EXHIBIT 10.2
BARNES GROUP INC.
-----------------
LONG TERM INCENTIVE PLAN
-----------------------
SECTION l. PURPOSE
--------------------
The Long Term Incentive Plan ("LTIP") is designed to provide
incentive compensation to key executives of Barnes Group Inc.
(the "Company") and its subsidiaries in a form which relates the
financial reward to an increase in the value of the Company to
its shareholders. The plan shall be administered by the
Compensation Committee of the Board of Directors (the
"Committee").
SECTION 2. DEFINITIONS
-----------------------
2.1 Cost of Equity. Cost of Equity equals Average Stockholder's
--------------
Equity, except for the cycles prior to the 1995-1997 cycle
such equity shall be determined without regard for the
effects of the Statements of Financial Accounting Standards
No. 106 ("FAS 106") and No. 112 ("FAS 112"), and the one-
time effect of the initial adoption of FAS 109 and the one-
time FAS 109 adjustment in 1993 of $800,000 resulting from a
change in the U.S. federal tax rate, multiplied by the sum
of
(i) a risk-free rate of return equal to the average of the
interest rates for Treasury Bills of 90-day maturity on
the first business day of each month, or such other
standard as may be designated by the Committee; plus
(ii) a risk adjustment factor computed by multiplying the
general stock market risk premium over a risk-free
1
Long Term Incentive Plan
------------------------
investment times the average Beta for the Company's
stock for each calendar year as published by Value Line
or some other source designated by the Committee.
Average Stockholder's Equity shall be computed by adding
stockholder's equity on December 31st of the prior year to
stockholder's equity at the end of each month of the
applicable year and dividing the result by 13.
2.2 Economic Return. Economic Return for any year equals Cash
---------------
Flow From Operations less the Cost of Equity divided by the
average number of common shares outstanding for the year.
In computing Economic Return, the Committee may make adjust-
ments for any extraordinary changes which occur during an
Incentive Award Period.
2.3 Cash Flow From Operations. Cash Flow From Operations equals
-------------------------
net income, less any dividends on preferred stock, plus
depreciation and amortization, losses (gains) on sale of
plant, property and equipment, and other assets, and
translation losses (gains) as appropriate in computing cash
provided from operations. For cycles prior to the 1995-1997
cycle, cash flows will be determined without regard to FAS
106, and FAS 112, and the one-time effect of the initial
adoption of FAS 109 in 1992 and the one-time FAS 109
adjustment in 1993 of $800,000 resulting from a change in
the U.S. federal tax rate. In addition, cash flow from
operations shall include the increase (decrease) in deferred
2
Long Term Incentive Plan
------------------------
income tax liabilities in all years through 1991 but be
excluded from the calculation in 1992 and thereafter. For
cycles beginning with the 1995-1997 cycle, which include
1992 in the base period, net income shall exclude the
cumulative effect of the accounting changes for FAS 106,
109, and FAS 112.
2.4 Performance Unit. A Performance Unit is the form of award
----------------
under the LTIP. Its value in any year is equal to the sum
of the Economic Returns for the five preceding calendar
years.
SECTION 3. ADMINISTRATION
--------------------------
The Committee shall designate participants, award a number
of Performance Units to each participant, and perform all other
actions necessary to the proper administration of the LTIP. The
interpretation by the Committee of the LTIP and any awards made
hereunder shall be binding upon the participants and the Company.
SECTION 4. PARTICIPANTS
------------------------
Key senior executives of the Company and its subsidiaries
whose activities can contribute significantly to the performance
of the Company are eligible to participate in the LTIP; provided,
however, that no member of the Committee may be a participant.
3
Long Term Incentive Plan
------------------------
SECTION 5. GRANT OF INCENTIVE AWARDS
-------------------------------------
5.1 Prior to March 1 of each year, the Committee shall determine
whether or not Performance Units will be granted in the
current year. If they are to be granted, the Committee
shall:
(a) establish an Incentive Award Period which will commence
on January 1 of the current year and terminate on
January 1 of a year selected by the Committee;
provided, however, that in no event shall it be less
than 24 months; and
(b) designate recipients of Performance Units and the
number of Performance Units to be awarded to each
participant.
5.2 During an Incentive Award Period, new employees and
employees who are promoted or transferred may be granted new
or additional Performance Units.
SECTION 6. PAYMENT
-------------------
6.1 Incentive award payments shall be calculated by multiplying
the number of Performance Units held by a participant times
the increase, if any, in the value of the Performance Unit
between the beginning and end of the Incentive Award Period.
6.2 If a participant has not worked at the Company unit with
respect to which his Performance Units were granted for the
entire Incentive Award Period, the Committee may direct that
4
Long Term Incentive Plan
------------------------
payment under any such Performance Unit will be reduced by
multiplying its value by a fraction, the numerator of which
shall be the number of full calendar months of the Incentive
Award Period during which the Participant worked at said
Company unit, and the denominator of which shall be the
number of full calendar months in the Incentive Award
Period.
6.3 Notwithstanding anything in the LTIP to the contrary, the
amount of payment made to each participant shall be in the
sole discretion of the Committee. The amount of all such
payments shall be determined by the Committee within 90 days
after the end of the Incentive Award Period.
6.4 The Committee, in its sole discretion, shall determine
whether all or any portion of any payment made with respect
to the Performance Units held by each participant shall be
deferred and credited to a participant's Incentive Deferred
Compensation Account.
6.5 As soon as practical after the amount of any award is deter-
mined, it shall be paid in cash to the participant or all or
part of it shall be credited to the participant's Incentive
Deferred Compensation Account, all in accord with the
procedures specified in paragraph 9.
5
Long Term Incentive Plan
------------------------
SECTION 7. EFFECT OF TERMINATION OF EMPLOYMENT OR DEATH
--------------------------------------------------------
If a participant ceases to be an employee prior to the end
of an Incentive Award Period other than by reason of death,
disability, or retirement after attaining age 55, then the
Performance Units granted to the participant shall terminate. If
a participant ceases to be an employee because of death,
disability, or retirement after attaining age 55, then payment
under his Performance Units may be adjusted as set forth in
paragraph 6.2.
SECTION 8. TRANSFERABILITY
---------------------------
Performance Units and any amount standing to a person's
credit in the Incentive Deferred Compensation Account may not be
transferred or assigned by a participant except by will or by the
laws of descent and distribution.
SECTION 9. INCENTIVE DEFERRED COMPENSATION ACCOUNT
---------------------------------------------------
9.1 To the extent that the Committee decided to defer payment of
any award made under the LTIP, the amount of such deferred
award shall be credited to the Company's Incentive Deferred
Compensation Account. The Company shall not be required to
segregate or earmark assets with respect to such account and
participants shall have no interest in any specific asset as
a result of the creation of such account or of any award
6
Long Term Incentive Plan
------------------------
under the LTIP. All funds in such accounts shall be
available for general corporate purposes.
9.2 Interest will be credited quarterly on the unpaid amount
standing to any participant's credit in the Incentive
Deferred Compensation Account at the end of each quarter.
On or as soon as practical after the first business day of
January, the Company will pay to each participant who is
less than 60 years old the interest credited to his account
with respect to the prior year. No cash payment will be
made to participants who are employed by the Company and who
have attained age 60.
9.3 The interest rate for purposes of computing interest under
paragraph 9.2 shall be the rate of interest for prime
commercial loans of 90-day maturities charged by Chemical
Bank (or such other New York City bank as the Committee may
select) on the first business day of each quarter.
9.4 Payments from the amount standing to a participant's credit
in the Incentive Deferred Compensation Account shall begin
on the first day of the month following the month in which
the participant ceases to be an employee of the Company.
Payments shall be made in 120 monthly installments (as equal
as possible); provided, however, that, except if otherwise
decided by the Committee, the entire amount then standing to
the participant's credit in the Incentive Deferred
Compensation Account shall be paid in one lump sum to any
7
Long Term Incentive Plan
------------------------
person whose employment is terminated other than by death or by
early or normal retirement under the applicable retirement plan.
Notwithstanding anything in this section to the contrary, the
Committee may in its discretion either:
(i) without the consent of the participant, advance the
time of payment of any unpaid portion of the award; or
(ii) if the consent of the participant is obtained, further
defer the time of payment of any unpaid portion of the
award to a time not later than 15 years after the ter-
mination of the participant's employment.
9.5 No amendment or termination of the LTIP shall reduce or
cancel any amount standing to a participant's credit in the
Incentive Deferred Compensation Account, prior to the
effective date of such amendment or termination.
9.6 In the event of the death of a participant while there is
still an amount standing to the participant's credit in the
Incentive Deferred Compensation Account, the amount shall be
paid to the beneficiary designated by the participant in
installments; provided, however, that (a) if the beneficiary
is the participant's estate, the funds shall be paid in a
lump sum, and (b) notwithstanding anything in this section
to the contrary, the Committee may advance the time of
payment to a beneficiary of any unpaid funds credited to the
Incentive Deferred Compensation Account. In the absence of
a designated beneficiary, any amount standing to the
8
Long Term Incentive Plan
------------------------
participant's credit in the Incentive Deferred Compensation
Account shall be paid in a lump sum to the participant's
estate.
SECTION 10. AMENDMENT
----------------------
The LTIP may be amended at any time by the Committee.
Amended: 2/17/95
----------------
HVL:B:\LTIP