UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
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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 (S) 240.14a-11(c) or (S) 240.14a-12
BARNES GROUP INC.
(Name of Registrant as Specified In Its Charter)
BARNES GROUP INC.
(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)(4) 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):
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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:
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(4)Date Filed:
Notes:
Reg. (S) 240.14a-101.
SEC 1913 (3-99)
Barnes Group Inc.
Executive Office
123 Main Street
Post Office Box 489
Bristol, Connecticut 06011-0489 U.S.A.
Tel. (860) 583-7070
[LOGO] BARNES GROUP INC.
March 13, 2002
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD APRIL 10, 2002
The Annual Meeting of Stockholders of Barnes Group Inc. will be held at The
Country Club of Farmington, 806 Farmington Avenue, Farmington, Connecticut
06032, at 11:00 a.m. on Wednesday, April 10, 2002, for the following purposes:
1.To elect three directors for a three-year term and one director for a
one-year term;
2.To approve the amended Barnes Group Inc. Employee Stock and Ownership
Program; and
3.To transact any other business that lawfully may come before the meeting or
any adjournment thereof.
Stockholders of record at the close of business on February 13, 2002 will be
entitled to vote at the meeting.
Your vote is important. Please VOTE BY PROXY USING THE TELEPHONE OR INTERNET AS
SOON AS POSSIBLE as described in the enclosed proxy card or, SIGN, DATE AND
RETURN THE ENCLOSED PROXY CARD IN THE ENVELOPE PROVIDED whether or not you plan
to attend the meeting.
Signe S. Gates
Secretary
PROXY STATEMENT FOR ANNUAL MEETING OF STOCKHOLDERS
TABLE OF CONTENTS
Page
----
Election of Three Directors for a Three-Year Term and One Director for a One-Year Term
(Proxy Proposal 1).................................................................. 1
The Board and Its Committees.......................................................... 3
Compensation of Directors............................................................. 4
Stock Ownership by Directors and Executive Officers................................... 4
Beneficial Owners of More Than 5% of Shares........................................... 5
Audit Committee Report................................................................ 6
Compensation and Management Development Committee Report.............................. 7
Compensation.......................................................................... 10
Stock Options......................................................................... 11
Pension Plans......................................................................... 12
Employment Agreement.................................................................. 13
Change-In-Control Agreements.......................................................... 14
Performance Graph..................................................................... 15
Approval of the Amended Barnes Group Inc. Employee Stock and Ownership Program
(Proxy Proposal 2).................................................................. 16
Independent Accountants............................................................... 20
Stockholder Proposals for 2003 Annual Meeting......................................... 21
General............................................................................... 21
Annex I, Amended Employee Stock and Ownership Program................................. A-1
PROXY STATEMENT FOR ANNUAL MEETING OF STOCKHOLDERS
APRIL 10, 2002
This Proxy Statement is furnished in connection with the solicitation by the
Board of Directors of Barnes Group Inc. (the "Company") of proxies to be voted
at the Annual Meeting of Stockholders to be held on April 10, 2002 and at any
adjournment thereof. A stockholder who votes by proxy using the telephone or
the Internet as described in the proxy card, or signs and returns a proxy card
in the accompanying form, may revoke it by notifying the Secretary of the
meeting in person or in writing (including by delivery of a later dated proxy)
at any time before it is voted. This Proxy Statement and the enclosed form of
proxy are being sent to stockholders on or about March 13, 2002.
ELECTION OF THREE DIRECTORS FOR A THREE-YEAR TERM AND ONE DIRECTOR FOR A
ONE-YEAR TERM (Proxy Proposal 1)
The Board of Directors Recommends a Vote "For" All Nominees.
Three directors are nominated for election at the 2002 Annual Meeting for a
three-year term and one director is nominated for re-election at the 2002
Annual Meeting for a one-year term (unless any of them earlier dies, resigns or
is removed, as provided in the Company's by-laws). William S. Bristow, Jr.,
Edmund M. Carpenter and G. Jackson Ratcliffe are nominated for re-election to
the Board of Directors for terms expiring at the Annual Meeting in 2005. In
order that the three classes of the Board of Directors have an equal number of
directors, Donald W. Griffin is nominated for re-election to the Board of
Directors for a one-year term expiring at the Annual Meeting in 2003. Directors
are elected by a plurality of the votes cast for Proposal 1. Proxies may be
voted only for the number of nominees named by the Board of Directors.
Pertinent information concerning the nominees for re-election as directors and
the five directors whose terms continue after the meeting is set forth below.
Each director has been associated with his present organization for at least
the past five years unless otherwise noted. Except as expressly stated below,
none of the organizations listed as business affiliates of the directors is a
subsidiary or other affiliate of the Company.
Nominees for Re-election
[PHOTO] William S. Bristow, Jr.
Director since 1978
Current term expires 2002
Mr. Bristow, 48, is President of W.S. Bristow & Associates, Inc., which is engaged in
small business development. He is Chairman of the Executive Committee, and a
member of the Corporate Governance Committee, the Finance Committee, and the
Audit Committee of the Company's Board of Directors.
[PHOTO] Edmund M. Carpenter
Director since 1998
Current term expires 2002
Mr. Carpenter, 60, became President and Chief Executive Officer of the Company in
1998. He is an ex officio, non-voting member of the Executive Committee of the
Company's Board of Directors. From 1996 to 1998, he was a Senior Managing Director
of Clayton, Dubilier & Rice, Inc., a private equity firm. He is a director of Campbell Soup
Company and Dana Corporation.
1
[PHOTO] G. Jackson Ratcliffe, Jr.
Director since 2001
Current term expires 2002
Mr. Ratcliffe, 65, is Chairman of the Board of Directors of Hubbell Incorporated. He is a
member of the Audit Committee, the Finance Committee, and the Compensation and
Management Development Committee of the Company's Board of Directors. He was
Chairman of the Board, President and Chief Executive Officer of Hubbell from 1987
through July 1, 2001. He is a director of Sunoco, Inc., Praxair, Inc. and Olin
Corporation.
[PHOTO] Donald W. Griffin
Director since 2001
Current term expires 2002
Mr. Griffin, 65, is Chairman of the Board of Directors of Olin Corporation. He is a
member of the Audit Committee, the Corporate Governance Committee, and the
Compensation and Management Development Committee of the Company's Board of
Directors. He was Chairman, President and Chief Executive Officer of Olin from 1996
through 2000. He is a director of Eastman Chemical Company.
Continuing Directors
[PHOTO] John W. Alden
Director since 2000
Current term expires 2004
Mr. Alden, 60, retired as Vice Chairman, United Parcel Service of America, Inc. in 2000.
He is Chairman of the Corporate Governance Committee, and a member of the Finance
Committee and the Compensation and Management Development Committee of the
Company's Board of Directors. From 1988 until his retirement, he served as a director
of United Parcel Service. He is a director of Silgan Holdings Inc.
[PHOTO] Thomas O. Barnes
Director since 1978
Current term expires 2003
Mr. Barnes, 52, is Chairman of the Board of Directors and an employee of the
Company. He is an ex officio, non-voting member of the Executive Committee of the
Company's Board of Directors. From 1993 through May 1997, Mr. Barnes also served
as Senior Vice President-Administration. Prior to joining the Company, he was
President of The Olson Brothers Company, a manufacturer of machined metal parts.
2
[PHOTO] Gary G. Benanav
Director since 1994
Current term expires 2003
Mr. Benanav, 56, is Chairman and Chief Executive Officer of New York Life
International, Inc. and Vice Chairman and a Director of New York Life Insurance
Company. He is Chairman of the Audit Committee, and a member of the Corporate
Governance Committee and the Compensation and Management Development
Committee of the Company's Board of Directors. Prior to his appointment at New York
Life International in December 1997, he was Chief Executive Officer of Aeris Ventures,
L.L.C., a venture capital firm. He is a director of Express Scripts, Inc., a full-service
pharmacy benefit management company.
[PHOTO] George T. Carpenter
Director since 1985
Current term expires 2004
Mr. Carpenter, 61, is President of The S. Carpenter Construction Company, which is
involved in general contracting, and The Carpenter Realty Company, which is involved
in real estate management. He is Chairman of the Finance Committee, and a member of
the Executive Committee and the Corporate Governance Committee of the Company's
Board of Directors. He is a director of Webster Bank.
[PHOTO] Frank E. Grzelecki
Director since 1997
Current term expires 2004
Mr. Grzelecki, 64, is retired. He is Chairman of the Compensation and Management
Development Committee, and a member of the Executive Committee, the Audit
Committee, and the Finance Committee of the Company's Board of Directors. He was a
Managing Director of Saugatuck Associates, Inc., a private investment firm, from 1999
to 2000. He was a director and Vice Chairman of Handy & Harman, a diversified
industrial manufacturing company, from 1997 to 1998. From 1992 to 1997, he served
as a director and President and Chief Operating Officer of Handy & Harman. Mr.
Grzelecki is a trustee of The Phoenix Edge Series Fund.
THE BOARD AND ITS COMMITTEES
In 2001, the Board of Directors held six meetings. Each incumbent director of
the Company attended in excess of 90% of the meetings of the Board of Directors
and Board committees on which he served during 2001. In accordance with the
Company's by-laws, the Board of Directors has fixed the number of directors at
ten and is actively pursuing qualified candidates who are available to fill one
vacancy. The Audit Committee is responsible for matters relating to accounting
policies and practices, financial reporting and the internal control structure.
The Audit Committee held three meetings in 2001. The Compensation and
Management Development Committee administers the Company's incentive and stock
plans, sets the salary of the President and Chief Executive Officer, and
reviews and approves the compensation of the other executive officers. The
Compensation and Management Development Committee held three meetings in 2001.
The Corporate Governance Committee makes recommendations concerning Board
membership, functions and compensation. The Corporate Governance Committee will
consider director nominations submitted by stockholders in accordance with the
procedures described below under the caption "Stockholder Proposals for 2003
Annual Meeting." The Corporate Governance Committee held three meetings in
2001. All of these committees are standing committees of the Board.
3
COMPENSATION OF DIRECTORS
The annual retainer for directors is $35,000. The fee for attending a meeting
is $1,000 ($1,500 if held outside of Connecticut or New York City), except that
the committee chairperson receives an additional $500 for each meeting at which
he presides. Messrs. Barnes and E.M. Carpenter do not receive a retainer or
meeting fees for service as directors. Mr. Barnes receives $250,000 for serving
as Chairman and performing various other duties as a nonexecutive employee of
the Company. The other duties performed by Mr. Barnes include working with the
President and Chief Executive Officer to develop relationships with possible
strategic partners, participating in the process of acquiring other businesses
or entities and engaging in various operational corporate activities when
requested, chairing Barnes Group Foundation, Inc., serving on the
NHK-Associated Spring Suspension Components Inc. Board of Directors, and
maintaining an active role in community affairs in the Bristol and Hartford
areas. The grant of rights to receive stock and the payment of dividend
equivalents under the Non-Employee Director Deferred Stock Plan are additional
forms of director compensation. Under this plan each non-employee director is
granted the right to receive 6,000 shares of Company common stock when his
membership on the Board terminates. The plan provides that each newly elected
director will receive the same grant. The plan also provides for the payment of
dividend equivalents equal to 6,000 times the dividend per share for each
dividend payment date./1/ In addition, in 2001, Messrs. Ratcliffe and Griffin
were each granted stock options to acquire 2,500 shares of Company common stock
and each of the other directors other than Mr. E.M. Carpenter was granted stock
options to acquire 5,000 shares of Company common stock under the Barnes Group
Inc. Employee Stock and Ownership Program (the "Employee Stock and Ownership
Program"). These options become exercisable at the rate of 33.4% on the first
anniversary of the grant date and 33.3% on the second and third anniversaries
of the date of grant.
STOCK OWNERSHIP BY DIRECTORS AND EXECUTIVE OFFICERS
As of January 1, 2001, the Company's directors, named executive officers, and
directors and officers as a group beneficially owned the number of shares of
the Company's common stock, par value $0.01 per share (the "Common Stock"),
shown below:
Amount and Nature Percent of
Name of Person or Group of Beneficial Ownership/1/ Common Stock
------------------------------------------------------------------------------------
John W. Alden............................... 7,667 *
Thomas O. Barnes............................ 628,604 3.4%
Gary G. Benanav............................. 22,554 *
William S. Bristow, Jr...................... 380,971 2.1%
Leonard M. Carlucci......................... 196,869 1.1%
Edmund M. Carpenter......................... 513,064 2.7%
George T. Carpenter......................... 148,737 *
William C. Denninger........................ 66,714 *
A. Keith Drewett............................ 73,849 *
Donald W. Griffin........................... 6,600 *
Frank E. Grzelecki.......................... 18,667 *
Gregory F. Milzcik.......................... 97,799 *
G. Jackson Ratcliffe........................ 6,104 *
-------------------------------------------- ------------------------- ------------
Directors & officers as a group (21 persons) 2,618,570 13.3%
------------------------------------------------------------------------------------
*Less than 1% of Common Stock beneficially owned.
Note to the above table:
/1/The named person or group has sole voting and investment power with respect
to the shares listed in this column, except as set forth in this Note.
Mr. Barnes has sole voting and shared investment power with respect to 319,837
shares and no voting and shared investment power with respect to 66,352
shares. Included in Mr. G.T. Carpenter's total are 119,147 shares held by
corporations through which he has voting control. Mr. Bristow has shared
voting and shared investment power with respect to 186,098 shares. The
remainder of Mr. Bristow's shares are held in a trust which he has the power
to revoke.
--------
/1/Mr. Barnes became a participant in the plan when it was adopted in 1987. He
became an employee in 1993 and continues to participate in the plan.
4
The shares listed for Messrs. Barnes, Carlucci, E.M. Carpenter, Denninger,
Drewett, and Milzcik, and the directors and officers as a group include
70,117, 174,220, 410,303, 54,531, 62,611, 81,175 and 1,273,690 shares,
respectively, which they have the right to acquire within 60 days after
January 1, 2002. The shares listed for Messrs. Barnes, Carlucci, E.M.
Carpenter, Denninger, Drewett, Milzcik, and the directors and officers as a
group also include 6,335, 16,016, 2,643, 741, 460, 1,179, and 67,713 shares,
respectively, over which they have voting power and limited investment power.
These shares are held under the Company's Retirement Savings Plan. The shares
listed for Messrs. Alden, Barnes, Benanav, Bristow, G.T. Carpenter, Griffin,
Grzelecki, and Ratcliffe include 6,000 shares that each of them has the right
to receive under the Non-Employee Director Deferred Stock Plan described above
under the heading "Compensation of Directors."
The shares listed for Messrs. Carlucci, E.M. Carpenter, Denninger, Drewett,
Milzcik, and the directors and officers as a group do not include 14,523,
111,498, 14,523, 14,523, 10,374, and 209,007 restricted stock awards,
respectively, that they currently may have the right to receive on a future
date pursuant to the underlying agreements.
The number of shares reported as beneficially owned has been determined in
accordance with Rule 13d-3 under the Securities Exchange Act of 1934, as
amended (the "Exchange Act").
BENEFICIAL OWNERS OF MORE THAN 5% OF SHARES
The individuals and institutions set forth below are the only persons known by
the Company to be beneficial owners of more than 5% of the outstanding shares
of Common Stock (as of December 31, 2001, in each case as indicated in the
notes to this table):
Amount and Nature of Percent of
Name and Address of Beneficial Owner Beneficial Ownership Common Stock
----------------------------------------------------------------------------------------
Mr. Wallace Barnes/1/................................. 2,004,187 10.9%
1875 Perkins Street
Bristol, Connecticut 06010
Fleet National Bank/2/................................ 2,221,372 12.0%
777 Main Street
Hartford, Connecticut 06115
Frank Russell Trust Company/3/........................ 3,814,260 20.7%
909 A Street
Tacoma, Washington 98402
Gamco Investors, Inc./4/.............................. 1,146,875 6.3%
One Corporate Center
Rye, New York 10580
Notes to the above table:
/1/As of December 31, 2001, as reported on a Schedule 13G filed with the
Securities and Exchange Commission (the "SEC") on February 8, 2002.
According to such filing on such date, he had sole investment power with
respect to 1,149,722 shares; and shared investment power with respect to
854,465 shares. Mr. Barnes had shared voting power with respect to 30,000
shares, which are held by a private charitable foundation established by Mr.
Barnes, as to which shares he disclaims beneficial ownership, and sole
voting power with respect to 1,974,187 shares.
/2/As of December 31, 2001, Fleet National Bank ("Fleet") as reported on a
Schedule 13G filed with the SEC on February 14, 2002. According to such
filing, Fleet had sole voting power with respect to 481,545 shares; sole
investment power with respect to 432,165 shares; and shared investment power
with respect to 1,741,303 shares.
/3/As of December 31, 2001, as reported on a Schedule 13G filed with the SEC on
February 14, 2002. According to such filing, Frank Russell Trust Company
("Frank Russell") holds such shares in its capacity as trustee for the
Company's Retirement Savings Plan (a 401(k) plan) and two of the Company's
defined benefit pension plans. As reported on the 13G, Frank Russell has
shared voting power and shared investment power with respect to such shares.
/4/As of December 31, 2001, as reported on a Schedule 13F filed with the SEC on
February 14, 2002. According to such filing, as of such date, Gamco
Investors, Inc. reported that it had sole voting power with respect to
1,138,875 shares; shared voting power with respect to 8,000 shares; and sole
investment power with respect to 1,146,875 shares.
5
AUDIT COMMITTEE REPORT
To Our Fellow Stockholders at Barnes Group Inc.:
We, the members of the Audit Committee of the Board of Directors, are
independent directors, as defined by the New York Stock Exchange. Management is
responsible for the Company's financial reporting process and internal
controls. The responsibility of the Committee is to provide general oversight
of the Company's financial accounting, reporting and underlying internal
controls. The Committee provides additional oversight of the Company's
Corporate Compliance Program. The Committee, in conjunction with the Board of
Directors, has the ultimate authority for the selection, evaluation and
retention of the independent auditors.
On February 6, 2002, the Audit Committee reviewed and reassessed the
Committee's charter to ensure its adequacy and compliance with the new rules of
the Securities and Exchange Commission and the New York Stock Exchange. A copy
of the Committee's charter was filed with the 2001 Proxy Statement. In 2001,
the Committee operated in accordance with its charter.
During 2001, the Committee met three times for the purpose of providing a forum
for communication among the directors, the Company's independent auditors,
PricewaterhouseCoopers LLP, the Company's internal audit function and corporate
management. During these meetings, the Committee reviewed and discussed the
interim and the audited financial statements with management and
PricewaterhouseCoopers. In accordance with Statement of Auditing Standards No.
61, Communication with Audit Committees, the Committee discussed all required
matters with PricewaterhouseCoopers including the conduct of the audit of the
Company's financial statements.
In addition, the Committee obtained formal, written disclosures from
PricewaterhouseCoopers, including a letter affirming their independence as
required by Independence Standards Board Standard No. 1. The information
contained in this letter was discussed with PricewaterhouseCoopers.
The Committee reviewed aggregate fees billed by PricewaterhouseCoopers for
the year 2001 which are as follows:
Audit Fees............................................ $ 706,067
Financial Information Systems Design and
Implementation Fees................................. 0
All Other Fees:
Acquisition Due Diligence.......................... $398,388
Tax Services....................................... 450,602
Internal Audit..................................... 83,912
Other.............................................. 157,809
--------
Total All Other Fees............................... 1,090,711
----------
Total Fees............................................ $1,796,778
==========
The Committee concluded that the non-audit services rendered in 2001 did not
impair the independence of PricewaterhouseCoopers.
Based on the reviews and discussions referred to above, the Committee
recommended to the Board of Directors, and the Board has approved, inclusion of
the audited financial statements in the Company's Annual Report on Form 10-K,
for the year ended December 31, 2001, for filing with the Securities and
Exchange Commission. The Committee has also recommended to the Board, and the
Board has approved, the selection of PricewaterhouseCoopers as the Company's
independent accountants for 2002.
AUDIT COMMITTEE
Gary G. Benanav, Chairperson
William S. Bristow, Jr.
Donald W. Griffin
Frank E. Grzelecki
G. Jackson Ratcliffe
6
COMPENSATION AND MANAGEMENT DEVELOPMENT COMMITTEE REPORT
To Our Fellow Stockholders at Barnes Group Inc.:
We, the members of the Compensation and Management Development Committee of the
Board of Directors of Barnes Group Inc. (the "Company"), are independent,
non-employee directors with no "interlocking" relationships as defined by the
Securities and Exchange Commission. We are committed to developing compensation
strategies with strong ties to stockholder value creation. When Barnes Group's
stockholders win - by building lasting value through balanced, profitable,
sustainable growth - Barnes' executives win. The overarching philosophy with
respect to executive compensation, therefore, is to deploy programs directly
linked to the Company's strategic business objectives and total stockholder
return. If the Company's results against its goals and targets are below preset
performance thresholds, and if stock price appreciation is not realized,
payouts under the Company's short-term and long-term incentive programs are
reduced to zero. If, however, the Company's results exceed preset performance
targets, Barnes executives have an opportunity to realize significant
additional compensation. This high degree of performance linkage, and the
significant leverage and risk incorporated into the programs, give Barnes
Group's executive team a very strong financial incentive to build the lasting
value through balanced, profitable, sustainable growth that creates stockholder
wealth.
Barnes Group's short-term incentive strategies incorporate "stretch"
operational goals. The Company's Board of Directors has taken an active role in
the determination of these goals, and participated in the development of
compensation programs directly tied to these same goals. Our objective has been
to ensure appropriate balance between short-term and long-term incentives.
During 2001, the Company retained independent compensation consultants to
assist in the development of competitive compensation data for a group of
comparative companies and for general industry. The comparison group currently
consists of companies of similar size in one or more of the Company's
industries. The companies chosen for the comparison group are not necessarily
the same as those represented in the stock price performance graph accompanying
this report. We believe Barnes Group's market for executive talent extends
beyond this comparison group, and the competitive compensation levels have been
determined accordingly.
The key elements of Barnes Group's executive compensation strategy are salary,
short-term incentives, and long-term incentives.
Salaries
Executive officer salaries are established with reference to competitive levels
for positions of similar responsibility and impact. We review executive
officers' salaries at least annually. Salaries are targeted to fall within a
range of (+/-)10% of the median competitive level for the executive team
overall. Individual salaries may exceed or fall below that competitive range,
depending on the experience requirements of the position and the executive's
contribution to the Company.
Mr. E.M. Carpenter became President and Chief Executive Officer on December 8,
1998. His initial annual salary was established in accordance with his
Employment Agreement (which is described below under the heading "Employment
Agreement"). The Committee increased Mr. Carpenter's annual salary to $650,000
effective March 1, 2001. In determining the magnitude of the increase, the
Committee considered the annual salaries of chief executive officers of the
group of comparative companies described above, and of industrial companies of
comparable size and complexity.
Short-Term Incentives
Barnes Group executives place a significant percentage of their annual cash
compensation at risk under the Barnes Group Inc. Performance-Linked Bonus Plan
For Selected Executive Officers, approved by stockholders at the
7
April 12, 2001 Annual Meeting, and the Management Incentive Compensation Plan.
Award opportunities are based on the performance of the Company as a whole, the
business unit over which the executive has a direct influence, or a combination
of both. For 2001, the performance measures were earnings per share, operating
profit (less a charge for the capital employed by the applicable business unit)
and revenue, but may include in future periods other measures directly tied to
stockholder value creation as we believe to be appropriate given changes in
business conditions. Target incentive amounts are established at the start of
the year for each executive, stated as a percent of salary. Performance target,
threshold, and maximum amounts are established at the start of each operating
period. The final payout is calculated based upon the operating results
attained relative to these preset performance targets. If performance is below
the threshold amount established, the payout is reduced to zero. If the
targeted operating results are attained, the target incentive amounts are
payable. If performance exceeds the applicable maximum amount, the maximum
performance factor is awarded. For 2001, if performance exceeded the applicable
maximum amounts, the following percent of salary was payable: 225% for the
President and Chief Executive Officer; 150% for Group Presidents; 135% for
Senior Vice Presidents; and 105% for Vice Presidents.
In 2001, the Company outperformed most of the comparative companies that serve
as the compensation peer group on several key measures, including total
shareholder return. As indicated above, the performance measures for 2001 were
earnings per share and revenue. As a result of not attaining threshold amounts
established, the short-term incentive for Mr. E.M. Carpenter was reduced to
zero for 2001, as shown on page 10, consistent with the performance
requirements of the Company's short-term incentive compensation plans.
Long-Term Incentives
We believe a substantial percentage of total compensation must be tied directly
to the creation of stockholder value. Historically, we have determined
long-term compensation based on two indicators of stockholder value creation:
stock price and economic return. The latter measure has served effectively as
the basis for the Barnes Group Inc. 1996 Long-Term Incentive Plan ("LTIP") and
predecessor plans throughout the 1990s.
Under the LTIP, the Committee has granted performance units to executive
officers. Any resulting cash payments are equal to the increase in the value of
the performance units over a three-year period. The value of a performance unit
for any single year is equal to economic return, measured as cash flow from
operations in excess of the risk-adjusted cost of equity capital, for the
current and previous four years. Awards for each three-year period are paid in
the year following the end of the period. Awards under the LTIP paid in 2001
were based on an increase in the value of performance units over the three-year
period from 1998 to 2000. Beginning January 1, 1999, Mr. E.M. Carpenter became
a participant in the LTIP in accordance with his Employment Agreement.
Beginning in 2000, we discontinued future awards under the LTIP. Existing LTIP
cycles continued uninterrupted, with the last three-year period having ended on
December 31, 2001. In 2001, we utilized a combination of stock options and
restricted stock awards as the vehicles for long-term incentives, to maximize
the retention capability of and the impact of stock price appreciation on
long-term compensation. Stock-based long-term incentives incorporate a higher
level of risk than other forms of executive compensation, including the LTIP
they supplanted, and tie employees' long-term economic interests directly to
those of stockholders. These options and restricted stock awards were
principally granted under the Employee Stock and Ownership Program approved by
stockholders at the April 12, 2000 Annual Meeting. This plan allows for the use
of several long-term incentive vehicles, in addition to stock options and
restricted stock awards.
Beginning in 2000, we instituted stock ownership guidelines under which every
executive is expected to hold a substantial ownership stake in the Company.
Ownership includes stock owned under the Barnes Group Inc. Retirement Savings
Plan and Employee Stock Purchase Plan. In contrast to some companies' ownership
programs, restricted stock awards, stock options, and performance stock are
excluded until the related stock is directly owned.
8
The current stock ownership guidelines that apply to the top 45 executives of
the Company worldwide are:
Multiple of
Position Annual Salary
-------- -------------
Chief Executive Officer................ 5x
All Other Executive Officers........... 3x
Non-Officers........................... 1x
We monitor ownership levels at least annually. Executives subject to the
ownership guidelines are expected to make substantial progress toward the
applicable guideline, with full compliance by the end of 2004, or 5 years from
date of hire or promotion for new executives. The Committee is pleased with the
progress demonstrated by the management team through December, 2001. We will,
at our discretion, pay future amounts under the Company's short-term incentive
compensation plans in stock if the guidelines are not met and if substantial
progress is not apparent, or take other actions as we deem appropriate at that
time to ensure compliance.
The Committee currently grants stock options and restricted stock awards to
executive officers and other key employees under the 1991 Barnes Group Stock
Incentive Plan ("SIP") and the Employee Stock and Ownership Program. Except for
initial grants (which are typically awarded at 85% of market value) to certain
executive officers upon assumption of their positions, options generally have
been granted on an annual basis at the market price of the Common Stock on the
date of grant. Such options become exercisable over time.
In 2001, we granted Mr. E.M. Carpenter an option to purchase Company Stock at
100% of the then current market value, as shown on page 12. In 2001, we also
granted Mr. E.M. Carpenter a restricted stock award, as shown on page 11. In
determining the size and type of grants, we considered the magnitude and types
of grants to chief executive officers of industrial companies of comparable
size and complexity and the importance of linking a significant part of Mr.
E.M. Carpenter's total compensation package to the future performance of the
Company's stock.
Policy on Deductibility of Compensation
Section 162(m) of the Internal Revenue Code of 1986, as amended (the "Code"),
limits the Company's tax deduction to $1 million per year for compensation paid
to the Chief Executive Officer and each other executive officer named in that
year's proxy statement unless certain conditions are met. One of those
requirements is that compensation over $1 million annually must be based on
stockholder-approved plans. The SIP, which was approved as amended and restated
in 1996, meets these requirements. The Employee Stock and Ownership Program,
which was approved in 2000, and the Barnes Group Inc. Performance-Linked Bonus
Plan For Selected Executive Officers, which was approved in 2001, were also
designed to meet these requirements. Our present intention is to comply with
the requirements of Section 162(m) unless and until we determine that
compliance would not be in the best interest of the Company and its
stockholders.
COMPENSATION AND MANAGEMENT
DEVELOPMENT COMMITTEE
Frank E. Grzelecki, Chairman
John W. Alden
Gary G. Benanav
Donald W. Griffin
G. Jackson Ratcliffe
9
COMPENSATION
The following table sets forth compensation paid by the Company to the Chief
Executive Officer and to the four other most highly paid persons who were
executive officers at the end of 2001 (the "named executive officers").
SUMMARY COMPENSATION TABLE
Long-Term Compensation
-------------------------------
Annual Compensation Awards/3/ Payouts
-------------------------- --------------------- ---------
Other Restricted Securities
Annual Stock Underlying All Other
Compen- Awards/4/ Options LTIP Compen-
Name and Principal Position/1/ Year Salary Bonus sation/2/ ($) (#) Payouts/5/ sation/6/
------------------------------ ---- -------- -------- -------- ---------- ---------- --------- ---------
E.M. Carpenter 2001 $638,338 $ -0- $ 31,456 $1,092,600 371,311 $144,499 $ 26,535
President and Chief 2000 575,008 808,605 143,713 -0- 280,280 92,208 175,250
Executive Officer 1999 550,000 275,000 60,703 -0- 128,200 -0- 80,860
L.M. Carlucci 2001 337,330 -0- 12,440 254,940 76,124 66,868 10,895
Vice President, Barnes Group Inc. 2000 321,668 368,770 22,514 -0- 72,000 103,734 28,990
and President, Associated Spring 1999 307,038 336,686 67,633 -0- 66,300 163,191 105,901
A.K. Drewett 2001 285,839 -0- 10,427 254,940 75,708 31,691 12,178
Vice President, Barnes Group Inc. 2000 157,043 168,173 23,913 -0- 86,000 -0- 27,643
and President, Barnes Distribution
W.C. Denninger 2001 284,164 -0- 4,748 254,940 75,967 35,790 10,903
Senior Vice President, Finance 2000 207,310 174,918 18,318 -0- 74,000 -0- 21,504
and Chief Financial Officer
G.F. Milzcik 2001 267,500 468,421 1,873 182,100 85,448 67,461 5,689
Vice President, Barnes Group Inc. 2000 252,500 120,682 7,066 -0- 63,711 31,798 11,695
and President, Barnes Aerospace 1999 132,923 59,815 51,239 -0- 57,380 -0- 85,709
Notes to the above table:
/1/Mr. Denninger joined the Company in March 2000; accordingly, no information
is provided for him in 1999. Mr. Drewett joined the Company in May 2000;
accordingly, no information is provided for him in 1999. Mr. Milzcik joined
the Company in June 1999.
/2/Other annual compensation consists of reimbursement for taxes paid on
perquisites, including life insurance premiums, financial planning services,
country club dues and relocation expenditures paid by the Company.
/3/Awards to the executives were granted under the 1991 Barnes Group Stock
Incentive Plan and the Employee Stock and Ownership Program, except for
75,000 stock options and 60,000 restricted stock units that were granted to
Mr. E.M. Carpenter in 1998 in accordance with his Employment Agreement.
/4/Messrs. E.M. Carpenter and Milzcik were each awarded restricted stock units
in the amounts of 60,000 and 10,000, respectively, on 2/6/01. Messrs.
Carlucci, Denninger and Drewett were each awarded restricted stock units in
the amount of 14,000 on 2/6/01. Units will be credited to each executive in
the amount of 33.4%, 33.3% and 33.3% of the number of restricted stock units
on the third, fourth and fifth anniversaries, respectively, of the date of
the award, in each case, provided that he is an employee of the Company on
such anniversary dates. The units awarded to each executive entitles him to
receive, without payment to the Company, shares of Common Stock equal to the
number of restricted stock units credited to him. Each holder is credited
with dividend equivalents on all restricted stock units credited to him
based upon dividends paid on outstanding shares of Common Stock. Such
dividend equivalents are converted, as of each dividend payment date, into a
number of additional restricted stock units equal to the amount of dividends
that would have been paid on the number of shares of Common Stock equivalent
to the number of restricted stock units credited to the holder immediately
prior to the dividend payment date, divided by the market price of the
Common Stock on the dividend payment date. As of December 31, 2001, Messrs.
E.M. Carpenter and Milzcik were credited with 111,498, and 10,374 restricted
stock units, respectively, having a value of $23.99 per share as of December
31, 2001, or in the aggregate $2,674,840 and $248,864, respectively. As of
December 31, 2001 Messrs. Carlucci, Drewett and Denninger each were credited
with 14,523 restricted stock units, having a value of $23.99 per share as of
December 31, 2001, or in the aggregate $348,410.
/5/Payment in the designated year with respect to the three-year performance
period ending the prior year. Thus, the payment made in 2001 covered the
three-year period ending in 2000.
/6/Includes matching contributions by the Company under the Retirement Savings
Plan and premiums paid for life insurance. Included in "All Other
Compensation" for Mr. E.M. Carpenter for 2000 is $100,000 for the
reimbursement of moving expenses paid by the Company in 2000. Included in
"All Other Compensation" for Mr. Milzcik in 1999 is $40,000 for a sign-on
bonus and $37,255 for the reimbursement of moving expenses. Included in "All
Other Compensation" for Mr. Carlucci for 1999 is $71,093 for the
reimbursement of moving expenses.
10
STOCK OPTIONS
The following table provides information on grants of stock options in 2001
pursuant to the 1991 Barnes Group Stock Incentive Plan and the Employee Stock
and Ownership Program to the named executive officers.
OPTION GRANTS IN 2001
Number of Percent of Potential Realizable Value at
Securities Total Assumed Annual Rates of
Underlying Options Stock Price Appreciation to
Options Granted to Exercise End of Option Term in 2011/3/
Granted/1/ Employees Price/2/ Expiration -----------------------------
Name (#) in 2001 ($/Sh) Date 5% 10%
---- ---------- ---------- -------- ---------- ---------- ----------
E.M. Carpenter 250,000 15.6% $18.2100 2/06/11 $2,863,050 $7,255,525
E.M. Carpenter/4/ 10,755 0.7% 20.6400 2/10/10 81,842 301,441
E.M. Carpenter/4/ 19,100 1.2% 20.6400 2/10/10 217,347 535,335
E.M. Carpenter/4/ 13,365 0.8% 20.4600 2/19/09 134,114 312,712
E.M. Carpenter/4/ 13,252 0.8% 20.4600 2/10/10 149,485 368,188
E.M. Carpenter/4/ 34,563 2.2% 22.0800 2/10/10 333,885 1,036,320
E.M. Carpenter/4/ 30,276 1.9% 20.2000 2/10/10 425,478 830,486
L.M. Carlucci 75,000 4.7% 18.2100 2/06/11 1,102,028 2,176,658
L.M. Carlucci/4/ 1,124 0.1% 19.4800 2/10/10 9,857 29,733
A.K. Drewett 62,000 3.9% 18.2100 2/06/11 838,296 1,799,370
A.K. Drewett/4/ 5,409 0.3% 19.3000 5/11/10 48,409 141,761
A.K. Drewett/4/ 1,095 0.1% 21.6500 2/10/10 9,078 32,193
A.K. Drewett/4/ 4,576 0.3% 23.4500 5/11/10 46,384 145,718
A.K. Drewett/4/ 2,628 0.2% 23.4500 5/11/10 33,976 83,686
W.C. Denninger 62,000 3.9% 18.2100 2/06/11 1,239,231 1,799,370
W.C. Denninger/4/ 5,851 0.4% 21.0000 4/11/10 42,418 166,852
W.C. Denninger/4/ 376 0.0% 20.0000 4/11/10 4,729 10,212
W.C.Denninger/4/ 5,408 0.3% 22.1000 4/11/10 48,275 162,297
W.C. Denninger/4/ 1,868 0.1% 22.1000 4/11/10 22,760 56,060
W.C. Denninger/4/ 464 0.0% 20.1600 4/11/10 6,554 12,703
G.F. Milzcik 60,000 3.7% 18.2100 2/06/11 783,888 1,483,692
G.F. Milzcik/4/ 3,243 0.2% 20.4500 7/15/09 20,932 75,842
G.F. Milzcik/4/ 7,936 0.5% 20.4500 2/10/10 89,476 220,383
G.F. Milzcik/4/ 14,269 0.9% 21.1900 2/10/10 150,320 410,589
Notes to the above table:
/1/Options granted under the Employee Stock and Ownership Program for Salary
Grade 21 and above on February 6, 2001 become exercisable at the rate of
33.4% on the first anniversary and 33.3% on the second and third
anniversaries of the grant date. Each option listed above includes a reload
feature.
/2/For awards under the Employee Stock and Ownership Program, the exercise
price is defined as the closing market price for the preceding day.
/3/Represents total appreciation over the exercise price at the assumed annual
appreciation rates of 5% and 10% compounded annually for the term of the
option. The preceding calculations are not intended to be a prediction by
the Company of the price of its shares in the future.
/4/These option grants were made pursuant to the reload provisions under the
1991 Barnes Group Inc. Stock Incentive Plan and the Barnes Group Inc.
Employee Stock and Ownership Program. The preceding calculations are not
intended to be a prediction by the Company of the price of its shares in the
future.
11
The following table provides information relating to stock option exercises in
2001 by the named executive officers and the number and value of each such
officer's unexercised in-the-money options on December 31, 2001, based on the
difference between the exercise price and the $23.99 per share year-end market
price of the Common Stock.
AGGREGATED OPTION EXERCISES IN 2001 AND YEAR-END OPTION VALUES
Number of Securities Value of Unexercised
Underlying Unexercised In-The-Money Options
Shares Options at Fiscal Year-End(#) at Fiscal Year-End($)
Acquired on ----------------------------- -------------------------
Name Exercise(#) Value Realized($) Exercisable Unexercisable Exercisable Unexercisable
---- ----------- ----------------- ----------- ------------- ----------- -------------
E.M. Carpenter 135,354 $447,651 254,919 409,517 $725,079 $2,277,349
L.M. Carlucci 11,429 99,941 125,145 139,650 521,545 753,592
W.C. Denninger 16,936 97,113 33,864 99,167 174,847 677,574
A.K. Drewett 16,597 99,083 41,944 103,167 230,955 702,409
G.F. Milzcik 28,958 110,670 61,175 107,023 247,452 609,127
PENSION PLANS
The following table gives examples of estimated annual retirement benefits
payable to a named executive officer as though he had retired in 2001 at age 65
in specified compensation and years of service classifications under the
Company's Salaried Retirement Income Plan, Retirement Benefit Equalization Plan
and Supplemental Executive Retirement Plan.
PENSION PLAN TABLE A
Years of Service
------------------------------------------------------------------------------
Remuneration 15 years 20 years 25 years 30 years 35 years 40 years
------------ -------- -------- -------- -------- -------- --------
$125,000 $ 42,698 $ 56,930 $ 71,163 $ 74,288 $ 77,413 $ 80,538
$150,000 $ 51,885 $ 69,180 $ 86,475 $ 90,225 $ 93,975 $ 97,725
$200,000 $ 70,260 $ 93,680 $117,100 $122,100 $127,100 $132,100
$250,000 $ 88,635 $118,180 $147,725 $153,975 $160,225 $166,475
$300,000 $107,010 $142,680 $178,350 $185,850 $193,350 $200,850
$350,000 $125,385 $167,180 $208,975 $217,725 $226,475 $235,225
$400,000 $143,760 $191,680 $239,600 $249,600 $259,600 $269,600
$450,000 $162,135 $216,180 $270,225 $281,475 $292,725 $303,975
$500,000 $180,510 $240,680 $300,850 $313,350 $325,850 $338,350
$550,000 $198,885 $265,180 $331,475 $345,225 $358,975 $372,725
$600,000 $217,260 $289,680 $362,100 $377,100 $392,100 $407,100
$650,000 $235,635 $314,180 $392,725 $408,975 $425,225 $441,475
$700,000 $254,010 $338,680 $423,350 $440,850 $458,350 $475,850
$750,000 $272,385 $363,180 $453,975 $472,725 $491,475 $510,225
$800,000 $290,760 $387,680 $484,600 $504,600 $524,600 $544,600
The compensation included in Pension Plan Table A in determining earnings for
retirement plan purposes includes only annual salaries as shown in the column
labeled "Salary" in the Summary Compensation Table. Benefits are computed on a
straight-life annuity. The benefits listed in the table are not subject to a
deduction for Social Security.
Messrs. L.M. Carlucci, E.M. Carpenter, W.C. Denninger, A.K. Drewett, and G.F.
Milzcik all participate in the Company's Supplemental Senior Officer Retirement
Plan. The following table gives examples of estimated annual
12
retirement benefits payable under the Company's Supplemental Senior Officer
Retirement Plan to each of these senior executive officers as though he had
retired in 2001 at age 65 in specified compensation and years of service
classifications.
PENSION PLAN TABLE B
15 or More
Remuneration Years of Service
------------ ----------------
$125,000 $68,750
150,000 82,500
200,000 110,000
250,000 137,500
300,000 165,000
350,000 192,500
400,000 220,000
450,000 247,500
500,000 275,000
600,000 330,000
700,000 385,000
800,000 440,000
900,000 495,000
1,000,000 550,000
1,200,000 660,000
1,300,000 715,000
1,400,000 770,000
1,500,000 825,000
The compensation included in determining earnings for the Supplemental Senior
Officer Retirement Plan includes only salary and bonus as shown in the columns
labeled "Salary" and "Bonus" in the Summary Compensation Table. Benefits are
computed based on a straight-life annuity. This plan functions as an "umbrella"
plan, and benefits listed in the table above are subject to deduction for
Social Security benefits, benefits derived from other employers' pension plans
and any benefits earned under the Company's other defined benefit plans,
including, without limitation, the Salaried Retirement Income Plan, Retirement
Benefit Equalization Plan and Supplemental Executive Retirement Plan.
Years of Service as of December 31, 2001, rounded to the nearest whole year,
for the named executive officers are as follows: Mr. L.M. Carlucci, 26 years;
Mr. E.M. Carpenter, 3 years; Mr. W.C. Denninger, 2 years; Mr. A.K. Drewett, 2
years; and Mr. G.F. Milzcik, 3 years.
EMPLOYMENT AGREEMENT
On December 8, 1998, the Company entered into an employment agreement (the
"Agreement") with Mr. E.M. Carpenter under which he serves as the President and
Chief Executive Officer of the Company. The Agreement provides for Mr. E.M.
Carpenter's employment through December 31, 2001, and for automatic annual
extensions until Mr. E.M. Carpenter reaches age 65, unless either party
furnishes 90 days prior written notice that the Agreement will not be extended.
Mr. E.M. Carpenter was granted a one-time lump sum payment under the Agreement
of $100,000 as a relocation allowance, with the amount grossed up for any
applicable taxes. Mr. E.M. Carpenter also became entitled to receive
reimbursement of expenses reasonably incurred in connection with his duties and
to receive reimbursement of reasonable legal fees in connection with the
negotiation and documentation of the Agreement and the enforcement of his
rights under it. As part of the Agreement Mr. E.M. Carpenter purchased on the
open market $1,000,000 of Common Stock.
13
The Agreement provides for the following compensation benefits for Mr. E.M.
Carpenter: (i) a base salary of $550,000 annually, subject to increase at the
discretion of the Board of Directors; (ii) an annual bonus pursuant to the
Company's Management Incentive Compensation Plan ("MICP"), up to a maximum of
150% of salary, with a minimum bonus of $275,000 payable for calendar year 1999
if Mr. E.M. Carpenter remains in the employ of the Company through December 1,
1999; (iii) the granting of the following securities: (a) 90,300 Long Term
Incentive Plan ("LTIP") units, (b) options to acquire 75,000 shares of Common
Stock at an exercise price of 85% of fair market value on the date of grant,
(c) 60,000 incentive stock units to acquire restricted shares of Common Stock
that will vest over a five-year period if Mr. E.M. Carpenter remains in the
employ of the Company, and (d) 60,000 incentive stock units to acquire
restricted shares of Common Stock that will vest over a five-year period if
specified performance goals are attained and Mr. E.M. Carpenter remains in the
employ of the Company; and (iv) other benefits, consisting of the payment of
life insurance premiums, a financial planning allowance, an automobile
allowance, service credits under the Company's non-qualified retirement plans,
annual vacations, immediate participation in the Company's welfare benefit
plans, and country club membership expense reimbursement.
The Agreement is subject to early termination by reason of Mr. E.M. Carpenter's
death or disability, by the Company for cause, or by either party upon 30 days
prior written notice. Upon termination, Mr. E.M. Carpenter would be entitled to
any benefits due to him under any plan, program or policy of the Company which
provides benefits after termination, other than any severance pay or salary
continuation plan. In addition, if Mr. E.M. Carpenter's employment were
terminated without cause or good reason, he would be entitled to continue
receiving his salary and welfare plan benefits for a severance period extending
through the end of the remaining employment period or two years, whichever is
longer. He also would receive other benefits, including the payment of his
target bonus under the MICP, continued vesting of his stock options and
incentive stock units, continued service credits under the Company's
non-qualified plans through the end of the severance period, and full payment
of the amount owed pursuant to his LTIP awards if applicable performance goals
were achieved. Payments to Mr. E.M. Carpenter would be subject to reduction
under certain circumstances if necessary to avoid imposition of the golden
parachute excise tax. In the event Mr. E.M. Carpenter were to terminate his
employment without good reason and accept a comparable position with a company
of equal or larger size during the employment period, he would be obliged to
pay the Company $500,000 in cash. For a period of two years following
termination for any reason, Mr. E.M. Carpenter would be obliged not to compete
with the Company or disparage it.
Readers desiring more complete information may examine the Agreement, which has
been filed as an exhibit to the Company's Form 10-K for the Fiscal Year Ended
December 31, 1998.
CHANGE-IN-CONTROL AGREEMENTS
The Company has entered into change-in-control severance agreements (the "CIC
Agreements") with Mr. E.M. Carpenter and each named executive officer as of the
following effective dates: Mr. E.M. Carpenter, December 8, 1998; Mr. L.M.
Carlucci, October 17, 1997; Mr. W.C. Denninger, March 31, 2000; Mr. A.K.
Drewett, May 10, 2000; and Mr. G.F. Milzcik, June 17, 1999. The CIC Agreements
for Messrs. Carpenter and Carlucci each has an initial term which ended on
December 31, 1999 and, in the cases of Messrs. Denninger, Drewett and Milzcik,
the initial term ended on December 31, 2000, with automatic annual extensions
commencing on the immediately following January 1 and each January 1
thereafter, unless the Company or the executive provides written notice not
later than September 30 of the preceding year of a determination not to extend
the agreement. In the event of a "change-in-control" (as defined in the CIC
Agreements), an executive who is incapacitated would be entitled to receive
full salary and employment benefits (less any amounts received under the
Company's long-term disability plan) until terminated for reasons of
disability. An executive who is not incapacitated but is terminated for any
reason after a change in control would be entitled to receive full salary and
benefits through the date of termination, as well as normal post-termination
compensation and benefits under the Company's compensation and benefit plans.
In addition, such an executive would be entitled to receive a lump sum cash
payment equal to the target award under the LTIP that is pro-rated to cover the
portion of the award cycle in which the person was employed.
An executive who is terminated following a change in control other than for
cause or by reason of death, disability or voluntary termination, would be
entitled to severance payments and benefits. These would consist of (i) a cash
14
payment equal to a multiple (3 times in the case of Mr. E.M. Carpenter, 2 times
for each other executive) of the executive's most recent base salary and
average annual bonus (as defined); (ii) continuation of participation in the
Company's pension and welfare benefit plans for a number of months (36 or 24)
corresponding to the multiple in (i), with the benefits reduced to the extent
the executive subsequently receives coverage elsewhere; and (iii) a cash
payment equal to the target award to which the executive would have been
entitled under the Company's incentive compensation plans (other than the LTIP)
to the date of termination (less any pro rata bonus previously paid for the
same period). In addition, upon the occurrence of a change in control, (a) the
executive would receive pro rata target awards under the LTIP, as if fully
vested, and under the Company's other incentive compensation plans; (b) the
executive's options to acquire Company stock would vest and become exercisable;
and (c) all restrictions on the executive's stock-based awards would lapse.
Payments to the executive would be subject to reduction under certain
circumstances if necessary to avoid imposition of the golden parachute excise
tax.
Readers desiring more complete information may examine the CIC Agreement of Mr.
Carpenter, which has been filed as an exhibit to the Company's Form 10-K for
the Fiscal Year Ended December 31, 1998.
PERFORMANCE GRAPH
A stock performance graph based on cumulative total returns (price change plus
reinvested dividends) for $100 invested on December 31, 1996 is set forth below.
[CHART]
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN OF BARNES GROUP INC.,
THE S&P SMALLCAP 600 INDEX, AND THE RUSSELL 2000 INDEX
1996 1997 1998 1999 2000 2001
BGI $100.0 $116.7 $153.7 $89.1 $113.7 $142.5
S&P 600 $100.0 $125.6 $123.9 $139.3 $155.8 $165.9
Russell 2000 $100.0 $122.2 $119.5 $145.0 $140.8 $144.5
15
APPROVAL OF THE AMENDED BARNES GROUP INC. EMPLOYEE STOCK AND OWNERSHIP PROGRAM
(Proxy Proposal 2)
The Board of Directors Recommends a Vote "For" This Proposal.
In February, 2002, the Board of Directors adopted the Barnes Group Inc.
Employee Stock and Ownership Program as amended effective February 1, 2002 (as
amended, the "Plan"), for submission to stockholders for their approval at the
Annual Meeting. Among the amendments reflected in the Plan approved by the
Board of Directors is an increase in the aggregate number of shares of Common
Stock authorized for issuance under the Plan from 2,500,000 to 3,450,000
shares. Also, the Plan has been amended to provide that no more than 862,500
shares may be issued pursuant to restricted stock awards, performance shares
and performance cash units, collectively (prior to the amendment, such limit
applied only to restricted stock awards). In addition, the Plan was amended
specifically to prohibit the repricing of stock options awarded at any time
under the Plan, whether by cancellation and issuance of substitute stock
options or otherwise. Other modifications to the Plan are discussed below under
the heading "Section 162(m) Performance-Based Compensation" and other
non-material modifications are reflected in the summary of the Plan set forth
below.
The purposes of the Plan are:
.. to enhance the Company's ability to attract and retain key individuals as
employees and service providers who will make contributions to the Company's
long-term business growth, and
.. to closely align the interests of these individuals with those of the
stockholders by providing opportunities to acquire and maintain Common Stock
and strengthening their commitment to the Company.
The Board of Directors believes that it is in the best interests of the Company
and its stockholders to approve the Plan as amended.
The Company is requesting stockholder approval of the Plan so that any stock
options designated as incentive stock options will continue to qualify as such
pursuant to Section 422 of the Internal Revenue Code, to satisfy the
stockholder approval requirements of the New York Stock Exchange and to ensure
the deductibility of any compensation attributable to stock options, stock
appreciation rights, performance shares and performance cash units granted
under the Plan that is intended to qualify as performance-based compensation
pursuant to the provisions of Section 162(m) of the Internal Revenue Code (the
"Code") and the regulations promulgated thereunder.
Summary of the Plan
The Plan is administered by the Compensation and Management Development
Committee, a committee of the Board of Directors; provided, that, to the extent
permitted by applicable law, such Committee may delegate to the Chief Executive
Officer and the chairperson of such Committee the authority to take any action
of such Committee authorized under the Plan with respect to any eligible person
other than current or former officers or directors of the Company (within the
meaning of Section 16(b) of the Exchange Act of 1934, as amended, and the
regulations thereunder) or current or former covered employees (within the
meaning of Section 162(m)(3) of the Code) (together, referred to herein as the
"Committee").
Employees, consultants and other service providers of the Company and its
subsidiaries are eligible to receive awards under the Plan as determined by the
Committee. The approximate number of eligible employee participants is 615. The
Company does not presently intend to grant awards to consultants or service
providers and, accordingly, the number of consultants and service providers is
not determinable. Awards under the Plan may consist of incentive stock options,
non-qualified stock options, stock appreciation rights, restricted stock
awards, performance shares and performance cash units. Incentive stock options
granted under the Plan are intended to qualify as "incentive stock options"
within the meaning of Section 422 of the Internal Revenue Code, and may only
16
be granted to employees of the Company or one of its subsidiaries.
Non-qualified stock options, stock appreciation rights, restricted stock
awards, performance shares and performance cash units may be granted to any
eligible participant under the Plan.
Subject to stockholder approval, a maximum of 3,450,000 shares of Common Stock
may be issued under the Plan. Shares of Common Stock underlying any award that
are surrendered, terminated, expired or forfeited shall be added back to the
shares of Common Stock available for issuance under the Plan. The maximum
number of shares that may be granted over the period that the Plan is in effect
as restricted stock awards, performance shares and performance cash units,
collectively, shall be 862,500. If there is a stock split, reverse stock split,
stock dividend, recapitalization, reorganization, merger, other relevant change
affecting the outstanding shares of Common Stock, other event which warrants
equitable adjustment because it interferes with the intended operation of the
Plan or if there is a change in applicable law or circumstances which results
in any substantial dilution or enlargement of the rights granted to or
available for participants in the Plan, appropriate adjustments will be made in
the number and kind of shares as to which outstanding awards shall be
exercisable and the purchase price per share for any outstanding awards.
Stock Options and Stock Appreciation Rights. The exercise price per share for
each stock option or stock appreciation right granted under the Plan must equal
at least the fair market value of a share of Common Stock on the date of grant;
provided, that the exercise price of an incentive stock option granted to a
participant who at the time of grant owns (or is deemed to own) at least 10% of
the total combined voting power of all classes of the Company's stock
(including its parent or subsidiary corporations) must equal at least 110% of
the fair market value of a share of Common Stock on the date of grant. For any
date, fair market value means the closing sale price reported on the primary
exchange on which the Common Stock is listed and traded on the date prior to
such date or, if there is no such sale on that date, then on the last preceding
date on which a sale was reported. The closing sale prices of the shares of
Common Stock on the New York Stock Exchange was $23.60 on March 1, 2002.
Generally, the exercise price for stock options and stock appreciation rights
may be paid in cash or by check or, in the Committee's sole discretion, shares
of Common Stock valued at their fair market value on the date of exercise or
pursuant to an arrangement with a broker in which proceeds of a sale or loan
with respect to some or all of the shares of Common Stock being acquired upon
the exercise of the option are assigned to the Company.
Stock options and stock appreciation rights must expire within 10 years from
their date of grant or, if earlier, no later than: (a) the fifth anniversary of
the participant's termination date if the termination is due to death,
disability, retirement or, in the case of a non-employee director, after
attaining age 55, or (b) the third anniversary of the participant's termination
date for any other termination; provided, that an incentive stock option
granted to a participant who at the time of grant owns (or is deemed to own) at
least 10% of the total combined voting power of all classes of the Company's
stock (including its parent and subsidiary corporations) must expire within
five years from its date of grant. Regardless of the expiration date, incentive
stock options must be exercised within three months of a participant's
termination date. Otherwise, such stock options will automatically constitute
non-qualified stock options. The Committee may provide that stock options and
stock appreciation rights will be exercisable at any time after a participant
completes both six months of service after the date of grant and one year of
service with the Company or one of its subsidiaries; provided, that stock
option and stock appreciation rights will be exercisable immediately upon the
participant's termination due to death, disability, retirement or, in the case
of a non-employee director, after age 55.
Performance Shares and Performance Cash Units. The Committee may establish
performance goals for performance shares and performance cash units based upon
certain financial objectives of the Company for an award period which shall be
at least three years in length. Performance goals for awards which the
Committee intends to qualify as performance-based compensation within the
meaning of Section 162(m)(4)(C) of the Code are described in more detail below.
A stock or cash payment equal to the number of shares of Common Stock or cash
earned pursuant to the applicable performance shares or performance cash units
will be made as soon as practicable following the completion of each award
period; provided, that payment may be made: (a) immediately if
17
a change in control occurs or a participant terminates due to death, disability
or any other reason specified by the Committee, or (b) at any time after the
first year of the award period if performance goals are satisfied before the
end of such award period. A participant may elect to defer any such payment by
submitting a timely election to the Company.
Restricted Stock Awards. Subject to applicable law, restricted stock awards
may be granted for no consideration. Restricted stock awards will be subject to
a vesting period of at least two years, except that such vesting period may be
one year if certain performance goals are satisfied. If a participant
terminates service prior to the end of any vesting period, the portion of the
restricted stock award subject to vesting will be forfeited. A participant may
elect to receive performance shares in place of any restricted stock award to
be granted to such participant.
Provisions Applicable to All Awards. Awards under the Plan are generally not
transferable by the participant other than by will or by the laws of descent
and distribution and are exercisable during the participant's lifetime only by
the participant, except that the Committee may, in its sole discretion, permit
a participant to transfer to any person or entity any award that is not an
incentive stock option.
If a change in control occurs and if provided in an award agreement or an
employee's employment, severance or other agreement, awards shall become fully
vested, stock options shall be immediately exercisable and performance shares
and performance cash units shall be earned and paid in whole or in part, as
specified by the Committee. Further, in the event of certain mergers or
consolidations, asset sales, reorganizations, liquidations or the execution of
a written agreement to undergo any of the foregoing, the Committee may, with at
least 10 days prior notice, cancel any outstanding awards and pay to the
holders thereof cash equal to the value of such awards based upon the price per
share to be received by the stockholders in such event.
The Board of Directors may, at any time, terminate the Plan. The Committee may,
at any time, amend, suspend or reinstate the Plan, except that no such
amendment shall be made without the approval of the Company's stockholders that
would materially increase the benefits available to participants or that would
otherwise require stockholder approval pursuant to applicable law. The Plan, as
amended, shall be effective as of the date that the amendment is approved by
the stockholders. No awards may be made under the Plan after January 31, 2005
or earlier termination by the Board of Directors.
Section 162(m) Performance-Based Compensation
Section 162(m) of the Code limits the amount that can be deducted for total
compensation paid to a "Covered Executive" for any one year to $1,000,000.
"Covered Executives" are the named executive officers employed by the Company
or its affiliates as of December 31 of such year (collectively, the "Covered
Executives"). This deduction limit does not apply to performance-based
compensation. The Plan permits the Committee to grant awards which will qualify
as "performance-based" compensation, as well as awards that do not qualify as
"performance-based" compensation. Awards that do not qualify as such may not be
deductible by the Company.
Stock options and stock appreciation rights granted under a plan will satisfy
the performance-based compensation exception if the awards are granted by a
committee of the Board of Directors consisting solely of two or more "outside
directors," the plan sets the maximum number of shares that can be granted to
any person within a specified period, the company's stockholders approve such
grant limit, and the compensation is based solely on an increase in the fair
market value of the common stock after the date of grant. The Plan has been
designed to comply with these requirements by providing that the exercise price
of stock options and stock appreciation rights shall be the fair market value
of the Common Stock.
Performance Shares and Performance Cash Units. Performance shares and
performance cash units granted under the Plan will satisfy the
performance-based compensation exception if the stockholders have approved
certain designated material terms and the awards otherwise comply with Section
162(m) of the Code. For purposes of Section 162(m), these material terms of the
Plan must apply to the Covered Executives for any given year, although the
Company may apply the same or similar performance criteria to other executives.
18
The Committee has approved the following four material terms of the Plan as
they relate to performance shares and performance cash units granted to the
Covered Executives and designated as performance-based compensation for
purposes of Section 162(m) of the Code:
1. Class of Eligible Employees. Any employee of the Company or one of its
subsidiaries selected by the Committee to participate in the Plan.
2. Performance Goals. Payments made pursuant to performance shares and
performance cash units shall consist of targeted levels of, targeted levels of
return on or targeted levels of growth for, one or more of the following
criteria on a consolidated Company, consolidated principal business segment of
the Company, business unit or divisional level, as the Committee may specify,
and shall be stated for the Covered Executives in terms of an objective formula
or standard established by the Committee within the first 90 days of the award
period as required by Section 162(m) of the Code and the Plan: (a) earnings per
share, (b) net income, (c) operating income, (d) performance profit, (e) gross
margin, (f) revenue, (g) working capital, (h) total assets, (i) net assets, (j)
stockholders' equity, or (k) cash flow. The foregoing performance criteria
shall be determined in accordance with generally accepted accounting
principles, except to the extent the Committee determines otherwise within the
first 90 days of the award period and, unless the Committee determines
otherwise and subject to the Committee's negative discretion at any time during
the award period with respect to any such items, the following items shall be
automatically excluded or included in determining whether a performance goal is
satisfied, whichever produces the highest award: extraordinary, unusual or
non-recurring items; discontinued operations; effects of accounting changes;
effects of currency fluctuations; effects of financing activities; expenses for
restructuring or productivity initiatives; non-operating items; effects of
acquisitions and acquisition expenses; and effects of divestitures and
divestiture expenses. Further, the Committee may exercise negative discretion
at any time during the award period to make adjustments to the performance
goals to compensate for, or reflect: extraordinary or non-recurring events
experienced during an award period by the Company or by any other corporation
whose performance is relevant to the determination of whether a performance
goal has been attained; any significant changes that may have occurred during
such award period in applicable accounting rules or principles or changes in
the Company's method of accounting or in that of any other corporation whose
performance is relevant to the determination of whether an award has been
earned; any significant changes that may have occurred during such award period
in the tax laws or other laws or regulations that alter or affect the
measurement of the performance goals; or any other factors which the Committee
deems appropriate.
3. Maximum Awards. The maximum number of shares that may be granted during
any calendar year to any eligible person as stock options, stock appreciation
rights, performance shares or restricted stock awards, collectively, shall be
500,000 and the maximum amount that may be paid in respect of performance cash
units that are granted during any calendar year to any eligible person shall be
$7,000,000.
4. Committee Certification of Performance Goal Achievement. Pursuant to the
Section 162(m) treasury regulations and the Plan, at or after the end of each
calendar year, the Committee is required to certify in writing whether the
pre-established performance goals and objectives have been satisfied in such
year with respect to the Covered Executives. The actual payment to any eligible
officer for such year shall then be determined by the Committee based upon the
pre-established computation formula or methods. Payment will be made as
described under the heading "Performance Shares and Performance Cash Units"
above.
In addition, the Committee generally intends to take reasonable measures to
avoid the loss of a Company tax deduction due to Section 162(m) of the Code.
However, the Committee may, in certain circumstances, approve awards under the
Plan or payments outside of the Plan that do not qualify as performance-based
compensation within the meaning of Section 162(m)(4)(C) of the Code and may not
be tax deductible.
Certain Federal Tax Consequences
The following summary is intended only as a general guide as to the United
States federal income tax consequences under current law applicable to stock
options awarded under the Plan and does not attempt to
19
describe all possible federal or other tax consequences applicable to such
stock options or tax consequences based on particular circumstances.
A participant recognizes no taxable income for regular income tax purposes as
the result of the grant or exercise of an incentive stock option qualifying
under Section 422 of the Code. However, upon the exercise of an incentive stock
option, the difference between the fair market value of the Common Stock on
that date and the purchase price will be treated as an adjustment in computing
the participant's alternative minimum taxable income for the taxable year in
which the exercise occurred and may subject the participant to an alternative
minimum tax liability if such tax liability exceeds the participant's regular
tax liability for such year. If a participant incurs an alternative minimum tax
liability as a result of the exercise of an incentive stock option, special
rules, not discussed herein, apply with respect to subsequent sales of the
shares within the same calendar year, basis adjustments for purposes of
computing the alternative minimum taxable income on a subsequent sale of the
shares and tax credits which may arise in subsequent tax years.
Participants who dispose of their shares after two years following the date the
option was granted and one year following the exercise of the option, whichever
occurs later, will normally recognize a long-term capital gain or loss equal to
the difference, if any, between the sale price and the purchase price of the
shares. If a participant disposes of such shares within two years after the
date of grant or within one year from the date of exercise, the participant
will recognize ordinary income equal to the lesser of: (a) the excess of the
Common Stock's fair market value on the date of exercise over the purchase
price, or (b) the participant's actual gain on the sale. Any additional gain
(or loss) will be treated as a capital gain (or loss), which will be long- or
short- term depending on how long the participant holds the shares.
A participant generally recognizes no taxable income as the result of the grant
of a non-qualified stock option. Upon exercise of a non-qualified stock option,
the participant normally recognizes ordinary income in an amount equal to the
difference between the purchase price and the fair market value of the Common
Stock on the exercise date. If the participant is an employee, the Company is
generally required to withhold on any such ordinary income for purposes of
income and employment taxes. Upon the subsequent sale of the shares, any gain
(or loss) will be a long- or short-term capital gain (or loss), depending on
how long the participant holds the shares.
Generally, the Company will be able to deduct for federal income tax purposes
any ordinary income recognized by the participant, except to the extent that
the deduction is limited by applicable provisions of the Code or the
regulations thereunder.
Awards Granted Under the Plan
As of December 31, 2001, and before giving effect to the amendment of the Plan,
awards covering an aggregate of 2,169,120 shares of Common Stock (excluding
awards which have been terminated or otherwise forfeited) had been granted
under the Plan, and 330,880 shares of Common Stock remained available for
future grant under the Plan before giving effect to the amendment of the Plan.
As of December 31, 2001, under the Plan, (i) the current executive officers of
the Company as a group had received 1,587,000 stock options in the aggregate,
(ii) Messrs. E.M. Carpenter, Carlucci, Drewett, Denninger and Milzcik had
received 540,000, 161,000, 132,000, 120,000 and 125,000 stock options,
respectively; (iii) the current directors of the Company who are not executive
officers of the Company, as a group had received 57,500 stock options in the
aggregate, and (iv) employees of the Company and its subsidiaries, including
all current officers who are not executive officers of the Company, as a group
had received 524,620 stock options in the aggregate.
INDEPENDENT ACCOUNTANTS
A representative of PricewaterhouseCoopers LLP, the Company's independent
accountant for the current year and for the most recently completed fiscal
year, is expected to be present at the meeting and will have the opportunity to
make a statement, if desired, and to be available to respond to appropriate
questions.
20
STOCKHOLDER PROPOSALS FOR 2003 ANNUAL MEETING
Stockholders wishing to submit proposals for inclusion in the Company's proxy
statement and form of proxy for the 2003 Annual Meeting of Stockholders must
submit proposals to the Company at its address given above by November 12,
2002. Stockholders wishing to present proposals for a formal vote (other than
proposals included in the Company's proxy statement), or to nominate candidates
for election as directors at a meeting of the Company's stockholders, must do
so in accordance with the Company's by-laws. In order to be presented at the
2003 Annual Meeting, the by-laws provide that such stockholder proposals or
nominations may be made only by a stockholder of record who shall have given
notice of the proposed business or nomination to the Company between December
12, 2002 and January 11, 2003. The notice must contain, among other things, the
name and address of the stockholder, a brief description of the business
desired to be brought before the Annual Meeting, the reasons for conducting the
business at the Annual Meeting, and the stockholder's ownership of the
Company's capital stock. In the case of nominations, the notice should contain
the background and stock ownership information with respect to each nominee.
Stockholders may obtain a copy of the relevant provisions of the by-laws by
writing to the Secretary of the Company at the address given above. Proposals
received after January 11, 2003 will not be considered "timely" for the purpose
of determining whether the Company may use discretionary authority to ask
stockholders to vote on any such proposals.
GENERAL
The cost of solicitation of proxies will be borne by the Company. Such
solicitation will be made by mail and may also be made by the Company's
officers and employees personally or by telephone, facsimile, Internet or
telegram without additional compensation. The Company may also reimburse
brokers, dealers, banks, voting trustees or their nominees for their reasonable
expenses in sending proxies, proxy material and annual reports to beneficial
owners. The Company has retained Mellon Investor Services, LLC, 44 Wall Street,
New York, New York 10005, to aid in the solicitation of proxies. Mellon
Investor Services will solicit proxies by personal interview, telephone,
facsimile and mail, and may request brokerage houses and other nominees and
fiduciaries or custodians to forward soliciting materials to beneficial owners
of the Company's stock. For these services, the Company will pay a fee of
approximately $7,500, plus expenses.
The Company had outstanding 18,468,837 shares of Common Stock as of February
13, 2002, each of which is entitled to one vote. Only holders of record at the
close of business on February 13, 2002 will be entitled to vote.
Under applicable Delaware law, abstentions and broker non-votes will be treated
as present at the meeting for purposes of determining a quorum. With respect to
any proposal, an abstention will have the same effect as a vote against such
proposal; however, a broker non-vote will not have an effect on the outcome of
the vote thereon.
If a nominee for director should become unavailable for any reason, it is
intended that votes will be cast for a substitute nominee designated by the
Board of Directors. The Board of Directors has no reason to believe the persons
nominated will be unable to serve if elected. The Board of Directors does not
know of any matters to be presented for consideration at the meeting other than
the matters described in Proposals 1 and 2 of the Notice of Annual Meeting.
However, if other matters are presented, it is the intention of the persons
named in the accompanying proxy to vote on such matters in accordance with
their judgment. All shares represented by the accompanying proxy, if the proxy
is given prior to the meeting, will be voted in the manner specified therein.
By order of the Board of Directors.
Signe S. Gates
Secretary
March 13, 2002
21
ANNEX I
BARNES GROUP INC.
AMENDED EMPLOYEE STOCK
AND OWNERSHIP PROGRAM
1. Purpose
The purpose of the Plan is to provide a means through which the Company may
attract able persons to provide services to or enter and remain in the employ
with the Company and its Subsidiaries and to provide a means whereby they can
acquire and maintain Common Stock ownership, or be paid incentive compensation
measured by reference to the value of Common Stock, thereby strengthening their
commitment to the welfare of the Company and promoting an identity of interest
between stockholders of the Company and these service providers and employees.
So that the appropriate incentive can be provided, the Plan provides for
granting Incentive Stock Options, Nonqualified Stock Options, Restricted Stock
Awards, Performance Share or Cash Unit Awards, and SARs or any combination of
the foregoing.
2. Definitions
The following definitions shall be applicable throughout the Plan.
(a) "Acceleration Event" shall have the meaning set forth in Section 8(e).
(b) "Affiliate" shall have the meaning set forth in Rule 12b-2 promulgated
under Section 12 of the Exchange Act.
(c) "Award" means, individually or collectively, any Incentive Stock Option,
Nonqualified Stock Option,Restricted Stock Award, Performance Share or Cash
Unit Award, or SAR under the Plan.
(d) "Award Agreement" means the agreement between the Company and a
Participant who has been granted an Award which defines the rights and
obligations of the parties with respect to such Award.
(e) "Award Period" means a period of time within which performance is
measured for the purpose of determining whether an Award of Performance Share
or Cash Units has been earned.
(f) "Beneficial Owner" shall have the meaning set forth in Rule 13d-3 under
the Exchange Act.
(g) "Board" means the Board of Directors of the Company.
(h) "Change-in-Control" shall have the meaning set forth in Section 11(p).
(i) "Code" means the Internal Revenue Code of 1986, as amended. Reference in
the Plan to any section of the Code shall be deemed to include any amendments
or successor provisions to such section and any regulations under such section.
(j) "Committee" means the committee appointed by the Board to administer the
Plan as described in Section 4.
(k) "Common Stock" means the common stock of the Company.
(l) "Company" means Barnes Group Inc.
(m) "Date of Grant" means the date on which the granting of an Award is
authorized or such other date as may be specified in such authorization.
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(n) "Disability" means, with respect to Incentive Stock Options, "permanent
and total disability" as defined in Section 22(e)(3) of the Code, and, for all
other purposes shall have the meaning set forth in the Company's long-term
disability plan.
(o) "Eligible Person" means any person regularly employed by or providing
consulting or other services to the Company or a Subsidiary. An Award other
than an Incentive Stock Option may be granted to an Eligible Person, in
connection with hiring, retention or otherwise, prior to the date the Eligible
Person first performs services for the Company or a Subsidiary, provided that
such Award shall not become vested prior to the date on which the Eligible
Person completes one continuous year of employment/service with the Company
and/or Subsidiaries.
(p) "Exchange Act" means the Securities Exchange Act of 1934, as amended.
(q) "Fair Market Value" on a given date means (i) if the Stock is listed on
a national securities exchange, the closing sale prices reported as having
occurred on the primary exchange on which the Stock is listed and traded on the
date prior to such date, or, if there is no such sale on that date, then on the
last preceding date on which such a sale was reported; (ii) if the Stock is not
listed on any national securities exchange but is quoted in the National Market
System of The Nasdaq Stock Market on a last sale basis, the average between the
high bid price and low ask price reported on the date prior to such date, or,
if there is no such sale on that date, then on the last preceding date on which
a sale was reported; or (iii) if the Stock is not listed on a national
securities exchange nor quoted in the National Market System of The Nasdaq
Stock Market on a last sale basis, the amount determined by the Committee to be
the fair market value based upon a good faith attempt to value the Stock
accurately.
(r) "Group" means a principal business segment of the Company, including by
way of example and not limitation, Associated Spring, Barnes Aerospace, and
Barnes Distribution.
(s) "Holder" means a Participant who has been granted an Award, or a
permitted transferee of such a Participant.
(t) "Incentive Stock Option" means an Option granted by the Committee to a
Participant under the Plan which is designated by the Committee as an
"incentive stock option" within the meaning of Section 422 of the Code.
(u) "Nonqualified Stock Option" means an Option granted under the Plan which
is not designated as an Incentive Stock Option.
(v) "Normal Termination" means termination of employment or service with the
Company or a Subsidiary other than by reason of death or Disability.
(w) "Option" means an Award granted under Section 7 of the Plan.
(x) "Option Period" means the period described in Section 7(c).
(y) "Option Price" means the exercise price set for an Option described in
Section 7(a).
(z) "Participant" means an Eligible Person who has been selected by the
Committee to participate in the Plan and to receive an Award pursuant to
Section 6.
(aa) "Performance Goals" means the performance objectives established by the
Committee with respect to an Award Period, Restricted Period, or Option Period
with respect to Performance Share or Cash Units, Restricted Stock, Options or
SARs respectively, established for the purpose of determining whether, and to
what extent, such Awards will be earned for an Award Period, Restricted Period
or Option Period.
(bb) "Performance Cash Unit" means a hypothetical equivalent to a number of
dollars established by the Committee and granted in connection with an Award
made under Section 8 of the Plan.
(cc) "Performance Share Unit" means a hypothetical investment equivalent
equal to one share of Stock granted in connection with an Award made under
Section 8 of the Plan.
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(dd) "Person" shall have the meaning given in Section 3(a)(9) of the
Exchange Act, as modified and used in Sections 13(d) and 14(d) thereof, except
that such term shall not include (i) any member of the Barnes family (by blood
or marriage) or any entity for the benefit of, or controlled by, a member of
the Barnes family (by blood or marriage), (ii) the Company or a Subsidiary,
(iii) a trustee or other fiduciary holding securities under an employee benefit
plan of the Company or any of its Affiliates, (iv) an underwriter temporarily
holding securities pursuant to an offering of such securities, or (v) a
corporation owned, directly or indirectly, by the stockholders of the Company
in substantially the same proportions as their ownership of stock of the
Company.
(ee) "Plan" means the Company's Employee Stock And Ownership Program, as
amended.
(ff) "Restricted Period" means, with respect to any share of Restricted
Stock, the period of time determined by the Committee during which such Award
is subject to the restrictions set forth in Section 9 of the Plan.
(gg) "Restricted Stock" means shares of Stock issued or transferred to a
Participant subject to forfeiture and the other restrictions set forth in
Section 9 of the Plan.
(hh) "Restricted Stock Award" means an Award of Restricted Stock granted
under Section 9 of the Plan.
(ii) "SAR" means a stock appreciation right which entitles a Participant to
receive, in cash or Stock (valued at Fair Market Value), at the discretion of
the Committee, an amount equal to the excess of the Fair Market Value of a
specified number of shares of Stock at the time of exercise over the Option
Price established by the Committee.
(jj) "Securities Act" means the Securities Act of 1933, as amended.
(kk) "SEC" means Securities and Exchange Commission.
(ll) "Stock" means the Common Stock of the Company or such other authorized
shares of stock of the Company as from time to time may be authorized for use
under the Plan.
(mm) "Subsidiary" means any corporation or other business entity in which
the Company owns a significant equity interest, as determined in the discretion
of the Committee; provided, that, with respect to Incentive Stock Options, the
term "Subsidiary" shall mean a "subsidiary corporation" as defined in Section
424(f) of the Code.
3. Effective Date, Duration and Stockholder Approval
The Plan is effective as of February 1, 2000. The validity of any and all
Awards granted pursuant to the Plan is contingent upon approval of the Plan by
the stockholders of the Company in a manner which complies with Section
422(b)(1) of the Code and Section 162(m)(4)(C)(ii) of the Code.
The expiration date of the Plan, after which no Awards may be granted
hereunder, shall be January 31, 2005; provided, however, that the
administration of the Plan shall continue in effect until all matters relating
to the payment of Awards previously granted have been settled.
4. Administration
The Plan shall be administered by the Committee, which shall be composed of at
least two persons, each member of which, at the time he or she takes any action
with respect to an Award under the Plan, shall be a "Non-Employee Director", as
defined in Rule 16b-3 under the Exchange Act, or any successor rule or
regulation, and an "outside director", as defined in Treasury Regulations (S)
1.162-27(e)(3), or any successor regulation, unless the Board determines
otherwise. The majority of the members of the Committee shall constitute a
quorum. The acts of a majority of the members present at any meeting at which a
quorum is present or acts approved in writing by a majority of the Committee
shall be deemed the acts of the Committee.
Subject to the provisions of the Plan, the Committee shall have exclusive power
to:
(a) Select the Eligible Persons to participate in the Plan;
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(b) Determine the nature and extent of the Awards to be made to each
Participant, and determine whether an Award is intended to qualify as
performance-based compensation within the meaning of Section 162(m)(4)(C) of
the Code;
(c) Determine the time or times when Awards will be made to Eligible Persons;
(d) Determine the duration of each Award Period and Restricted Period;
(e) Determine the conditions to which the payment of Awards may be subject;
(f) Establish the Performance Goals, if any, for each Award Period;
(g) Prescribe the form of Award Agreement or other form or forms evidencing
Awards; and
(h) Cause records to be established in which there shall be entered, from
time to time as Awards are made to Eligible Persons, the date of each Award,
the number of Incentive Stock Options, Nonqualified Stock Options, Performance
Share or Cash Units, shares of Restricted Stock and SARs awarded by the
Committee to each Eligible Person, and the expiration date and the duration of
any applicable Award Period or Restricted Period.
The Committee shall have the authority, subject to the provisions of the Plan,
to establish, adopt, or revise such rules and regulations and to make all such
determinations relating to the Plan as it may deem necessary or advisable for
the administration of the Plan. Without limiting the generality of the
foregoing, the Committee shall have the authority to establish and administer
performance goals applicable to Awards under the Plan, and the authority to
certify that such performance goals are attained, within the meaning of
Treasury Regulation Section 1.162-27(c)(4). The Committee's interpretation of
the Plan or any documents evidencing Awards granted pursuant thereto and all
decisions and determinations by the Committee with respect to the Plan shall be
final, binding, and conclusive on all parties. Any provision of the Plan to the
contrary notwithstanding, the Committee shall not have the authority to reduce
the exercise price of outstanding Options, whether by canceling the Options and
issuing substitute Awards in replacement thereof or otherwise.
Any provision of the Plan to the contrary notwithstanding, to the extent
permitted by, and on the terms and subject to the conditions of, applicable
law, including in particular but not limited to Sections 141(c) and 157(c) of
the General Corporation Law of Delaware, the power and authority of the
Committee under the Plan, including but not limited to its power and authority
to make, administer and interpret Awards, may be exercised by the Chief
Executive Officer of the Company and the chairperson of the Committee, but only
with respect to Eligible Persons and Participants who are not and have never
been (i) officers or directors of the Company within the meaning of Section
16(b) of the Exchange Act and the related SEC regulations, or (ii) "covered
employees" within the meaning of Section 162(m)(3) of the Code, and only if and
to the extent that the Committee expressly authorizes the Chief Executive
Officer and the chairperson of the Committee to exercise such power and
authority. If and to the extent that the Chief Executive Officer of the Company
and the chairperson of the Committee exercise the power and authority of the
Committee in accordance with the preceding sentence, the term "Committee" as
used in this Plan shall include the Chief Executive Officer of the Company and
the chairperson of the Committee.
5. Grant of Awards; Shares Subject to the Plan
The Committee may, from time to time, grant Awards of Options, Restricted
Stock, Performance Share or Cash Units and/or SARs to one or more Eligible
Persons; provided, however, that:
(a) The aggregate number of shares of Stock that may be issued or
transferred pursuant to all Awards may not exceed 3,450,000, subject to Section
12; provided, however, that no more than 25% of the foregoing number of shares
of Stock may be issued or transferred in respect of Restricted Stock,
Performance Share Units and Performance Cash Units, collectively; and provided,
further, that the maximum number of shares of Stock with respect to which
Options or SARs or Performance Share Unit or Restricted Stock Awards, or any
combination of Options, SARs, Performance Share Unit Awards or Restricted Stock
Awards, may be granted during any calendar year to any Eligible Person is
500,000. The maximum amount that may be paid in respect of Performance Cash
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Units that are granted in any one calendar year to any Eligible Person is $7
million (or the equivalent thereof in Shares based on the Fair Market Value of
the shares on the payment date). If, after Performance Share Units or
Performance Cash Units are earned, the delivery of shares of Stock or cash is
deferred, any additional shares of Stock or amounts attributable to Dividend
Equivalents or earnings during the deferral period shall be disregarded in
applying the foregoing per Eligible Person limitations.
(b) In the event any Option, Restricted Stock Award, Performance Share or
Cash Unit or SAR shall be surrendered, terminate, expire, or be forfeited, the
number of shares of Stock no longer subject thereto shall thereupon be released
and shall thereafter be available for new Awards under the Plan. If the person
exercising an Option pays the purchase price of the shares subject to such
Option by delivering shares of Common Stock to the Company (either through
actual delivery or by attestation) in accordance with the provisions of Section
7(b) below, or pays the withholding taxes due in connection with the grant,
exercise, vesting, distribution, or payment of any Award or the shares subject
thereto (including without limitation any withholding taxes due as a result of
an election made by an Eligible Person under Section 83(b) of the Code) by
delivering shares of Common Stock to the Company or having the Company withhold
shares of Common Stock otherwise issuable in connection with the Award in
accordance with the provisions of Section 11(d) below, the number of shares so
delivered or withheld shall be added back to the aggregate number of shares
available for issuance or transfer under the Plan so that the aggregate number
of shares that may be issued or transferred under the Plan pursuant to Section
5(a) above shall have been charged only for the net number of shares issued or
transferred by the Company in connection with the Award; provided, however,
that none of the surrendered or withheld shares shall be available for issuance
under Incentive Stock Options.
(c) Stock delivered by the Company in settlement of Awards under the Plan
may be authorized and unissued Stock or Stock held in the treasury of the
Company or may be purchased on the open market or by private purchase.
(d) The Committee may, in its sole discretion, require a Participant to pay
consideration for an Award in an amount and in a manner as the Committee deems
appropriate.
(e) The Committee may only grant Incentive Stock Options to Eligible Persons
who are employees of the Company or a subsidiary corporation as defined in
Section 424 of the Code.
(f) Under the Plan, the Committee may grant Awards that qualify as
performance-based compensation within the meaning of Section 162(m)(4)(C) of
the Code, as well as Awards that do not so qualify. Awards that the Committee
intends to qualify as performance-based compensation within the meaning of
Section 162(m)(4)(C) shall be granted and administered in a manner that will
enable such Awards to qualify as performance-based compensation. Any provision
of the Plan to the contrary notwithstanding, the Plan shall be interpreted,
administered and construed to permit the Committee to grant Awards that qualify
as performance-based compensation as well as Awards that do not so qualify, and
any provision of the Plan that cannot be so interpreted, administered or
construed shall to that extent be disregarded.
6. Eligibility
Participation shall be limited to Eligible Persons selected by the Committee.
7. Stock Options and SARs
Subject to Section 5(e), the Committee is authorized to grant one or more
Incentive Stock Options, Nonqualified Stock Options or SARs to any Eligible
Person. Each Option or SAR so granted shall be subject to the following
conditions or to such other conditions as may be reflected in the applicable
Award Agreement.
(a) Option Price. The exercise price ("Option Price") per share of Stock
for each Option or SAR shall be set by the Committee at the time of grant but
shall not be less than the Fair Market Value of a share of Stock at the Date of
Grant or, other than with respect to Incentive Stock Options, at a date
subsequent to the Date of Grant as specified in the Option Award Agreement.
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(b) Manner of Exercise and Form of Payment. SARs which have become
exercisable may be exercised by delivery of written notice of exercise to the
Committee. Options which have become exercisable may be exercised by delivery
of written notice of exercise to the Committee accompanied by payment of the
Option Price. The Option Price shall be payable either (i) by United States
dollars in cash or by check, (ii) at the discretion of the Committee, by either
actual delivery of shares or by attestation, through shares of Stock valued at
the Fair Market Value at the time the Option is exercised (provided that such
Stock has been held by the Participant for at least six months unless such
Stock was acquired through an open market purchase within six months before
actual delivery or attestation), or (iii) at the discretion of the Committee,
by a cashless exercise procedure that the Company determines satisfies the
provisions of section 220.3(e)(4) (or a successor provision) of Regulation T
promulgated by the Board of Governors of the Federal Reserve System/1/, or (iv)
at the discretion of the Committee, by any combination of (i), (ii) and (iii)
above.
(c) Option Period and Expiration. Options and SARs shall vest and become
exercisable in such manner and on such date or dates determined by the
Committee and shall expire after such period, not to exceed ten years, as may
be determined by the Committee (the "Option Period"); provided, however, that
notwithstanding any vesting dates set by the Committee, the Committee may, in
its sole discretion, accelerate the exercisability of any Option or SAR, which
acceleration shall not affect the terms and conditions of any such Option or
SAR other than with respect to exercisability. If an Option or SAR is
exercisable in installments, such installments or portions thereof which become
exercisable shall remain exercisable until the Option or SAR expires.
In granting any Option or SAR, the Committee may specify such termination and
cancellation provisions as the Committee may determine; provided, however, that
in the event a Participant terminates service or employment due to death,
Disability, retirement (as defined in any qualified retirement plan maintained
by the Company), or, in the case of a non-employee director, after attaining
age 55, termination of the Option Period shall occur no later than the fifth
anniversary of such date of termination, and in the event of any other
termination, termination of the Option Period shall occur no later than the
third anniversary of such date of termination. Any Incentive Stock Option that
is exercised three months after the Participant's employment with the Company
and any Subsidiary terminates (or one year after such employment terminates, if
the Participant is disabled within the meaning of Section 22(e)(3)) of the
Code, or at any time after such three months' or one year period, will not be
eligible for federal tax treatment as an Incentive Stock Option unless the
exercise takes place after the death of the Participant by the estate of the
Participant or by a person who acquired the right to exercise such option by
bequest or inheritance or by reason of the death of the Participant.
(d) Other Terms and Conditions. In addition, each Option or SAR granted
under the Plan shall be evidenced by an Award Agreement, which shall contain
such provisions as may be determined by the Committee and, except as may be
specifically stated otherwise in such Award Agreement, which shall be subject
to the following terms and conditions:
(i) Each Option or SAR issued pursuant to this Section 7 or portion
thereof that is exercisable shall be exercisable for the full amount or for
any part thereof.
(ii) Each share of Stock purchased through the exercise of an Option
issued pursuant to this Section 7 shall be paid for in full at the time of
the exercise. Each Option shall cease to be exercisable, as to any share of
Stock, when the Holder purchases the share or when the Option expires.
(iii) Subject to Section 11(k), Options and SARs issued pursuant to this
Section 7 shall not be transferable by the Holder except by will or the laws
of descent and distribution and shall be exercisable during the Holder's
lifetime only by the Holder.
(iv) Each Option and SAR issued pursuant to this Section 7 shall vest and
become exercisable by the Holder in accordance with the vesting schedule
established by the Committee and set forth in the Award Agreement; provided,
however, that no Option or SAR shall be exercisable prior to the date on
which the
--------
/1/12 C.F.R. (S)220.3(e)(4).
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Participant completes both (A) six months of continuous service with the
Company or a Subsidiary after the date on which the Option or SAR was
granted, and (B) one year of continuous service with the Company or a
Subsidiary, unless termination of service occurs due to death, Disability,
retirement (as defined in any qualified retirement plan maintained by the
Company), after a Change-in-Control, or, in the case of a non-employee
director, after attaining age 55.
(v) Each Award Agreement may contain a provision that, upon demand by the
Committee for such a representation, the Holder shall deliver to the
Committee at the time of any exercise of an Option issued pursuant to this
Section 7 a written representation that the shares to be acquired upon such
exercise are to be acquired for investment and not for resale or with a view
to the distribution thereof. Upon such demand, delivery of such
representation prior to the delivery of any shares issued upon exercise of
an Option issued pursuant to this Section 7 shall be a condition precedent
to the right of the Holder to purchase any shares. In the event certificates
for Stock are delivered under the Plan with respect to which such investment
representation has been obtained, the Committee may cause a legend or
legends to be placed on such certificates to make appropriate reference to
such representation and to restrict transfer in the absence of compliance
with applicable federal or state securities laws.
(vi) Each Incentive Stock Option Award Agreement shall contain a
provision requiring the Holder to notify the Company in writing immediately
after the Holder makes a disqualifying disposition of any Stock acquired
pursuant to the exercise of such Incentive Stock Option. A disqualifying
disposition is any disposition (including any sale) of such Stock before the
later of (a) two years after the Date of Grant of the Incentive Stock Option
or (b) one year after the date the Holder acquired the Stock by exercising
the Incentive Stock Option.
(e) Incentive Stock Option Grants to 10% Stockholders. Notwithstanding
anything to the contrary in this Section 7, if an Incentive Stock Option is
granted to a Participant who owns stock representing more than ten percent of
the voting power of all classes of stock of the Company or of a Subsidiary, the
Option Period shall not exceed five years from the Date of Grant of such Option
and the Option Price shall be at least 110 percent of the Fair Market Value (on
the Date of Grant) of the Stock subject to the Option.
(f) $100,000 Per Year Limitation for Incentive Stock Options. To the extent
the aggregate Fair Market Value (determined as of the Date of Grant) of Stock
for which Incentive Stock Options are exercisable for the first time by any
Participant during any calendar year (under all plans of the Company and its
Subsidiaries) exceeds $100,000, such excess Incentive Stock Options shall be
treated as Nonqualified Stock Options.
(g) Conversion of Incentive Stock Options into Nonqualified Stock Options;
Termination of Incentive Stock Options. The Committee, at the written request
of any Holder, may in its discretion, take such actions as may be necessary to
convert such Holder's Incentive Stock Options (or any installments or portions
of installments thereof) that have not been exercised on the date of conversion
into Nonqualified Stock Options at any time prior to the expiration of such
Incentive Stock Options, regardless of whether the Holder is an employee of the
Company or a Subsidiary at the time of such conversion. Such actions may not,
however, include extending the Option Period or reducing the exercise price of
such Incentive Stock Options. At the time of such conversion, the Committee
(with the consent of the Holder) may impose such conditions on the exercise of
the resulting Nonqualified Stock Options as the Committee in its discretion may
determine, provided that such conditions shall not be inconsistent with the
Plan. Nothing in the Plan shall be deemed to give any Holder the right to have
such Holder's Incentive Stock Options converted into Nonqualified Stock
Options, and no such conversion shall occur until and unless the Committee
takes appropriate action. The Committee, with the consent of the Holder, may
also terminate any portion of any Incentive Stock Option that has not been
exercised at the time of such termination.
(h) Substitution of Options. The Committee may grant Options and/or SARs in
substitution for options or stock appreciation rights held for stock in
corporations acquired by the Company with terms in accordance with the terms
for such previous options, but with an appropriate adjustment in the exercise
price and number of shares subject to the options in compliance with the
requirements of Section 424 of the Code.
A-7
8. Performance Share or Cash Units
(a) Award Grants. The Committee is authorized to establish performance
programs to be effective over designated Award Periods determined by the
Committee. Award Periods applicable to Performance Share or Cash Unit Awards
shall be at least three years in length; provided that payment of such Awards
may be made before the completion of the applicable Award Period in the
circumstances set forth in Sections 8(c), 8(e) and 11(p) below. The Committee
may grant Awards of Performance Share or Cash Units to Eligible Persons in
accordance with such performance programs. Before or within 90 days after the
beginning of each Award Period, the Committee will establish written
Performance Goals based upon financial objectives for the Company for such
Award Period and a schedule relating the accomplishment of the Performance
Goals to the Awards to be earned by Participants. Performance Goals may include
absolute or relative growth in earnings per share or rate of return on
stockholders' equity or other measurement of corporate performance and may be
determined on an individual basis or by categories of Participants. However,
with respect to Performance Share or Cash Unit Awards which the Committee
intends to qualify as performance-based compensation within the meaning of
Section 162(m)(4)(C) of the Code, the Performance Goals shall consist of
targeted levels of, targeted levels of return on, or targeted levels of growth
for, one or more of the following on a consolidated Company, consolidated
Group, business unit or divisional level, as the Committee may specify:
earnings per share, net income, operating income, performance profit (operating
income minus an allocated charge approximating the Company's cost of capital,
before or after tax), gross margin, revenue, working capital, total assets, net
assets, stockholders' equity, or cash flow. The foregoing Performance Goals
shall be determined in accordance with generally accepted accounting
principles, except to the extent the Committee directs otherwise within the
earlier of (i) 90 days after the start of the Award Period or (ii) a date on
which no more than one fourth of the Award Period has elapsed, and may include
or exclude any or all of the following items, as the Committee may specify:
extraordinary, unusual or non-recurring items; discontinued operations; effects
of accounting changes; effects of currency fluctuations; effects of financing
activities (by way of example, without limitation, effect on earnings per share
of issuing convertible debt securities); expenses for restructuring or
productivity initiatives; non-operating items; effects of acquisitions and
acquisition expenses; and effects of divestitures and divestiture expenses. Any
such Performance Goal or combination of such Performance Goals may apply to the
Participant's Award in its entirety or to any designated portion or portions of
the Award, as the Committee may specify. The Committee shall determine the
number of Performance Share or Cash Units to be awarded, if any, to each
Eligible Person who is selected to receive such an Award.
(b) Determination of Award. At the completion of a Performance Award
Period, or at other times as specified by the Committee, the Committee shall
calculate the number of shares of Stock or amount of cash earned with respect
to each Participant's Performance Share or Cash Unit Award by multiplying the
number of Performance Units granted to the Participant by a performance factor
representing the degree of attainment of the Performance Goals.
(c) Payment of Performance Share or Cash Unit Awards. Performance Share or
Cash Unit Awards shall be payable in that number of shares of Stock or that
amount of cash determined in accordance with Section 8(b); provided, however,
that, at its discretion, the Committee may make payment to any Participant of
Performance Share Units in the form of cash upon the specific request of such
Participant. The amount of any payment made in cash shall be based upon the
Fair Market Value of the Stock on the business day prior to payment. Payments
of Performance Share or Cash Unit Awards shall be made as soon as practicable
after the completion of an Award Period; provided, however, that if the
Performance Goals for an Award Period are attained before the completion of
such Award Period, payment of Performance Share or Cash Unit Awards granted
with respect to such Award Period may be made at such time or times after the
first year of the Award Period and before the completion of such Award Period
as the Committee may direct, and, provided further, that if a Participant makes
the election described below, Performance Share or Cash Units (with any Cash
Units being converted into equivalent Performance Share Units) shall instead be
credited to the Participant's Performance Share Account. Such credit of
Performance Shares to a Participant's Performance Share Account shall be made
as of the same date as payment of the Award would have been made to the
Participant had no prior election been made.
A-8
(i) Elections.
Any election to have an Award or a portion of an Award credited to a
Performance Share Account shall be made on a written form provided by
the Company for such purpose and shall only be effective with respect to
Awards that may be made on and after the January 1 following the
Company's receipt of such form, provided that such form is received by
the December 24 prior to the applicable January 1. Any such election
shall be made only in increments of ten percent (10%) of the Award
(rounded to the nearest whole share) and shall be effective only for
Awards made during the year in which the election becomes effective.
(ii) Performance Share Account.
The Company shall maintain on its books and records a Performance
Share Account to record its liability for future payments to the
Participant or his or her beneficiary pursuant to the Plan. However, a
Performance Share Account under the Plan shall constitute an unfunded
arrangement; the Company shall not be required to segregate or earmark
any of its assets for the benefit of the Participant or his or her
beneficiary, and the amount reflected in a Performance Share Account
shall be available for the Company's general corporate purposes and
shall be available to the Company's general creditors. The amount
reflected in a Performance Share Account shall not be subject in any
manner to anticipation, alienation, transfer or assignment by the
Participant or his or her beneficiary, and any attempt to anticipate,
alienate, transfer or assign the same shall be void. Neither the
Participant nor his or her beneficiary may assert any right or claim
against any specific assets of the Company in respect of a Performance
Share Account, and the Participant and his or her beneficiary shall have
only a contractual right against the Company for the amount reflected in
a Performance Share Account.
Notwithstanding the foregoing, in order to pay amounts which may
become due under the Plan in respect of a Participant's Performance
Share Account, the Company may establish a grantor trust (hereinafter
the "Trust") within the meaning of Section 671 of the Code. Some or all
of the assets of the Trust may be dedicated to providing benefits to the
Participants pursuant to the Plan, but, nevertheless, all assets of the
Trust shall at all times remain subject to the claims of the Company's
general creditors in the event of the Company's bankruptcy or insolvency.
(iii) Dividend Equivalents.
On every date on which a dividend or other distribution is paid with
respect to Common Stock, commencing with the first such payment date
after the date on which a Performance Share is credited to a
Participant's Performance Share Account and continuing until such
Performance Share is either forfeited or paid out, there shall be
credited to the Participant's Performance Share Account a Dividend
Equivalent in respect of such Performance Share. A Dividend Equivalent
shall mean, with respect to a whole Performance Share credited to a
Participant's Performance Share Account, a measure of value equal to the
fractional share of Common Stock that could be purchased with the amount
that would have been paid to the Participant as a dividend or other
distribution if the Participant had owned a whole share of Common Stock
in lieu of said whole Performance Share, the date of such deemed
purchase being the dividend payment date. Dividend Equivalents are
expressed in the form of Performance Shares. Notwithstanding the
foregoing, the Committee may decide when granting a Performance Share
that Dividend Equivalents with respect to such Performance Share shall
be paid to a Participant as accrued, rather than credited to the
Participant's Performance Share Account.
(iv) Participant not a Stockholder.
The Participant shall have no stockholder's rights with respect to
any shares of Common Stock in respect of which Performance Shares are
credited to his or her Performance Share Account.
(v) Payments in Respect of Performance Shares.
(1) Termination of Employment or Provision of Services: In the event
of a Participant's Normal Termination and without a payment date having
been specified as provided below, such Participant shall
A-9
be entitled to receive payment in respect of the entire amount then
credited to his or her Performance Share Account. Such payment shall be
made in the form of the number of shares of Common Stock equal to the
number of whole Performance Shares then credited to the Participant's
Performance Share Account, with any fractional Performance Share being
paid in cash determined on the basis of the value of a corresponding
fractional share of Common Stock on the business day preceding the date
of payment. Said shares of Common Stock and any cash amount shall be
transferred to the Participant within sixty (60) days after the
Participant's Normal Termination.
(2) Election of Participant: Upon prior written election by a
Participant, the Participant shall be entitled to receive payment in
respect of an Award of Performance Shares, to the extent then vested,
and any Dividend Equivalents earned on such Award on the date or dates
specified in such written election. Such election must either be made as
part of the election to have such Award of Performance Shares credited
to a Performance Share Account as provided above, or at any time at
least one year prior to the date on which such payment would otherwise
be made. Such payment shall be made in the form of the number of shares
of Common Stock equal to the number of whole Performance Shares,
including related Dividend Equivalents, then credited to the
Participant's Performance Share Account with respect to such Award, with
any fractional Performance Share being paid in cash determined on the
basis of the value of a corresponding fractional share of Common Stock
on the business day preceding the date of payment. The Participant's
Performance Share Account thereafter shall be reduced to reflect the
foregoing payment. Nothing herein shall preclude separate elections with
respect to separate Awards.
(3) Disability or Death While Employed by or Providing Services to
the Company: Notwithstanding an election made pursuant to the preceding
section, in the event of a Participant's termination of employment or
provision of services for reasons of Disability or death, the
Participant or his or her beneficiary, as the case may be, shall be
entitled to receive payment in respect of the entire amount then
credited to his or her Performance Share Account. Such payment shall be
made in the form of the number of shares of Common Stock equal to the
number of whole Performance Shares then credited to the Participant's
Performance Share Account, with any fractional Performance Share being
paid in cash determined on the basis of the value of a corresponding
fractional share of Common Stock on the business day preceding the date
of payment. Said shares of Common Stock and any cash amount shall be
transferred to the Participant or his or her beneficiary within sixty
(60) days after the Company has been notified in writing of the
Disability or death of the Participant and has been provided with any
additional information, forms or other documents it may reasonably
request.
(4) Hardship Payment: Notwithstanding an election made pursuant to
the Plan or the Participant's continued employment with or provision of
services to the Company, if the Committee, upon written petition of the
Participant, determines, in the Committee's sole discretion, that the
Participant has suffered an unforeseeable financial emergency, the
Participant shall be entitled to receive, as soon as practicable
following such determination, payment sufficient to meet the cash needs
arising from the unforeseeable financial emergency, not in excess of the
number of whole Performance Shares then credited to the Participant's
Performance Share Account. Such payment shall be made, at the election
of the Participant, either (i) in the form of the number of whole shares
of Common Stock, the proceeds from the sale of which would be sufficient
to meet the cash needs arising from the unforeseeable financial
emergency, not in excess of the number of whole Performance Shares then
credited to the Participant's Performance Share Account; (ii) in cash
equal to the value on the business day preceding the date of payment of
the number of whole shares of Common Stock available for payment under
clause (i) of this sentence; or (iii) in any combination of the methods
of payment provided for in clauses (i) and (ii) of this sentence. In the
event of a hardship payment in respect of the Participant's entire
Performance Share Account, any fractional Performance Share shall be
paid in cash determined on the basis of the value of a corresponding
fractional share of Common Stock on the business day preceding the date
of payment. For purposes of the foregoing, an unforeseeable financial
emergency is an unexpected need for cash arising from an illness,
casualty loss, sudden financial reversal, or other such unforeseeable
occurrence. Cash needs arising from foreseeable events such as generally
the purchase of a house or educational expenses
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for children shall not be considered to be the result of an
unforeseeable financial emergency. Said shares of Common Stock and any
cash amount shall be transferred to the Participant as soon as
practicable after the Committee determines that the Participant has
suffered an unforeseeable financial emergency. The Participant's
Performance Share Account thereafter shall be reduced to reflect the
foregoing payment.
(5) Early Withdrawal: Notwithstanding an election made pursuant to
the Plan or the Participant's continued employment with or provision of
services to the Company, the Participant, upon written petition to the
Committee at any time, shall be entitled to receive payment in respect
of all or any portion of the amount then credited to his or her
Performance Share Account, subject to a forfeiture penalty of six
percent (6%) of the amount of the payment requested by the Participant.
Such payment shall be made, at the election of the Participant, either
(i) in the form of the number of shares of Common Stock equal to the
number of whole Performance Shares requested by the Participant in the
written petition and then credited to the Participant's Performance
Share Account; (ii) in cash equal to the value on the business day
preceding the date of payment of the number of whole shares of Common
Stock available for payment under clause (i) of this sentence; or (iii)
in any combination of the methods of payment provided for in clauses (i)
and (ii) of this sentence. In the event of an early withdrawal in
respect of the Participant's entire Performance Share Account, any
fractional Performance Share shall be paid in cash determined on the
basis of the value of a corresponding fractional share of Common Stock
on the business day preceding the date of payment. Said shares of Common
Stock and any cash amount shall be transferred to the Participant within
sixty (60) days after the Company has received the Participant's written
petition. The Participant's Performance Share Account thereafter shall
be reduced to reflect the foregoing payment and the six percent (6%)
forfeiture penalty.
(d) Adjustment of Performance Goals. The Committee may, during the Award
Period, make such adjustments to Performance Goals as it may deem appropriate,
to compensate for, or reflect, (i) extraordinary or non-recurring events
experienced during an Award Period by the Company or by any other corporation
whose performance is relevant to the determination of whether Performance Goals
have been attained; (ii) any significant changes that may have occurred during
such Award Period in applicable accounting rules or principles or changes in
the Company's method of accounting or in that of any other corporation whose
performance is relevant to the determination of whether an Award has been
earned; (iii) any significant changes that may have occurred during such Award
Period in tax laws or other laws or regulations that alter or affect the
computation of the measures of Performance Goals used for the calculation of
Awards; or (iv) any other factors which the Committee deems appropriate.
However, the Committee may exercise only negative discretion with respect to
awards that are intended to qualify as performance-based compensation under
Section 162(m)(4)(C) of the Code. With respect to such awards, unless the
Committee determines otherwise at any time prior to payment of a Participant's
award under the Plan for any Award Period, and subject to the Committee's right
to exercise negative discretion, extraordinary, unusual or non-recurring items,
discontinued operations, effects of accounting changes, effects of currency
fluctuations, effects of financing activities, expenses for restructuring or
productivity initiatives, non-operating items, effects of acquisitions and
acquisition expenses, and effects of divestitures and divestiture expenses, any
of which affect any Performance Goal applicable to such awards (including but
not limited to earnings per share) shall be automatically excluded or included
in determining the extent to which the Performance Goal has been achieved,
whichever will produce the higher award.
(e) Acceleration. Any provision of the Plan to the contrary
notwithstanding, the Committee may (but need not) provide that Performance
Share or Cash Unit Awards will be earned and paid in whole or in part (as the
Committee may specify) if an "Acceleration Event" (as hereafter defined) occurs
during the Award Period to which such Units relate, whether or not the
Performance Goal applicable to such Units is thereafter attained. For this
purpose, an "Acceleration Event" means (i) the Participant's employment by the
Company and its Subsidiaries terminates by reason of death, Disability or for
other reason(s) specified by the Committee, or (ii) a Change-in-Control (as
defined in Section 11(p) below) occurs; provided that, with respect to
Performance Share Units and Performance Cash Units that are intended to qualify
as performance-based compensation under Section 162(m)(4)(C) of the Code,
Acceleration Events shall be limited to such events (including without
limitation death,
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Disability and Change-in-Control) as will not prevent such Performance Share
Units and Performance Cash Units from qualifying as performance-based
compensation under Section 162(m)(4)(C) of the Code if the Performance Goal
applicable to such Performance Share and Cash Units is attained and no
Acceleration Event occurs.
9. Restricted Stock Awards
(a) Award of Restricted Stock.
(i) The Committee shall have the authority (1) to grant Restricted Stock
Awards, (2) to issue or transfer Restricted Stock to Eligible Persons, and
(3) to establish terms, conditions and restrictions applicable to such
Restricted Stock, including the Restricted Period, which may differ with
respect to each grantee, the time or times at which Restricted Stock shall
be granted or become vested and the number of shares to be covered by each
grant.
(ii) The Holder of a Restricted Stock Award shall execute and deliver to
the Company an Award Agreement with respect to the Restricted Stock setting
forth the restrictions applicable to such Restricted Stock. If the Committee
determines that the Restricted Stock shall be held in escrow rather than
delivered to the Holder pending the release of the applicable restrictions,
the Holder additionally shall execute and deliver to the Company (1) an
escrow agreement satisfactory to the Committee and (2) the appropriate blank
stock powers with respect to the Restricted Stock covered by such
agreements. If a Holder shall fail to execute a Restricted Stock Award
Agreement and, if applicable, an escrow agreement and stock powers, the
Award shall be null and void. Subject to the restrictions set forth in
Section 9(b), the Holder shall generally have the rights and privileges of a
stockholder as to such Restricted Stock, including the right to vote such
Restricted Stock, and to receive dividends paid thereon.
(iii) Upon the Award of Restricted Stock, the Committee shall cause a
Stock certificate registered in the name of the Holder to be issued and, if
it so determines, deposited together with the Stock powers with an escrow
agent designated by the Committee. If an escrow arrangement is used, the
Committee shall cause the escrow agent to issue to the Holder a receipt
evidencing any Stock certificate held by it registered in the name of the
Holder.
(b) Restrictions.
(i) Restricted Stock awarded to a Participant shall be subject to the
following restrictions until the expiration of the Restricted Period, and to
such other terms and conditions as may be set forth in the applicable Award
Agreement: (1) if an escrow arrangement is used, the Holder shall not be
entitled to delivery of the Stock certificate; (2) the shares shall be
subject to the restrictions on transferability set forth in the Award
Agreement; and (3) the shares shall be subject to forfeiture to the extent
provided in Section 9(d) and the Award Agreement and, to the extent such
shares are forfeited, the Stock certificates shall be returned to the
Company, and all rights of the Holder to such shares and as a stockholder
shall terminate without further obligation on the part of the Company.
(ii) The Committee shall have the authority to remove any or all of the
restrictions on the Restricted Stock whenever it may determine that, by
reason of changes in applicable laws or other changes in circumstances
arising after the date of the Restricted Stock Award, such action is
appropriate.
(c) Restricted Period. The Restricted Period of Restricted Stock shall
commence on the Date of Grant and shall expire from time to time as to that
part of the Restricted Stock Award indicated in a schedule established by the
Committee and set forth in the written Award Agreement. The Restricted Period
shall be at least two years; provided, however, that it may be as short as one
year if vesting is based on achievement of Performance Goals.
(d) Forfeiture Provisions. Except to the extent determined by the Committee
and reflected in the underlying Award Agreement, in the event a Participant
terminates employment with or ceases to provide services to the Company during
a Restricted Period for any reason, that portion of the Award with respect to
which restrictions have not expired shall be completely forfeited to the
Company. Except as otherwise determined by the Committee,
A-12
in the event of such a forfeiture, the amount of an Award that would otherwise
be payable shall be reduced, but not below zero, by the amount of any dividends
previously paid to the Holder with respect to the forfeited Restricted Stock.
(e) Delivery of Restricted Stock. Upon the expiration of the Restricted
Period with respect to any shares of Stock covered by a Restricted Stock Award,
the restrictions set forth in Section 9(b) and the Award Agreement shall be of
no further force or effect with respect to shares of Restricted Stock which
have not then been forfeited. If an escrow arrangement is used, upon such
expiration, the Company shall deliver to the Holder, or his or her beneficiary,
without charge, the Stock certificate evidencing the shares of Restricted Stock
which have not then been forfeited and with respect to which the Restricted
Period has expired (to the nearest full share) and any cash dividends or Stock
dividends credited to the Holder's account with respect to such Restricted
Stock and the interest thereon, if any.
(f) Stock Restrictions. Each certificate representing Restricted Stock
awarded under the Plan shall bear the following legend until the end of the
Restricted Period with respect to such Stock:
"Transfer of this certificate and the shares represented hereby is
restricted pursuant to the terms of a Restricted Stock Agreement, dated as
of , between Barnes Group Inc. and . A copy of such Agreement
is on file at the offices of the Company."
Stop transfer orders shall be entered with the Company's transfer agent and
registrar against the transfer of legended securities.
(g) Deferral. Upon election by a Participant, a whole share of Restricted
Stock that would otherwise have been granted to the Participant shall instead
be made in the form of Performance Shares, and such Performance Shares shall be
credited to the Participant's Performance Share Account, subject to the
provisions of Section 8. Such credit of Performance Shares shall be made as of
the same date as Restricted Stock would have been awarded to the Participant
had no prior election been made. Any such election shall be made by December 24
prior to the year in which the Award for which the election is made will be
made, and shall otherwise comply with the requirements for elections in Section
8(c). If an event occurs which would have caused forfeiture of the Restricted
Stock for which an election pursuant to this paragraph is made, then the
equivalent Performance Shares, along with any related Dividend Equivalents,
shall be forfeited.
10. Non-Competition Provisions
In addition to such other conditions as may be established by the Committee, in
consideration of the granting of Awards under the terms of the Plan, the
Committee, in its discretion, may include non-competition provisions in the
applicable Award Agreement.
11. General
(a) Additional Provisions of an Award. Awards under the Plan also may be
subject to such other provisions (whether or not applicable to the benefit
awarded to any other Participant) as the Committee determines appropriate
including, without limitation, provisions to assist the Participant in
financing the purchase of Stock upon the exercise of Options, provisions for
the forfeiture of or restrictions on resale or other disposition of shares of
Stock acquired under any Award, provisions giving the Company the right to
repurchase shares of Stock acquired under any Award in the event the
Participant elects to dispose of such shares, and provisions to comply with
Federal and state securities laws and Federal and state tax withholding
requirements. Any such provisions shall be reflected in the applicable Award
Agreement.
(b) Privileges of Stock Ownership. Except as otherwise specifically
provided in the Plan, no person shall be entitled to the privileges of stock
ownership in respect of shares of Stock which are subject to Awards hereunder
until such shares have been issued to that person.
A-13
(c) Government and Other Regulations. The obligation of the Company to make
payment of Awards in Stock or otherwise shall be subject to all applicable
laws, rules, and regulations, and to such approvals by governmental agencies as
may be required. Notwithstanding any terms or conditions of any Award to the
contrary, the Company shall be under no obligation to offer to sell or to sell
and shall be prohibited from offering to sell or selling any shares of Stock
pursuant to an Award unless such shares have been properly registered for sale
pursuant to the Securities Act with the SEC or unless the Company has received
an opinion of counsel, satisfactory to the Company, that such shares may be
offered or sold without such registration pursuant to an available exemption
therefrom and the terms and conditions of such exemption have been fully
complied with. The Company shall be under no obligation to register for sale
under the Securities Act any of the shares of Stock to be offered or sold under
the Plan. If the shares of Stock offered for sale or sold under the Plan are
offered or sold pursuant to an exemption from registration under the Securities
Act, the Company may restrict the transfer of such shares and may legend the
Stock certificates representing such shares in such manner as it deems
advisable to ensure the availability of any such exemption.
(d) Tax Withholding. Notwithstanding any other provision of the Plan, the
Company or a Subsidiary, as appropriate, shall have the right to deduct from
all Awards cash and/or Stock, valued at Fair Market Value on the date of
payment, in an amount necessary to satisfy all Federal, state or local taxes as
required by law to be withheld with respect to such Awards and, in the case of
Awards paid in Stock, the Holder may be required to pay to the Company prior to
delivery of such Stock, the amount of any such taxes which the Company is
required to withhold, if any, with respect to such Stock. The Company shall
accept shares of Stock of equivalent Fair Market Value in payment of such
withholding tax obligations if the Holder of the Award elects to make payment
in such manner.
(e) Claim to Awards and Employment or Service Rights. No employee or other
person shall have any claim or right to be granted an Award under the Plan or,
having been selected for the grant of an Award, to be selected for a grant of
any other Award. Neither the Plan nor any action taken hereunder shall be
construed as giving any Participant any right to be retained in the employ or
service of the Company or any Subsidiary.
(f) Designation and Change of Beneficiary. Each Participant may file with
the Committee a written designation of one or more persons as the beneficiary
who shall be entitled to receive the rights or amounts payable with respect to
an Award due under the Plan upon his or her death. A Participant may, from time
to time, revoke or change his or her beneficiary designation without the
consent of any prior beneficiary by filing a new designation with the
Committee. The last such designation received by the Committee shall be
controlling; provided, however, that no designation, or change or revocation
thereof, shall be effective unless received by the Committee prior to the
Participant's death, and in no event shall it be effective as of a date prior
to such receipt. If no beneficiary designation is filed by the Participant, the
beneficiary shall be deemed to be his or her spouse or, if the Participant is
unmarried at the time of death, his or her estate.
(g) Payments to Persons Other Than Participants. If the Committee shall
find that any person to whom any amount is payable under the Plan is unable to
care for his or her affairs because of illness or accident, or is a minor, or
has died, then any payment due to such person or his or her estate (unless a
prior claim therefor has been made by a duly appointed legal representative)
may, if the Committee so directs the Company, be paid to his or her spouse,
child, relative, an institution maintaining or having custody of such person,
or any other person deemed by the Committee to be a proper recipient on behalf
of such person otherwise entitled to payment. Any such payment shall be a
complete discharge of the liability of the Committee and the Company therefor.
(h) No Liability of Committee Members. No member of the Committee shall be
personally liable by reason of any contract or other instrument executed by
such member or on such member's behalf in such member's capacity as a member of
the Committee nor for any mistake of judgment made in good faith, and the
Company shall indemnify and hold harmless each member of the Committee and each
other employee, officer or director of the Company to whom any duty or power
relating to the administration or interpretation of the Plan may be allocated
or delegated, against any cost or expense (including counsel fees) or liability
(including any sum paid in settlement of a claim) arising out of any act or
omission to act in connection with the Plan unless arising out of such person's
own fraud or willful bad faith; provided, however, that approval of the Board
shall be required for the payment of any amount in settlement of a claim
against any such person. The foregoing right of indemnification shall not be
A-14
exclusive of any other rights of indemnification to which such persons may be
entitled under the Company's Certificate of Incorporation or By-Laws, as a
matter of law, or otherwise, or any power that the Company may have to
indemnify them or hold them harmless.
(i) Governing Law. The Plan shall be governed by and construed in
accordance with the internal laws of the State of Delaware without regard to
the principles of conflicts of law thereof.
(j) Funding. No provision of the Plan shall require the Company, for the
purpose of satisfying any obligations under the Plan, to purchase assets or
place any assets in a trust or other entity to which contributions are made or
otherwise to segregate any assets, nor shall the Company maintain separate bank
accounts, books, records or other evidence of the existence of a segregated or
separately maintained or administered fund for such purposes. Holders shall
have no rights under the Plan other than as unsecured general creditors of the
Company, except that insofar as they may have become entitled to payment of
additional compensation by performance of services, they shall have the same
rights as other employees under general law.
(k) Nontransferability. A person's rights and interest under the Plan,
including amounts payable, may not be sold, assigned, donated, or transferred
or otherwise disposed of, mortgaged, pledged or encumbered except, in the event
of a Holder's death, to a designated beneficiary to the extent permitted by the
Plan, or in the absence of such designation, by will or the laws of descent and
distribution; provided, however, the Committee may, in its sole discretion,
allow in an Award Agreement for transfer of Awards other than Incentive Stock
Options to other persons or entities.
(l) Reliance on Reports. Each member of the Committee and each member of
the Board shall be fully justified in relying, acting or failing to act, and
shall not be liable for having so relied, acted or failed to act in good faith,
upon any report made by the independent public accountants of the Company and
its Subsidiaries and upon any other information furnished in connection with
the Plan by any person or persons other than such member.
(m) Relationship to Other Benefits. No payment under the Plan shall be
taken into account in determining any benefits under any pension, retirement,
profit sharing, group insurance or other benefit plan of the Company except as
otherwise specifically provided in such other plan.
(n) Expenses. The expenses of administering the Plan shall be borne by the
Company.
(o) Titles and Headings. The titles and headings of the sections in the
Plan are for convenience of reference only, and in the event of any conflict,
the text of the Plan, rather than such titles or headings, shall control.
(p) Change-in-Control. Notwithstanding anything in the Plan to the
contrary, in the event of a "Change-in-Control", as defined below, all Awards
made pursuant to the Plan shall become fully vested immediately, and all
Options shall be immediately exercisable (provided that if the
"Change-in-Control" occurs with respect to a Subsidiary, only Awards and
Options granted to employees of such Subsidiary shall be affected), if the
Committee so provides in an Award Agreement, or if so provided in an
employment, severance or other agreement of an employee granted an Award. A
"Change-in-Control" shall be deemed to have occurred if the event set forth in
any one of the following paragraphs shall have occurred:
(i) any Person is or becomes the Beneficial Owner, directly or
indirectly, of securities of the Company (not including in the securities
beneficially owned by such Person any such securities acquired directly from
the Company or its Affiliates) representing 25% or more of the combined
voting power of the Company's then outstanding securities, excluding any
Person who becomes such a Beneficial Owner in connection with a transaction
described in clause (1) of paragraph (iii) below; or
(ii) the following individuals cease for any reason to constitute a
majority of the number of directors then serving: individuals who, on the
date hereof, constitute the Board and any new director (other than a
director whose initial assumption of office is in connection with an actual
or threatened election contest, including but not limited to a consent
solicitation, relating to the election of directors of the Company) whose
appointment or election by the Board or nomination for election by the
Company's stockholders was approved or recommended by a vote of at least
two-thirds ( 2/3) of the directors then still in office who either were
directors on the date hereof or whose appointment, election or nomination
for election was previously so approved or recommended; or
A-15
(iii) there is consummated a merger or consolidation of the Company or
any direct or indirect subsidiary of the Company with any other corporation,
other than (1) a merger or consolidation which would result in the voting
securities of the Company outstanding immediately prior to such merger or
consolidation continuing to represent (either by remaining outstanding or by
being converted into voting securities of the surviving entity or any parent
thereof), in combination with the ownership of any trustee or other
fiduciary holding securities under an employee benefit plan of the Company
or a Subsidiary, at least 60% of the combined voting power of the securities
of the Company or such surviving entity or any parent thereof outstanding
immediately after such merger or consolidation, or (2) a merger or
consolidation effected to implement a recapitalization of the Company (or
similar transaction) in which no Person is or becomes the Beneficial Owner,
directly or indirectly, of securities of the Company (not including in the
securities beneficially owned by such Person any securities acquired
directly from the Company or its Affiliates) representing 25% or more of the
combined voting power of the Company's then outstanding securities; or
(iv) the stockholders of the Company approve a plan of complete
liquidation or dissolution of the Company or there is consummated an
agreement for the sale or disposition by the Company of all or substantially
all of the Company's assets, other than a sale or disposition by the Company
of all or substantially all of the Company's assets to an entity, at least
60% of the combined voting power of the voting securities of which are owned
by stockholders of the Company in substantially the same proportions as
their ownership of the Company immediately prior to such sale.
12. Changes in Capital Structure
Awards granted under the Plan and any Award Agreements shall be subject to
equitable adjustment or substitution, as determined by the Committee in its
sole discretion, as to the number, price or kind of a share of Stock or other
consideration subject to such Awards (i) in the event of changes in the
outstanding Common Stock or in the capital structure of the Company by reason
of stock dividends, stock splits, reverse stock splits, recapitalizations,
reorganizations, mergers, consolidations, combinations, exchanges, or other
relevant changes in capitalization occurring after the Date of Grant of any
such Award, (ii) in the event of any change in applicable laws or any change in
circumstances which results in or would result in any substantial dilution or
enlargement of the rights granted to, or available for, Participants in the
Plan, or (iii) upon the occurrence of any other event which otherwise warrants
equitable adjustment because it interferes with the intended operation of the
Plan. In addition, in the event of any such corporate or other event, the
aggregate number of shares of Stock available under the Plan and the maximum
number of shares of Stock with respect to which any one person may be granted
Awards shall be appropriately adjusted by the Committee, whose determination
shall be conclusive.
Notwithstanding the above, in the event of any of the following:
(1) The Company is merged or consolidated with another corporation or entity
and, in connection therewith, consideration is received by stockholders of the
Company in a form other than stock or other equity interests of the surviving
entity;
(2) All or substantially all of the assets of the Company are acquired by
another person;
(3) The reorganization or liquidation of the Company; or
(4) The Company shall enter into a written agreement to undergo an event
described in clauses (1), (2) or (3) above,
then the Committee may, in its sole discretion and upon at least 10 days
advance notice to the affected persons, cancel any outstanding Awards and pay
to the Holders thereof, in cash, the value of such Awards based upon the price
per share of Stock received or to be received by other stockholders of the
Company in the event. The terms of this Section 12 may be varied by the
Committee in any particular Award Agreement.
A-16
13. Nonexclusivity of the Plan
Neither the adoption of the Plan by the Board nor the submission of the Plan to
the stockholders of the Company for approval shall be construed as creating any
limitations on the power of the Board to adopt such other incentive
arrangements as it may deem desirable, including, without limitation, the
granting of stock options otherwise than under the Plan, and such arrangements
may be either applicable generally or only in specific cases.
14. Amendment and Termination
The Board may at any time terminate the Plan. The Committee may, at any time,
or from time to time, amend or suspend and, if suspended, reinstate, the Plan
in whole or in part; provided, that any such amendment of the Plan shall be
contingent on obtaining the approval of the stockholders of the Company if such
amendment would materially increase benefits available to Participants or the
Committee determines that such approval is necessary to comply with any
requirement of law, including the requirements for qualification of Incentive
Stock Options or the rules of any stock exchange, stock market or automated
quotation system on which the Company's equity securities are traded or quoted.
A-17
Barnes Group Inc.
Executive Office
123 Main Street
Post Office Box 489
Bristol, Connecticut 06011-0489 U.S.A.
[LOGO] BARNES GROUP INC.
2002 Barnes Group Inc. Proxy
Please Mark
your votes as [X]
indicated in
this example.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR EACH OF THE FOLLOWING
------------------------------------------------------------------------------
NOMINEES AND PROPOSALS:
1. ELECTION OF DIRECTORS FOR A FOR all nominees WITHHOLD
THREE-YEAR TERM listed to the left AUTHORITY
(except as marked to vote for all
(01) William S. Bristow, Jr. to the contrary) nominees listed
(02) Edmund M. Carpenter to the left
(03) G. Jackson Ratcliffe [ ] [ ]
ONE-YEAR TERM
(04) Donald W. Griffin
(INSTRUCTION: To withhold authority to vote for any individual nominee, write
that nominee's name in the space provided below.)
2. APPROVAL OF THE AMENDED BARNES FOR AGAINST ABSTAIN
GROUP INC. EMPLOYEE STOCK AND [ ] [ ] [ ]
OWNERSHIP PROGRAM
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS. THIS PROXY WILL BE VOTED IN
THE MANNER SPECIFIED HEREIN BY THE UNDERSIGNED STOCKHOLDER(S). UNLESS OTHERWISE
DIRECTED, THIS PROXY SHALL BE VOTED FOR PROPOSALS 1 AND 2.
I plan to attend the meeting. [ ]
SIGNATURE SIGNATURE DATE
NOTE: PLEASE SIGN AS NAME APPEARS HEREON. JOINT OWNERS SHOULD EACH SIGN. WHEN
SIGNING AS ATTORNEY, EXECUTOR, ADMINISTRATOR, TRUSTEE OR GUARDIAN, PLEASE GIVE
FULL TITLE AS SUCH.
FOLD AND DETACH HERE IF VOTING BY MAIL
VOTE BY TELEPHONE OR MAIL
Your telephone or Internet vote authorizes the named proxies/trustee to vote
your shares in the same manner as if you had marked, signed and returned your
proxy by mail. Voting by telephone or Internet rather than by mail will help to
reduce the Company's costs. If you vote by telephone or Internet, you do not
need to mail your proxy.
To Vote by Telephone (for residents of the U.S.A. and Canada with touch tone
telephones only):
. Dial the following toll-free telephone number AT ANYTIME: 1-800-435-6710.
The call goes directly to our proxy tabulator, Mellon Investor Services,
LLC, and there is no charge to you.
. You will then be asked to enter a Control Number, which is located in the
box in the lower right-hand corner of this form.
. OPTION 1: To vote as the Board of Directors recommends, FOR ALL proposals
press 1. When you press 1, your vote will be confirmed and cast as you
directed. END OF CALL.
. OPTION 2: If you choose to vote on each proposal separately, press 2. You
will hear the following instructions:
Proposal 1: Election of Directors.
- To vote FOR ALL nominees, press 1;
- To WITHHOLD FOR ALL nominees, press 2;
- To WITHHOLD FOR AN INDIVIDUAL nominee, press 3 and follow the
instructions.
- If you press 3, enter the TWO-DIGIT NUMBER that precedes the
name of the nominee(s) for whom you withhold your vote, then
press #.
Proposal 2: Approval of the Amended Barnes Group Inc. Employee Stock and
Ownership Program.
- To vote FOR, press 1;
- To vote AGAINST, press 2;
- To ABSTAIN from voting, press 3.
Your vote will be confirmed and cast as you directed. END OF CALL.
To vote by Internet: http://www.eproxy.com/b
Use the Internet to vote your proxy. Have your proxy card in hand when you
access the web site. You will be prompted to enter your control number, located
in the box below, to create and submit an electronic ballot.
IF YOU VOTE BY TELEPHONE,
PLEASE DO NOT MAIL BACK YOUR PROXY,
THANK YOU FOR VOTING.
CALL, TOLL-FREE, ANYTIME
1-800-435-6710
2002 BARNES GROUP INC.,
ANNUAL MEETING OF STOCKHOLDERS
APRIL 10, 2002 - 11:00 a.m.
THE COUNTRY CLUB OF FARMINGTON
806 FARMINGTON AVENUE, FARMINGTON, CT 06032
The undersigned stockholder(s) of Barnes Group Inc. hereby appoints Signe S.
Gates and Monique B. Marchetti, each with the power to appoint her substitute,
as the undersigned's proxies and attorneys-in-fact, to vote all the shares of
common stock covered by this proxy at the Annual Meeting of Stockholders on
April 10, 2002, or at any adjournment thereof, upon the matters set forth in the
Notice of such meeting with all the powers the undersigned would possess if
personally present. Either person is individually authorized to vote as
specified on proposals 1 and 2 and otherwise in her discretion.
THIS CARD ALSO PROVIDES CONFIDENTIAL VOTING INSTRUCTIONS FOR SHARES HELD IN THE
BARNES GROUP INC. RETIREMENT SAVINGS PLAN. If you are a participant and have
shares of Barnes Group Inc. common stock allocated to your account under this
plan, please read the following as to the voting of such shares, as well as the
stock for which no voting instructions are received.
Trustee's Authorization: The undersigned authorizes Riggs Bank N.A., as Trustee
of the Barnes Group Inc. Retirement Savings Plan, to vote all shares of the
common stock of the Company allocated to the undersigned's account under such
plan, as well as a proportionate share of the stock for which voting
instructions are not timely received, at the Annual Meeting of Stockholders or
at any adjournment thereof, in accordance with the instructions on the reverse
side.
THIS PROXY/VOTING INSTRUCTION CARD IS CONTINUED ON THE REVERSE SIDE.
PLEASE SIGN ON THE REVERSE SIDE.
FOLD AND DETACH HERE
YOUR VOTE IS IMPORTANT!
For your convenience, you can vote your shares in one of three ways:
1. VOTE BY TELEPHONE:
----------------------
If you are a resident of the U.S.A. or Canada and have a touch tone
telephone, you can call the proxy tabulator, Mellon Investor Services, LLC,
at the toll-free telephone number: 1-800-435-6710 and follow the
instructions found on the reverse side of this card on how to vote your
shares. There will be no charge to you for the call. If you are not a
resident of the U.S.A. or Canada or do not have a touch tone telephone,
please vote by Internet or by mailing your proxy (see instructions below).
Please note that voting by telephone rather than by mail, will help to
reduce the Company's costs.
OR
2. VOTE BY INTERNET: http://www.eproxy.com/b
---------------------------------------------
Use the Internet to vote your proxy and help to reduce the Company's costs.
Have your proxy card in hand when you access the web site. You will be
prompted to enter your control number, located in the box below, to create
and submit an electronic ballot.
OR
3. VOTE BY MAIL:
-----------------
Mark, sign and date your proxy and return it promptly in the enclosed
envelope. Please sign exactly as the name(s) appears on the reverse side.
If the shares are registered in the names of two or more persons, each
should sign. Executors, administrators, trustees, guardians,
attorneys-in-fact, general partners and other persons acting in a
representative capacity should add their complete titles. When a
corporation gives the proxy, an authorized officer should sign.
THANK YOU FOR VOTING