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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. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only (as permitted
[X] Definitive Proxy Statement by Rule 14a-6(e)(2))
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S) 240.14a-11(c) or (S) 240.14a-12
BARNES GROUP INC.
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(Name of Registrant as Specified In Its Charter)
BARNES GROUP INC.
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(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:
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(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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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
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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
[BARNES LOGO APPEARS HERE]
March 15, 2001
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD APRIL 12, 2001
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 Thursday, April 12, 2001, for the following purposes:
1. To elect three directors for a three-year term;
2. To approve the Barnes Group Inc. Performance-Linked Bonus Plan For Selected
Executive Officers;
3. To ratify the selection of PricewaterhouseCoopers LLP as independent
accountants for 2001; and
4. 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 15, 2001 will be
entitled to vote at the meeting.
Your vote is important. Please VOTE BY TELEPHONE 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 Directors for a Three-Year Term (Proxy Proposal 1)........... 1
The Board and Its Committees............................................. 3
Compensation of Directors................................................ 3
Stock Ownership by Directors and Executive Officers...................... 4
Section 16(a) Beneficial Ownership Reporting Compliance.................. 5
Beneficial Owners of More Than 5% of Shares.............................. 5
Audit Committee Report................................................... 6
Compensation and Management Development Committee Report................. 7
Compensation............................................................. 11
Stock Options............................................................ 12
Long-Term Incentive Plan Awards.......................................... 13
Pension Plans............................................................ 14
Employment Agreement..................................................... 15
Change-In-Control Agreements............................................. 16
Performance Graph........................................................ 17
Approval of the Barnes Group Inc. Performance-Linked Bonus Plan For
Selected Executive Officers (Proxy Proposal 2).......................... 17
Ratification of Selection of PricewaterhouseCoopers LLP as Independent
Accountants
(Proxy Proposal 3)...................................................... 19
Stockholder Proposals for 2002 Annual Meeting............................ 19
General.................................................................. 19
Annex I, Audit Committee Charter......................................... I-1
Annex II, Barnes Group Inc. Performance-Linked Bonus Plan For Selected
Executive Officers...................................................... II-1
PROXY STATEMENT FOR ANNUAL MEETING OF STOCKHOLDERS
APRIL 12, 2001
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 12, 2001 and at any
adjournment thereof. A stockholder who votes by telephone 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 15, 2001.
ELECTION OF DIRECTORS FOR A THREE-YEAR TERM (Proxy Proposal 1)
The Board of Directors Recommends a Vote "For" All Nominees.
Three directors are nominated for election at the 2001 Annual Meeting for a
three-year term (unless any of them earlier dies, resigns or is removed, as
provided in the Company's by-laws). John W. Alden, George T. Carpenter and
Frank E. Grzelecki are nominated for re-election to the Board of Directors for
terms expiring at the Annual Meeting in 2004. 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 four directors whose terms continue after the meeting is set forth below.
Robert J. Callander will retire as of the 2001 Annual Meeting, having reached
the mandatory retirement age of 70, as specified by the Board of Directors.
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 OF John W. Alden
J. ALDEN Director since 2000
APPEARS HERE] Current term expires 2001
Mr. Alden, 59, retired as Vice Chairman, United Parcel
Service of America, Inc. in 2000. He is a member of the
Finance Committee and the Compensation and Management
Development Committee of the Company's Board of Directors.
From 1986 to 1996, he served as Senior Vice President of
Business Development, and from 1988 until his retirement, as
a director, of United Parcel Service. He is a director of
Talus Solutions, Inc. based in Atlanta, Georgia.
[PHOTO OF George T. Carpenter
G. CARPENTER Director since 1985
APPEARS HERE] Current term expires 2001
Mr. Carpenter, 60, is President and a director 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
Corporate Governance Committee, and a member of the
Executive Committee and the Finance Committee of the
Company's Board of Directors.
1
[PHOTO OF Frank E. Grzelecki
F. GRZELECKI Director since 1997
APPEARS HERE] Current term expires 2001
Mr. Grzelecki, 63, is retired. He is Chairman of the Finance
Committee, and a member of the Executive Committee, the
Audit Committee, and the Compensation and Management
Development 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 director of Trenwick Group Ltd., an insurance holding
company.
Continuing Directors
[PHOTO OF Thomas O. Barnes
T. BARNES Director since 1978
APPEARS HERE] 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 of the
Company. Prior to joining the Company, he was President of
The Olson Brothers Company, a manufacturer of machined metal
parts.
[PHOTO OF Gary G. Benanav
G. BENANAV Director since 1994
APPEARS HERE] Current term expires 2003
Mr. Benanav, 55, 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 Compensation and Management Development Committee,
and a member of the Audit Committee, and the Corporate
Governance 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. From 1993 to 1996,
he was an Executive Vice President of Aetna Life and
Casualty Company. He is a director of Express Scripts, Inc.,
a full-service pharmacy benefit management company.
[PHOTO OF William S. Bristow, Jr.
W. BRISTOW Director since 1978
APPEARS HERE] Current term expires 2002
Mr. Bristow, 47, 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.
2
[PHOTO OF Edmund M. Carpenter
E. CARPENTER Director since 1998
APPEARS HERE] Current term expires 2002
Mr. Carpenter, 59, 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; Dana Corporation; and Texaco Inc.
Retiring Director
[PHOTO OF Robert J. Callander
R. CALLANDER Director since 1991
APPEARS HERE] Will retire as of the 2001 Annual Meeting of Stockholders
Mr. Callander, 70, retired as Vice Chairman of Chemical
Banking Corporation in 1992 and also served as Executive in
Residence at Columbia University School of Business until
June, 2000. He is Chairman of the Audit Committee, and a
member of the Compensation and Management Development
Committee, the Corporate Governance Committee, and the
Finance Committee of the Company's Board of Directors. He is
a director of ARAMARK Corporation; Spectrum Health Services,
Inc.; Omnicom Group, Inc., an advertising holding company;
and the Scudder New Asia, Global High Income, Argentina,
Brazil, and Korea Funds.
THE BOARD AND ITS COMMITTEES
In 2000, the Board of Directors held eight 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 2000. 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 the vacancies. 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
2000. 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 four meetings in 2000. 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 2002 Annual Meeting." The Corporate
Governance Committee held three meetings in 2000. All of these committees are
standing committees of the Board.
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
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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 2000,
each director other than Mr. E.M. Carpenter was granted stock options to
acquire 4,000 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 in increments of 25% over a four-
year period beginning with the first anniversary following the date of the
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 of Percent of
Name of Person Beneficial Common
or Group Ownership(1) Stock
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John W. Alden.......................................... 6,000 *
John R. Arrington...................................... 55,979 *
Thomas O. Barnes....................................... 628,458 3.4%
Gary G. Benanav........................................ 16,802 *
William S. Bristow, Jr................................. 375,304 2.0%
Robert J. Callander.................................... 19,448 *
Leonard M. Carlucci.................................... 173,938 *
Edmund M. Carpenter.................................... 229,743 1.2%
George T. Carpenter.................................... 162,526 *
William C. Denninger................................... 20,425 *
Signe S. Gates......................................... 36,245 *
Frank E. Grzelecki..................................... 13,000 *
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Directors & officers as a group (21 persons)........... 2,235,653 11.5%
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* 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 323,037 shares and no voting and shared investment power with respect
to 65,827 shares. Included in Mr. G.T. Carpenter's total are 136,446
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.
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/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. Arrington, Barnes, Carlucci, E.M. Carpenter, and
Denninger, and Ms. Gates, and the directors and officers as a group include
50,898, 56,700, 157,950, 173,546, 14,667, 31,999 and 873,259 shares,
respectively, which they have the right to acquire within 60 days after January
1, 2001. The shares listed for Messrs. Arrington, Barnes, Carlucci, E.M.
Carpenter, and Denninger and Ms. Gates, and the directors and officers as a
group also include 1,919, 5,414, 14,907, 1,782, 0, 1,251 and 91,618 shares,
respectively, over which they have voting power and limited investment power.
These shares are held under the Company's Guaranteed Stock Plan (an employee
stock ownership plan). The shares listed for Messrs. Alden, Barnes, Benanav,
Bristow, Callander, G.T. Carpenter, and Grzelecki 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, and the directors and
officers as a group do not include 37,200, 120,000, and 14,400 incentive stock
units, respectively, that they currently may have the right to receive on a
future date pursuant to Incentive Stock Right Agreements.
Except for the shares under the Non-Employee Director Deferred Stock Plan, 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").
Except for matters required to be submitted to stockholders, the Board of
Directors believes that the Company is controlled by its Board of Directors
acting as such.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
The Company believes that its officers and directors, and individuals who own
more than 10% of the outstanding shares of Common Stock, have complied in 2000
with the filing requirements of the Exchange Act, except that three reports
filed on behalf of Mr. Wallace Barnes concerning 15 transactions was not timely
filed.
BENEFICIAL OWNERS OF MORE THAN 5% OF SHARES
As of December 31, 2000, 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:
Amount and
Nature of Percent of
Name and Address Beneficial Common
of Beneficial Owner Ownership Stock
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Mr. Wallace Barnes/1/..................................... 2,005,014 10.8%
1875 Perkins Street
Bristol, Connecticut 06010
Fleet National Bank/2,3/.................................. 5,666,389 30.5%
777 Main Street
Hartford, Connecticut 06115
Gamco Investors, Inc./4/.................................. 1,109,125 6.0%
One Corporate Center
Rye, New York 10580
Notes to the above table:
/1/As of December 31, 2000, Mr. Wallace Barnes reported on a Schedule 13G filed
with the Securities and Exchange Commission (the "SEC") that he beneficially
owned 2,005,014 (10.8%) shares of Common Stock. According to such filing, he
has sole investment power with respect to 1,150,549 shares; and
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shared investment power with respect to 854,465 shares; and 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.
/2/As of December 31, 2000, Fleet National Bank ("Fleet") reported on a
Schedule 13G filed with the SEC that it was the beneficial owner of 2,225,882
(12.0%) shares of Common Stock. According to such filing, Fleet reported that
it had sole voting power with respect to 485,380 shares; sole investment
power with respect to 435,130 shares; and shared investment power with
respect to 1,742,066 shares.
/3/As of December 31, 2000, Fleet reported that it held 3,440,507 (18.5%)
shares of Common Stock in its capacity as trustee for the Company's
Guaranteed Stock Plan (an employee stock ownership plan). The plan provides
that the stock shall be voted by the Trustee as directed by the participants
in the plan. Fleet disclaims beneficial ownership of this stock.
/4/As of December 31, 2000, Gamco Investors, Inc. ("Gamco") reported that it
was the beneficial owner of 1,109,125 (6.0%) shares of Common Stock. Gamco
reported that it had sole voting and sole investment power with respect to
1,109,125 shares.
AUDIT COMMITTEE REPORT
To Our Fellow Stockholders at Barnes Group Inc.:
We, the members of the Audit Committee of the Board of Directors, are four
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 9, 2000, the Board of Directors, upon the Committee's
recommendation, amended the Audit Committee's charter to comply with new rules
of the New York Stock Exchange. A copy of the Committee's charter is attached
as Annex I to this Proxy Statement. In 2000, the Committee operated in
accordance with its charter.
The Committee holds regularly scheduled meetings three times a year for the
purpose of providing a forum for communication among the directors, the
Company's independent auditors, PricewaterhouseCoopers LLP
("PricewaterhouseCoopers"), 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.
6
The Committee reviewed aggregate fees billed by PricewaterhouseCoopers for the
year 2000 which are as follows:
Audit Fees.......................................... $ 703,200
Financial Information Systems Design and
Implementation Fees................................ 0
All Other Fees:
Mergers and Acquisitions.......................... $771,974
Other............................................. 546,183
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Total All Other Fees.............................. 1,318,157
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Total Fees.......................................... $2,021,357
==========
The Committee concluded that the non-audit services rendered in 2000 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, 2000, for filing with the Securities and
Exchange Commission. The Committee has also recommended to the Board that
PricewaterhouseCoopers be selected as the Company's independent accountants for
2001.
AUDIT COMMITTEE
Robert J. Callander, Chairperson
Gary G. Benanav
William S. Bristow, Jr.
Frank E. Grzelecki
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--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, gives Barnes Group's executive team a very strong financial
incentive to provide the balanced, profitable, sustainable growth that creates
economic value and stockholder wealth.
Barnes Group's annual 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 to encourage balanced,
profitable, sustainable growth.
7
During 2000, 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 annual salary from that date through February 29, 2000 of $550,000
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 $580,000 effective March 1, 2000. 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 Management Incentive Compensation Plan ("MICP").
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 2000, the performance measures were earnings per share, operating
profit after tax (less a charge for the capital employed by the applicable
business unit) and revenue, but may include 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 2000, 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.
The full amount of the annual bonus shown on page 11 for Mr. E.M. Carpenter was
determined in accordance with the MICP.
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
8
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 2000
were based on an increase in the value of performance units over the three-year
period from 1997 to 1999. 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 will continue uninterrupted, with the last three-year period ending on
December 31, 2001. In 2000, we utilized stock options as the stand-alone
vehicle for long-term incentives, to maximize the impact of stock price
appreciation on long-term compensation. Stock options incorporate a higher
level of risk than other forms of executive compensation, including the LTIP
they will supplant, and tie employees' long-term economic interests directly to
those of stockholders. No economic benefit is derived from stock options absent
stock price appreciation. These options will principally be granted under the
Employee Stock and Ownership Program. This plan allows for the use of several
long-term incentive vehicles, in addition to stock options.
Also beginning in 2000, we instituted stock ownership guidelines under which
every executive will be expected to hold a substantial ownership stake in the
Company. Ownership will include stock owned under the Barnes Group Inc.
Guaranteed Stock Plan and Employee Stock Purchase Plan. In contrast to some
companies' ownership programs, restricted stock, stock options, and performance
stock will be excluded until the related stock is directly owned.
The current stock ownership guidelines that apply to the top 42 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 five years
from date of hire or promotion for new executives. We will, at our discretion,
pay future amounts under the MICP or any successor plan in stock if the
guidelines are not met, or take other actions as we deem appropriate at that
time to ensure compliance.
The Committee currently grants stock options 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 2000, 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 determining the
size of the grant we considered the magnitude 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.
9
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 $1 million annually must be based on
stockholder-approved plans. The SIP, which was approved as amended and restated
in 1996, was designed to meet these requirements. The Employee Stock and
Ownership Program, which was approved in 2000, was also designed to meet these
requirements. As described in Proposal 2, approval is being requested for the
Barnes Group Inc. Performance-Linked Bonus Plan For Selected Executive
Officers, which, if approved, will replace the MICP as the short-term incentive
program for named executive officers who contribute to the success of the
Company, effective January 1, 2001 to qualify awards under this plan for
deductibility without limitation under the Code. Our present intention is to
comply with the requirements of Section 162(m) unless and until we determine
that compliance would not be in the best interest of the Company and its
stockholders.
COMPENSATION AND MANAGEMENT
DEVELOPMENT COMMITTEE
Gary G. Benanav, Chairman
John W. Alden
Robert W. Callander
Frank E. Grzelecki
10
COMPENSATION
The following table sets forth compensation paid by the Company to the Chief
Executive Officer and to the four other most highly paid persons who were
executive officers at the end of 2000 (the "named executive officers").
SUMMARY COMPENSATION TABLE
Annual Compensation Long-Term Compensation
--------------------------- --------------------------------
Awards/3/ Payouts
--------------------- ----------
Other Restricted Securities
Annual Stock Underlying All Other
Name and Principal Compen- Awards/4/ Options LTIP Compen-
Position/1/ Year Salary Bonus sation/2/ ($) (#) Payouts/5/ sation/6/
- ------------------ ---- -------- -------- --------- ---------- ---------- ---------- ---------
E.M. Carpenter 2000 $575,008 $808,605 $143,713 $ -0- 280,280 $ 92,208 $175,250
President and Chief 1999 550,000 275,000 60,703 -0- 128,200 -0- 80,860
Executive Officer 1998 38,077 -0- 54,247 3,712,500 75,000 -0- 66,302
L.M. Carlucci 2000 321,668 368,770 22,514 -0- 72,000 103,734 28,990
Vice President, Barnes 1999 307,038 336,686 67,633 -0- 66,300 163,191 105,901
Group Inc. 1998 262,100 102,752 21,887 -0- 30,000 129,870 30,104
and President,
Associated Spring
J.R. Arrington 2000 249,170 210,237 21,151 -0- 56,463 100,740 24,712
Senior Vice President, 1999 236,108 10,035 21,515 -0- 26,400 -0- 31,035
Human Resources 1998 166,442 103,860 44,371 -0- 39,000 -0- 84,839
S.S. Gates 2000 236,670 199,690 17,340 -0- 55,473 33,580 20,606
Senior Vice President, 1999 131,250 52,500 18,383 -0- 54,784 -0- 66,132
General Counsel and
Secretary
W.C. Denninger 2000 207,310 174,918 18,318 -0- 74,000 -0- 21,504
Senior Vice President,
Finance
and Chief Financial
Officer
Notes to the above table:
/1/Ms. Gates joined the Company in June 1999; accordingly, no information for
1998 is provided for her. Mr. Denninger joined the Company in March 2000;
accordingly, no information for 1999 or 1998 is provided for him.
/2/Other annual compensation consists of reimbursement for taxes paid on
perquisites, including life insurance premiums, financial planning services
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 incentive stock units that were granted to
Mr. E.M. Carpenter in 1998 in accordance with his Employment Agreement.
/4/Messrs. Carlucci and E.M. Carpenter were each awarded an incentive stock
right consisting of incentive stock units in the amounts and on the dates
noted as follows: Mr. Carlucci, 23,250 on 2/16/96; and Mr. E.M. Carpenter,
60,000 on 12/8/98. Incentive stock units are denominated in shares of Common
Stock. The right awarded to Mr. Carlucci entitles him to receive, without
payment to the Company, shares of Common Stock equal to the number of
incentive stock units credited to him on the date five years from the date of
the award, provided that he is an employee of the Company on that date. Units
underlying these rights were credited to Mr. Carlucci as of the date of the
award. The right awarded to Mr. E.M. Carpenter entitles him to receive,
without payment to the Company, shares of Common Stock equal to the number of
incentive stock units credited to him on the third and fifth anniversaries of
the date of the award, provided, in each case, that he is an employee of the
Company on such anniversary. In addition, Messrs. Carlucci and E.M. Carpenter
were each awarded an additional incentive stock right consisting of incentive
stock units in the amounts and on the dates noted as follows: Mr. Carlucci,
23,250 on 2/16/96; and Mr. E.M. Carpenter, 60,000 on 12/8/98. The right
awarded to each executive entitles him to receive, without payment to the
Company, shares of Common Stock equal to the number of incentive stock units
credited to him on the fifth anniversary of the date of the award, and with
regard to Mr. E.M. Carpenter's right, the number of incentive stock units
credited to him on the third anniversary of the date of his
11
award, provided that, in each case with respect to each executive, the
executive is an employee of the Company on that date and that specified
performance targets for the Company's earnings per share are met. Units
underlying these rights are credited in increments to each executive over the
term of the award in accordance with a schedule based on the attainment by the
Company of specified levels of earnings per share. Pursuant to the terms of
the awards described above, each executive is credited with dividend
equivalents on all incentive stock units credited to him based upon dividends
paid on outstanding shares of Common Stock. Such dividend equivalents, once
credited, are converted into a number of additional incentive stock units, as
of each dividend payment date, equal to the amount of dividends that would
have been paid on the number of shares of Common Stock equal to the number of
incentive stock units credited to the executive 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, 2000, Messrs. Carlucci and E.M.
Carpenter were credited with 43,069 and 78,280 incentive stock units,
respectively, having a value at $19.88 per share as of December 31, 2000, of
$856,212 and $1,556,206, respectively.
/5/Payment in the designated year with respect to the three-year performance
period ending the prior year. Thus, the payment made in 2000 covered the
three-year period ending in 1999.
/6/Includes matching contributions by the Company under the Guaranteed Stock
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. Carlucci for 1999 is $71,093 for the
reimbursement of moving expenses paid by the Company in 1999.
STOCK OPTIONS
The following table provides information on grants of stock options in 2000
pursuant to the 1991 Barnes Group Stock Incentive Plan and the Employee Stock
and Ownership Program to the executive officers listed in the Summary
Compensation Table.
OPTION GRANTS IN 2000
Number of Percent of Potential Realizable Value at
Securities Total Assumed Annual Rates of Stock
Underlying Options Price Appreciation to End of
Options Granted to Exercise Market Price Option Term in 2010/3/
Granted/1/,/2/ Employees Price on Date of Expiration -----------------------------
Name (#) in 2000 ($/Sh)/4/ Grant ($/Sh) Date 0% 5% 10%
- ----------------- -------------- ---------- --------- ------------ ---------- ------- ---------- ----------
E.M. Carpenter 230,000 19.0% $16.9375 $14.0625 2/10/10 $ -0- $1,372,824 $4,493,510
E.M. Carpenter/5/ 25,234 2.1% 19.6875 19.6250 2/10/10 -0- 309,863 787,672
E.M. Carpenter/5/ 25,046 2.1% 19.2500 19.0000 2/10/10 -0- 293,013 752,159
L.M. Carlucci 72,000 6.0% 16.9375 14.0625 2/10/10 -0- 429,754 1,406,664
J.R. Arrington 55,000 4.6% 16.9375 14.0625 2/10/10 -0- 328,284 1,074,535
J.R. Arrington/5/ 757 0.1% 19.6875 19.6250 2/10/10 -0- 9,296 23,630
J.R. Arrington/5/ 706 0.1% 19.6250 19.0000 2/10/10 -0- 7,995 20,937
S.S. Gates 55,000 4.6% 16.9375 14.0625 2/10/10 -0- 328,284 1,074,535
S.S. Gates/5/ 473 0.0% 18.7500 18.8750 2/10/10 -0- 5,674 14,288
W.C. Denninger/1/ 30,000 2.5% 14.4000 16.9375 4/11/10 92,941 395,682 885,945
W.C. Denninger 44,000 3.6% 16.9375 16.9375 4/11/10 -0- 468,684 1,187,736
Notes to the above table:
/1/Mr. Denninger joined the Company in March 2000 and, accordingly, received on
April 11, 2000 options under the 1991 Barnes Group Inc. Stock Incentive Plan
and the Employee Stock and Ownership Program, subject to stockholder approval
of such Program. All other grants of stock options to the named executives in
2000 were pursuant to the Employee Stock and Ownership Program.
/2/Options under the 1991 Barnes Group Stock Incentive Plan become exercisable
in increments of 25% over a four-year period beginning with the first year
anniversary following the date of the grant. Options under the Employee Stock
and Ownership Program for Salary Grade 21 and above become exercisable at the
rate of 33 1/3% on the sixth, eighteenth and thirtieth months following the
date of the grant.
12
/3/With respect to options expiring on February 10, 2010, the stock price per
share in 2010 would be $14.0625 based on 0% annual appreciation from the
market price on the date of the grant, $22.9063 based on 5% annual
appreciation, and $36.47454 based on 10% annual appreciation. With respect to
options expiring on April 11, 2010, the stock price per share in 2010 would
be $16.9375 based on 0% annual appreciation from the market price on the date
of the grant, $27.5894 based on 5% annual appreciation, and $43.9315 based on
10% annual appreciation. The preceding calculations are not intended to be a
prediction by the Company of the price of its shares in the future.
/4/Options granted on February 10, 2000, and options granted to Mr. Denninger
under the Employee Stock and Ownership Program have an exercise price equal
to the Fair Market Value of a share of Common Stock on April 12, 2000, the
date when the Employee Stock and Ownership Program was approved by the
stockholders.
/5/These option grants were made pursuant to the reload provisions under the
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.
The following table provides information relating to stock option exercises in
2000 by the named executive officers and the number and value of each such
officer's unexercised in-the-money options on December 29, 2000, based on the
difference between the exercise price and the $19.8750 per share year-end
market price of the Common Stock.
AGGREGATED OPTION EXERCISES IN 2000 AND YEAR-END OPTION VALUES
Number of Securities Value of Unexercised
Underlying Unexercised In-The-Money Options
Shares Options at Fiscal Year-End(#) At Fiscal Year-End($)
Acquired on Value -------------------------------- -------------------------
Name Exercise(#) Realized($) Exercisable Unexercisable Exercisable Unexercisable
- -------------- ----------- ----------- -------------- --------------- ----------- -------------
E.M. Carpenter 55,001 $139,351 141,496 286,983 $ 97,971 $492,241
L.M. Carlucci -0- -0- 81,975 118,125 170,969 162,630
J.R. Arrington 1,559 4,062 44,298 75,966 52,613 116,319
S.S. Gates 504 914 31,999 77,754 54,520 112,544
W.C.Denninger -0- -0- 14,667 59,333 43,084 250,416
LONG-TERM INCENTIVE PLAN AWARDS
The following table provides information relating to grants of performance
units in 2000 under the LTIP.
LONG-TERM INCENTIVE PLANS--AWARDS IN 2000
Number of Performance or
Shares, Units Other Period
or Other Until Maturation
Name Rights(#) or Payout/1/
-------------- ------------- ----------------
J.R. Arrington 50,943 1997-1999/2/
W.C. Denninger 62,515 1998-2000
W.C. Denninger 46,156 1999-2001
Notes to the above table:
/1/Under the LTIP, there are no thresholds, targets or maximums as those terms
are used in the Securities and Exchange Commission's rules. Payments are
based on the increase in the value of performance units during the indicated
performance period and, for the named executives above, are prorated based
upon their hire date with the Company. The value of a performance unit over
the three-year periods ending December 31, 1999 and 2000 increased by $3.39
and $2.29, respectively. However, this is not necessarily representative of
the increase, if any, that will occur during the period 1999-2001. Payments
under the LTIP made in the prior three years are shown in the Summary
Compensation Table.
/2/Units were granted in 2000, retroactively, for the 1997-1999 period,
consistent with the LTIP and other grants for such period.
13
PENSION PLANS
The following table gives examples of estimated annual retirement benefits
payable to a named executive officer as though he had retired in 2000 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
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. E.M. Carpenter, Arrington, Carlucci, and Denninger, and Ms. Gates all
participate in the Company's Supplemental Senior Officer Retirement Plan. The
following table gives examples of estimated annual retirement benefits payable
under the Company's Supplemental Senior Officer Retirement Plan to each of
these executive officers as though he/she had retired in 2000 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
14
The compensation included in determining earnings for the Supplemental Senior
Officer Retirement Plan includes only annual 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, 2000, rounded to the nearest whole year,
for the named executive officers are as follows: E.M. Carpenter, 2 years; L.M.
Carlucci, 25 years; J.R. Arrington, 3 years; S.S. Gates, 2 years; and W.C.
Denninger, 1 year.
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.
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
15
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. J.R. Arrington, May 15, 1998; Ms. S.S. Gates,
June 1, 1999; and Mr. W.C. Denninger, March 31, 2000. Each of the CIC
Agreements has an initial term which ended on December 31, 1999 or, in the
cases of Ms. Gates and Mr. Denninger, 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
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.
16
PERFORMANCE GRAPH
A stock performance graph based on cumulative total returns (price change plus
reinvested dividends) for $100 invested on December 31, 1995 is set forth
below.
[PERFORMANCE GRAPH APPEARS HERE]
BGI S&P 600 Russell 2000
----- ------- ------------
1995 100.0 100.0 100.0
1996 172.8 121.3 116.5
1997 201.6 152.3 142.5
1998 265.7 150.3 139.3
1999 154.0 169.0 169.0
2000 196.5 188.9 164.1
APPROVAL OF THE BARNES GROUP INC. PERFORMANCE-LINKED BONUS PLAN FOR SELECTED
EXECUTIVE OFFICERS (PROXY PROPOSAL 2)
The Board of Directors Recommends a Vote "For" This Proposal.
Current regulations under the Internal Revenue Code (the "Code") limit the
deductibility by the Company of certain types of compensation provided to
executive officers. Under these regulations, which are included in Section
162(m) of the Code, the deductibility of performance-based compensation can be
preserved if the Company meets certain conditions. One of these conditions is
that the performance-based plan under which the compensation will be paid must
be disclosed to and approved by stockholders. Another is that the performance-
based plan must be administered by a committee of not less than two directors
who are not employees of the Company and such committee must be comprised
solely of directors who are "outside directors" within the meaning of the Code.
The Barnes Group Inc. Performance-Linked Bonus Plan For Selected Executive
Officers (the "Plan") is being submitted to stockholders for approval so that
the compensation paid pursuant to the Plan will qualify as "performance-based"
as defined in Section 162(m) of the Code. The Plan will be administered by the
Compensation and Management Development Committee of the Board of Directors of
the Company (the "Committee"). The description of the Plan terms that follows
is subject to and qualified by reference to the complete text of the Plan set
forth in Annex II to this Proxy Statement. Approval of the Plan requires a
plurality of the votes cast for Proposal 2.
17
Payment of any awards pursuant to the Plan is contingent on stockholder
approval of the Plan. If such approval is not obtained, no such awards will be
paid pursuant to the Plan.
The persons who are eligible to be selected by the Committee to participate in
the Plan are executive officers of the Company whose annual incentive
compensation for any taxable year of the Company commencing on or after January
1, 2001 the Committee anticipates would not be deductible by the Company in
whole or in part unless the incentive compensation qualifies as "performance-
based" under section 162(m)(4)(C) of the Code. An eligible executive officer
may (but need not) be selected to participate each year. For 2001, subject to
stockholder approval, two executive officers, Messrs. E.M. Carpenter and
Carlucci, are eligible to participate in the Plan. However, approximately 500
other executive officers and employees of the Company are eligible to be
selected to participate in similar annual incentive compensation arrangements
on terms that are generally less restrictive than the Plan terms.
Under the Plan, participants are awarded the opportunity to receive specified
payments after the close of each Award Period if specified performance
objectives established by the Committee are attained during the Award Period.
Payment of any Award will be contingent upon the Committee's certifying in
writing that the performance level applicable to such Award were in fact
satisfied. Unless and until the Committee so certifies, no Award will be paid.
The Committee may not increase the amount of an Award upon satisfaction of the
performance level. Except for Plan participants who retire, die or become
permanently disabled during the year, whose Award will be prorated to the date
of such retirement, death or permanent disability, a participant must be
employed by the Company on the date of payment of an Award. Unless the
Committee determines otherwise, all payments pursuant to the Plan are to be
made in cash.
No later than 90 days after the start of each year commencing on or after
January 1, 2001 (or by such other deadline as may apply under the Code), the
Committee will select the persons who will participate in the Plan in such year
and establish in writing the performance goals for that year as well as the
method for computing the amount of compensation which each such participant
will be paid if such performance goals are attained in whole or in part. Such
method will be stated in terms of an objective formula or standard that
precludes discretion to increase the amount that will be due upon attainment of
the goals.
Under the Plan, the performance goals for any Award Period may be based on any
of the following criteria, either alone or in any combination, and on either a
consolidated Company, consolidated Group, business unit or divisional level, as
the Committee may determine: 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 criteria shall be determined in accordance with generally
accepted accounting principles, except to the extent the Committee directs
otherwise 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 criterion or
combination of such criteria may apply to the participant's Award opportunity
in its entirety or to any designated portion or portions of the Award
opportunity, as the Committee may specify. Unless the Committee determines
otherwise at any time prior to payment of a participant's Award for an 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
criterion applicable to the Award (including but not limited to the criterion
of earnings per share) shall be automatically excluded or included in
determining the extent to which the Performance level has been achieved,
whichever will produce the higher Award.
18
This provision is included in the Plan because awards may qualify as
"performance-based compensation" under Section 162(m) of the Code if the
Committee has discretion to reduce an award, but not if the Committee has
discretion to increase an award.
The Committee may amend or terminate the Plan without stockholder approval at
any time. Certain amendments may require reapproval of the Plan by stockholders
for the performance-based compensation to continue to qualify for deductibility
by the Company, as specified by the Code.
RATIFICATION OF SELECTION OF PRICEWATERHOUSECOOPERS LLP AS INDEPENDENT
ACCOUNTANTS (PROXY PROPOSAL 3)
The Board of Directors Recommends a Vote "For" This Proposal.
Although not required by the Certificate of Incorporation or by-laws, it has
been the Company's practice for many years to have the stockholders act on a
proposal of the Board of Directors relating to the selection of independent
accountants. Ratification of such proposal requires a plurality of the votes
cast for Proposal 3. Otherwise, the Company may select other independent
accountants as recommended by the Audit Committee of the Board of Directors. A
representative of PricewaterhouseCoopers LLP 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.
STOCKHOLDER PROPOSALS FOR 2002 ANNUAL MEETING
The Board of Directors requests that any stockholder who wishes to recommend
nominees for directors submit names of such nominees in writing to the
Secretary of the Company at its address given above prior to December 1, 2001.
Stockholders wishing to submit proposals for inclusion in the Company's proxy
statement and form of proxy for the 2002 Annual Meeting of Stockholders must
submit proposals to the Company at such address by December 1, 2001.
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
2002 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
13, 2001 and January 12, 2002. 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 12, 2002 will not be considered "timely" under the
federal proxy rules for the purpose of determining whether the Company may use
discretionary authority 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 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.
19
The Company had outstanding 18,610,326 shares of Common Stock as of February
15, 2001, each of which is entitled to one vote. Only holders of record at the
close of business on February 15, 2001 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, 2 and 3 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 15, 2001
20
ANNEX I
BARNES GROUP INC.
CHARTER
AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
The Board of Directors of Barnes Group Inc. hereby sets forth a Charter for its
Audit Committee, with membership and specific responsibilities as outlined
below:
Membership
The Audit Committee shall comprise at least three directors. None of the
members of the Audit Committee shall be an employee of the Company, and all
shall be free from any relationship to the Company that may interfere with the
exercise of their independence from management and the Company and shall meet
the criteria set forth in Section 303.01(B)(3) of the listing standards of the
New York Stock Exchange. All members of the Audit Committee shall be
financially literate and at least one member shall have accounting or related
financial management expertise, as such qualifications are interpreted by the
Board of Directors in its business judgment.
Responsibilities
The Board of Directors intends the Audit Committee to serve as its focal point
for the general oversight of Company affairs in the area of financial
accounting, reporting, and the underlying internal controls. The Company's
outside auditors are ultimately accountable to the Board of Directors and the
Audit Committee, and the Audit Committee and the Board of Directors shall have
the ultimate authority and responsibility to select, evaluate and, when
appropriate, replace the outside auditors. Through its activities, the Audit
Committee will facilitate open communication among directors, the Company's
independent accounting firm, the Company's internal audit function, and
corporate management.
The Audit Committee will assist the directors in discharging their fiduciary
responsibilities to shareholders, providing assurance as to the independence of
the Company's outside auditors and the adequacy of disclosure to shareholders
and to the public.
Specifically, the Audit Committee will:
1. Hold regularly scheduled meetings in February, April and October of
each year, and other meetings from time to time as called pursuant to
the Company's by-laws. A majority shall constitute a quorum of the
Audit Committee. A majority of the members in attendance shall decide
any question brought before any meeting of the Audit Committee.
2. Recommend to the Board of Directors, annually, the appointment of a
firm of independent public accountants as the Company's outside
auditors.
3. Ensure that the outside auditors submit periodically a formal written
statement to the Audit Committee delineating all relationships between
the auditors and the Company that includes the written disclosures and
the letter from the auditors required by Independence Standards Board
Standard No. 1, Independence Discussions with Audit Committees, as it
may be modified or supplemented. The Audit Committee shall discuss with
the auditors the auditors' independence and actively engage in a
dialogue with the auditors with respect to any disclosed relationships
or services that may impact the auditors' objectivity and independence,
and, in response to the auditors' report, the Audit Committee shall
recommend such actions as it deems appropriate to the Board of
Directors, to satisfy itself of the outside auditors' independence.
4. After December 15, 2000, make a recommendation to the Board of
Directors as to whether the Company's audited financial statements
should be included in the Company's Annual Report on Form 10-K for
filing with the Securities and Exchange Commission.
I-1
5. Beginning with the proxy statement for the Company's first annual
meeting of stockholders held after December 15, 2000, approve the
report of the Audit Committee to be included in the Company's proxy
statement for its annual meeting of stockholders.
6. Review with representatives of the independent accountants:
. The independent accountants' review of the Company's interim financial
statements to be included in the Company's Quarterly Reports on Form
10-Q, as the Audit Committee or its chairman deems necessary.
. The matters required to be discussed by Statement of Auditing
Standards 61, as it may be modified or supplemented.
. The plan for and scope of its annual audit of the Company's financial
statements.
. The results of the annual audit.
. Any recommendations with respect to internal controls and other
financial matters, including any perceived weaknesses in the Company's
internal controls, policies, and procedures.
. Any significant changes proposed by management in the basic accounting
principles and reporting standards used in the preparation of the
Company's financial statements.
7. Review any services outside of the audit area performed for the
Company by its independent accountants.
8. Review and approve the fees proposed by the Company's independent
accountants for their services.
9. Review and discuss the Company's audited financial statements with
management.
10. Review the work of the Company's internal audit department with the
Director, Internal Audit, including management's responses to
recommendations made and plans for future audit coverage.
11. Review from time to time the financial impact of material litigation
and related matters. Also review from time to time the suitability,
reliability and security of the Company's information technology
management systems.
12. Review compliance by officers and employees with the Company's
Corporate Compliance Program, and with the Company's environmental,
health and safety policies.
13. Determine from time to time whether management has sought a second
opinion regarding a significant accounting issue, and, if so, obtain
the rationale for the particular accounting treatment chosen.
14. Make such other recommendations to the Board of Directors on such
matters, within the scope of the Committee's functions, as may come to
its attention and which in its discretion warrant consideration by the
Board of Directors.
15. Annually, review and assess the adequacy of this Charter. Also affirm
to the New York Stock Exchange in writing, annually and at such other
times as there are changes in the composition of the Audit Committee,
such annual review and assessment of the adequacy of this Charter; and
the Board of Directors' determination of the independence and
financial literacy of the Audit Committee members, and the accounting
or related financial management expertise of at least one such member.
16. The Chairman of the Audit Committee will from time to time and, at
least annually, review the expense accounts of the Chairman and the
Chief Executive Officer.
I-2
ANNEX II
BARNES GROUP INC.
PERFORMANCE-LINKED BONUS PLAN
FOR SELECTED EXECUTIVE OFFICERS
Section 1. Purpose
The Performance-Linked Bonus Plan For Selected Executive Officers (the "Plan")
is designed to provide cash incentive compensation opportunities to key
executives that contribute to the success of Barnes Group Inc. (the "Company")
and its subsidiaries. All employees (a) who are executive officers of the
Company, (b) whose incentive compensation for any taxable year(s) of the
Company commencing on or after January 1, 2001 the Committee (as hereafter
defined) anticipates may not be deductible by the Company in whole or in part
but for compliance with section 162(m)(4)(C) of the Internal Revenue Code of
1986 as amended (the "Code"), and (c) who are selected to participate in the
Plan, including members of the Board of Directors of the Company who are such
employees, are eligible to participate in the Plan.
Section 2. Administration
The Plan shall be administered by the Compensation and Management Development
Committee of the Board of Directors of the Company, or its successor (the
"Committee"). The Committee shall consist of not less than two directors who
are not employees of the Company or any subsidiary of the Company and shall be
comprised solely of directors who are "outside directors" within the meaning of
Section 162(m)(4)(C)(i) of the Code. The Committee shall have authority,
subject to the provisions of the Plan, to: select employees to participate in
the Plan; establish and administer the performance objectives and the Award
opportunities applicable to each participant and certify whether the goals have
been attained; construe and interpret the Plan and any agreement or instrument
entered into under the Plan; establish, amend, and waive rules and regulations
for the Plan's administration; and make all other determinations which may be
necessary or advisable for the administration of the Plan. Any determination by
the Committee pursuant to the Plan shall be final, binding and conclusive on
all employees and participants and anyone claiming under or through any of
them. Amounts paid or projected to be paid under the Plan are referred to
herein as "Awards."
Section 3. Definitions
3.1 "Award Period" shall mean the period of time within which Performance is
measured for the purpose of determining whether an Award has been earned.
3.2 "CEO" shall mean the President and Chief Executive Officer of the Company.
3.3 "Covered Employee" shall have the meaning set forth in Section 162(m) of
the Code.
3.4 "Group" shall mean the Executive Office, Associated Spring, Barnes
Distribution, or Barnes Aerospace, or any business unit, division, or
similar collection of cost centers, profit centers, or international
subsidiaries that may be recognized as such by the Committee.
3.5 "Individual Target" shall mean a percentage of salary for each individual
participating in the Plan. The Committee will establish the Individual
Target for each participant no later than the earlier of (a) 90 days after
the start of the Award Period or (b) a date on which no more than one
fourth of the Award Period has elapsed.
3.6 "Maximum" shall mean a Performance level at or above which the amount paid
or projected to be paid for an Award Period is equal to such maximum
percentage of the Individual Targets as may be established by the
Committee for each participant no later than the earlier of (a) 90 days
after the start of the Award Period or (b) a date on which no more than
one fourth of the Award Period has elapsed.
II-1
3.7 "Performance" shall mean the performance objectives established by the
Committee in advance, in writing, in terms of an objective formula or
standard, with respect to each Group for an Award Period, for the purpose
of determining whether, and to what extent, an Award has been earned by
the Group for such Award Period. The terms of the objective formula or
standard shall preclude discretion to increase the amount of the Award
that would otherwise be due upon attainment of the Performance level.
Performance objectives shall consist of targeted levels, 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: 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 criteria shall be determined in
accordance with generally accepted accounting principles, except to the
extent the Committee directs otherwise within the earlier of (a) 90 days
after the start of the Award Period or (b) 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 criterion or combination of
such criteria may apply to the participant's Award opportunity in its
entirety or to any designated portion or portions of the Award
opportunity, as the Committee may specify. Unless the Committee determines
otherwise at any time prior to payment of a participant's Award for an
Award Period and subject to the Committee's right to exercise negative
discretion pursuant to Section 6.1, 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
criterion applicable to the Award (including but not limited to the
criterion of earnings per share) shall be automatically excluded or
included in determining the extent to which the Performance level has been
achieved, whichever will produce the higher Award.
3.8 "Target" shall mean a Performance level above the Threshold and below the
Maximum at which the amount paid or projected to be paid for an Award
Period is equal to 100% of the Individual Targets for the members of the
corresponding Group.
3.9 "Threshold" shall mean a Performance level at or above which an Award is
earned for an Award Period. For Threshold Performance, the amount paid or
projected to be paid for an Award Period is equal to such minimum
percentage of the Individual Targets as may be established by the
Committee no later than the earlier of (a) 90 days after the start of the
Award Period or (b) a date on which no more than one fourth of the Award
Period has elapsed.
Section 4. Group Performance Levels
If an Award Period is a calendar year, prior to March 31, the Committee shall
establish the Threshold, Target and Maximum for each Group, and the method for
computing the Award for each participant in the Group for such year if the
Threshold, Target or Maximum is attained. If an Award Period is not a calendar
year, then the Committee shall establish in writing no later than the earlier
of (a) 90 days after the start of the Award Period or (b) a date on which no
more than one fourth of the Award Period has elapsed, the Threshold, Target and
Maximum for each Group and the method for computing the Award for each
participant in the Group for such Award Period if the Threshold, Target or
Maximum is attained. The Committee may also designate one or more intermediate
levels of Performance between the Threshold and the Target, and the Target and
the Maximum, for a Group, and the percentage of the corresponding Individual
Targets that will be available for payment as an Award if Performance equals
such intermediate level.
II-2
Section 5. Participants
If an Award Period is a calendar year, prior to March 31, the Committee shall
designate the eligible participants and the respective Groups in which they
shall participate. The CEO shall participate in the Executive Office Group for
each Award Period. If an Award Period is not a calendar year, then the
Committee shall designate the eligible participants, and the respective Groups,
no later than the earlier of (a) 90 days after the start of the Award Period or
(b) a date on which no more than one fourth of the Award Period has elapsed.
Except for Plan participants who retire, die or become permanently disabled
during the year, whose Award shall be prorated to the date of such retirement,
death or permanent disability, a person must be employed by the Company or one
of its subsidiaries on the date of payment of an Award in order to be eligible
to receive an Award.
Section 6. Awards
6.1 After the end of the Award Period and based on the final Performance of
each Group, the Committee shall determine the Award for each participant,
based in all instances on the participant's Individual Target and the
Performance level achieved. No provision of the Plan shall preclude the
Committee from exercising negative discretion with respect to any Award
hereunder, within the meaning of Treasury Regulation Section 1.162-
27(e)(2)(iii)(A).
6.2 Subject to Section 7, the Committee shall have the authority to refrain
from making an Award to any participant.
Section 7. Limitations
Notwithstanding anything in the Plan to the contrary, no Award in excess of the
calculated Award shall be made to any Covered Employee under any circumstances.
Awards at Target shall be greater than Awards at Threshold and less than Awards
at Maximum.
Regulations under Section 162(m) of the Internal Revenue Code of 1986, as
amended, require that a maximum individual Award be established for any Awards
to Covered Employees that are intended to qualify as performance-based
compensation. For purposes of qualifying Awards as performance-based
compensation under such regulations, notwithstanding anything in the Plan to
the contrary, no Award in excess of $7 million shall be paid to any Covered
Employee for services rendered in any calendar year.
Section 8. Payment of Awards
Payment of any Award shall be contingent upon approval by the stockholders of
the Company, prior to payment, of the material terms under which the Award is
to be paid, in accordance with Section 162(m)(4)(C)(ii) of the Code and the
related Treasury regulations. Unless and until such stockholder approval is
obtained, no Award shall be paid.
Payment of any Award shall also be contingent upon the Committee's certifying
in writing that the Performance level and any other material terms applicable
to such Award were in fact satisfied, in accordance with Section
162(m)(4)(C)(iii) of the Code and the related Treasury regulations. Unless and
until the Committee so certifies, such Award shall not be paid.
Awards shall be paid in cash within 75 days after the expiration of the Award
Period, unless otherwise decided by the Committee.
II-3
Section 9. General
9.1 The interpretation of the Plan by the Committee and its decisions on all
questions arising under the Plan shall be conclusive and binding on all
Plan participants.
9.2 The Plan may be amended at any time, including retroactively, by the
Committee.
9.3 The Plan supersedes all prior incentive plans, including without limitation
the Management Incentive Compensation Plan, for all participants, effective
as of January 1, 2001 for the Award Period of calendar year 2001 and Award
Periods thereafter.
9.4 Any provision of the Plan to the contrary notwithstanding, (a) Awards to
Covered Employees under the Plan are intended to qualify as performance-
based compensation under Code Section 162(m)(4)(C), and (b) any provision
of the Plan that would prevent an Award to any Covered Employee from so
qualifying shall be administered, interpreted and construed to carry out
such intention and any provision that cannot be so administered,
interpreted and construed shall, to that extent, be disregarded. No
provision of the Plan, nor the selection of any eligible employee to
participate in the Plan, shall constitute an employment agreement or affect
the duration of any participant's employment, which shall remain
"employment at will" unless an employment agreement between the Company and
the participant provides otherwise. Both the participant and the Company
shall remain free to terminate employment at any time to the same extent as
if the Plan had not been adopted.
II-4
Barnes Group Inc.
Executive Office
123 Main Street
Post Office Box 489
Bristol, Connecticut 06011-0489 U.S.A.
[BARNES LOGO APPEARS HERE]
2001 - BARNES GROUP INC.
ANNUAL MEETING OF STOCKHOLDERS
APRIL 12, 2001 - 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 12, 2001, 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, 2 and 3 and otherwise in her discretion.
THIS CARD ALSO PROVIDES CONFIDENTIAL VOTING INSTRUCTIONS FOR SHARES HELD IN
THE BARNES GROUP INC. GUARANTEED STOCK 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 Fleet National Bank, as
Trustee of the Barnes Group Inc. Guaranteed Stock 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 two 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 their toll-free telephone number: 1-800-840-
1208 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 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 MAIL: Mark, sign and date your proxy and return it promptly in
------------
the enclosed envelope. Please sign exactly as the name(s) appear 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
Please mark
2001-BARNES GROUP INC.-PROXY 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) John W. Alden to the contrary) nominees listed
(02) George T. Carpenter and to the left
(03) Frank E. Grzelecki
(INSTRUCTION: To withhold authority to vote for any individual nominee, write
that nominee's name on the space provided below.)
2. APPROVAL OF THE BARNES GROUP INC. FOR AGAINST ABSTAIN
PERFORMANCE-LINKED BONUS PLAN [ ] [ ] [ ]
FOR SELECTED EXECUTIVE OFFICERS:
3. RATIFICATION OF SELECTION OF [ ] [ ] [ ]
PRICEWATERHOUSECOOPERS LLP AS
INDEPENDENT ACCOUNTANTS.
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, 2 AND 3.
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
(Residents of the U.S.A. and Canada only)
Your telephone 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. If
you vote by telephone, you do not need to mail your proxy. Voting by telephone
rather than by mail will help to reduce the Company's costs.
TO VOTE BY TELEPHONE (FOR TOUCH TONE TELEPHONES ONLY):
. Dial the following toll-free telephone number AT ANYTIME: 1-800-840-1208
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 0. You
will hear the following instructions:
Proposal 1: Election of Directors
- To vote FOR ALL nominees, press 1;
- To WITHHOLD FOR ALL nominees, press 9;
- To WITHHOLD FOR AN INDIVIDUAL nominee, press 0 and follow the
instructions.
- If you press 0, enter the TWO-DIGIT NUMBER that precedes the
nominee(s)' name for whom you withhold your vote, then press 0.
Proposal 2: Approval of the Barnes Group Inc. Performance-Linked Bonus Plan For
Selected Executive Officers.
- To vote FOR, press 1;
- To vote AGAINST, press 9;
- To ABSTAIN from voting, press 0.
Proposal 3: Ratification of selection of PricewaterhouseCoopers LLP as
independent accountants.
- To vote FOR, press 1;
- To vote AGAINST, press 9;
- To ABSTAIN from voting, press 0.
Your vote will be confirmed and cast as you directed. END OF CALL.
IF YOU VOTE BY TELEPHONE,
PLEASE DO NOT MAIL BACK YOUR PROXY,
THANK YOU FOR VOTING.
CALL, TOLL-FREE, ANYTIME
1-800-840-1208