UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
PROXY STATEMENT
PURSUANT TO SECTION 14(a) OF SECURITIES EXCHANGE ACT OF 1934
(Amendment No.___ )
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(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
BAIRNCO CORPORATION
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(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other then Registrant)
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BAIRNCO CORPORATION
300 PRIMERA BOULEVARD, SUITE 432
LAKE MARY, FLORIDA 32746
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held April 22, 2004
To Shareholders:
The Annual Meeting of Shareholders of Bairnco Corporation (the
"Company", or "Bairnco") will be held on Thursday, April 22, 2004, at Bairnco's
corporate offices, 300 Primera Boulevard, Suite 432, Lake Mary, Florida at 9:00
A.M., local time, for the following purposes:
1. To elect the Board of Directors of Bairnco.
2. To ratify management's selection of Bairnco's auditors.
3. To transact such other business as may properly come before the
meeting and any adjournment thereof.
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Only shareholders of record at the close of business on March 15, 2004
will be entitled to notice of and to vote at the meeting.
If you do not expect to attend the meeting in person, please date and
sign the enclosed proxy and return it promptly by mail in the envelope provided.
By Order of the Board of Directors
/s/ LARRY D. SMITH
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Larry D. Smith
Secretary
Lake Mary, Florida
March 17, 2004
THE BOARD OF DIRECTORS SOLICITS THE EXECUTION AND IMMEDIATE RETURN OF THE
ACCOMPANYING PROXY. PLEASE DATE, SIGN, AND RETURN THE PROXY IN THE ENCLOSED
ADDRESSED ENVELOPE.
BAIRNCO CORPORATION
300 Primera Blvd., Suite 432
Lake Mary, Florida 32746
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PROXY STATEMENT
Annual Meeting of Shareholders
To Be Held April 22, 2004
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INTRODUCTION
The Annual Meeting of Shareholders of Bairnco Corporation will be held
on Thursday, April 22, 2004, at Bairnco's corporate headquarters, 300 Primera
Boulevard, Suite 432, Lake Mary, Florida at 9:00 a.m., local time, for the
purposes set forth in the accompanying notice. This Proxy Statement is furnished
in connection with the solicitation by Bairnco's Board of Directors of proxies
to be voted at such meeting and at any and all adjournments thereof. Proxies
properly executed, duly returned and not revoked will be voted at the Annual
Meeting (including adjournments) in accordance with the specifications therein.
If a proxy in the accompanying form is executed and returned, it
nevertheless may be revoked at any time prior to the exercise thereof by
executing and returning a proxy bearing a later date, by giving notice of
revocation to the Secretary of Bairnco, or by attending the Annual Meeting and
voting in person. On the matters coming before the meeting as to which a choice
has been specified by a shareholder by means of the ballot on the proxy, the
shares will be voted accordingly. If no choice is so specified, the shares will
be voted for the nominees listed in this Proxy Statement and in favor of the
ratification of auditors. Abstentions (including broker non-votes) will be
counted for quorum purposes, but will have no affect on the outcome of the
voting.
Only shareholders of record at the close of business on March 15, 2004,
are entitled to notice of, and to vote at, the Annual Meeting. At the close of
business on such date there were 7,476,605 shares of common stock of Bairnco
("Bairnco Common Stock") outstanding. Each such share will be entitled to one
vote on each matter submitted to shareholders.
The Proxy Statement and accompanying form of proxy are first being sent
to shareholders on or about March 17, 2004. Bairnco's Annual Report to
shareholders accompanies this Proxy Statement.
PROPOSAL 1. ELECTION OF DIRECTORS
DIRECTORS AND NOMINEES FOR ELECTION AS DIRECTORS
The persons designated as proxies in the accompanying form of proxy have
been selected by the Board of Directors of Bairnco and have indicated that they
intend to vote all proxies received by them for the election of each of the
following nominees for the office of director of Bairnco, unless instructed
otherwise. The terms of all incumbent directors expire at the 2004 Annual
Meeting of Shareholders, or at such later time as their successors have been
duly elected and qualified. Nominees elected at the Annual Meeting will serve
until the Annual Meeting of Shareholders next succeeding their election or until
their successors have been duly elected and qualified. All such nominees are
currently directors of Bairnco, and all were elected by shareholders at the 2003
Annual Meeting of Shareholders.
If for any reason any of the following nominees is not a candidate when
the election occurs, proxies will be voted for the election of a substitute
nominee designated by the Board of Directors. The Board of Directors has no
reason to believe that any substitute nominees will be required.
Names and Ages of Nominees Data Pertaining to Nominees
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Luke E. Fichthorn III (62).... Since May 23, 1990, Mr. Fichthorn has
served as the Chairman and on December
18, 1991, Mr. Fichthorn became Chief
Executive Officer of Bairnco. For over
thirty years, Mr. Fichthorn has been a
private investment banker and partner of
Twain Associates, a private investment
banking and consulting firm. Mr.
Fichthorn became a director of Bairnco in
January, 1981. Mr. Fichthorn is also a
director of Florida Rock Industries,
Inc., and Patriot Transportation Holding,
Inc.
Gerald L. DeGood (61)......... Mr. DeGood was elected to the Board in
December of 2002. Mr. DeGood was
responsible for the Central Florida
Accounting Practice of Arthur Anderson
LLP for more than 20 years. He joined
Arthur Anderson LLP in 1964 and became
partner in 1974. He subsequently retired
from the firm in 1999. Mr. DeGood is
currently an independent business
consultant. Mr. DeGood is Chairman of the
Audit Committee and a member of the
Compensation and Corporate Governance and
Nominating Committees. He is also a
member of the Board of Directors and
Chairman of the Audit Committee of
Consolidated - Tomoka Land Co.
Charles T. Foley (65)......... For 30 years, Mr. Foley was President,
Chief Investment Officer and a director
of Estabrook Capital Management, Inc., an
investment advisory firm providing asset
management services for individuals and
institutions. In September 2003, Mr.
Foley became President of Grove Creek
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Asset Management as well as a consultant
to Dialectic Capital Management, LLC. Mr.
Foley is a member of the Audit,
Compensation, and Corporate Governance
and Nominating Committees. Mr. Foley has
been a director of Bairnco since May
1990.
James A. Wolf (61)............ Mr. Wolf was with the international
management consulting firm, Booz, Allen
and Hamilton, from June 1967 to March
1989, where he was the partner directing
the firm's industrial marketing
consulting practice. From 1989 to
present, he has been an independent
consultant, providing business and
marketing counsel to industrial and
commercial clients. In April 1997, he
also founded and became President of
Marketwolf, Inc., which does strategic
business and organization planning for
privately held industrial products
companies. Mr. Wolf has served as a
Bairnco director since 2001. He is
Chairman of the Corporate Governance and
Nominating Committee and a member of the
Audit and Compensation Committees.
William F. Yelverton (62)..... Currently, Mr. Yelverton is an
independent business consultant. From
January 2000 until November 2000, Mr.
Yelverton served as CEO of
LiveInsurance.com, an online insurance
brokerage agency. From July 1997 until
January 2000, Mr. Yelverton was an
independent consultant. From September
1995 through June 1997, Mr. Yelverton was
Executive Vice President of Prudential
Insurance Company of America. From
September 1989 until September 1995, he
was Chairman and CEO of New York Life
Worldwide Holding, Inc., an insurance
holding company. Mr. Yelverton was
elected as a director in August 1991. Mr.
Yelverton is Chairman of the Compensation
Committee and is a member of the Audit
and Corporate Governance and Nominating
Committees.
Assuming that a quorum is present, nominees receiving a plurality of the
votes cast at the Annual Meeting will be elected to the Board of Directors of
Bairnco. The Board of Directors recommends a vote FOR its nominees for election
to the Board of Directors.
MEETINGS OF THE BOARD OF DIRECTORS
During 2003, Bairnco's Board of Directors met seven times for regular
meetings and had three regular telephonic meetings. Each director attended more
than 75% of the total number of meetings of the Board of Directors and the
committees of the Board on which he served.
Each non-employee director received an annual retainer of $16,000
payable in four quarterly installments and a fee of $1,500 for each regular or
special meeting attended in person. Under this policy, attendance fees for all
regular meetings, special meetings and committee meetings held on a single day
and attended in person are limited to $1,500. No fees are paid for meetings
conducted via telephone. It is also the company's policy to grant to each
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non-employee director an option to purchase 5,000 shares of Bairnco stock when
they are initially elected to the Board and 1,000 shares of Bairnco stock
annually thereafter provided they remain a Board member. The exercise price of
the option is set at the fair market value of the common stock on the date of
grant. One third of the options vest in each of the succeeding three years on
the anniversary date of the grant. The options remain exercisable for ten years
from the date of vesting.
In addition, each director and former director of Bairnco, who is not at
the time an employee of Bairnco or any of its subsidiaries, is entitled to
$1,500 per day when called upon by Bairnco to perform extraordinary services
(not incidental to attendance at directors' meetings) on its behalf. No such
payments were made during 2003.
Effective January 1, 2003, the Board of Directors authorized an annual
retainer of $3,000 for each Audit Committee member and $6,000 for the Audit
Committee Chairman, payable in four quarterly installments, in recognition of
the increased education, time and workload commitment placed upon the committee
as a result of the Sarbanes-Oxley Act, and changes in New York Stock Exchange
regulations and Securities and Exchange Commission requirements.
During 2003, Bairnco's outside directors received the following
compensation: Gerald L. DeGood - $32,250, Charles T. Foley - $29,750, James A.
Wolf - $29,500, William F. Yelverton - $29,500. Also, in keeping with the policy
above, Mr. DeGood, Mr. Foley, Mr. Wolf, and Mr. Yelverton were each granted
options to purchase 1,000 shares of Bairnco stock, and Mr. DeGood was granted an
option to purchase 5,000 shares in January of 2003 following his election to the
Board in the previous month.
It is the present policy of Bairnco that outside directors, upon
retirement from the Board of Directors, shall receive annually for the number of
years equal to the number of years he or she has served on the Board of
Directors of Bairnco as a non-employee director, an amount equal to the
non-employee director annual retainer in effect at the time of his or her
retirement. Such amount shall be payable in quarterly installments. If the
retired non-employee director should die prior to receiving payments equal to
the number of years served on the Board, the director's estate will have the
choice of either continuing to receive the remaining payments on a quarterly
basis, or receiving in a lump sum, the net present value of the remaining
payments discounted at the then current thirty year U.S. Government bond yield.
COMMITTEES OF THE BOARD OF DIRECTORS
Bairnco has standing Audit, Compensation, and Corporate Governance and
Nominating Committees of the Board of Directors. During 2003, the Audit
Committee met five times, the Compensation Committee met six times, and the
Corporate Governance and Nominating Committee did not meet. The non-employee
directors who are members of the Audit, Compensation, and Corporate Governance
and Nominating Committees of Bairnco were entitled to receive a fee for each
meeting attended in person on a day during which the Board of Directors did not
meet. During 2003, the Audit and Compensation Committees met only on days on
which the Board of Directors met and, accordingly, no additional fees were paid
with respect to such meetings.
On January 29, 2004, the Board of Directors adopted a revised charter
for the Audit Committee (the "Audit Committee Charter"). The Audit Committee
Charter contains the Audit Committee's mandate, membership requirements, and
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duties and obligations and is posted on the Company's Internet site:
www.bairnco.com. The Audit Committee Charter complies with requirements
established by the Sarbanes-Oxley Act and requirements of the New York Stock
Exchange. The Audit Committee will review the Audit Committee Charter annually
and, if appropriate, recommend revisions to the Board of Directors. Under the
Audit Committee Charter, the Audit Committee reviews and is responsible, among
other tasks, for the appointment, compensation, retention and oversight of the
independent auditors, reviewing with management and the independent auditors the
Company's operating results and resolving any disagreements between management
and the Auditors, establishing procedures to handle complaints regarding the
Company or its accounting, considering the adequacy of the internal accounting
and control procedures of the Company, and authorizing in advance the audit and
non-audit services to be performed by the independent auditors. No member of the
Company's Audit Committee serves on the audit committees of more than three
public companies including the Company. All members of the Audit Committee meet
the independence and experience requirements of the New York Stock Exchange and
the Securities Exchange Commission. For additional information, see the
discussion under "Proposal 2 - Ratification of Auditors" beginning on page 18.
On January 29, 2004, the Board of Directors adopted a charter for the
Compensation Committee (the "Compensation Committee Charter"). The Compensation
Committee Charter contains the Compensation Committee's purpose, membership
requirements, and duties and responsibilities and is posted on the Company's
Internet site: www.bairnco.com. The Compensation Committee will review the
Compensation Committee Charter annually and, if appropriate, recommend revisions
to the Board of Directors. Under the Compensation Committee Charter, the
Compensation Committee reviews and recommends to the Board of Directors the base
salaries proposed to be paid to officers of Bairnco, Presidents of its
subsidiaries, Presidents of divisions of its subsidiaries, and other employees
whose base salaries exceed $150,000. The Compensation Committee also reviews and
approves incentive compensation programs, reviews and administers the Stock
Incentive Plan, and reviews management development and succession plans. All
members of the Compensation Committee meet the independent director requirements
of the New York Stock Exchange
On January 29, 2004, the Board of Directors adopted a charter for the
Corporate Governance and Nominating Committee (the "Corporate Governance and
Nominating Committee Charter"). The Corporate Governance and Nominating
Committee Charter contains the Corporate Governance and Nominating Committee's
purpose, membership requirements and duties and responsibilities and is posted
on the Company's Internet site: www.bairnco.com. The Corporate Governance and
Nominating Committee will review the Corporate Governance and Nominating
Committee Charter annually and, if appropriate, recommend revisions to the Board
of Directors. Each member of the Corporate Governance and Nominating Committee
is, or upon his election or appointment to the Corporate Governance and
Nominating Committee will be, "independent" within the meaning of the currently
effective New York Stock Exchange rules. Under the Corporate Governance and
Nominating Committee Charter, the Corporate Governance and Nominating Committee
is responsible for recommending to the Board of Directors the appropriate size
and composition of the Board of Directors, the appropriate criteria for the
selection of new directors, identifying and recommending candidates qualified
and suitable to become members of the Board of Directors, overseeing the system
of corporate governance, and developing and recommending corporate governance
principles, which will be reviewed on an annual basis. The Corporate Governance
and Nominating Committee has not established any minimum qualification for
candidates for election as directors. In identifying and evaluating candidates
for election as directors, the Corporate Governance and Nominating Committee
will identify and select candidates who can add value to the Company's Board of
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Directors and advance the interests of the Company. The Corporate Governance and
Nominating Committee will not consider recommendations from shareholders; the
Board of Directors believes the Committee has sufficient resources and contacts
to fulfill its obligations. Neither the Board of Directors nor the Corporate
Governance and Nominating Committee employ any third party to identify or assist
it in identifying or evaluating potential candidates for election as directors
but may choose to do so in the future as circumstances warrant.
Executive Sessions of Independent Directors
In accordance with recent corporate governance reforms, the independent
directors meet at regularly scheduled executive sessions without management. The
responsibility for presiding at each meeting of independent directors is rotated
among all independent members of the Board of Directors. Interested parties who
wish to make their concerns known by communicating directly with the presiding
independent director or with the independent directors as a group may do so by
sending an email to Auditcommittee@bairnco.com or by writing to the Presiding
Non-Management Director in care of the Bairnco Secretary.
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COMMON STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The following table sets forth information as of December 31, 2003,
regarding the beneficial ownership of Bairnco Common Stock by the only persons
known to Bairnco to be the beneficial owners of more than 5% of Bairnco's issued
and outstanding Common Stock:
Amount and Nature Percentage of Issued
of Beneficial and Outstanding
Ownership of Common Stock on
Name and Address of Beneficial Owner Common Stock December 31, 2003
------------------------------------ ------------ -----------------
Marvin Schwartz 922,800 12.35%
605 Third Avenue
New York, NY 10158
FMR Corp. 900,900 12.05%
82 Devonshire Street
Boston, MA 02109
Dimensional Fund Advisors Inc. 495,400 6.63%
1299 Ocean Avenue
Santa Monica, CA 90401
Neuberger Berman, LLC 489,900 6.55%
605 Third Avenue
New York, NY 10158
The Company has retained the services of Neuberger Berman, LLC to serve as
investment manager with respect to a portion of the assets in the Bairnco
Corporation Retirement Plan. Neuberger Berman, LLC is a registered investment
advisor under the Investment Advisors Act of 1940 and serves as investment
advisor to numerous individuals and retirement plans. Fees payable under this
arrangement are customary for these services.
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The following table presents information regarding beneficial ownership
of Bairnco Common Stock by each member of the Board of Directors, each nominee
for election as a director, each of the executive officers of Bairnco named in
the summary compensation table below and by all directors and executive officers
of Bairnco as a group, as of December 31, 2003.
Amount and Nature Percentage of Issued
of Beneficial and Outstanding
Ownership of Common Stock on
Name of Individual or Group Common Stock December 31, 2003
--------------------------- ------------ -----------------
Luke E. Fichthorn III 362,748(1) 5.31%
Gerald L. DeGood 500 (8)
Charles T. Foley 255,682(2) 3.42%
Lawrence C. Maingot 17,314(3) (8)
Larry D. Smith 38,814(4) (8)
James A. Wolf 4,667(5) (8)
William F. Yelverton 38,735(6) (8)
All executive officers and directors
as a group (7 persons) 718,460(7) 9.61%
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(1) Includes 2,000 shares owned by Mrs. Fichthorn and 1,500 shares owned by
two trusts of which Mr. Fichthorn is a co-trustee. Mr. Fichthorn
disclaims beneficial ownership of these shares. Also includes shares
that would be issued upon exercise of 166,667 vested unexercised stock
options granted under the 1990 Bairnco Stock Option Plan and 42,000
restricted shares granted under the 2000 Bairnco Stock Option Plan.
(2) Includes shares that would be issued upon the exercise of 8,001 vested
unexercised stock options granted under the 1990 Bairnco Stock Option
Plan and 2,001 vested unexercised stock options granted under the 2000
Bairnco Stock Option Plan.
(3) Mr. Maingot indirectly owns 1,564 shares through ownership in trust
under the Bairnco Corporation 401(k) Savings Plan. Also includes shares
that would be issued upon the exercise of 3,375 vested unexercised stock
options granted under the 1990 Bairnco Stock Option Plan and 375 vested
unexercised stock options and 12,000 restricted shares under the 2000
Bairnco Stock Option Plan.
(4) Mr. Smith indirectly owns 1,814 shares through ownership in trust under
the Bairnco Corporation 401(k) Savings Plan. Also includes shares that
would be issued upon exercise of 20,000 vested unexercised stock options
granted under the 1990 Bairnco Stock Option Plan and 17,000 restricted
shares granted under the 2000 Bairnco Stock Option Plan.
(5) Includes shares that would be issued upon the exercise of 3,667 vested
unexercised stock options under the 2000 Bairnco Stock Option Plan.
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(6) Includes shares that would be issued upon the exercise of 9,334 vested
unexercised stock options granted under the 1990 Bairnco Stock Option
Plan and 2,001 vested unexercised stock options granted under the 2000
Bairnco Stock Option Plan.
(7) Includes a total of 3,500 shares owned by the wives, children or in
trusts or custodial accounts for relatives of executive officers or
directors but as to which each executive officer or director,
respectively, disclaims beneficial ownership. Also includes shares that
would be issued upon the exercise of 207,377 vested unexercised stock
options granted under the 1990 Bairnco Stock Option Plan and 8,004
vested unexercised stock options and 71,000 restricted shares granted
under the 2000 Bairnco Stock Option Plan.
(8) The percentage of shares owned by such executive officer or director
does not exceed 1% of the issued and outstanding Bairnco Common Stock.
COMPENSATION OF MANAGEMENT
General
The following table sets forth information regarding the compensation paid,
distributed or accrued for services rendered during 2001, 2002, and 2003 to the
Chairman of the Board and each of the two other most highly compensated
executive officers of Bairnco (collectively the "Named Executives").
SUMMARY COMPENSATION TABLE
Long Term
Annual Compensation Compensation Awards
------------------- --------------------------
Stock Restricted All Other
Name and Principal Position Year Salary Bonus Options Stock Award (1) Compensation
--------------------------- ---- ------ ----- ------- --------------- ------------
($) ($) (#) ($) ($)
Luke E. Fichthorn III 2003 $430,067 0 50,000 $214,200 $6,300
Chairman of the Board and 2002 419,567 $105,000 -0- -0- -0-
Chief Executive Officer 2001 408,690 0 -0- -0- -0-
Larry D. Smith 2003 $169,167 $ 20,400 -0- $ 86,700 $2,550
Vice President Administration 2002 165,167 37,170 -0- -0- -0-
2001 160,083 0 -0- -0- -0-
Lawrence C. Maingot 2003 $116,292 $ 18,630 -0- $ 61,200 $1,800
Corporate Controller 2002 105,333 33,642 1,500 -0- -0-
2001 96,250 0 -0- -0- -0-
(1) The amounts in the table reflect the market value on the date of award
of restricted shares of Common Stock ("Restricted Stock") (based on the
$5.10 per share closing price of the Common Stock on April 24, 2003).
Total number and value of shares of Restricted Stock held as of
December 31, 2003 (based on $6.09 per share closing price of the Common
Stock on December 31, 2003) for each Named Executive officer are: Luke
E. Fichthorn III - 42,000 shares/$255,780; Larry D. Smith - 17,000
shares/$103,350; and Lawrence C. Maingot - 12,000 shares/$73,080.
Restricted Stock is contingent upon five continuous years of
employment, with "cliff" vesting of all shares upon the fifth
anniversary of the date of the award. All shares are forfeited in the
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event of termination of employment prior to the five years, for other
than retirement, death or disability. Restricted Stock holders receive
voting power and payment of dividends related to the shares during the
vesting period.
Stock Options
The following table sets forth information concerning the grant of stock options
during 2003 to Luke E. Fichthorn III. No stock options were granted to the other
Named Executives during 2003.
Number of Percentage Potential Realizable Value at
Securities of Total Assumed Annual Rates of Stock
Underlying Options Price Appreciation for Ten-Year
Options Granted to Exercise or Option Term(2)
Granted Employees Base Price Expiration ----------------------------
Name (#)(1) in 2003 ($/share) Date 5% 10%
----------------------- ---------- ---------- ---------- ---------- --------- ----------
Luke E. Fichthorn III 16,666 $5.05 2/3/14 $59,785 $155,964
16,666 $5.05 2/3/15 $66,982 $179,977
16,667 $5.05 2/3/16 $74,539 $206,404
Total 50,000 56%
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(1) The exercise price of the stock options is equal to 100% of the fair
market value of the Common Stock on the date of grant (February 3,
2003). The stock options vest in increments of one-third of the total
grant on each of the first, second and third anniversaries of the grant
date. Accordingly, one-third of the options (16,666) become exercisable
on February 3, 2004, one-third of the options (16,666) become
exercisable on February 3, 2005, and one-third (16,667) become
exercisable on February 3, 2006. The stock options remain exercisable
for ten years from the first date they become exercisable. Accordingly,
one-third of the options (16,666) expire on February 3, 2014, one-third
of the options (16,666) expire on February 3, 2015, and one-third of the
options (16,667) expire on February 3, 2016.
(2) The option values presented were calculated based on a per-share price
of $5.05 on the date of the grant as assumed 5% and 10% annualized rates
of appreciation for the term of the award. The actual value, if any,
which an individual may realize upon exercise will depend on the excess
of the market price of the Common Stock over the option exercise price
on the date the option is exercised. There is no assurance that the
actual value realized by an individual upon the exercise of an option
will be at or near the value estimated under the model described above.
The following table sets forth information for each Named Executive with regard
to the value of stock options held as of December 31, 2003.
AGGREGATED OPTION EXERCISES IN 2003
AND 2003 YEAR END OPTION VALUE
Shares Number of Securities Value of Unexercised
Acquired Value Underlying Unexercised In-the-Money Options at
on Exercise Realized Options at Year-End (#) Year-End ($) (1)
Name (#) ($) Exercisable Unexercisable Exercisable Unexercisable
---- --- --- ----------- ------------- ----------- -------------
Luke E. Fichthorn III -0- -0- 166,667 50,000 $25,000 $52,000
Larry D. Smith -0- -0- 20,000 -0- $ 0 $ 0
Lawrence C. Maingot -0- -0- 3,750 1,125 $ 1,560 $ 608
--------------------------
(1) Value is determined by multiplying the number of unexercised in-the-money
options by the difference between the stock price on December 31, 2003 and
the option grant price.
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Bairnco Retirement Plan
Bairnco maintains the Bairnco Corporation Retirement Plan (the "Bairnco
Plan"), a non-contributory defined benefit pension plan, in which all salaried
employees and certain hourly employees of Bairnco and its U.S. subsidiaries,
Kasco Corporation and Arlon, Inc., participate.
Remuneration covered by the Bairnco Plan in a particular year includes
that year's base salary, overtime pay, commissions, stock purchase plan
payments, other incentive compensation and amounts that are deferred under a
401(k) plan that is at any time maintained by Bairnco, but excludes, among other
items, compensation received in that year under the Management Incentive
Compensation Plan in excess of 50% of the participant's basic pay rate as of the
December 31 preceding the date of payment. The 2003 remuneration covered by the
Bairnco Plan for each participant therefore includes management incentive
compensation (up to such 50% ceiling) paid during 2003 in respect of 2002
awards.
The following table presents information regarding estimated annual
benefits payable in the form of a straight life annuity upon retirement to
persons in specified remuneration and years of service classifications:
Years of Service at Retirement
Average ------------------------------
Compensation
At Retirement 5 10 15 20 25 or More
------------- ------- ------- ------- ------- ----------
$ 50,000 $ 3,446 $ 6,891 $10,337 $13,783 $17,229
75,000 5,883 11,766 17,650 23,533 29,416
100,000 8,321 16,641 24,962 33,283 41,604
150,000 13,196 26,391 39,587 52,783 65,979
200,000 or more 18,071 36,141 54,212 72,283 90,354
In accordance with IRS regulation, the maximum allowable compensation
permitted in computing a benefit is $200,000 for 2003. However, employees will
receive the greater of the benefit outlined above or the accrued benefit as of
December 31, 1993 which was based on compensation in excess of $200,000 plus a
benefit based on service after December 31, 1993 and final average compensation
based on the $200,000 limit.
For each of the following, the credited years of service under the
Bairnco Plan as of December 31, 2003, and the remuneration received during 2003
covered by the Retirement Plan, were, respectively, as follows: Mr. Fichthorn,
14 years and $200,000; Mr. Smith, 5 years and $200,000; Mr. Maingot, 12 years
and $151,733.
In addition, Bairnco sponsors a non-qualified retirement plan such that
retirement benefits as determined under the Bairnco Plan are supplemented to
provide an aggregate pension benefit based on adjusted dates of hire and
remuneration. Pursuant to his employment agreement, this non-qualified
retirement plan provides Mr. Fichthorn an estimated annual benefit of $39,603
payable upon normal retirement date, based upon 25 projected years of credited
service, and 2003 covered remuneration of $200,000.
-12-
Executive Contracts
Employment Agreement with Mr. Fichthorn
On May 23, 1990, Bairnco entered into an agreement with Mr. Fichthorn,
Chairman of Bairnco, under which Mr. Fichthorn became an employee. The initial
term of the agreement was for four years, but the agreement generally
automatically renews so that at no time will the term of the agreement be less
than four years. Under the agreement, Mr. Fichthorn presently receives a base
salary of $433,600 and is entitled to participate in the Bairnco Headquarters
management incentive compensation plan, where he is entitled to receive 25% of
an annual pool that is generated at the rate of $15,000 for each $.01 per share
of net income of Bairnco and its consolidated subsidiaries as reported to
shareholders in excess of $.30 per share after reflecting the management
incentive compensation annual pool as a cost in arriving at pre-tax income.
In accordance with the agreement, Mr. Fichthorn received, on the date
when he became an employee of Bairnco, stock options for 350,000 shares of
Bairnco Common Stock at an exercise price equal to the book value of a share of
stock determined on the last day of the month in which he became an employee
($5.94 per share). One hundred thousand of the option shares became exercisable
on the first anniversary of the date of grant and were exercised during 2001. Of
the remaining 250,000 shares, 83,333 shares became exercisable on January 28,
1993 for earnings of $.70 per share for the calendar year 1992 and expired in
2003 without being exercised; an additional 83,333 shares became exercisable on
January 26, 1996 for earnings at $.75 per share for the calendar year 1995; and
the remaining 83,334 became exercisable on May 31, 2000, the tenth anniversary
of the date of grant.
All options remain exercisable for ten years from the first date they
become exercisable. Except in the case of a voluntary termination or a
termination for cause, as defined in the agreement, exercisable options will
generally remain exercisable for three years following termination. The
exercisability of all of the options granted to Mr. Fichthorn generally will
accelerate in the event of a change of control. Each option share is to be
accompanied by a limited stock appreciation right that will become exercisable
for six months following a change of control. Upon exercise of such right, Mr.
Fichthorn will receive the excess of the fair market value per share (or, if
greater, $10 per share) over the exercise price per share for the underlying
option. In the event that the payments received by Mr. Fichthorn with respect to
his options and under any other provision of the agreement by reason of a change
of control are subject to the excise tax on excess parachute payments, Bairnco
will pay Mr. Fichthorn such amounts as are necessary to place him in the same
position as he would have been in if no excise tax had been payable.
Mr. Fichthorn will also receive a special retirement supplement that is
intended to provide him a retirement benefit comparable to what he would have
received under the Bairnco Plan (described above) if his combined past service
as a director of Bairnco's former subsidiary, Keene Corporation, and Bairnco (25
years) were treated as years of service under that plan. The supplemental,
non-qualified benefit (as described above) is fully vested.
The Agreement provides that if Mr. Fichthorn dies while an employee, his
surviving spouse or estate will receive a death benefit equal to three times the
sum of (i) his base salary, and (ii) the highest bonus paid to him during the
prior three years or the current year. If Mr. Fichthorn's employment terminates
due to disability, he will receive 75% of his base salary for two years and 55%
of such salary thereafter until the disability ends or his supplemental
retirement benefits commence.
-13-
If Bairnco terminates Mr. Fichthorn's employment without cause or
breaches the agreement in a material fashion leading Mr. Fichthorn to terminate
his employment, Bairnco will pay Mr. Fichthorn a lump sum benefit equal to the
sum of (i) four times his then base salary, and (ii) the highest bonus paid or
payable to him during the prior three years or the current year. Regardless of
the reason for his termination, Bairnco will also provide Mr. Fichthorn and his
spouse with medical, health and hospitalization benefits following his
termination until he attains age 65 (or, in the event of his death, until his
spouse attains age 65).
Compensation Committee Interlocks and Insider Participation in Compensation
Decisions
The Compensation Committee consisted of the following members during all
of 2003: Messrs. Gerald DeGood, Charles Foley, James Wolf, and William
Yelverton.
BOARD COMPENSATION COMMITEE REPORT ON EXECUTIVE COMPENSATION
Compensation Philosophy
The executive compensation program of the Company has been designed to
motivate, reward, attract and retain the management deemed essential to ensure
the success of the Company. The program seeks to align executive compensation
with Company objectives, business strategy and financial performance. In
applying these principles, the Compensation Committee seeks to:
o Reward executives for long-term strategic management and the
enhancement of stockholder value;
o Support an environment that rewards performance with respect to
Company goals, as well as Company performance relative to
industry competitors;
o Integrate compensation programs with the short and long-term
strategic plans of the Company;
o Attract and retain key executives critical to the long-term
success of the Company; and
o Align the interests of executives with the long-term interests
of stockholders through award opportunities that can result in
ownership of Common Stock.
Compensation Program Components
The compensation programs of the Company for its executive officers
and key employees are generally administered by or under the direction of the
Committee and are reviewed on an annual basis to ensure that remuneration levels
and benefits are competitive and reasonable using the guidelines described
above. The particular elements of the compensation programs for such persons are
set forth in more detail below.
Base Salary - Base salary levels are primarily determined by the
Committee at levels the Committee deems necessary or appropriate to
attract the level of competence needed for the position. Base salary
levels are reviewed annually based on individual performance, industry
conditions and market considerations. The Committee believes that base
salary levels for the Company's executive officers and key employees
are competitive within a range that the Committee considers to be
reasonable and necessary.
-14-
Performance Bonus - The Company provides incentive compensation to its
executive officers and key employees in the form of annual cash
bonuses relating to financial and operational achievements during the
prior year through the Company's Management Incentive Compensation
(MIC) Program. The amount and form of such bonuses are determined by
the Committee based primarily upon the analysis of the individual's
job performance and the specific accomplishments of the individual
during the preceding calendar year. In the case of corporate
administrative and financial officers, incentive compensation
decisions are made primarily on the basis of the assistance and
performance of the officer in implementing corporate objectives within
the scope of his or her responsibilities. In the case of operational
officers, incentive compensation decisions are made primarily on the
basis of operational results of the business operations for which the
officer is responsible. Although the achievement of certain financial
objectives as measured by a business segment's earnings are considered
in determining incentive compensation, other subjective and less
quantifiable criteria are also considered. In this regard, the
Committee takes into account specific achievements that are expected
to affect future earnings and results or that had an identifiable
impact on the prior year's results.
Stock Incentive Plan - The Company also provides long-term incentive
compensation to its executive officers and key employees through stock
options and restricted shares. The 2000 Bairnco Stock Incentive Plan
(the "Stock Incentive Plan") was approved by shareholders at the 2000
Annual Meeting of Shareholders. As originally established, the Stock
Incentive Plan provided for stock option awards. In April 2003, the
Board of directors amended the Stock Incentive Plan to add a
restricted stock award program. The restricted stock award program
permits the committee to grant to an employee an award consisting of
shares of Bairnco stock that are subject to specified forfeiture and
transfer restrictions. Upon the lapse of these restrictions, the
restricted stock award becomes vested. Generally, a restricted stock
award under the Stock Incentive Plan becomes vested if the recipient
remains employed until the fifth anniversary of the date of the award.
The restricted stock award recipient receives dividends and voting
rights during the vesting period. Under the terms of the Stock
Incentive Plan, the Committee has complete discretion in determining
eligibility for participation and the number of stock options or
restricted stock shares, if any, to be granted to a participant. Stock
option and restricted stock awards may be made from the shares of
Bairnco Common Stock originally approved by the shareholders for
issuance under the Stock Incentive Plan. The Committee has established
and follows guidelines with respect to the granting of options and
restricted stock awards under the Stock Incentive Plan to employees.
The use of these instruments is intended to provide incentives to the
Company's executive officers and key employees to work toward the
long-term growth of the Company by providing them with a benefit that
will increase only to the extent the value of the Common Stock
increases. Options and restricted shares are not granted by the
Committee as a matter of course as part of the regular compensation of
any executive or key employee. The decision to grant options or
restricted shares is based on the perceived incentive that the grant
will provide and the benefits that the grant may have on long-term
stockholder value. The determination of the number of shares granted
is based on the level and contribution of the employee. Consideration
is also given to the anticipated contribution of the business
operations for which the optionee has responsibility to overall
stockholder value.
-15-
Compensation Earned by the Chief Executive Officer
In considering the Chairman's base salary, the Committee reviewed Bairnco's
general financial performance and the progress in improving operating
performance. The Committee also reviewed the Chairman's base salary against
recent salary surveys. This information showed Mr. Fichthorn's salary to be in
the average range for industrial companies the size of Bairnco. The Committee
also considered the time period elapsed from Mr. Fichthorn's date of last
increase in May 2002. On May 1, 2003, he received a salary increase of 2.5%
resulting in a current salary for Mr. Fichthorn of $433,600. In accordance with
his contract, Mr. Fichthorn is eligible for 25% of an MIC pool generated by a
formula in his contract. However, since 2001, Mr. Fichthorn has voluntarily
waived this portion of his contract on a year-to-year basis and has agreed to
participate in the MIC pool that covers Bairnco's officers. In 2003, Mr.
Fichthorn elected not to receive a bonus even though he earned one under the
Bairnco MIC program.
162 (m) Disclosure
Based on current levels of compensation, no executive officer is
expected to receive compensation for 2004 services that would be non-deductible
under Section 162 (m) of the Internal Revenue Code. Accordingly, the
Compensation Committee has not considered any revisions to its policies and
programs in response to this provision of law.
Respectfully submitted,
The Compensation Committee
William F. Yelverton, Chairman
Gerald L. DeGood
Charles T. Foley
James A. Wolf
-16-
Performance Graph
Presented in the graph below is a comparison of the five-year
cumulative returns among Bairnco Common Stock, the Russell 2000 Index and the
Dow Jones Electrical Components and Equipment Index ("DJELQ"). The cumulative
returns shown in the graph assume an initial investment of $100 as of December
31, 1998, and reinvestment of all cash and cash equivalent dividends declared as
of the ex-date of the dividend.
[GRAPHIC OMITTED]
-17-
PROPOSAL 2. RATIFICATION OF AUDITORS
The Board of Directors has voted unanimously to retain the firm of Ernst
& Young LLP, independent certified public accountants, as auditors for Bairnco
and its subsidiaries for the 2004 fiscal year. The Board of Directors is
submitting its selection of Ernst & Young LLP to shareholders for ratification.
Representatives of Ernst & Young LLP are expected to be present at the Annual
Meeting and to be available to respond to appropriate questions. These
representatives will have the opportunity to make a statement at the Annual
Meeting if they desire to do so. Ratification of the Board of Directors'
selection of auditors will require the affirmative vote of the holders of a
majority of the shares of Bairnco Common Stock present at the Annual Meeting
(assuming that a quorum is present). The Board of Directors recommends a vote
FOR ratification of its selection of auditors.
Audit & Non-Audit Fees
The following table presents fees charged for professional audit
services rendered by Ernst & Young LLP for the audit of the Company's financial
statements for the years ended December 31, 2003 and 2002, and fees billed by
Ernst & Young for other services during those years. Certain amounts for 2002
have been reclassified to conform to the current year presentation.
2003 2002
---- ----
Audit fees (1) $160,100 $125,000
Audit related fees (2) 13,700 28,000
Tax fees (3) 32,500 7,500
All other fees -- --
$206,300 $160,500
(1) Audit fees consisted of audit work (including the tax accrual
review) performed in connection with the preparation of the quarterly and year
end financial statements, European statutory audits and review of documents
filed with the SEC.
(2) Audit related fees consisted of audits of employee benefit
plans.
(3) Tax fees consisted of assistance related to tax compliance and
reporting.
Pre-Approval of Audit & Non-Audit Services - Under the Company's Audit
Committee Charter, the Audit Committee of the Board of Directors ("Audit
Committee") is required to pre-approve all auditing services and permissible
non-audit services, including related fees and terms, to be performed for the
Company by the independent auditor, subject to de-minimus exceptions for
non-audit services described under the Securities Exchange Act of 1934 which are
approved by the Audit Committee prior to the completion of the audit. The Audit
Committee pre-approved all audit services, audit related services and tax review
and compliance services for the Company by Ernst & Young during 2003.
Audit Committee Report
In accordance with its written charter adopted by the Board of Directors
("Board"), the Audit Committee of the Board ("Audit Committee") monitors the
financial reporting process on behalf of the Board. All members of the Audit
-18-
Committee are independent of management and the Company in accordance with the
Company's Standards of Board Independence which are based on the requirements of
the New York Stock Exchange, the Securities and Exchange Act of 1934 and rules
and regulations of the Securities and Exchange Commission.
During 2003, the Audit Committee met five times, and the Committee chair, as
representative of the Audit Committee, discussed the interim financial
information contained in each quarterly earnings announcement with the Corporate
Controller and independent auditors prior to the filing of the Company's Form
10-Q.
The Audit Committee obtained from the independent auditors a formal written
statement describing all relationships between the auditors and the Company that
might bear on the auditors' independence consistent with Independence Standards
Board Standard No. 1, "Independence Discussions with Audit Committees", and
discussed with the auditors any relationships that might affect their
objectivity and independence.
The Audit Committee discussed with the independent auditors the matters required
to be discussed by Statement on Auditing Standards No. 61, as amended,
"Communication with Audit Committees" and, with and without management present,
discussed and reviewed the results of the independent auditors' examination of
the quarterly and annual financial statements. The Audit Committee also
discussed the results of the internal audit examinations with the Corporation's
internal audit department.
The Committee reviewed the audited financial statements of the Company for the
fiscal year ended December 31, 2003, with management and the independent
auditors. Management has the responsibility for the preparation of the Company's
financial statements, and the independent auditors express an opinion on those
financial statements based on their audit.
Based on the reviews and discussions referred to above, the Audit Committee
recommended to the Board that the Company's audited financial statements be
included in its Annual Report on Form 10-K for the fiscal year ended December
31, 2003, for filing with the Securities and Exchange Commission. The Committee
also recommended the reappointment, subject to shareholder approval, of Ernst &
Young LLP as independent auditors, and the Board concurred in such
recommendation.
Respectfully submitted,
The Audit Committee
Gerald L. DeGood, Chairman
Charles T. Foley
James A. Wolf
William F. Yelverton
-19-
PROPOSALS BY HOLDERS OF COMMON STOCK
Any proposal that a shareholder of Bairnco desires to have included in
the Proxy Statement relating to the 2005 Annual Meeting of Shareholders must be
received by Bairnco at its executive offices no later than December 1, 2004. The
executive offices of Bairnco currently are located at 300 Primera Boulevard,
Suite 432, Lake Mary, Florida 32746.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Based upon a review of filings with the Securities and Exchange
Commission and written representations from its directors and executive officers
that no other reports were required, the Company believes that all of the
Company's directors and executive officers complied with the filing requirements
of Section 16(a) of the Securities Exchange Act of 1934 during the fiscal year
ended December 31, 2003. The Company is not aware of any beneficial holder of
10% of the Company's common stock that has not complied with filing
requirements.
-20-
EXPENSES AND OTHER MATTERS
Bairnco will pay the costs of preparing, assembling, and mailing this
Proxy Statement and the material enclosed herewith. Bairnco has requested
brokers, nominees, fiduciaries and other custodians who hold shares of Bairnco
Common Stock in their names to solicit proxies from their clients who own such
shares, and Bairnco has agreed to reimburse them for their expenses in so doing.
In addition to the use of the mails, certain officers, directors and
regular employees of Bairnco, at no additional cost, may request the return of
proxies by personal interview or by telephone or telegraph.
Management does not intend to present any further items of business at
the Annual Meeting, and knows of no such items that will or may be presented by
others. If, however, any other matter properly comes before the meeting, the
persons named in the enclosed proxy form will vote thereon in such manner as
they may in their discretion determine.
By Order of the Board of Directors
/s/ LARRY D. SMITH
--------------------------------
Larry D. Smith
Secretary
Lake Mary, Florida
March 17, 2004
PLEASE DATE, SIGN AND IMMEDIATELY RETURN THE ACCOMPANYING PROXY IN THE
ENCLOSED ADDRESSED ENVELOPE.
-21-
PROXY
BAIRNCO CORPORATION
ANNUAL MEETING OF SHAREHOLDERS, April 22, 2004
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF BAIRNCO CORPORATION
The undersigned hereby appoints LUKE E. FICHTHORN III, LARRY D. SMITH,
and LAWRENCE C. MAINGOT, and each of them, the proxies of the undersigned, with
power of substitution in each, to vote all stock of BAIRNCO CORPORATION that the
undersigned is entitled to vote at the Annual Meeting of Shareholders of such
Corporation to be held at Bairnco's corporate offices, 300 Primera Boulevard,
Suite 432, Lake Mary, Florida, on Thursday, April 22, 2004, at 9:00 A.M., local
time, and at any adjournment thereof.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE FOLLOWING PROPOSALS:
1. ELECTION OF DIRECTORS
[ ] FOR all nominees listed below (except [ ] WITHHOLD AUTHORITY to vote
as listed to the contrary below) for all nominees listed below
NOMINEES: Luke E. Fichthorn III, Gerald L. DeGood, Charles T. Foley,
James A. Wolf, William F. Yelverton
(INSTRUCTIONS: To withhold your vote from any individual nominee or nominees,
check the FOR box above and write each such nominee's name on the space provided
below.)
--------------------------------------------------------------------------------
2. RATIFICATION OF THE AUDIT COMMITTEE'S SELECTION OF AUDITORS
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. TO VOTE, IN THEIR DISCRETION, UPON SUCH OTHER MATTERS AS MAY PROPERLY COME
BEFORE THE MEETING
If no contrary instructions are indicated on this Proxy, this Proxy will be
voted FOR Proposals 1 and 2.
Dated:
----------------------------------
----------------------------------
Signature
----------------------------------
Signature
Please sign exactly as name
appears at left. Joint owners
should each sign. When signing as
attorney, executor, administrator,
trustee or guardian, give your
full title as such.
PLEASE SIGN AND DATE THIS PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE