1
Exhibit 10.5
1991 BARNES GROUP STOCK INCENTIVE PLAN
As Amended and Restated as of May 15, 1998
1. Purpose
The purpose of the Plan is to authorize the grant to Key Employees of the
Company or any Subsidiary of (i) nonqualified options to purchase shares of
Common Stock, (ii) Stock Appreciation Rights, (iii) Incentive Stock Rights, and
(iv) Performance Unit Awards, and to grant Directors of the Company or any
Subsidiary nonqualified options to purchase shares of Common Stock, and thus
benefit the Company by giving such employees and Directors a greater personal
interest in the success of the enterprise and an added incentive to continue and
advance their employment or service as a Director. An additional purpose of the
Plan is to provide "qualified performance-based compensation" (within the
meaning of Section 162(m) of the Internal Revenue Code of 1986, as amended, and
the regulations thereunder ("Section 162(m)") to Key Employees.
2. Definitions
The following terms, when used in the Plan, shall mean:
1981 Plan: The Barnes Group Inc. Stock Incentive Plan adopted by the
stockholders of the Company in 1981.
Board: The Board of Directors of the Company.
CEO: The Chief Executive Officer of the Company.
Committee: Such committee as shall be appointed by the Board pursuant to
the provisions of Section 11.
Common Stock: The Common Stock of the Company, par value $0.01 per share,
or such other class of shares or other securities as may be applicable
pursuant to the provisions of Section 9.
Company: Barnes Group Inc.
1
1991 Barnes Group Stock Incentive Plan
5/15/98
2
Director: A member of the Board of Directors of the Company or a Subsidiary
who is not an employee of the Company or a Subsidiary.
Disability: Inability to perform the services normally rendered by the
employee or Director due to any physical or mental impairment that can be
expected either to be of indefinite duration or to result in death, as
determined by the Committee on the basis of appropriate medical evidence.
Fair Market Value: As applied to the Common Stock on any day, the closing
market price of such stock as reported in the New York Stock Exchange
Composite Transactions Index for such day, or if the Common Stock was not
traded on such day, for the last preceding day on which the Common Stock
was traded.
Incentive: An incentive granted under the Plan in one of the forms provided
for in Section 3.
Key Employee: An employee of the Company or of a Subsidiary, including an
officer or a member of the Board of Directors who is an employee, who in
the Committee's or CEO's judgment can contribute significantly to the
growth and successful operations of the Company or a Subsidiary.
Option: An option to purchase shares of Common Stock.
Plan: The 1991 Barnes Group Stock Incentive Plan herein set forth, as
amended from time to time.
Subsidiary: A corporation in which the Company owns, directly or
indirectly, at least 50% of the voting stock.
3. Grants of Incentives
(a) Subject to the provisions of the Plan, the Committee may at any time,
or from time to time, grant Incentives under the Plan to, and only to, Key
Employees and, with respect to Options only, to Directors. In addition,
subject to the provisions of the Plan, the CEO may also grant Options to
Key Employees, but only in connection with the hiring or promotion of such
Key Employees and only if such Key Employees are not (or, by virtue of such
hiring or promotion, would not become) subject to the reporting
2
1991 Barnes Group Stock Incentive Plan
5/15/98
3
requirements under Rule 16a promulgated under the Securities Exchange Act
of 1934, as amended (the "Exchange Act"). Any Options granted by the CEO
shall be (i) evidenced by a written instrument in the form most recently
approved by the Committee for such Option and (ii) subject to, if
applicable, the performance targets and incentive periods most recently set
forth by the Committee for such Option. For purposes of the Plan, grants by
the CEO complying with this Section 3(a) shall be deemed to have been
effected by the Committee.
(b) Incentives may be in the following forms:
(i) an Option, in accordance with Section 5;
(ii) a Stock Appreciation Right, in accordance with Section 6;
(iii) an Incentive Stock Right, in accordance with Section 7;
(iv) a Performance Unit Award, in accordance with Section 8; or
(v) a combination of two or more of the foregoing.
4. Stock Subject to the Plan
(a) Subject to adjustment as provided in Section 9, the aggregate number of
shares of Common Stock which may be issued subject to Incentives granted
under the Plan shall not exceed the sum of (i) 3,000,000 shares and (ii)
the number of shares of stock covered by outstanding options (or
installments thereof) granted under the 1981 Plan which, after its
expiration, shall terminate or expire in whole or in part without being
exercised. Charges against such aggregate number are governed by the
provisions of paragraph (c) of this Section 4, paragraph (k) of Section 5,
paragraph (e) of Section 6, paragraph (c) of Section 7, and paragraph (e)
of Section 8. No Key Employee may receive grants of Options, Stock
Appreciation Rights or Incentive Stock Rights in any year relating to
shares of Common Stock which in the aggregate exceed 150,000 shares, which
number shall be adjusted pursuant to the terms hereof.
(b) Such shares may be either authorized but unissued shares or shares
issued and thereafter acquired by the Company.
3
1991 Barnes Group Stock Incentive Plan
5/15/98
4
(c) If any shares subject to an Incentive shall cease to be subject thereto
because of the termination without exercise or payment, in whole or in
part, of such Incentive, the shares as to which the Incentive was not
exercised or paid shall no longer be charged against the limits in
paragraph (a) of this Section 4 and may again be made subject to
Incentives.
(d) The Committee may permit the voluntary surrender of all or a portion of
any Incentive granted under this Plan conditioned upon the granting to the
employee of a new Incentive for the same or a different number of shares or
amount of other payment as the Incentive surrendered, or it may require
such voluntary surrender as a condition to a grant of a new Incentive to
such employee. Such new Incentive shall be exercisable at the price, during
the period, and in accordance with any other terms or conditions specified
by the Committee at the time the new Incentive is granted, all determined
in accordance with the provisions of this Plan without regard to the price,
period of exercise, or any other terms or conditions of the Incentive
surrendered.
5. Options
Incentives, in the form of options to purchase shares of Common Stock,
shall be subject to the following provisions:
(a) The Option price per share shall be determined as of the effective date
of the grant and shall not be less than 85% of the Fair Market Value of the
Common Stock at the time of the grant of the Option. In no event shall the
Option price be less than the par value of the stock which is the subject
of the Option.
(b) Each Option shall expire at such time as the Committee may determine at
the time the Option is granted; provided, however, that no Option may,
under any circumstances, expire later than ten years from the date such
Option shall have been granted.
(c) Any Option granted under the Plan may be exercised solely by the person
to whom granted, by his/her guardian or legal representative, or, in the
case of death, by an estate.
(d) No Option may be exercised less than 12 months from the date it is
granted. After completion of any additional required period of employment
or service as a
4
1991 Barnes Group Stock Incentive Plan
5/15/98
5
Director specified in the Option grant, the Option may be exercised, in
whole or in part, at any time or from time to time during the balance of
the term of the Option, except as limited by provisions contained in the
Option (including provisions regarding exercise in installments).
(e) If the optionee terminates employment or service as a Director prior to
attaining age 55, the Option shall terminate 90 days after termination of
employment or service as a Director, except in the case of death or
Disability.
(f) If employment or service as a Director terminates as a result of death
or Disability, or if the Optionee terminates employment or service as a
Director after attaining age 55, the Option shall terminate five years
after termination of employment or service as a Director; provided,
however, if the Optionee's employment is terminated upon the request of the
Company after the Optionee attains age 55, the Option may be terminated by
the Committee effective 90 days after termination of employment.
(g) Notwithstanding anything else in this Section 5 to the contrary, (1)
the Committee may provide that an Option will terminate prior to time
periods specified in paragraphs 5(e) and 5(f) on conditions specified by
the Committee and incorporated in an Option Agreement between the Company
and the person receiving the option; and (2) in no event may any Option be
exercised after the expiration date thereof.
(h) Shares purchased upon exercise of an Option shall be paid for in full
within twenty days of the date of exercise in cash or, with the consent of
the Committee, in whole or in part in shares of Common Stock based on their
Fair Market Value on the date of exercise.
(i) If so authorized by the Committee, the Company may, with the consent of
the optionee, and at any time or from time to time, cancel all or a portion
of any Option granted under the Plan then subject to exercise and discharge
its obligation in respect of the Option either by payment to the optionee
of an amount of cash equal to the excess, if any, of the Fair Market Value,
at such time, of the shares subject to the portion of the Option so
canceled over the aggregate option price of such shares, or by issuance or
transfer to the optionee of shares of Common Stock with a Fair Market
Value, at such time, equal to any such excess, or by a combination of cash
and shares.
5
1991 Barnes Group Stock Incentive Plan
5/15/98
6
(j) The forms of Option authorized by the Plan may contain such other
provisions as the Committee shall deem advisable.
(k) Upon the exercise of an Option there shall be charged against the
limits in paragraph (a) of Section 4 the number of shares issued to the
optionee. Upon the cancellation of any Option pursuant to paragraph (i) of
Section 5, there shall be charged against the limitations in paragraph (a)
of Section 4 a number of shares equal to (A) the number of any shares
issued to the optionee plus (B) the number of shares purchasable with the
amount of any cash paid to the optionee on the basis of the Fair Market
Value as of the date of payment; and the number of shares subject to the
portion of the Option so canceled, less the number of shares so charged
against such limitations, shall thereafter be available for other grants of
Incentives.
(l) An Option will not be treated as an Incentive Stock Option within the
meaning of section 422 of the Internal Revenue Code of 1986, as amended.
6. Stock Appreciation Rights
(a) A Stock Appreciation Right ("SAR") may be granted in connection with
any Option granted under the Plan, either at the time of the grant of such
Option or at any time thereafter during the term of the Option, or
independently of the grant of an Option.
(b) An SAR shall entitle the holder thereof, upon exercise of the SAR, to
receive a number of shares of Common Stock or cash or a combination of cash
and shares (as the Committee in its discretion may elect) determined
pursuant to paragraph (d) of this Section 6.
(c) An SAR shall be subject to the following terms and conditions and to
such other terms and conditions not inconsistent with the Plan as shall
from time to time be approved by the Committee:
(i) If granted in connection with an Option, an SAR shall be
exercisable at such time or times and by such person or persons and to
the extent, but only to the extent, that the Option to which it
relates shall be exercisable; provided, however, that such SAR shall
be exercisable only during the ten-day periods
6
1991 Barnes Group Stock Incentive Plan
5/15/98
7
(the "Exercise Periods") beginning on the third business day following
the date of release of a summary statement of the Company's quarterly
or annual sales and earnings and ending on the twelfth business day
following such date of release.
(ii) If granted independently of an Option, an SAR shall be subject to
the following provisions:
(A) If a person terminates employment prior to attaining age 55,
the SAR shall terminate 90 days after the termination of
employment, except in the case of death or Disability.
(B) If employment terminates as a result of death or Disability
or if a person terminates employment after attaining age 55, the
SAR will terminate one year after the termination of employment.
(d) Upon exercise of an SAR, the holder thereof shall be entitled to
receive a number of shares equal in Fair Market Value to (1) the amount by
which the Fair Market Value of a share of Common Stock on the date of such
exercise shall exceed the Fair Market Value of a share of Common Stock on
the date of grant of the related Option, or, in the case of any SAR granted
independently of an option, on the date of grant of such SAR, multiplied by
(2) the number of shares in respect of which the SAR shall have been
exercised. Settlement for any fraction of a share due shall be made in
cash. The Committee may settle all or any part of the Company's obligation
arising out of an exercise of any SAR by the payment of cash equal to the
aggregate value of the shares of Common Stock that it would otherwise be
obligated to deliver under the provisions of this paragraph (d).
(e) Upon exercise of any SAR, (i) there shall be charged against the
limitations in paragraph (a) of Section 4 a number of shares equal to (A)
the number of shares issued to the grantee under paragraph (d) of this
Section 6 plus (B) the number of shares purchasable with the amount of any
cash paid to the grantee on the basis of the Fair Market Value as of the
date of payment and (ii) the portion of the Incentive in respect of which
such SAR shall have been exercised shall be canceled and the number of
shares subject to such portion, less the number of shares so charged
against such limitations, shall thereafter be available for other grants of
Incentives.
7
1991 Barnes Group Stock Incentive Plan
5/15/98
8
7. Incentive Stock Rights
(a) An Incentive Stock Right will consist of incentive stock units, each of
which will be equivalent to one share of Common Stock. An Incentive Stock
Right will be evidenced by an agreement in form approved by the Committee;
will be nontransferable; will entitle the holder to receive shares of
Common Stock, without payment to the Company, after the lapse of the
incentive period or periods established by the Committee and subject to the
satisfaction of any performance goals established by the Committee from the
performance criteria set forth in Section 14 hereof with respect to such
Incentive Stock Rights; and will be subject to the limitations in paragraph
(a) of Section 4. The terms of the agreement evidencing an Incentive Stock
Right shall provide that holders of Incentive Stock Rights will be
entitled, from the date of the award, either (1) to receive from the
Company cash payments equal to the amount of dividends declared on the
number of shares of Common Stock equal to the number of incentive stock
units held by them, such payments to be made on or about the Company's
dividend payment dates or (2) to be credited with dividend equivalents
based upon dividends paid on outstanding shares of Common Stock. Such
dividend equivalents, once credited, shall be converted into a number of
additional incentive stock units, as of each dividend payment date, in
accordance with the following formula:
(A x B) /C
in which "A" equals the number of incentive stock units credited to the
holder on the dividend payment date, "B" equals the dividend per share and
"C" equals the Fair Market Value per share of Common Stock on the dividend
payment date. If a dividend is paid in property other than cash, dividend
equivalents shall be credited, as of the dividend payment date, in
accordance with the formula set forth above, except that "B" shall equal
the fair market value per share of the property which the holder would have
received in respect of the number of shares of Common Stock equal to the
number of incentive stock units credited to the holder as of the dividend
payment date, had such shares been owned as of the record date for such
dividend.
(b) If an employee terminates employment prior to attaining age 55, all
Incentive Stock Rights will terminate on the date employment terminates,
except in the case of death or Disability. Except as otherwise provided in
the agreement evidencing the
8
1991 Barnes Group Stock Incentive Plan
5/15/98
9
Incentive Stock Right, if employment terminates as a result of death or
Disability, or after attainment of age 55, the Committee may elect, at any
time during or at the end of the Incentive period, to award a portion of
the shares of Common Stock that would have been awarded, but for the
termination of employment, equal to the number of months in the incentive
period prior to the termination date divided by the number of months in the
incentive period.
(c) After the issuance of shares in respect of Incentive Stock Rights,
there will be charged against the limitations in paragraph (a) of Section 4
a number of shares equal to the number of shares so issued.
(d) To the extent not inconsistent with Section 162(m), the Committee may
make such adjustments to any performance goals or to the Company's
financial results as it deems appropriate for changes in accounting
practices or principles, for material acquisitions or dispositions of stock
or property, for recapitalizations or reorganizations or for any other
events with respect to which the Committee determines such an adjustment to
be appropriate in order to avoid distortion in the operation of the Plan.
8. Performance Unit Awards
(a) A Performance Unit Award will consist of performance units granted to
Key Employees selected by the Committee which can be paid in cash or shares
of Common Stock. Performance units may be granted alone or in conjunction
with and related to an Option. When granted in conjunction with an Option,
the number of performance units, unless otherwise provided by the
Committee, will be equal to the number of shares under the related Option.
To the extent that the Committee elects to pay performance units granted
with a related Option, there will be a proportionate reduction in the
number of shares available under such Option and any related SAR. To the
extent the related Option or an SAR granted in connection with such Option
is exercised, the related number of performance units will be
proportionately reduced.
(b) The Committee will establish an initial value for each performance unit
at the time of grant. At that time, the Committee will also establish
performance targets (from the performance criteria set forth in Section 14
hereof) to be achieved during the award period of not less than one year
set by the Committee. The value of the performance units at the end of the
award period will be determined by the degree to which the performance
targets are achieved. Performance Unit Awards will be subject
9
1991 Barnes Group Stock Incentive Plan
5/15/98
10
to the limitations in paragraph (a) of Section 4 and will be evidenced by
agreements setting forth the initial value for each performance unit, the
performance targets, the award period and such other terms and conditions
not inconsistent with the Plan as the Committee may determine.
(c) Payment, if any, at the end of the award period will be made in cash,
shares of Common Stock, or both, as determined by the Committee. In no
event shall payment to an individual in respect of any Performance Unit
Award exceed $250,000 in value. A Performance Unit Award granted alone, not
in conjunction with an Option, is automatically payable if the conditions
are met. A Performance Unit Award granted in conjunction with an Option is
payable only if the conditions are met and then at the election of the
Committee, as an alternative to the continuance of the related option and
any related SAR. The Committee may make this election to pay only during
the first two months after the end of the award period. If the election to
pay is not made, the Performance Unit Award terminates and the related
Option and SAR continue in effect.
(d) In the event of termination of employment prior to the end of the award
period by reason of death, Disability, or termination of employment after
attainment of 55 years of age, a pro rata portion of the value of the
performance units at the end of the award period will be paid to the
employee (or his/her estate in the case of death), unless the Committee
determines that a different portion should be payable or elects to
terminate the award. Except as otherwise determined by the Committee, upon
termination of employment under any other circumstances, the Performance
Unit Award will terminate.
(e) Upon payment of a Performance Unit Award, there shall be charged
against the aggregate limitations in paragraph (a) of Section 4 a number of
shares equal to (i) the number of any shares issued to the employee in
respect of the Performance Unit Award plus (ii) the number of shares
purchasable with the amount of any cash paid to the employee in respect of
the Performance Unit Award on the basis of the Fair Market Value of the
Common Stock as of the date of payment.
(f) To the extent not inconsistent with Section 162(m), the Committee may
make such adjustments to the performance goals or to the Company's
financial results as it deems appropriate for changes in accounting
practices or principles, for material acquisitions or disposition of stock
or property, for recapitalizations or reorganizations
10
1991 Barnes Group Stock Incentive Plan
5/15/98
11
or for any other events with respect to which the Committee determines such
an adjustment to be appropriate in order to avoid distortion in the
operation of the Plan.
9. Adjustment Provisions
The Options granted under the Plan shall contain such provisions as the
Committee may determine with respect to adjustments to be made in the number and
kind of shares covered by such Options and in the Option price in the event of a
reorganization, recapitalization, stock split, stock dividend, combination of
shares, merger, consolidation, rights offering, or any other change in the
corporate structure or shares of the Company, and in the event of any such
change, the aggregate number and kind of shares available under the Plan and the
maximum number of Options, Stock Appreciation Rights, and Incentive Stock Rights
which can be granted to any individual shall be appropriately adjusted. In the
event of any such change, equitable adjustments shall also be made by the
Committee in its discretion in the terms and conditions of any SAR, Incentive
Stock Right, or Performance Unit Award granted under the Plan.
10. Term
The Plan, as amended and restated as of February 16, 1996, shall become
effective if and when approved by the Company's stockholders at the 1996 Annual
Meeting. In the absence of such approval, the Plan, as in effect prior to such
amendment and restatement, shall remain in effect. No Incentives shall be
granted under the Plan after April 2, 2006.
11. Administration
(a) The Plan shall be administered by the Committee, to be appointed from
time to time by the Board consisting of not less than three members of the
Board. Each member of the Committee shall qualify as an "outside director"
within the meaning of Section 162(m).
(b) Incentives under the Plan shall be granted in accordance with the
Committee's determinations pursuant to the Plan, by execution and prompt
delivery to the employee of instruments approved by the Committee. Any such
grant shall be effective on the date of such determination or, if after, on
the date specified in the instrument evidencing the grant.
11
1991 Barnes Group Stock Incentive Plan
5/15/98
12
(c) The interpretation and construction by the Committee of any provision
of the Plan and of any Incentive granted thereunder shall, unless otherwise
determined by the Board, be final and conclusive on all persons having any
interest thereunder.
12. General Provisions
(a) Absence on leave because of military or governmental service, or other
reason, if such absence is approved by the Committee, shall not be
considered an interruption or termination of employment or service as a
Director for any purpose of the Plan, or Incentives granted thereunder,
except that no Incentive may be granted to an employee or Director while
he/she is absent on leave.
(b) Nothing in the Plan or in any instrument executed pursuant thereto
shall confer upon any employee any right to continue in the employ of the
Company or a Subsidiary.
(c) No shares of Common Stock shall be sold, issued, or transferred
pursuant to, or accepted as payment of the Option price of, an Incentive
unless and until there has been compliance, in the opinion of the Company's
General Counsel, with all applicable legal requirements, including without
limitation those relating to securities laws and stock exchange listings.
(d) No employee or Director (individually or as a member of a group), and
no beneficiary or other person claiming under or through him/her, shall
have any right, title, or interest in or to any shares of Common Stock
allocated or reserved for the Plan or subject to any Incentive except as to
such shares of Common Stock, if any, as shall have been sold, issued, or
transferred to him/her.
(e) The Company or a Subsidiary may make such provisions as it may deem
appropriate for the withholding of any taxes which the Company or
Subsidiary determines it is required to withhold in connection with any
Incentive.
(f) No Incentive and no rights under the Plan, contingent or otherwise, (i)
shall be assignable or subject to any encumbrance, pledge, or charge of any
nature, whether by operation of law or otherwise, (ii) shall be subject to
execution, attachment, or similar process, or (iii) shall be transferable
other than by will or the laws of descent and distribution, and every
Incentive and all rights under the Plan shall be exercisable
12
1991 Barnes Group Stock Incentive Plan
5/15/98
13
during the employee's or Director's lifetime only by him/her or by a
guardian or legal representative.
(g) Nothing in the Plan is intended to be a substitute for, or shall
preclude or limit the establishment or continuation of, any other plan,
practice, or arrangement for the payment of compensation or fringe benefits
to any employee or Director which the Company or any Subsidiary now has or
may hereafter put into effect, including without limitation any retirement,
pension, savings or thrift, insurance, death benefit, stock purchase,
incentive compensation, or bonus plan.
13. Amendment or Discontinuance of Plan
(a) The Plan may be amended by the Board at any time, provided that,
without the approval of the stockholders of the Company, no amendment shall
be made if stockholder approval is required in order for the Plan to comply
with Rule 16b-3 promulgated under the Exchange Act or Section 162(m).
(b) The Board may discontinue the Plan at any time.
(c) No amendment or discontinuance of the Plan shall adversely affect,
except with the consent of the holder, any Incentive theretofore granted.
14. Performance Goals
The Committee may establish performance goals or targets in connection with
the grant of, and as a condition to payment in respect of, Incentive Stock
Rights and shall establish performance goals or targets in connection with the
grant of, and as a condition to payment in respect of Performance Unit Awards.
Such goals or targets shall be expressed in terms of one or more of the
following financial criteria or objectives of the Company: Net Income; Earnings
Per Share; Return on Equity; Return on Invested Capital; or Performance Profit.
For purposes of the Plan:
(a) "Return on Equity" shall mean net income divided by stockholders'
equity;
(b) "Return on Invested Capital" shall mean net income before interest and
taxes times one minus the tax rate divided by interest-bearing debt plus
equity;
13
1991 Barnes Group Stock Incentive Plan
5/15/98
14
(c) "Performance Profit" shall mean operating income minus the charge for
the capital employed in the unit's basic business that is used in the
Company's current operating plan.
* * * * *
14
1991 Barnes Group Stock Incentive Plan
5/15/98