BARNWELL INDUSTRIES INC — Proxy Solicitation & Information Statement 2001

Jan 16, 2001

SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 SCHEDULE 14A INFORMATION Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934 Filed by the Registrant [X] Filed by a Party other than the Registrant [ ] Check the appropriate box: [ ] Preliminary Proxy Statement [ ] Confidential, for use of the Commission Only (as permitted by Rule 14a-6(e)(2)) [X] Definitive Proxy Statement [ ] Definitive Additional Materials [ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12 BARNWELL INDUSTRIES, INC. - -------------------------------------------------------------------------------- (Name of registrant as specified in its charter) - -------------------------------------------------------------------------------- (Name of Person(s) Filing Proxy Statement, if other than the Registrant) Payment of Filing Fee (Check the appropriate box): [X] No fee required. [ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. 1) Title of each class of securities to which transaction applies: ---------------------------------------------------------------------- 2) Aggregate number of securities to which transaction applies: ---------------------------------------------------------------------- 3) Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined): 4) Proposed maximum aggregate value of transaction: ---------------------------------------------------------------------- 5) Total fee paid: ---------------------------------------------------------------------- [ ] Fee paid previously with preliminary materials. [ ] Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. (1) Amount Previously Paid: ------------------------------------------------------------------------ (2) Form, Schedule or Registration Statement No.: ------------------------------------------------------------------------ (3) Filing Party: ------------------------------------------------------------------------ (4) Date Filed: ------------------------------------------------------------------------ 1 BARNWELL INDUSTRIES, INC. ------------------- Notice of Annual Meeting of Stockholders ------------------- To the Stockholders of BARNWELL INDUSTRIES, INC.: NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of BARNWELL INDUSTRIES, INC., a Delaware corporation, will be held on March 5, 2001, at 9:30 a.m., Central Standard Time, at the Sheraton Shreveport Hotel, 1419 East 70th Street, Shreveport, Louisiana, for the purpose of considering and acting upon: (1) The election of a Board of Directors to serve until the next Annual Meeting of Stockholders and until their successors shall have been elected and qualified; and (2) Any and all other business which may properly come before the meeting or any adjournment thereof. Only stockholders of record at the close of business on January 8, 2001, are entitled to notice of and to vote at this meeting or any adjournment thereof. The Company's Annual Report to Stockholders for the fiscal year ended September 30, 2000, which includes consolidated financial statements, is enclosed herewith. We will be pleased to have you attend the meeting. However, if you are unable to do so, please sign and return the enclosed Proxy in the enclosed addressed envelope. By Order of the Board of Directors, /s/ Alexander C. Kinzler ------------------------ ALEXANDER C. KINZLER Secretary Dated: January 18, 2001 2 BARNWELL INDUSTRIES, INC. 1100 ALAKEA STREET, SUITE 2900 HONOLULU, HAWAII 96813 PROXY STATEMENT SOLICITATION AND REVOCATION OF PROXIES The following information is furnished in connection with the Annual Meeting of Stockholders of Barnwell Industries, Inc., a Delaware corporation (the "Company") to be held on March 5, 2001 at 9:30 a.m. Central Standard Time, at the Sheraton Shreveport Hotel, 1419 East 70th Street, Shreveport, Louisiana. The accompanying Proxy is solicited by the Board of Directors of the Company, and the Company will bear the cost of such solicitation. Solicitation of proxies will be primarily by mail. Proxies may also be solicited by regular employees of the Company by telephone at a nominal cost. Brokerage houses and other custodians, nominees and fiduciaries will be requested to forward soliciting material to the beneficial owners of Common Stock (as defined below) and will be reimbursed for their expenses. All properly executed proxies will be voted as instructed. Stockholders who execute proxies may revoke them by delivering subsequently dated proxies or by giving written notice of revocation to the Secretary of the Company at any time before such proxies are voted. No proxy will be voted if the stockholder attends the meeting and elects to vote in person. This Proxy Statement and the accompanying Form of Proxy are first being sent to stockholders on or about January 18, 2001. VOTING AT THE MEETING Only stockholders of record at the close of business on January 8, 2001, (the "Record Date") will be entitled to vote at the annual meeting and any adjournment thereof. As of the Record Date, 1,310,952 shares of common stock, par value $0.50, of the Company (the "Common Stock") were issued and outstanding. Each share of Common Stock outstanding as of the Record Date is entitled to one vote on any proposal presented at the meeting. With respect to abstentions, the shares will be considered present at the meeting for a particular proposal, but since they are not affirmative votes for the proposal, they will have the same effect as a vote withheld on the election of directors or a vote against such other proposal, as the case may be. Brokers and nominees may be precluded from exercising their voting discretion with respect to certain matters to be acted upon and, thus, in the absence of specific instructions from the beneficial owner of the shares, will not be empowered to vote the shares on such matters and, therefore, will not be counted in determining the number of shares necessary for approval. Shares represented by such broker nonvotes will, however, be counted for purposes of determining whether there is a quorum. ELECTION OF DIRECTORS At the meeting all nine directors of the Company are proposed to be elected, each elected director to hold office until the next annual meeting and until his successor is elected and qualified. The persons named as proxies in the enclosed Proxy are executive officers of the Company and, unless contrary instructions are given, they will vote the shares represented by the Proxy for the election to the Board of Directors of the persons named below. The election of directors will require a plurality of the votes cast at the meeting. The Board of Directors has no reason to believe that any of the nominees for the office of Director will be unable to serve; however, in the event any of the nominees should withdraw or otherwise become unavailable for reasons not presently known, the persons named as proxies will vote for other persons in place of such nominees. 3

4 The Board of Directors has a standing Compensation Committee, a standing Audit Committee, and a standing Executive Committee. It has no standing nominating committee. The members of the Compensation Committee are Mr. Hunter, Chairman, and Messrs. Jacobson, Anderson, Gardner, Johnston and Morton Kinzler, with Mr. Morton Kinzler being a non-voting member. The Compensation Committee (i) determines the annual compensation of the Company's senior officers; (ii) recommends, if appropriate, new employee benefit plans to the Board of Directors; (iii) administers all employee benefit plans and (iv) makes determinations in connection therewith as may be necessary or advisable. During the fiscal year ended September 30, 2000, the Compensation Committee held one meeting. The members of the Audit Committee are Mr. Jacobson, Chairman, and Messrs. Yago, Gardner and Anderson. All of the members of the Audit Committee are independent (as independence is defined in Section 121 (A) of the American Stock Exchange listing standards). The Board of Directors has adopted a written charter for the Audit Committee to set forth its responsibilities. A copy of the charter is attached as Exhibit A to this Proxy Statement. The Audit Committee recommends the independent accountants appointed by the Board of Directors to audit the consolidated financial statements of the Company, and reviews with such accountants the scope of their audit and report thereon, including any questions and recommendations that may arise relating to such audit and report or the Company's internal accounting and auditing procedures. It also reviews periodically the performance of the Company's accounting and financial personnel. During the fiscal year ended September 30, 2000, the Audit Committee held two meetings. Report of the Audit Committee The Audit Committee has reviewed and discussed the audited financial statements with management, and the Audit Committee has discussed with KPMG LLP, the independent auditors, the matters required to be discussed by Statement on Auditing Standards No. 61 (Codification of Statements on Auditing Standards, AU Section 380), as such may be modified or supplemented. The Audit Committee has also received the written disclosures and the letter from KPMG LLP that are required by Independence Standards Board Standard No. 1 (Independence Standards Board Standard No. 1, Independence Discussions with Audit Committee) as may be modified or supplemented, and has discussed with KPMG LLP the independent auditor's independence. Based upon its discussions with management and with KPMG LLP, the Audit Committee has recommended to the Board of Directors that the audited financial statements be included in the Company's Annual Report on form 10-KSB for the fiscal year ended September 30, 2000. Audit Committee Daniel Jacobson, Chairman Glenn Yago Murray C. Gardner Martin Anderson The members of the Executive Committee are Mr. Morton Kinzler, Chairman, and Messrs. Anderson, Hazelhoff-Roelfzema and Gardner. The Executive Committee is empowered to exercise all of the authority of the Board of Directors, except for certain items enumerated in the Company's By-Laws. During the fiscal year ended September 30, 2000, the Executive Committee held no meetings. The Board of Directors held three meetings during the fiscal year ended September 30, 2000. Other than Mr. Yago, who attended one Board Meeting and one Audit Committee Meeting, all directors attended all meetings of the Board of Directors and of the Committees of the Board on which each of them served. 5

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Directors who are not officers of the Company receive an annual fee of $10,000 and are reimbursed for expenses incurred with respect to meeting attendance. The Chairman of the Compensation Committee receives an additional $7,500 annual fee. The Chairman of the Audit Committee receives an additional $12,500 annual fee. The members of the Executive and Compensation Committees, other than the Chairmen, receive an additional $1,250 annual fee. The members of the Audit Committee, other than the Chairman, receive an additional $3,750 annual fee. In lieu of payment of such fees to Mr. Hazelhoff-Roelfzema, the Company reimburses him for certain expenses incurred in connection with his service as a director.

7 Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End Option Values The following table sets forth information related to the number of shares of Common Stock acquired during the fiscal year ended September 30, 2000 by the Named Executive Officers pursuant to the exercise of stock options, the value realized by the Named Executive Officers on exercise of such stock options and the number and value of unexercised stock options held by the Named Executive Officers at the end of the fiscal year ended September 30, 2000:

The Company has an agreement with Mr. Warren D. Steckley with respect to his entry into employment with Barnwell of Canada, Limited, a wholly owned subsidiary of the Company ("BOC"), whereby the Company agreed to provide him an annual salary of $150,000 Canadian dollars and a minimum bonus of $30,000 Canadian dollars for his first full fiscal year of employment. This agreement does not provide any term of employment. Also pursuant to this agreement, on June 1, 1998, Mr. Steckley was granted 30,000 non-qualified options to purchase the Company's common stock at $15.625 per share. Mr. Steckley was also granted 30,000 incentive units on June 1, 1998, pursuant to an incentive plan adopted by the Board of Directors of BOC in 1998, which was created to give an incentive to key employees of BOC to increase the value of BOC's oil and gas reserves. The value of the units under such plan directly relates to BOC's net income and to changes in the value of BOC's oil and gas reserves since 1998, with adjustments for changes in commodities prices and subject to other terms and conditions. Such adjusted reserve value is then divided by the number of shares of the Company's outstanding common stock to determine the value of each unit. These units become exercisable over 4 years from the date of grant and expire 10 years from the date of grant. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The Company has an agreement with Mr. Terry Johnston, a director of the Company, whereby Barnwell Hawaiian Properties, Inc., a wholly owned subsidiary of the Company ("BHP"), is to pay him certain fees upon the receipt by Kaupulehu Developments, the Company's majority-owned real estate partnership ("KD"), of cash consideration, in consideration of substantial time Mr. Johnston has devoted to KD over the past 16 years. In January 2000, BHP paid a fee of $60,000 to a company controlled by Mr. Johnston in connection with KD's receipt of consideration for the exercise of certain residential parcel options. In August 1998, KD arranged a credit facility to finance KD's pursuit of development approvals. KD entered into an agreement with Mr. Terry Johnston whereby he assisted KD in arranging such facility by guaranteeing principal repayments and collateralizing such facility with $500,000 in cash. In return, KD agreed to pay Mr. Johnston a fee calculated as the difference between KD's interest cost and 400 basis points above the prime rate on borrowings under such credit facility, to be paid at the time the principal borrowings were repaid and the credit facility was terminated. In January 2000, in connection with KD's receipt of consideration for the exercise of certain residential parcel options, KD repaid such borrowings under the facility, thereby terminating it, and paid a fee of $30,304 to a company controlled by Mr. Johnston, calculated as described in this paragraph. 8 In June, 1995, the Company issued $2,000,000 of convertible notes due July 1, 2003 for an aggregate price of $2,000,000. $400,000 of such notes were purchased by Mr. Morton H. Kinzler, President, Chief Executive Officer and Chairman of the Board of Directors of the Company, $200,000 were purchased by Mr. Martin Anderson, a director of the Company, $200,000 were purchased by Dr. Joseph E. Magaro, a 16.4% shareholder of the Company, $100,000 were purchased by Dr. R. David Sudarsky, a 9.4% shareholder of the Company, and $1,000,000 were purchased by Ingalls and Snyder, a 5.0% shareholder of the Company. See "Security Ownership of Certain Beneficial Owners and Management", below. The notes are payable in 20 consecutive equal quarterly installments beginning in October 1998. Interest, which is adjusted quarterly to the greater of 10% per annum or 1% over the prime rate of interest, is payable quarterly. Throughout fiscal year 2000, the notes bore interest at the rate of 10% per annum. The notes are convertible into shares of Common Stock at a price of $20.00 per share, subject to adjustment for certain events including a stock split of, or stock dividend on, the Common Stock. The notes are redeemable, at the option of the Company, at premiums declining 1% annually, beginning in 1997, from 5% to 0% of the principal amount of the notes. The Company is contingently liable for a demand loan made by a Canadian bank in fiscal 1991 and renewed annually to Dr. Joseph E. Magaro, a 16.4% shareholder of the Company, in the amount of $100,000 in connection with the development of certain oil and gas properties in Canada in which he participated. The loan is secured by Dr. Magaro's interest in those oil and gas properties, the value of which, in the Company's opinion, far exceeds the amount of the loan. The annual rate of interest applicable to this loan is set by the Royal Bank of Canada. As of September 30, 2000, such rate of interest was 7.50%. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The following table sets forth information as of December 1, 2000, with respect to the beneficial ownership of the Common Stock, the sole voting security of the Company, by (i) each person known to the Company who beneficially owns more than 5% of the Common Stock, (ii) each director and nominee of the Company, (iii) the Named Executive Officers and (iv) all directors and executive officers of the Company as a group.

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10 SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE Section 16(a) of the Securities Exchange Act of 1934 requires the Company's officers and directors, and persons who own more than 10% of a registered class of the Company's equity securities, to file reports of beneficial ownership on Forms 3, 4, and 5 with the Securities and Exchange Commission and any national securities exchange on which such equity securities are registered. Based solely on the Company's review of the copies of such forms it has received and written representations from certain reporting persons that they were not required to file reports on Form 5 during the most recently completed fiscal year or prior years, the Company believes that all of its officers, directors and greater than 10% beneficial owners complied with all Section 16(a) filing requirements applicable to them during the Company's most recently completed fiscal year. SELECTION OF INDEPENDENT ACCOUNTANTS The Board of Directors of the Company has appointed KPMG LLP as the firm of independent public accountants to audit the accounts of the Company for the year ending September 30, 2001. This firm expects to have a representative available by telephone at the meeting who will have an opportunity to make a statement if he or she desires to do so and will be available to respond to appropriate questions. STOCKHOLDER PROPOSALS Any proposal submitted by a stockholder of the Company for action at the next Annual Meeting of Stockholders will not be included in the proxy material to be mailed to the Company's stockholders in connection with such meeting unless such proposal is received at the principal office of the Company no later than September 25, 2001. GENERAL No business other than those set forth in Item (1) and Item (2) of the Notice of Annual Meeting of Stockholders is expected to come before the meeting, but should any other matters requiring a vote of stockholders properly arise, including a question of adjourning the meeting, the persons named in the accompanying Proxy will vote thereon according to their best judgment in the best interests of the Company. Insofar as any of the information in this Proxy Statement may rest peculiarly within the knowledge of persons other than the Company, the Company has relied upon information furnished by such persons. By Order of the Board of Directors, /s/ Alexander C. Kinzler ------------------------ ALEXANDER C. KINZLER Secretary Dated: January 18, 2001 Stockholders may obtain a copy, without charge, of the Company's Annual Report on Form 10-KSB, as filed with the Securities and Exchange Commission, by writing to Alexander C. Kinzler, Barnwell Industries, Inc., 1100 Alakea Street, Suite 2900, Honolulu, Hawaii 96813 11 EXHIBIT A BARNWELL INDUSTRIES, INC. AUDIT COMMITTEE CHARTER The Audit Committee is appointed by the Board to assist the Board in monitoring (1) the integrity of the financial statements of the Company, (2) the compliance by the Company with legal and regulatory requirements and (3) the independence and performance of the Company's independent auditors. There shall be at least two members of the Audit Committee, the majority of whom shall meet the independence requirements of the American Stock Exchange. The Audit Committee shall have the authority to retain special legal, accounting or other consultants to advise the Committee. The Audit Committee may request any officer or employee of the Company or the Company's outside counsel or independent auditor to attend a meeting of the Committee or to meet with any members of, or consultants to, the Committee. The Audit Committee shall make regular reports to the Board. Meetings of the Audit Committee may be either in person or by telephonic conference. The Audit Committee shall: 1. Review and reassess the adequacy of this Charter annually and submit it to the Board for approval. 2. Review the annual audited financial statements with management, including major issues regarding accounting and auditing principles and practices as well as the adequacy of internal controls that could significantly affect the Company's financial statements. 3. Review an analysis prepared by management and the independent auditor of significant financial reporting issues and judgments made in connection with the preparation of the Company's financial statements. 4. Review with management and the independent auditor the Company's quarterly financial statements prior to the release of quarterly earnings. The Chairman of the Committee may represent the entire Audit Committee for purposes of this review, which may be done in person or by telephonic conference. 5. Meet periodically with management, in person or by telephone, to review the Company's major financial risk exposures and the steps management has taken to monitor and control such exposures. 6. Review major changes to the Company's auditing and accounting principles and practices as suggested by the independent auditor, internal auditors or management. 7. Recommend to the Board the appointment of the independent auditor, which firm is ultimately accountable to the Audit Committee and the Board. 8. Approve the fees to be paid to the independent auditor. 9. Receive periodic reports from the independent auditor regarding the auditor's independence, discuss such reports with the auditor, and if so determined by the Audit Committee, recommend that the Board take appropriate action to insure the independence of the auditor. 10. Evaluate the performance of the independent auditor and, if so determined by the Audit Committee, recommend that the Board replace the independent auditor. 11. Meet with the independent auditor prior to the audit to review the planning and staffing of the audit. 12 12. Obtain from the independent auditor assurance that Section 10 A of the Private Securities Litigation Reform Act of 1995 has not been implicated. 13. Discuss with the independent auditor the matters required to be discussed by Statement on Auditing Standards No. 61, as modified or amended, relating to the conduct of the audit. 14. Review with the independent auditor any problems or difficulties the auditor may have encountered and any management letter provided by the auditor and the Company's response to that letter. Such review should include: Any difficulties encountered in the course of the audit work, including any restrictions on the scope of activities or access to required information. Any changes required in the planned scope of the audit. 15. Prepare the report required by the rules of the Securities and Exchange Commission to be included in the Company's annual proxy statement. 16. Advise the Board with respect to the Company's policies and procedures regarding compliance with applicable laws and regulations. 17. Review with the Company's General Counsel legal matters that may have a material impact on the financial statements, the Company's compliance policies and any material reports or inquiries received from regulators or governmental agencies. 18. Meet at least annually with the chief financial officer and the independent auditor in separate executive sessions. While the Audit Committee has the responsibilities and powers set forth in this Charter, it is not the duty of the Audit Committee to plan or conduct audits or to determine that the Company's financial statements are complete and accurate and are in accordance with generally accepted accounting principles. This is the responsibility of management and the independent auditor. Nor is it the duty of the Audit Committee to conduct investigations, to resolve disagreements, if any, between management and the independent auditor or to assure compliance with laws and regulations. 13 Appendix 1 - ---------- FRONT OF CARD PROXY BARNWELL INDUSTRIES, INC. THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF THE COMPANY The undersigned stockholder of Barnwell Industries, Inc., a Delaware corporation, hereby appoints Morton H. Kinzler and Alexander C. Kinzler, and each of them, attorneys, agents and proxies of the undersigned, with full power of substitution to each of them, to vote all the shares of Common Stock which the undersigned may be entitled to vote at the Annual Meeting of Stockholders of the Company to be held at the Sheraton Shreveport Hotel, 1419 East 70th Street, Shreveport, Louisiana, on March 5, 2001, at 9:30 A.M., Central Standard time, and at any adjournment of such meeting, with all powers which the undersigned would possess if personally present: (Continued and to be signed on reverse side) - ------------------------------------------------------------------------------- 14 BACK OF CARD X Please mark your votes as in this example. ----- 1. The election of the 9 Directors listed at right: Nominees: Morton H. Kinzler FOR all nominees WITHHOLD AUTHORITY Alan D. Hunter listed at right to vote for all Erik Hazelhoff-Roelfzema (except as marked nominees listed at Daniel Jacobson to the contrary) right Martin Anderson Glenn Yago ----- ----- Murray C. Gardner (INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR Alexander C. Kinzler ANY INDIVIDUAL NOMINEE, STRIKE A LINE THROUGH Terry Johnston THAT NOMINEE'S NAME IN THE LIST AT RIGHT.) 2. Upon any and all other business which may come before the meeting or any adjournment thereof. The undersigned acknowledges receipt of the Notice of Annual Meeting of Stockholders, Proxy Statement of the Company for the Annual Meeting and the Company's Annual Report to Stockholders for the fiscal year ended September 30, 2000. This Proxy, when properly executed, will be voted in accordance with the specification made hereon. If not otherwise specified, this Proxy will be voted FOR the election of Board of Directors as proposed herein. PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED ENVELOPE. SIGNATURE DATE SIGNATURE DATE ------------------ -------- ------------------ ------- IF HELD JOINTLY (Signature(s) should agree with name on stock certificate as stenciled hereon. Executors, administrators, trustees, etc., should so indicate when signing.)