment agreement currently expires on December 31, 2014. Pursuant to the employment agreement, Mr. Di Paglia's annual compensation is subject to an increase equal to the greater of 3% or the increase in the Consumer Price Index for All Urban Customers. Under the agreement, in the event NAPE should terminate Mr. Di Paglia's employment, other than for disability or for cause, he shall be entitled to receive (without offset by earnings of subsequent employment) his then-annual compensation (presently $155,799) for each year in the unexpired term of the contract (presently through December 31, 2014), payable at his election, monthly over such period or in the lump sum discounted to present value (currently $1,210,000). The Company shall be deemed to have terminated the contract for the foregoing purposes in the event of Mr. Di Paglia's determination made in good faith that, as a result of a change of control of the Company, and a change in the circumstances which thereafter significantly affect his position, he is unable to carry out the authorities, powers and duties attached to this position. A change in control would be deemed to have occurred upon the acquisition by a person (or group of persons acting in concert), other than Mr. Di Paglia, of over 50% of the Common Stock of the Company, or a significant change in the composition of the Board of Directors without the concurrence of the present directors. A termination would also be deemed to occur in the event a successor to the Company in a business combination did not assume the employment contract.
The Company has a profit sharing plan qualified under Section 401 of the Internal Revenue Code under which employees of the Company, including two executive officers, may receive benefits upon retirement. Under the plan, the Company contributes the lesser of 25% of the compensation of the participating employees, or 5% of the pre-tax profits of the Company for such year (excluding any capital gains or losses). All employees are eligible to participate upon meeting certain requirements. Plan participants vest at the rate of 10% annually for the first two years and 20% annually for the next four years of service. Benefits are payable at normal retirement age 65 under a variety of payment options upon disability, and upon termination of service before normal retirement age in specified circumstances. For the year ended December 31, 2004, the Company contributed $70,108 to the plan, of which $39,028 was credited to Raymond Di Paglia, and $16,737 was credited to Kristine M. Fasano. Because amounts contributed to the plan in the future will be dependent upon future profits, it is not possible to presently estimate the amount of benefits which may be payable to the executive officers of the Company upon retirement.
Item 12.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters
To the Registrant's knowledge, the following persons owned or may be deemed to have beneficial ownership or control of, by virtue of actual or attributed voting rights or investment powers, more than 5% of the outstanding shares of Common Stock of the Company:
Number of Shares In which Voting Rights or Number Investment Power Percentage of Shares May Be Deemed Total of Shares Name Owned To Exist Shares Outstanding - ---- ---------- ----------------- -------- ---------- - -
Raymond Di Paglia (2) (as of March 1, 2005) 131,000 86,000(1) 217,000(1) 53.04% 4500 Merle Hay Road Des Moines, Iowa 50310
Robert W. Guely (as of March 1, 2005) 30,000(3) 30,000(3) 30,000(3) 7.33% 4320 Park Hill Cir. Urbandale, Iowa 50322
I. Wistar Morris III (as of May 24, 2005) 34,336(4) 34,336(4) 34,336(4) 8.39% 200 Four Falls Corp. Ctr, Suite 208 W. Conshohocken, PA 19428
(1) Includes 1,000 shares which were purchased and are owned by his wife, and 85,000 shares which are held as trustee of a testamentary trust created under his father's will. Mr. Di Paglia disclaims beneficial ownership and control of these shares, except to the extent of his beneficial interest in the testamentary trust.
(2) Mr. Di Paglia may be deemed to be a controlling person of the Company.
(3) These shares are held by two trusts of which Mr. Guely serves as trustee and is a beneficiary.
(4) As reported on Schedule 13D filed with the Securities and Exchange Commission on May 24, 2004.
Item 13.
Item 13. Certain Relationships and Related Transactions.
Not Applicable.
Item 14.
Item 14. Principal Accountant Fees and Services.
Audit Fees. The aggregate audit fees billed for professional services rendered by Northup, Haines, Kaduce, Schmid, Macklin, P.C. (the "Auditor") for the fiscal years ending December 31, 2004 and 2003 were $44,500 and $39,500. This amount includes fees necessary to perform an audit and quarterly reviews in accordance with generally accepted auditing standards and services that generally only the independent auditor can reasonably provide.
Tax Fees. Fees of $4,000 and $3,200 were incurred for the professional tax services rendered by the Auditor for the fiscal years ending December 31, 2004 and 2003. More specifically, these services include the preparation of Federal and State corporate income tax filings. In addition, fees of $21,200 were incurred in 2004 for services performed by the Auditor in determining the Company's earnings and profits income tax base for payment of a dividend to its shareholders as a condition to the Company closing on its proposed merger with Commercial Net Lease Realty, Inc.
The Registrant's Audit Committee has concluded that the non-audit services performed for the Registrant are compatible with maintaining the Auditor's independence.
All Other Fees. There were no fees billed by Northup, Haines, Kaduce, Schmid, Macklin, P.C. to the Registrant for 2004 or 2003 for any other services rendered to the Company.
All tax fees and other fees described above were approved by the Registrant's Audit Committee.
PART IV
Item 15.
Item 15. Exhibits and Financial Statement Schedules.
(a) The following documents are filed as part of this report:
1. Financial statements: See index to financial statements under Item 8 on Page 13 of this report.
2. Financial statement schedules: See Schedule III on page 24 of this report.
3. Exhibits:
Exhibit Number Description
10 Raymond Di Paglia's Employment Contracts:
10.1 1985 Employment Contract.
10.2 1991 Employment Contract.
10.3 1999 Employment Contract.
10.4 2002 Amendment No. 1 to Employment Contract.
31.1 Certification of Chief Executive Officer pursuant to Section 302 of The Sarbanes-Oxley Act.
31.2 Certification of Secretary-Treasurer pursuant to Section 302 of the Sarbanes-Oxley Act.
32.1 Certification of Chief Executive Officer and Secretary-Treasurer pursuant to Section 906 of The Sarbanes-Oxley Act.
31.1 Certification of Chief Executive Officer pursuant to Section 302 of The Sarbanes-Oxley Act.
31.2 Certification of Secretary-Treasurer pursuant to Section 302 of The Sarbanes-Oxley Act.
32.1 Certification of Chief Executive Officer and Secretary-Treasurer pursuant to Section 906 of The Sarbanes-Oxley Act.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
___NATIONAL PROPERTIES CORPORATION___ (Registrant)
Date __3/30/05__ By _____/S/__Raymond_Di_Paglia_________ Raymond Di Paglia, President and Chief Executive Officer
Date __3/30/05__ By _____/S/__Kristine_M._Fasano__________ Kristine M. Fasano, Vice President, Secretary and Treasurer
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Company and in the capacities and on the dates indicated.
DIRECTORS OF THE COMPANY
Date __3/30/05__ By _____/S/__Raymond_Di_Paglia________ Raymond Di Paglia
Date __3/30/05__ By _____/S/__Kristine_M._Fasano_______ Kristine M. Fasano
Date __3/30/05__ By _____/S/__Robert_H._Jamerson_______ Robert H. Jamerson
Date __3/30/05__ By _____/S/__Tim_Lynch________________ Tim Lynch
NORTHUP, HAINES, KADUCE, SCHMID, MACKLIN, P.C. Certified Public Accountants
Board of Directors and Stockholders National Properties Corporation
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We have audited the accompanying balance sheets of National Properties Corporation as of December 31, 2004 and 2003 and the related statements of income and comprehensive income, stockholders' equity and cash flows for each of the three years in the period ended December 31, 2004. These financial statements and the schedules referred to below are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and schedules based on our audits.
We conducted our audits in accordance with the Standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatements. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of National Properties Corporation as of December 31, 2004 and 2003, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2004, in conformity with accounting principles generally accepted in the United States of America.
Our audits were made for the purpose of forming an opinion on the basic financial statements taken as a whole. The schedules listed in Item 15(a)(2) are presented for purposes of complying with the Securities and Exchange Commission's rules and are not part of the basic financial statements. These schedules have been subjected to the auditing procedures applied in our audits of the basic financial statements, and in our opinion, fairly state in all material respects, the financial data required to be set forth therein in relation to basic financial statements taken as whole.
/S/ NORTHUP, HAINES, KADUCE, SCHMID, MACKLIN, P.C. NORTHUP, HAINES, KADUCE, SCHMID, MACKLIN, P.C.
West Des Moines, Iowa January 10, 2005
See Notes to Financial Statements
See Notes to Financial Statements
See Notes to Financial Statements
See Notes to Financial Statements
NOTES TO FINANCIAL STATEMENTS SUMMARY OF ACCOUNTING POLICIES
The Company: National Properties Corporation is a Lessor of commercial real estate to tenants, under net lease arrangements. The Company seeks to acquire or develop real estate for lease to commercial tenants anywhere in the United States. The Company currently owns property located in Arizona, Colorado, Georgia, Iowa, Kansas, Missouri, Nebraska, North Carolina, Oklahoma, South Dakota, Tennessee, and Texas.
Marketable Securities: The Company classifies its existing marketable equity securities as available-for-sale in accordance with the provisions of Statement of Financial Standards No. 115, "Accounting for Certain Investments in Debt and Equity Securities". These securities are carried at fair market value, with the increase or decrease in unrealized gains and losses reported as other comprehensive income or losses in the statement of income and comprehensive income. Gains or losses on securities sold are based on the specific identification method.
Property and Equipment: Property and equipment are recorded at cost and depreciated on a straight-line basis over the estimated useful lives of 15 to 39 years for buildings and 5 to 7 years for equipment.
Exchange of Nonmonetary Assets: Real estate investments acquired or developed by the Company are not held for resale, but are held as productive assets. When the Company disposes of a property, it will generally exchange that property for another productive property. The Company accounts for these nonmonetary transactions in accordance with Accounting Principles Board Opinion 29 "Accounting for Nonmonetary Transactions", by recording the property received in the exchange at the recorded amount of the property surrendered plus any cash paid in the transaction. Therefore, no gain or loss is recognized on the disposed property. However, see New Accounting Standard below, regarding an amendment to APB 29.
Impairment of Long-Lived Assets: The Company evaluates its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets or intangibles may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future net cash flows expected to be generated by the asset. If such asset is considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the asset exceeds the fair value of the asset. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell. During 2004 and 2003, the Company determined that none of its long-lived assets had been impaired, and therefore the Company did not adjust the carrying amounts of such assets.
Net Earnings Per Common Share: Net earnings per share are based on the weighted average number of shares outstanding of 409,133 in 2004, 409,898 in 2003 and 412,250 in 2002.
Profit-Sharing Plan: The Company has a profit sharing plan adopted in 1965, for eligible employees, under which it contributes a portion of its annual earnings. The plan and all of its amendments have been approved by the Internal Revenue Service. The Company's contribution to the plan was $70,108 in 2004; $67,945 in 2003 and $61,382 in 2002.
Lease Rentals - Commercial Real Estate: Lease rentals received on commercial real estate are accounted for under the operating method, under which rentals, including contingent rents, are included in income as earned over the term of the lease. When scheduled rentals vary during the lease term, income is recognized on a straight-line basis so as to produce a constant periodic rent over the term of the lease. Accrued rental income is the aggregate difference between the scheduled rents which vary during the lease term and the income recognized on a straight-line basis.
Estimates: The preparation of the financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could vary from the estimates that were used.
Fair Value of Financial Instruments: The Company's financial instruments are valued at their carrying amounts which are reasonable estimates of fair value.
New Accounting Standard: In December 2004, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards (SFAS) Statement No. 153, Exchanges of Nonmonetary Assets-an amendment to APB Opinion 29. SFAS No. 153 eliminates the exception in APB 29 that permits the exchange of productive assets not held for sale in the ordinary course of business to be accounted for based on the recorded amount of the nonmonetary asset relinquished rather than fair value. Therefore, under APB 29, gain or loss was generally not recognized on the exchange of productive assets. Real estate investments acquired by the Company are not held for resale but are held as productive assets. When the Company disposes of a property, it will generally exchange that property for another productive property and historically had accounted for such exchange in accordance with APB 29. Although the provisions of SFAS Statement No. 153 are effective for years beginning after June 15, 2005, earlier application is permitted from the date of issuance. The Company has adopted SFAS Statement No. 153 and applied its provisions to the QuikTrip property it sold in December 2004. The provisions of SFAS No. 153 are to be applied prospectively.
NOTE 1 - PROPERTIES UNDER LEASE
The Company is the Lessor of commercial real estate under noncancelable operating leases requiring fixed and contingent rentals through the year 2028. Contingent rentals based on sales overages amounted to $43,672 in 2004; $62,550 in 2003 and $71,870 in 2002. The following is a schedule of future minimum rentals at December 31, 2004, not including renewal options and contingent rentals.
NOTE 2 - INCOME TAXES
NOTE 3 - MARKETABLE SECURITIES
The Company's marketable securities consist of equity securities and were carried at fair market value. At December 31, 2004, marketable securities available-for-sale had an aggregate market value of $1,286,898 and a cost of $456,858 resulting in an unrealized gain of $830,040. At December 31, 2003, marketable securities had an aggregate market value of $1,302,844 and a cost of $511,996 for an unrealized gain of $790,848. The increase or decrease in unrealized holding gains each year is shown as other comprehensive income in the statement of income and comprehensive income.
The Company had gross realized gains of $74,903 and no realized losses on the sale of marketable securities in 2004. In 2003, the Company had gross realized gains of $31,247 and no realized losses. In 2002, the Company had gross realized gains of $52,712 and gross realized losses of $16,678. Gains on sales were based on the cost of the securities using the specific identification method.
NOTE 4 - LONG-TERM DEBT
The Company has a revolving credit agreement dated February 8, 2001, with Wells Fargo Bank, N.A (Bank). The credit facility permits the Company to borrow up to $15,000,000. At December 31, 2004, $8,800,000 ($11,975,000 at December 31, 2003) was outstanding under the agreement and matures on April 30, 2006. The revolving period of the agreement provides for annual extensions each April 30th at the mutual agreement of the Bank and the Company. It is the Company's intention to request an extension of the revolving period, as provided by the agreement. Advances under the credit facility bear interest at 0.75% below the Bank's base rate. At December 31, 2004, the outstanding balance accrued interest at 4.5%. In addition, the agreement requires the Company to pay an annual commitment fee of 1/8 of 1% (payable quarterly) on the unused portion of the line of credit commitment. The credit agreement contains various covenants, including limitations on additional borrowings and maintaining a minimum free cash flow as defined in the agreement of $1,800,000 per year measured as of the end of each fiscal quarter on an annualized basis. The Company was in compliance with all covenants at December 31, 2004. The line of credit is secured by first mortgages on nine properties that had a net book value of $7,381,000 at December 31, 2004.
NOTE 5 - CONCENTRATIONS
NOTE 6 - EARNINGS FROM DISCONTINUED OPERATIONS - REAL ESTATE HELD FOR INVESTMENT
NOTE 7 - QUARTERLY OPERATING DATA (UNAUDITED)
Exhibit 10.1 AMENDED AND RESTATED EMPLOYMENT CONTRACT
THIS AGREEMENT made this 15th of March, 1985, between NATIONAL PROPERTIES CORPORATION, hereinafter called the "Employer", and RAYMOND DI PAGLIA, hereinafter called the "Employee".
1. Employment. The Employer hereby employs the Employee and the Employee hereby accepts employment upon the terms and conditions hereinafter set forth.
2. Term and Extension. Subject to the provisions for termination as hereinafter provided, this Agreement shall be effective as of January 1, 1985, and, subject to the extension provisions set forth in this Section 2, this Agreement shall terminate on December 31, 1994. The expiration date of the initial ten year term provided by this Agreement shall automatically be extended for one year on each and every January 1 commencing with January 1, 1986, without action on the part of any person; provided, however, that the Board of Directors of Employer, may, by majority vote taken prior to the end of any given year suspend the automatic one year renewal which otherwise would be effective as of the following January 1; it being the intention of the parties to provide for a continuous ten year term unless affirmative action is taken by the Board of Directors each year to void the automatic one year extension.
3. Compensation. For all services rendered by the Employee under this Agreement during the calendar year 1985, the Employer shall pay the Employee "Basic Compensation" of $75,000. Commencing with the calendar year 1985, the compensation provided for herein shall be adjusted in the manner herein specified. The 1985 Basic Compensation shall be increased, but not decreased, to give effect to changes in cost of living levels, in the same proportion as the Consumer Price Index ("CPI") published by the U.S. Department of Labor shall increase during the calendar year 1985. The 1985 Basic Compensation shall be paid in the same installments in which it is now being paid, and any increase in compensation attributable to an increase in the CPI during the calendar year 1985 shall be payable in a lump sum as soon as the amount is determinable following December 31, 1985.
In the event that the aggregate compensation of the Employee shall be increased for the year 1985 by reason of the foregoing provisions, the aggregate compensation paid or accrued shall, for the year 1986, become the Basic Compensation to be paid during such year, increased or decreased by subsequent changes in the CPI during such year; and comparable adjustments, made in like manner, shall be made in each ensuing year thereafter during the term of this Agreement. In the event of a reduction in the CPI during any year, the Basic Compensation payable to the Employee for such year shall be reduced in the same proportion as the reduction in the CPI (but not below $75,000) and the Basic Compensation for the following year shall be the total compensation paid the previous year, giving effect to such reduction. In the event that the Employee shall have been overpaid for any year (through payment of installments of Basic Compensation), the amount of such overpayment shall be offset against the next ensuing installments of Basic Compensation payable following the determination of overpayment, or, at the option of the Employee, shall be repaid by him in full in cash when so determined.
4. Duties. The Employee is engaged as an executive to supervise and direct the activities of the Employer in the conduct of its real estate investment business, including the development, construction, financing, and promotion of new investment opportunities, as well as operation of all facilities; and, in addition, the Employee shall have general responsibilities and supervision over the conduct of the business of any subsidiary of the Employer, whether or not such subsidiary shall be engaged in the real estate investment business. In case the Employee shall be an officer of the Employer, or of a subsidiary of the Employer, during the term of this Agreement, the Employee shall have such duties in addition to the general statement thereof here made as shall be prescribed by the Bylaws or the Board of Directors from time to time. In such event, Employee shall serve in such capacity or capacities without further compensation.
5. Extent of Service. The Employee shall devote substantially his entire time, attention, and energies to the business of the Employer, and shall not during the term of this Agreement be engaged in any other business activity to a material extent whether or not such business activity is pursued for gain, profit, or other proprietary advantage; but this shall not be construed as preventing the Employee from investing his assets in such form or manner as will not require any substantial services on the part of the Employee in the operation of such investments or in the affairs of the Companies in which such investments are made.
6. Corporate Opportunity. The Employee acknowledges the value to the Employer of his knowledge, contacts, and working relationships with present and prospective customers, suppliers, lending institutions and other persons dealing with the Employer in the various aspects of its real estate investment activities. Employee agrees to utilize all of such capabilities solely for the full use and benefit of the Employer and to first offer to the Employer any and all of those opportunities which shall come to his knowledge and fall within the designated area of business which the Board of Directors may, from time to time, designate as business of the Employer.
7. Working Facilities. The Employee shall be furnished with a private office, stenographic help, the use of an automobile owned by the Employer, and such other facilities and services, suitable to his position and adequate for the performance of his duties.
8. Expenses. The Employee is authorized to incur reasonable expenses for promoting the business of the Employer, including expenses for entertainment, travel and similar items. The Employer will reimburse the Employee for all such expenses upon presentation by the Employee, from time to time, of an itemized account of such expenses.
9. Vacation. The Employee shall be entitled each year to a vacation period suitable to his position and subject to the over-sight of the Board of Directors, during which time his compensation shall be paid in full. Vacations may be taken at such times as the Employee may choose, but such vacations shall not be timed in such a manner as to interfere with the reasonable performance of his services to the Employer by the Employee.
10. Additional Benefits. Employer acknowledges the desirability of developing additional benefits for its employees, and in particular its executive employees. Specifically, it recognizes the ultimate desirability of developing a retirement program, a life insurance and disability insurance program, and some form of bonus or profit sharing benefits based upon the success of its operations.
Employer and Employee agree that the development of such programs is a time consuming and complex task requiring consultation with counsel, accountants, banks, insurance companies and agents, actuaries, and possibly others. For these reasons it is not now possible in connection with the execution of this Agreement to extend to Employee any existing plan or benefit of the type mentioned but which the Employer proposes to adopt in the future.
Employer agrees and represents to Employee that the Employer will undertake the investigation and study of these additional benefits and will use its best efforts to establish and implement a retirement program covering Employee providing for pension payments upon retirement at age 65, a life insurance and disability income program providing benefits to the Employee or his beneficiaries in the event of his death or total disability while so employed, and some form of incentive compensation such as a bonus plan or a profit sharing plan to reward the Employee on the basis of the profitability of the operations of Employer; all of which benefits to be commensurate with benefits payable under like programs established by other companies engaged in the same business of a like size and volume to executives holding similar positions.
11. Termination of Employment.
11.1 Death. In the event of the death of the Employee during the term of this Agreement, Basic Compensation shall be paid through the end of the month in which death occurs in accordance with the Employer's regular practice.
11.2 Disability. In the event the Employee's employment terminates due to "Disability", the Employee shall be entitled to receive 100% of his Basic Compensation at the rate in effect at the time of such termination, payable in monthly installments, for a period of 12 months commencing with the month following such termination, reduced however, by amounts received in respect of the same period of time under other long-term disability programs provided by the Employer or from workmen's compensation benefits.
"Disability", for purposes of this Agreement, shall mean the Employee's permanent physical or mental disability so as to render him incapable of carrying out his duties under this Agreement. A determination of Disability shall be subject to the certification of a qualified medical doctor agreed to by the Employer and the Employee, or, in the event of the Employee's incapacity to designate a doctor, the Employee's legal representative. In the absence of agreement between the Employer and the Employee, each party shall nominate a qualified medical doctor and the two doctors shall select a third doctor, who shall make the determination as to Disability.
11.3 Termination by the Employer Other Than for Disability or Cause.
(a) In the event the Employer terminates the Employee's employment for any reason other than for Disability, as provided in Section 11.2 above, or for Cause, as provided in Section 11.5 below, the Employer shall pay to the Employee, or his beneficiary, in the event of his death prior to the completion of such payments, an amount equal to his Basic Compensation at the rate in effect at the time of such termination for each year (prorated for a partial year) of the unexpired term of this Agreement. Such amounts shall be paid in monthly installments at the end of each month during such unexpired term unless, at the election of the Employee filed in writing with the Employer within 60 days following the effective date of termination, the Employee elects to receive such payments in a lump sum, in which event the Employer shall, within 60 days of the date of such election, pay such amount in a lump sum, discounted, however, to present value at 10% annual interest. This Section 11.3 shall in no way limit the Employee's rights to Employer benefits, including, without limitation, maintenance of insurance and pension benefits in the event the Employer terminates the Employee's employment.
(b) The word "termination", for the purpose of this Section 11.3, shall mean, in addition to a termination by the Employer of the employment of the Employee, as described in Section 11.3(a) above, the following:
(i) a determination by the Employee made in good faith that as a result of a change in control of the Employer and a change in circumstances thereafter significantly affecting his position, he is unable to carry out the authorities, powers and duties attached to his position. A "change in control of the Employer" shall be deemed to have occurred if (1) the beneficial ownership of over 50% of the common stock of the Employer is held directly or indirectly by any person or group of persons (excluding the Employee) acting in concert so as to be reportable as such under the Securities Exchange Act of 1934, or (2) a majority of the members of the Board of Directors of the Employer cease to be persons now serving in such capacity or persons nominated by or with the approval of the present majority of the Board of Directors.
(ii) the liquidation, dissolution, consolidation, or merger of the Employer or the transfer to another entity or any other person of all or a significant portion of its assets if such successor to the employer does not agree to assume this Agreement.
An election by the Employee to terminate his employment given under the provisions of this Section 11.3(b) shall not be deemed a voluntary termination of employment by the Employee for the purpose of this Agreement or any plan or practice of the Employer. In the event the Employee is terminated as described in Section 11.3, there will be no offset to any benefits due him hereunder on account of any salary, bonus and continuing benefits earned by him from employment elsewhere following his termination of employment with the Employer.
11.4 Voluntary Termination. In the event the Employee terminates his employment on his own volition prior to his 62nd birthday, other than in the case of a termination under Section 11.2 or 11.3 above, such termination shall constitute a voluntary termination and in such event the Employee shall be entitled the Compensation provided in Section 3 through the date of termination. Except as provided in this Section 11.4 below, the Employee shall have no further rights or entitlements under this Agreement in the event of a voluntary termination of employment as hereinabove defined. This Section 11.4 shall in no way limit the Employer's rights pursuant to this Agreement in the event the Employee voluntarily terminates employment in breach of this Agreement.
11.5 Termination for Cause.
(a) The termination of the Employee's employment shall be deemed to have been for Cause only if termination of his employment shall have been the result of
(i) any act or acts committed by the Employee constituting a felony, or
(ii) The Employee's willful and gross negligence or willful and gross neglect in carrying out his duties and authorities hereunder which results, or which, if continued, might reasonably be expected to result, in material harm to the Employer.
(b) In the event the Employee's employment is terminated for Cause as provided in this Section 11.5, the Employee shall be entitled to the Basic Compensation through the date of termination.
12. Notices. Any notice required or permitted to be given under this Agreement shall be sufficient if given in writing and if sent by certified mail to his residence in the case of the Employee, or to its principal office in the case of the Employer.
13. Waiver of Breach. The waiver by the Employer of a breach of any provision of this Agreement by the Employee shall not operate or be construed as a waiver of any subsequent breach by the Employee.
14. Assignment. The performance of the duties of the Employee are considered to be personal to the Employee and no assignment by the Employee of this Agreement shall have any force or effect.
15. Entire Agreement. This instrument contains the entire agreement of the parties. It may not be changed orally but only by an agreement in writing signed by the party against whom enforcement of any waiver, change, modification, extension or discharge is sought.
IN WITNESS WHEREOF, the parties have executed this Agreement on the date first hereinabove set forth.
NATIONAL PROPERTIES CORPORATION
By: /S/ Robert W. Guely Vice President
ATTEST:
/S/ KRISTINE M. FASANO SECRETARY
/S/RAYMOND DI PAGLIA Raymond Di Paglia
This Amended and Restated Employment Agreement is acknowledged and approved this 15th day of March, 1985, by the following members of the Board of Directors.
Robert E. Combs
/S/ ROBERT H. JAMERSON Robert H. Jamerson
/S/WILLIAM D. BUZARD William D. Buzard
/S/KRISTINE M. FASANO Kristin M. Fasano
Exhibit 10.2 1991 EMPLOYMENT CONTRACT
THIS AGREEMENT is made as of January 1, 1991, between NATIONAL PROPERTIES CORPORATION, hereinafter called the "Employer," and RAYMOND DI PAGLIA, hereinafter called the "Employee."
R E C I T A L S
A. On March 15, 1985, the Employer and the Employee entered into an agreement entitled "Amended and Restated Employment Contract" (the "Old Contract") under which the Employee was employed by the Employer.
B. Effective December 31, 1990, by mutual agreement, the Employer and the Employee terminated the "Old Contract."
C. Effective as of January 1, 1991, the Employer and the Employee desire to enter into this 1991 Employment Contract (the "Agreement") under which the Employer will employ the Employee on the terms and conditions hereinafter set forth.
NOW, THEREFORE, the Employer and the Employee hereby agree as follows:
1. As a matter of convenience, the parties elect to adopt and incorporate by reference herein each of the following Sections of the Old Contract as fully and completely as though set forth herein in their entirety: 1. Employment. 4. Duties. 5. Extent of Services. 6. Corporate Opportunity. 7. Working Facility. 8. Expenses. 9. Vacation. 10. Additional Benefits. 11.1. Death. 11.2. Disability. 11.3 Termination by the Employer Other Than for Disability or Cause (including the amendments to Sections 11.3(a) and 11.3(b) (ii) effective June 21, 1985). 11.4 Voluntary Termination. 11.4.A. Termination Upon Liquidation or Dissolution (as added effective June 21, 1985). 11.5. Termination for Cause. 12. Notices. 14. Assignment. 15. Entire Agreement.
2. Section 2 of the Agreement is set forth below:
2. Term and Extension. Subject to the provisions for termination as hereinafter provided, this Agreement shall be effective as of January 1, 1991, and, subject to the extension provision set forth below in this Section 2, this Agreement shall terminate on December 3l, 2000. The expiration date of the initial ten year term provided by this Agreement shall automatically be extended for one year on each and every January 1 commencing January 1, 1992, without action on the part of any person; provided, however, that the Board of Directors of the Employer, may, by majority vote taken prior to the end of any given year, suspend the automatic one year renewal which otherwise would be effective as of the following January 1; it being the intention of the parties to provide for a continuous ten year term unless affirmative action is taken by the Board of Directors each year to void the automatic one year extension.
3. Section 3 of the Agreement is set forth below:
3. Compensation. For all services rendered by the Employee under this Agreement during the calendar year 1991, the Employer shall pay the Employee "Basic Compensation" of $91,243. That amount includes $86,898 as the "Basic Compensation" for 1990 under the Old Contract, and $4,345 as the compensation adjustment due for 1990 under the Old Contract. Commencing with the calendar year 1991, the compensation provided for herein shall be adjusted in the manner herein specified. The 1991 Basic Compensation shall be increased, but not decreased, to give effect to changes in cost of living levels, in the same proportion as the Consumer Price Index ("CPI") published by the U.S. Department of Labor shall increase during the calendar year 1991. The 1991 Basic Compensation shall be paid in the same installments in which it was being paid under the Old Agreement, and any increase in compensation attributable to an increase in the CPI during the calendar year 1991 shall be payable in a lump sum as soon as the amount is determinable following December 31, 1991.
The aggregate compensation of the Employee paid or accrued for the year 1991, including any increase which occurs by reason of the foregoing provisions, shall become the Basic Compensation to be paid during the year 1992, increased, but not decreased, by subsequent changes in the CPI during such year. Any increase shall be payable in a lump sum as soon as the amount is determinable following December 31, 1992. Comparable adjustments, made in like manner, shall be made in each ensuing year thereafter during the term of this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement on the date first hereinabove set forth.
NATIONAL PROPERTIES CORPORATION
By____/S/ Robert W. Guely __________________ Vice President
ATTEST:
_______/S/ Kristine M. Fasano________________ Secretary
_______/S/ Raymond Di Paglia _______________ Raymond Di Paglia
This 1991 Employment Contract is acknowledged and approved this 18th day of January, 1991, by he following members of the Board of Directors:
/S/ Robert E. Combs Robert E. Combs
/S/ Robert H. Jamerson Robert H. Jamerson
/S/ William D. Buzard William D. Buzard
/S/ Kristine M. Fasano Kristine M. Fasano
Exhibit 10.3 1999 EMPLOYMENT CONTRACT
THIS AGREEMENT is made November 20, 1998, between NATIONAL PROPERTIES CORPORATION, hereinafter called the "Employer," and RAYMOND DI PAGLIA, hereinafter called the "Employee."
R E C I T A L S
A. On March 15, 1985, the Employer and the Employee entered into an agreement entitled "Amended and Restated Employment Contract" (the "Old Contract") under which the Employee was employed by the Employer.
B. Effective December 31, 1990, by mutual agreement, the Employer and the Employee terminated the "Old Contract."
C. On January 1, 1991, the Employer and the Employee entered into an agreement entitled the "Agreement" under which the Employee was employed by the Employer.
D. Effective December 31, 1998, by mutual agreement the Employer and the Employee will terminate the 1991 "Agreement".
E. Effective January 1, 1999, the Employer and the Employee desire to enter into this 1999 Employment Contract (the "1999 Contract") under which the Employer will employ the Employee on the terms and conditions set forth:
NOW, THEREFORE, the Employer and the Employee hereby agree as follows:
1. As a matter of convenience, the parties elect to adopt and incorporate by reference herein each of the following Sections of the Old Contract as fully and completely as though set forth herein in their entirety:	1. Employment. 4. Duties. 5. Extent of Services. 6. Corporate Opportunity. 7. Working Facility. 8. Expenses. 9. Vacation. 10. Additional Benefits. 11.1. Death. 11.2. Disability. 11.3 Termination by the Employer Other Than for Disability or Cause (including the amendments to Sections 11.3(a) and 11.3(b) (ii) effective June 21, 1985). 11.4 Voluntary Termination. 11.4.A. Termination Upon Liquidation or Dissolution (as added effective June 21, 1985). 11.5. Termination for Cause. 12. Notices. 14. Assignment. 15. Entire Agreement.
2. Section 2 of the Agreement is set forth below:
	2. Term and Extension. It is the intention of the parties that unless otherwise terminated in accordance with the provisions of this Agreement that the term of this Agreement shall always be for ten (10) years. To that end, the initial term shall end on December 31, 2008 but, unless the Board of Directors of the Employer shall by majority vote otherwise direct in December of each year beginning in 1999, the term shall automatically be extended so as to end on December 31st of the tenth year thereafter. For instance, unless the Board shall so act in December of 1999 to cancel this automatic extension, the term shall be extended until December 31, 2009, and so on. 3.	Section 3 of the Agreement is set forth below:
	3. Compensation. For all services rendered by the Employee under this Agreement during the calendar year 1999, the Employer shall pay the Employee "Basic Compensation" of $120,000. Commencing with the calendar year 2000, the compensation provided for herein shall be adjusted in the manner herein specified. The 1999 Basic Compensation shall be increased, but not decreased by the greater of 3% or any increase in the Cost of Living in the same proportion as the All Urban Consumers Price Index ("CPI-U") published by the U.S. Department of Labor shall increase during the calendar year 1999. The 1999 Basic Compensation shall be paid in the same installments in which it was being paid under the 1991 Agreement, and any increase in compensation attributable to an increase in the CPI during the calendar year 1999 shall be payable in a lump sum as soon as the amount is determinable following December 31, 1999.
The aggregate compensation of the Employee paid or accrued for the year 1999, including any increase which occurs by reason of the foregoing provisions, shall become the Basic Compensation to be paid during the year 2000, increased, but not decreased, by the greater of 3% or subsequent changes in the CPI during such year. Any increase shall be payable in a lump sum as soon as the amount is determinable following December 31, 2000. Comparable adjustments, made in like manner, shall be made in each ensuing year thereafter during the term of this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement on the date first herein above set forth.
NATIONAL PROPERTIES CORPORATION
By____/S/ Kristine M. Fasano_________________ Kristine M. Fasano, Vice President/Secretary
______/S/ Raymond Di Paglia _________________ Raymond Di Paglia
This 1999 Employment Contract is acknowledged and approved this 20th day of November, 1998, by the following members of the Board of Directors:
/S/ William D. Buzard William D. Buzard
/S/ Robert H. Jamerson Robert H. Jamerson
/S/Kristine M. Fasano Kristine M. Fasano
Exhibit 10.4
AMENDMENT NO. 1 TO EMPLOYMENT CONTRACT DATED NOVEMBER 20, 1998
THIS AMENDMENT, dated as of November 15, 2002, is made to the Employment Contract dated November 20, 1998, between NATIONAL PROPERTIES CORPORATION (herein after called the "Employer") and RAYMOND DI PAGLIA, (hereinafter called the "Employee"), and hereinafter called the "Agreement".
WHEREAS, it is the desire of the parties to alter the provisions of the Agreement with respect to the compensation to be received by the Employee.
NOW, THEREFORE, the parties agree to the following amendment to the Agreement:
1. Section 3 of the Agreement is amended by deleting Section 3 and substituting a new Section 3 as follows:
3. Compensation. For all services rendered by Employee under this Agreement, the Employer shall pay the Employee compensation as follows:
(a) Prior to 2003. For all services rendered by the Employee under this Agreement during the calendar year 1999, the Employer shall pay the Employee "Basic Compensation" of $120,000. Commencing with the calendar year 2000, the 1999 Basic Compensation shall be increased, but not decreased, by the greater of 3 percent or any increase in the Cost of Living in the same proportion as the All Urban Consumer Price Index ("CPI-U") published by the U.S. Department of Labor shall increase during the calendar year 1999. The aggregate compensation of the Employee paid or accrued for the year 1999, including any increase which occurs by reason of the foregoing provisions, shall become the Basic Compensation to be paid during the year 2000, increased, but not decreased, by the greater of 3 percent or subsequent changes in the CPI-U during such year. Comparable adjustments, made in like manner, shall be made in each ensuing year thereafter through 2002.
(b) During and after 2003. For all services rendered by the Employee under this Agreement during the calendar year 2003, the Employer shall pay the Employee "Basic Compensation" of $145,000. Commencing with the calendar year 2004, the 2003 Basic Compensation shall be increased, but not decreased, by the greater of 3 percent or any increase in the Cost of Living in the same proportion as the CPI-U shall increase during the calendar year 2003. The aggregate compensation of the Employee paid or accrued for the year 2003, including any increase which occurs by reason of the foregoing provisions, shall become the Basic Compensation to be paid during the year 2004, increased, but not decreased, by the greater of 3 percent or subsequent changes in the CPI-U during such year. Comparable adjustments, made in like manner, shall be made in each ensuing year thereafter during the term of this Agreement.
(c) Payments in Installments. All Basic Compensation under this Agreement shall be payable in installments in accordance with past practice.
(d) Lump Sum Payments. All increases in compensation attributed to the greater of 3 percent or any increase in the CPI-U during any calendar year shall be payable in a lump sum as soon as the amount is determinable following the end of such calendar year.
	2. In all other respects, the provisions of the November 20, 1998 Agreement shall remain in full force and effect.
IN WITNESS WHEREOF, the parties have executed this Amendment No. 1 on the date first herein above set forth.
By:/S/ Kristine M. Fasano Kristine M. Fasano, Secretary
/S/ Raymond Di Paglia Raymond Di Paglia
This November 15, 2002 Amendment to the November 20, 1998 Employment Contract is acknowledged and approved this 15th day of November, 2002 by the following members of the Board of Directors:
/S/ Kristine M. Fasano Kristine M. Fasano
/S/ Robert H. Jamerson Robert H. Jamerson
/S/ Tim Lynch Tim Lynch
Exhibit 31.1 CERTIFICATION
I, Raymond Di Paglia, certify that:
1. I have reviewed this annual report on Form 10-K of National Properties Corporation;
2. Based on my knowledge, this 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;
3. 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 registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e)) for the registrant and have:
(a) 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 registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) (Reserved)
(c) Evaluated the effectiveness of the registrant'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
(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal controls over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function):
(a) All significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
Date __3/30/05__ By _____/S/__Raymond_Di_Paglia_________ Raymond Di Paglia, President and Chief Executive Officer
Exhibit 31.2 CERTIFICATION
I, Kristine M. Fasano, certify that:
1. I have reviewed this annual report on Form 10-K of National Properties Corporation;
2. Based on my knowledge, this 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;
3. 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 registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e)) for the registrant and have:
(a) 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 registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) (Reserved)
(c) Evaluated the effectiveness of the registrant'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
(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal controls over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function):
(a) All significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
Date __3/30/05__ By _____/S/__Kristine_M._Fasano__________ Kristine M. Fasano, Vice President, Secretary and Treasurer
Exhibit 32.1 CERTIFICATION
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of National Properties Corporation (the "Company") on Form 10-K for the year ended December 31, 2004 as filed with the Securities and Exchange Commission on March 30, 2005 (the "Form 10-K"), we, the undersigned officers of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
1.	The Annual Report on Form 10-K fully complies with the requirements of Section 13(a) or 15 (d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and
2.	The information contained in the Annual Report on Form 10-K fairly presents, in all material respects, the financial condition and results of operations of the Company.
Date 3/30/05
By _____/S/__Raymond_Di_Paglia_________ Raymond Di Paglia, President and Chief Executive Officer
and
By _____/S/__Kristine_M._Fasano__________ Kristine M. Fasano, Vice President, Secretary and Treasurer