[TOP OF FRONT COVER OF PROXY]
Barnes Group Inc.
Executive Office
123 Main Street
Bristol, CT 06011-0489
U.S.A.
Tel. (203)583-7070
BARNES
GROUP INC [CORPORATE LOGO]
March 4, 1994
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD APRIL 6, 1994
AND PROXY STATEMENT
The Annual Meeting of Stockholders of Barnes Group Inc. will be held in the
Aetna Theater at the Wadsworth Atheneum, 600 Main Street, Hartford, Connecticut,
at 10:30 a.m., Wednesday, April 6, 1994 for the following purposes:
1. to elect five directors;
2. to approve the selection of independent auditors for 1994;
3. to act on a proposed amendment to the 1991 Barnes Group Stock Incentive
Plan;
4. to act on a stockholder proposal relating to executive officers' bonuses;
and
5. to transact any other business that lawfully may come before the meeting or
at any adjournment thereof.
Stockholders of record at the close of business February 8, 1994 will be
entitled to vote at the meeting.
Stockholders who do not expect to attend the meeting and wish their stock voted
pursuant to the accompanying proxy are requested to date and sign the proxy and
return it as soon as possible in the enclosed reply envelope addressed to Barnes
Group Inc., Midtown Station, P. O. Box 946, New York, NY 10138-0746.
[signature]
Mary Louise Beardsley
Secretary
[BOTTOM OF FRONT COVER OF PROXY]
<PAGE>
PROXY STATEMENT FOR ANNUAL MEETING OF STOCKHOLDERS APRIL 6, 1994
This Proxy Statement is furnished in connection with the solicitation by the
Board of Directors of Barnes Group Inc. of proxies to be voted at the Annual
Meeting of Stockholders to be held on April 6, 1994 and at any adjournment
thereof. A stockholder who signs and returns a proxy in the accompanying form
may revoke it by notifying the secretary of the meeting in person or in writing
(including the delivery of a later dated proxy) at any time before it is voted.
ELECTION OF DIRECTORS
Five directors are to be elected at the meeting for the terms set forth below or
otherwise as provided in the By-Laws. Thomas O. Barnes, Marcel P. Joseph, and
K. Grahame Walker are nominated to succeed themselves for terms expiring at the
1997 Annual Meeting. A new nominee, Gary G. Benanav, is also nominated for a
term expiring at the 1997 Annual Meeting. Theodore E. Martin was elected in
1993 to a newly created directorship and was assigned to the class of directors
whose term expires in 1996. However, under the Company's By-Laws, a person
elected by the Board of Directors to a newly created directorship must stand for
election at the following Annual Meeting. Therefore, he is nominated for a term
expiring at the 1996 Annual Meeting or otherwise as provided in the By-Laws. A.
Stanton Wells was elected as a director in 1993 to fill the vacancy caused by
the resignation of William R. Fenoglio. His term will expire in April, 1995.
Carlyle F. Barnes and Boris Yavitz are retiring pursuant to the Board of
Director's retirement policy effective at the Annual Meeting in 1994.
Pertinent information concerning the nominees for directors and the seven
directors whose terms continue after the meeting is set forth below. Each
director has been associated with his/her present organization for at least the
past five years unless otherwise noted. None of the organizations listed as
business affiliates of the directors is a subsidiary or other affiliate of the
Company.
THOMAS O. BARNES
[PICTURE OF MR. BARNES APPEARS TO THE LEFT OF HIS INFORMATION]
Director since 1978
Current term expires 1994
Mr. Barnes, 45, was elected Senior Vice President-Administration of the Company
in December, 1993. Prior to then he was President of The Olson Brothers
Company, Plainville, CT, a manufacturer of machined metal parts. He is a member
of the Executive Committee of the Board. Mr. Barnes is Chairman and a director
of Chapman Machine Co., Director-President of Colonial Realty Corporation, a
partner in New Cambridge Realty Company, and a director of The Olson Brothers
Company, Bristol Shopping Plaza, Inc., and Whitman General Corporation. He is
also Chairman of the Board of Directors of Greater Bristol Health Services
Corp., a trustee of Bristol Regional Environmental Center, and Secretary and a
trustee of the West Cemetery Association. Mr. Barnes graduated from the
University of Hartford in 1972 with a B.A. degree in business and from the
University of Connecticut in 1978 with an M.B.A. degree. Mr. Barnes is the son
of Mr. Wallace Barnes.
1
<PAGE>
WALLACE BARNES
[PICTURE OF MR. BARNES APPEARS TO THE LEFT OF HIS INFORMATION]
Director since 1953
Current term expires 1996
Mr. Barnes, 68, joined the Company in 1962. He retired from his position as
Chairman and Chief Executive Officer in 1991. He is Chairman of the Board of
Directors and a member of the Executive Committee and the Committee on Directors
of the Board. Mr. Barnes is a director of Aetna Life & Casualty Company, Aetna
Life Insurance Company, The Aetna Casualty and Surety Company, The Automobile
Insurance Company of Hartford, Connecticut, Loctite Corporation, Rogers
Corporation, and Rohr Industries, Inc. Mr. Barnes graduated from Williams
College in 1949 with a B.A. degree and from Yale Law School in 1952 with an
LL.B. degree.
GARY G. BENANAV
[PICTURE OF MR. BENANAV APPEARS TO THE LEFT OF HIS INFORMATION]
Nominee for term
expiring in 1997
Mr. Benanav, 48, is Executive Vice President of Aetna Life & Casualty Company.
He is a director of Executive Risk Inc. and Vice Chairman of the Capitol Housing
Corporation. Mr. Benanav graduated from the State University of New York in
1967 with a B.A. degree, from the Columbia University Law School in 1970 with a
J.D. degree, and from the Columbia University School of Business in 1970 with an
M.B.A. degree.
WILLIAM S. BRISTOW, JR.
[PICTURE OF MR. BRISTOW APPEARS TO THE LEFT OF HIS INFORMATION]
Director since 1978
Current term expires 1996
Mr. Bristow, 40, is New England Region Manager of Roberts Express, Inc., a
provider of expedited transportation services. He is also President of W. S.
Bristow & Associates, Inc. which owns a Parcel Plus franchise in North Hampton,
NH. From October, 1989 to August, 1992 he was a regional manager for Parcel
Plus, Inc., a franchiser of mail and business services. Prior to that he was a
sales representative for Gerrity Company, a building materials supplier in
Rochester, NH. He is Chairman of the Committee on Directors and a member of the
Audit Committee of the Board. He graduated from St. Lawrence University in 1976
with a B.S. degree. Mr. Bristow is a nephew of Mr. Carlyle F. Barnes.
ROBERT J. CALLANDER
[PICTURE OF MR. CALLANDER APPEARS TO THE LEFT OF HIS INFORMATION]
Director since 1991
Current term expires 1996
Mr. Callander, 63, retired as Vice Chairman of Chemical Banking Corporation in
1992. He is currently Executive in Residence at the Columbia University School
of Business. He is a member of the Incentive and Compensation Committee and the
Committee on Directors of the Board. He is a director of ARA Services, Inc.,
Beneficial Corporation, The Latin American Dollar Income Fund, and Omnicom, Inc.
He is a trustee of Drew University, managing director of the Metropolitan Opera
Association, and a member of the Council on Foreign Relations, and the Japan
Society. He graduated from Dartmouth College in 1952 with a B.A. degree and
from the Yale Divinity School in 1955.
2
<PAGE>
GEORGE T. CARPENTER
[PICTURE OF MR. CARPENTER APPEARS TO THE LEFT OF HIS INFORMATION]
Director since 1985
Current term expires 1996
Mr. Carpenter, 53, is President of The S. Carpenter Construction Company,
Bristol, CT, which is involved in real estate management and general
contracting. He is a member of the Executive Committee and the Committee on
Directors of the Board. He is President of the Board of Directors of Carpenter
Realty Company and Bristol Shopping Plaza, Inc., and a director of Eagle
Financial Corp. and the Eagle Federal Savings Bank. He is also a commissioner
of the Bristol Board of Police. Mr. Carpenter graduated from Wentworth
Institute in 1963.
DONNA R. ECTON
[PICTURE OF MS. ECTON APPEARS TO THE LEFT OF HER INFORMATION]
Director since 1987
Current term expires 1995
Ms. Ecton, 46, was President and Chief Executive Officer of Van Houten North
America, Inc., and Andes Candies, Inc., manufacturers of confectionery
products, from December, 1991 to January, 1994. From 1989-1991 she was Senior
Vice President of Nutri/System, Inc., Blue Bell, PA, a weight loss business.
Prior to joining Nutri/System, she was an officer of Campbell Soup Company. She
is a member of the Audit Committee and the Incentive and Compensation Committee
of the Board. She is a director of Vencor, Inc. and H & R Block, Inc., and a
member of the Council on Foreign Relations. Ms. Ecton graduated from Wellesley
College in 1969 with a B.A. degree and from Harvard University in 1971 with an
M.B.A. degree.
MARCEL P. JOSEPH
[PICTURE OF MR. JOSEPH APPEARS TO THE LEFT OF HIS INFORMATION]
Director since 1991
Current term expires 1994
Mr. Joseph, 59, is Chairman of the Board, Chief Executive Officer, and President
of Augat Inc., a multi-national manufacturer of electromechanical connectors and
other components. Before joining Augat in 1988, he was President of
Communications Satellite Corporation from 1985-1987. He is a member of the
Audit Committee and the Incentive and Compensation Committee of the Board. Mr.
Joseph graduated from Southeastern Massachusetts University with a B.S.M.E.
degree in 1957 and from Rensselaer Polytechnic Institute with an M.S.M.E. degree
in 1961.
THEODORE E. MARTIN
[PICTURE OF MR. MARTIN APPEARS TO THE LEFT OF HIS INFORMATION]
Director since 1993
Current term expires 1994
Mr. Martin, 54, is Executive Vice President-Operations of the Company. Prior to
assuming that position in December, 1993, Mr. Martin was President and Chief
Operating Officer of the Company's Associated Spring Group. Prior to joining
the Company in 1990, he was Corporate Vice President of Manufacturing for Herman
Miller Inc. Before joining Herman Miller in 1988, he held various senior
positions with Bendix Corporation including the presidency of its Fram
Automotive manufacturing/distribution business in Canada. He graduated from
Syracuse University in 1961 with a B.A. degree and from the University of Hawaii
in 1969 with an M.B.A. degree.
3
<PAGE>
JUAN M. STETA
[PICTURE OF MR. STETA APPEARS TO THE LEFT OF HIS INFORMATION]
Director since 1974
Current term expires 1995
Mr. Steta, 67, is counsel to the law firm of Santamarina Y Steta, Mexico, D.F.,
Mexico of which he was a partner prior to 1992. He is Chairman of the Audit
Committee of the Board. Mr. Steta is a director of The Gillette Company. He is
Chairman of the Board of T & N de Mexico, and serves as a director of numerous
other companies in Mexico, including General Motors de Mexico, SKF Industrias,
and BIP Plastics. He is a trustee of the law school of the Pan American
University, and is a past president of the University Club of Mexico. Mr. Steta
graduated from Collegio Frances Morelos (Mexico City) in 1943 with a B.A. degree
and received his law degree from the National University of Mexico.
K. GRAHAME WALKER
[PICTURE OF MR. WALKER APPEARS TO THE LEFT OF HIS INFORMATION]
Director since 1988
Current term expires 1994
Mr. Walker, 56, is Chairman and Chief Executive Officer of The Dexter
Corporation, Windsor Locks, CT, a global manufacturer of specialty materials for
high technology markets. He is a member of the Audit Committee and the
Committee on Directors of the Board. He is Chairman of Life Technologies Inc.,
Vice Chairman of the Connecticut Business and Industry Association, a director
of the New England Air Museum, and a trustee of the University of Hartford. Mr.
Walker graduated from Merchant Taylors' School (Hertfordshire, England) in 1955,
from the Britannia Royal Naval College (Dartmouth, England) in 1957, and from
the Institute of Mechanical Engineers (London, England) in 1962.
A. STANTON WELLS
[PICTURE OF MR. WELLS APPEARS TO THE LEFT OF HIS INFORMATION]
Director since 1993
Current term expires 1995
Mr. Wells, 63, is President and Chief Executive Officer of the Company. Prior
to assuming that position in December, 1993, Mr. Wells had been Executive Vice
President-Finance of the Company. He graduated from Yale University in 1953
with a B.A. degree and from Harvard University in 1957 with an M.B.A. degree.
THE BOARD AND ITS COMMITTEES
In 1993, the Board held eight meetings and the Executive Committee held two
meetings. The Audit Committee is responsible for matters relating to accounting
policies and practices, financial reporting, and the internal control structure.
Each year it recommends to the Board the appointment of a firm of independent
auditors to audit the financial statements of the Company. It reviews with
representatives of the independent auditors the scope of their audit of the
Company's financial statements, results of audits, audit fees, and any
recommendations with respect to the internal control structure. The Audit
Committee also reviews non-audit services rendered by the Company's independent
auditors and periodically meets with or receives reports from principal
corporate officers and the Director, Internal Audit. The Audit Committee held
three meetings in 1993. The Incentive and Compensation Committee, which met
four times last year, administers the incentive and stock plans referred to
below, sets the salary for the President and Chief Executive Officer, and
reviews the compensation of the Company's other officers. The Committee on
Directors, which met three times last year, makes recommendations concerning
Board membership, functions, and compensation. All of these committees are
standing committees of the Board.
4
<PAGE>
COMPENSATION OF DIRECTORS
The annual retainer for directors is $15,000 except that the retainer for the
Chairman of the Board of Directors is $25,000. Fees for attending meetings are
$1,000 ($1,500 if held outside of Connecticut or New York City), except that the
committee chairman receives an additional $200 for each meeting at which he
presides. Messrs. T. Barnes, Martin and Wells receive no retainer or meeting
fees for service as directors. The grant of rights to receive stock and the
payment of dividend equivalents under the stock plan for non-employee directors
discussed below are additional forms of compensation.
TRANSACTIONS WITH DIRECTORS OR THEIR FIRMS
Mr. W. Barnes has a three-year consulting contract with the Company which
commenced April 1, 1991. The contract provides for payment of $125,000 in the
first year, $100,000 in the second year, and $75,000 in the third year. Since
October, 1993 when Mr. W. Barnes relocated his office away from the Company's
executive office, the Company has also paid him $2,750 per month as a
contribution towards his current office expenses. The Company and its Mexican
subsidiaries have retained Mr. Steta's law firm this year and during the past
year. A company of which Mr. Carpenter is a major stockholder rents warehouse
space to the Company at a rate of approximately $80,000 per year.
NEXT 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, 1994.
Stockholders wishing to submit proposals for inclusion in the Company's proxy
statement for the 1994 Annual Meeting of Stockholders must submit proposals to
the Company at such address by November 3, 1994.
MANAGEMENT'S STOCK OWNERSHIP
<TABLE>
As of February 14, 1994, the Company's directors, nominees, and its directors and
officers as a group, beneficially owned the number of shares of the Company's
common stock shown below:
<CAPTION>
Name of Person Amount and Nature of Percent of
or Group Beneficial Ownership(1)<F02> Common Stock
- --------------------- ------------------------- ------------
<S> <C> <C>
Carlyle F. Barnes(2)<F03> 362,301 5.8%
Thomas O. Barnes(2)<F03> 449,256 7.1%
Wallace Barnes(2)<F03> 442,095 7.0%
Gary G. Benanav 500 * <F01>
William S. Bristow, Jr. 6,252 * <F01>
Robert J. Callander 848 * <F01>
George T. Carpenter 58,037 * <F01>
Donna R. Ecton 705 * <F01>
Marcel P. Joseph 748 * <F01>
Theodore E. Martin 23,975 * <F01>
Juan M. Steta 4,012 * <F01>
K. Grahame Walker 511 * <F01>
A. Stanton Wells 28,919 * <F01>
Boris Yavitz 961 * <F01>
Directors, Nominees &
Officers as a Group (26) 1,534,017 23.8%
<FN>
Notes to the Stock Ownership Table:
<F01> * Less then 1% of common stock or votes.
5
<PAGE>
<F02> (1) The 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. C. F. Barnes has sole voting and shared investment power with respect to 152,796 shares and shared voting
and investment power with respect to 61,682 shares. Mr. T.O. Barnes has sole voting power and no investment power with respect to
244,634 shares pursuant to a revocable power of attorney given to him by Mr. W.Barnes. To avoid duplication, these shares, over
which Mr. W. Barnes has sole investment power, are included in Mr. T. O. Barnes' holdings only. Mr. T. O. Barnes also has sole
and shared investment power with respect to 120,479 shares and no voting and shared investment power with respect to 22,056 shares.
Mr. W. Barnes has sole voting and shared investment power with respect to 278,001 shares. 55,482 of Mr. Carpenter's shares are held
by corporations over which he has voting control. All of Mr. Bristow's shares are held in a trust which he has the power to revoke.
In addition, Messrs. C. F. Barnes and W. Barnes share investment power with respect to 3,000 shares; to avoid duplication, these
shares are included in Mr. C. F. Barnes' holdings only.
The shares listed for Messrs. Martin, Wells, and the Directors, Nominees and Officers as a group include 18,375, 20,350, and 158,400
shares, respectively, which they have the right to purchase within 60 days after February 17, 1994. The shares listed for Mes
Martin, Wells, and the Directors, Nominees and Officers as a group also include 1,449, 4,567, and 31,832 shares, respectively,
which they have voting power and limited investment power. These shares are held under the Company's Guaranteed Stock Plan
employee stock ownership plan). The number of 3hares reported as beneficially owned have been determined in accordance with Rule 1
under the Securities Exchange Act of 1934.
<F03> (2) His address is 123 Main Street, Bristol, Connecticut 06011-0489.
The Board of Directors believes that, except for matters required to be submitted to stockholders, the Company is controlled by
Board of Directors acting as such. The Messrs. Barnes and Bristow may also be considered in control of the Company; they and mem
of their families beneficially own 31% of the Company's outstanding common shares.
The Company believes that its Officers and Directors have complied with the filing requirments of Section 16(a) of the Securities
Exchange Act of 1934 except that Mr. John M. Knapp, a former officer, reported one transaction 12 days after the prescribed date.
</TABLE>
STOCK PLAN FOR NON-EMPLOYEE DIRECTORS
In 1987, the Company adopted a plan under which the non-employee directors have
been granted the right to receive 2,000 shares each of the common stock of the
Company when their 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 2,000 times the dividend per
share for each dividend payment date.*
* Mr. T. O. 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.
HOLDERS OF MORE THAN 5% OF VOTES
In addition to Mr. C. F. Barnes, Mr. T. O. Barnes and Mr. W. Barnes, the
institutions set forth below held stock representing more than 5% of the votes
entitled to be cast at the Annual Meeting.
As of December 31, 1993, State Street Bank and Trust Company, 225 Franklin
Street, Boston, MA 02110 ("State Street") reported that it held 1,144,790
(18.2%) shares of the Company's 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. State Street also reported that it had sole voting
and investment power with respect to 17,991 shares and no vote and sole
investment power with respect to 400 shares.
6
<PAGE>
As of January 19, 1994, Fleet Bank, N.A., One Constitution Plaza, Hartford, CT
06115, reported that it was the beneficial owner of 1,039,168 (16.5%) shares of
the Company's common stock. Fleet reported that it had sole voting and sole
investment power with respect to 344,412 shares (of which 6,252 shares are
included above as beneficially owned by Mr. Bristow), sole voting and shared
investment power with respect to 8,458 shares, sole voting and no investment
power with respect to 5,455 shares (of which 3,000 shares are included above as
beneficially owned by Mr. C. F. Barnes), shared voting and shared investment
power with respect to 800 shares, shared voting and no investment power with
respect to 144 shares, and no voting and shared investment power with respect to
679,809 shares. Of the last number, 152,796 shares are included above as
beneficially owned by Mr. C. F. Barnes, 142,535 shares as beneficially owned by
Mr. T. O. Barnes, and 278,001 shares as beneficially owned by Mr. W. Barnes.
As of December 31, 1993, Mitchell Hutchins Institutional Investors, Inc., 1285
Avenue of the Americas, New York, NY 10019 reported that it was the beneficial
owner of 490,800 (7.8%) shares of the Company's common stock. It has shared
voting power and shared investment power with respect to all shares of the
Company's stock which it owns.
As of December 31, 1993, Pioneering Management Corporation, 60 State Street,
Boston, MA 02114 reported that it was the beneficial owner of 316,200 (5.0%)
shares of the Company's common stock. It has sole voting power and shared
investment power with respect to all shares of the Company's stock which it
owns.
EXECUTIVE OFFICER COMPENSATION
REPORT OF THE INCENTIVE AND COMPENSATION COMMITTEE
The Company's compensation program for executive officers is designed to
attract, retain, and motivate superior executive talent and to align a
significant portion of each officer's total compensation with the performance of
the applicable business unit, the Company, and the interests of our
stockholders. To this end, the Company has implemented a competitive total
compensation program for executive officers composed of the following elements
which are separately discussed below: base salary, annual bonus, and long-term
compensation, including awards under the Company's Long Term Incentive Plan and
stock options.
BASE SALARY
Base salaries for the chief executive officer and the other executive officers
are established by considering competitive levels for positions of similar
responsibility, the experience of the individual, and his/her expected
contribution to the Company. Merit increases are determined by evaluating the
overall performance of the individual, including the performance of the business
unit for which the officer has responsibility, overall Company performance, and
by competitive levels.
The salary of Mr. Fenoglio, the former President and Chief Executive Officer,
was reviewed during the first half of 1993. In this review, the Incentive and
Compensation Committee considered many factors including the following:
leadership of and individual contribution to the Company, the Company's progress
with respect to financial and strategic targets and objectives, trends with
respect to sales, earnings per share, return on equity, return on capital
employed, operating margin, cash flow, and the salaries of chief executive
officers of companies similar in size to Barnes Group. The Committee decided
that any increase in compensation would only be justified if driven by improved
performance. Therefore, in lieu of a salary increase, the Committee granted him
options to purchase 2,400 shares of stock at 100% of the market value on July
16, 1993 which was $31.25 per share.
7
<PAGE>
Mr. Wells became President and Chief Executive Officer in December, 1993. In
determining his base compensation, the Committee primarily took into account his
experience, his expected contributions to the Company, and the salaries of chief
executive officers of companies similar in size to Barnes Group.
ANNUAL BONUSES
Annual bonuses may be earned by executive officers and other key employees under
the Company's annual bonus plans. Payments under these plans are based on the
performance of the business unit over which the individual has a direct
influence. The Committee establishes annual financial measurements in terms of
thresholds, targets, and maximums for the Company and each major operating unit,
the achievement of which will determine the level of the bonus. The
measurements for the Company, which are applicable to the President and Chief
Executive Officer, the Executive Vice President-Operations, and the corporate
staff officers, are based on the Company's consolidated income before taxes and
before certain one-time provisions such as restructuring charges. The
measurements for operating units, which are applicable to officers having
direct responsibilities relating to one of the Company's three operating units,
are based on the operating income of the applicable unit less a charge for the
capital employed by the unit. A maximum of 35% (42.5% in 1994) of salary is
payable for the achievement of financial goals.
The annual bonus plans applicable to executive officers also involve the
establishment of personal objectives which vary from year to year and may or may
not involve financial targets. A maximum of 15% (7.5% in 1994) of salary is
payable for achievement of personal goals. Any payment for achievement of
personal objectives is contingent upon the relevant business unit achieving the
threshold targets set under the financial portion of the annual bonus plans.
The Committee approves personal objectives for the President and Chief Executive
Officer and evaluates his performance against those objectives. Personal
objectives for the other executive officers are established and evaluated by the
officer to whom they report.
The only officers who earned annual bonuses in 1993 were the two officers with
direct responsibilities for Associated Spring: Theodore E. Martin in his cap-
pacity as President and Chief Operating Officer of the Associated Spring Group,
and Leonard M. Carlucci, Vice President, Marketing and Sales, Associated Spring.
LONG TERM COMPENSATION
Management and the Committee believe that in the long run, stockholder value is
created by the generation of cash flow in excess of the risk-adjusted cost of
the stockholders' equity invested in the Company. The Company's Long Term
Incentive Plan ("LTIP") rewards executive officers for increasing over time the
excess of cash flow from operations over the risk-adjusted cost of equity. For
purposes of the LTIP, the risk-adjusted cost of equity equals stockholders'
equity, multiplied by a factor equal to the sum of the average interest rate on
Treasury bills of 90-day maturity for the applicable period plus an appropriate
equity risk premium established by the Committee.
Under the LTIP, the Committee grants performance units to executive officers,
and 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 a function of cash flow from operations, less the risk-adjusted cost of
equity capital, for the current year plus the previous four years. Awards for
the three-year cycle are paid in the year after the end of the cycle.
Awards under the LTIP paid in 1993 were based on an increase in the value of
performance units over the three-year period from 1990 to 1992 resulting from an
increase in cash flow in excess of the cost of equity capital. In 1993, Messrs.
Fenoglio and Wells received payments of $77,127 and $57,987, respectively, for
the 1990-1992 period.
8
<PAGE>
Under the 1991 Barnes Group Stock Incentive Plan, which was approved by the
stockholders, the Committee grants stock options to executive officers and other
key executives. Like the LTIP, stock options are designed to align the
interests of executives with those of the stockholders. Except for one-time
initial grants (which have been at 85% of market value) to certain senior
executive officers upon assumption of their positions, options granted after
1983 have been granted at the market price of the stock on the date of grant.
In February, 1993, Messrs. Fenoglio and Wells received options to purchase
10,800 and 3,700 shares, respectively, at a price of $32.00 per share.
Consistent with past practice, the Committee made a normal grant of options to
executive officers and other key managers in February, 1993. In July, 1993,
the Committee met to review its policies with respect to stock option grants.
It decided to make special option grants at that time to executive officers and
other key managers which would be in lieu of grants which would normally be
given in the four-year period 1994 through 1997. To ensure that option
recipients are not rewarded unless stockholders have had good gains, these
options contain special provisions relating to exercisability. They do not
become exercisable until 1997 at the earliest, and then only if the market
price of the Company's stock is $44. (The exercise price is $31.25, the market
price on the date of grant.) If the stock does not reach $44 for at least 30
consecutive trading days during the period 1/1/97 to 7/16/97, the hurdle price
increases at the rate of 8% per year thereafter. Messrs. Fenoglio and Wells
received options under this special grant to purchase 43,200 shares and 14,800
shares, respectively.
The number of performance units granted under the LTIP and the number of stock
options granted under the Stock Incentive Plan are based on the performance of
the individual and the market median of long term incentive opportunities for
persons in similar positions at companies whose size is comparable to Barnes
Group.
CONCLUSION
The Committee believes that the elements of the compensation programs described
above combine to provide competitive total compensation packages to the
Company's executive officers. Most importantly, an executive's total
compensation is heavily dependent on corporate performance in a manner which
aligns the interests of the executives with those of the stockholders over the
long term.
INCENTIVE AND COMPENSATION COMMITTEE:
Boris Yavitz, Chairman
Robert J. Callander
Donna R. Ecton
Marcel P. Joseph
9
<PAGE>
COMPENSATION
The following table sets forth compensation paid by the Company to its Chief
Executive Officer and to the four remaining most highly-paid persons who were
executive officers at the end of 1993 based on salary and any payments made
under the Company's annual bonus plan. Pursuant to the applicable rules,
compensation information is also provided for two officers who resigned in 1993:
William R. Fenoglio, formerly President and Chief Executive Officer, and John M.
Knapp, formerly President, Bowman Distribution.
<TABLE>
SUMMARY COMPENSATION TABLE
<CAPTION>
Annual Compensation Long Term Compensation
-------------------------------- ----------------------
Awards Payouts
------ -------
Other Securities
Annual Underlying LTIP All Other
Compensa- Options Payouts Compensa-
Name and Principal Position Year Salary Bonus tion(b)<F05> (#) (c)<F06> tion(d)<F07>
--------------------------- ---- ------ ----- ------------ ---------- -------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
A. S. Wells 1993 $238,039 $ -0- $15,333 18,500 $ 57,987 $32,462
President and CEO(a)<F04> 1992 223,668 -0- 4,102 3,700 113,454 24,934
1991 215,892 53,766 *<F08> 3,700 40,005 *<F08>
T. E. Martin 1993 201,160 100,580 9,046 18,600 32,405 19,114
Executive Vice President-Operations(a)<F04> 1992 180,150 88,274 2,562 3,800 37,961 13,424
1991 165,399 48,500 *<F08> 3,600 2,966 *<F08>
J. E. Besser 1993 176,454 -0- 6,708 13,000 42,069 16,423
Senior Vice President-Finance and Law(a)<F04> 1992 168,864 -0- 1,862 2,600 83,945 11,454
1991 162,888 39,425 *<F08> 2,600 29,610 *<F08>
D. E. Berges 1993 158,193 -0- 2,891 16,300 7,885 9,637
Vice President, Barnes Group 1992 144,038 25,426 478 16,600 -0- 1,230
and President, Barnes Aerospace 1991 123,576 46,181 *<F08> 1,600 -0- *<F08>
L. M. Carlucci 1993 126,036 63,017 2,916 7,800 -0- 8,965
Vice President, Marketing and Sales, 1992 118,166 57,280 504 11,200 -0- 1,296
Associated Spring 1991 109,384 39,477 *<F08> 800 -0- *<F08>
W. R. Fenoglio 1993 360,000 -0- 13,736 56,400 77,127 30,022
Former President and CEO 1992 360,000 -0- 3,722 10,800 150,126 23,737
1991 348,750 86,853 *<F08> 20,000 63,630 *<F08>
J. M. Knapp 1993 196,047 -0- 10,209 18,600 52,113 22,646
Former President, 1992 205,500 35,531 2,341 4,000 93,113 18,546
Bowman Distribution 1991 195,677 52,124 *<F08> 4,000 34,650 *<F08>
<FN>
<F04>(a) From January 1, 1993 to December 16, 1993, Mr. Wells was Executive Vice President-Finance, Mr. Martin was President and
Chief Operating Officer, Associated Spring, and Mr. Besser was Vice President, General Counsel and Secretary.
<F05>(b) Reimbursement for taxes paid on insurance premiums paid by the Company. The figure for Mr. Martin also includes "above-
market" interest (as defined in rules promulgated by the Securities and Exchange Commission) paid on deferred compensation.
<F06>(c) Payment in the designated year with respect to three-year performance cycles ending the prior year. Thus, the payment
made in 1993 covered the three-year cycle ending in 1992.
<F07>(d) Includes Company-matching contributions under the Guaranteed Stock Plan and premiums paid for life insurance. In the case
of Mr. Fenoglio, it also includes amounts deemed to constitued income to him for federal income tax purposes in connection
with a special life insurance policy whose premiums are paid by the Company. As a result of his resignation, the Company
will receive the cash surrender value of the policy.
<F08> * Under the Commission's transition rules, no disclosure is required.
</TABLE>
10
<PAGE>
STOCK OPTIONS
<TABLE>
The following table provides information on grants of stock options in 1993 pursuant to the 1991
Barnes Group Stock Incentive Plan the executive officers listed in the Summary Compensation Table.
OPTION/SAR GRANTS IN 1993
<CAPTION>
Number of Percent of Potential Realizable Value
Securities Total at Assumed Annual Rates of
Underlying Options Stock Price Appreciation
Options Granted to to End of Option Term in
Granted Employees Exercise Expiration 2003(c)<F11>
Name (#)<F10> in 1993 Price ($Sh) Date 5% 10%
- ------ ----------- ---------- ----------- ---------- ------- ---------
<S> <C> <C> <C> <C> <C> <C>
A. S. Wells 3,700 5.1% $32.00 2/18/03 $ 74,444 $ 188,700
14,800 31.25 7/15/03 -0- 737,040
T. E. Martin 3,800 5.1 32.00 2/18/03 76,456 193,800
14,800 31.25 7/15/03 -0- 737,040
J. E. Besser 2,600 3.6 32.00 2/18/03 52,312 132,600
10,400 31.25 7/15/03 -0- 517,920
D. E. Berges 3,100 4.5 32.00 2/18/03 62,372 158,100
13,200 31.25 7/15/03 -0- 657,360
L. M. Carlucci 1,400 2.1 32.00 2/18/03 28,168 71,400
6,400 31.25 7/15/03 -0- 318,720
W. R. 10,800 15.5 32.00 2/18/03 217,296 550,800
Fenoglio(a)<F09> 43,200 31.25 7/15/03 -0- 2,151,360
2,400 31.25 7/15/03 47,160 119,520
J. M. Knapp(a)<F09> 2,800 4.8 32.00 2/18/03 56,336 142,800
14,800 31.25 7/15/03 -0- 737,040
<FN>
<F09>(a) As a result of their resignations, 31,628 of the options granted to Mr. Fenoglio and 15,512 of the options granted
Mr. knapp have lapsed. The expiration dates shown for Messrs. Fenoglio and Knapp are as of the date of grant. As a
result of their resignations, the expiration dates will be accelerated under the terms of the option plan.
<F10>(b) Except for 2,400 options granted to Mr. Fenoglio, the options expiring on 7/15/03 do not become exercisable until 1997
at the earliest and then only if the stock price reaches $44 per share for at least 30 consecutive trading days during the
period 1/1/97-7/16/97. If the stock price does not reach $44 for at least 30 consecutive trading days during the period
1/1/97-7/16/97, the hurdle rate increases at the rate of 8% per year thereafter. The other options listed in the table vest
at the rate of 25% per year and are fully vested four years from the grant date.
<F11>(c) With respect to options expiring on February 18, 2003, the stock price in 2003 would be $52.12 based on 5% annual
appreciation from the price on the date of the grant and $83.00 based on 10% annual appreciation. With respect to the
options expiring on July 2003, the stock price in 2003 would be $81.05 based on 10% annual appreciation from the price on
the date of the grant.
</TABLE>
11
<PAGE>
The following table provides information relating to stock option exercises in
1993 by the named executive officers and the number and value of each such
officer's unexercised in-the-money options/SARs on December 31, 1993 based on
the difference between the exercise price and the year-end stock price.
<TABLE>
AGGREGATED OPTION/SAR EXERCISES IN 1993 AND YEAR-END OPTION/SAR VALUES
<CAPTION>
Number of
unexercised options/SARs Value of unexercised
at fiscal year end in-the-money options/SARs
(No. Shares) at fiscal year-end
Shares --------------------------- --------------------------
acquired on Value
Name exercise (#) Realized($) Exercisable Unexercisable Exercisable Unexercisable
-------------- ------------ ----------- ----------- ------------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
A. S. Wells -0- $ -0- 16,650 24,050 $ 15,956 $ 5,318
T. E. Martin 1,800 20,556 15,575 27,855 121,250 46,668
J. E. Besser 13,945 197,968 11,700 16,900 11,212 3,737
D. E. Berges -0- -0- 10,950 29,950 26,475 61,025
L. M. Carlucci -0- -0- 6,550 16,800 16,500 40,300
W. R. Fenglio -0- -0- 66,450 29,822 268,192 14,087
J. M. Knapp 17,975 154,558 14,500 5,363 17,681 5,893
</TABLE>
LONG TERM INCENTIVE PLAN AWARDS
<TABLE>
The following table provides information relating to grants of performance units in 1993 under the
Company's Long Term Incentive Plan.
LONG TERM INCENTIVE PLANS - AWARDS IN 1993(a)<F12>
<CAPTION>
Number of Performance
Name Performance Units(b)<F13> Period
--------- ------------------------- ------------
<S> <C> <C>
A. S. Wells 37,700 1993-1995
T. E. Martin 30,200 1993-1995
J. E. Besser 28,000 1993-1995
D. E. Berges 23,500 1993-1995
L. M. Carlucci 16,200 1993-1995
W. R. Fenoglio 66,600(c)<F14> 1993-1995
J. M. Knapp 28,000(c)<F14> 1993-1995
<F12>(a) Under the Company's Long Term Incentive Plan ("LTIP"), there are no thresholds, targets, or maximums as those terms are
use in the Securities and Exchange Commission's rules. Payments are based on the increase in the value of performance units
during indicated performance period. The value of a performance unit over the three-year period ending December 31, 1993
increased by $0.18. However, this is not necessarily representative of the increase, if any, that will occur during the
period 1993-1995. During 1993, the first year of the current performance period, the value of a performance unit decreased by
$1.21. Payments under the LTIP made in prior three years are shown in the Summary Compensation Table on page 10.
<F13>(b) Performance units granted under the Company's Long Term Incentive Plan are described in the Report of the Incentive
and Compensation Committee on page 8.
<F14>(c) The performance units granted to Messrs. Fenoglio and Knapp have lapsed as result of their resignations.
</TABLE>
12
<PAGE>
SEVERANCE ARRANGEMENTS
Mr. John M. Knapp resigned as President and Chief Operating Officer of Bowman
Distribution effective November 30, 1993. Pursuant to the Company's severance
pay plan, his severance arrangement provides for payments equivalent to his
monthly salary of $18,084 and continuation of medical, dental, and long-term
disability benefits for a period of nine months or the date on which he
commences new employment, whichever occurs first. He will receive no payments
under the outstanding cycles of the Company's Long Term Incentive Plan. The
Company has also agreed to purchase an annuity which will provide him with $750
per month during his lifetime commencing September 1, 1994.
Mr. William R. Fenoglio resigned as President and Chief Executive Officer
of Barnes Group effective December 15, 1993. His severance arrangement
provides for payment equivalent to his monthly salary of $30,000 for
twelve months. During that period he will be treated as an employee
for purposes of employee benefits. Upon retirement, he will receive
payments equivalent to those he would have received under the Company's
Supplemental Executive Retirement Plan if he had retired as an officer
with 10 years of service at age 55 or older. These payments amount to
approximately $400 per month during his lifetime. He has been paid $15,000
in lieu of benefits payable under the three-year cycle of the Company's
Long Term Incentive Plan ending in 1995. The Company is also providing up
to $10,000 in expenses in connection with his search for new employment.
PENSION PLANS
The following table gives examples of estimated annual retirement benefits
payable to an executive officer who retired in 1993 at age 65 under the
Company's Salaried Retirement Income Plan, Retirement Benefit Equalization Plan,
and Supplemental Executive Retirement Plan.
<TABLE>
PENSION PLAN TABLE
<CAPTION>
Years of Service
--------------------------------------------------------------------------------
Remuneration 15 20 25 30 35 40
------------ -------- -------- -------- -------- -------- --------
<C> <C> <C> <C> <C> <C> <C>
$150,000 $ 53,073 $ 70,764 $ 88,452 $ 92,205 $ 95,955 $ 99,705
200,000 71,448 95,264 119,080 124,080 129,080 134,080
250,000 89,823 119,764 149,705 155,955 162,205 168,455
300,000 108,198 144,264 180,330 187,830 195,330 202,830
350,000 126,573 168,764 210,955 219,705 228,455 237,205
400,000 144,948 193,264 241,580 251,580 261,580 271,580
450,000 163,323 217,764 272,205 283,455 294,705 305,955
500,000 181,698 242,264 302,830 315,330 327,830 340,330
</TABLE>
The compensation included in determining earnings for retirement plan purposes
includes only annual salaries as shown in the first column of the Summary
Compensation Table. Years of service as of December 31, 1993 for the named
executive officers are as follows: A. S. Wells, 14 years; T. E. Martin, 3 years;
J. E. Besser, 13 years; D. E. Berges, 2 years; L. M. Carlucci, 18 years; W. R.
Fenoglio, 9 years; and J. M. Knapp, 8 years. Benefits are computed based on a
straight-life annuity. Although Social Security benefits are taken into account
in the formula under which benefits are calculated, the amounts set forth in the
table are not subject to deduction for Social Security or other offset amounts.
13
<PAGE>
PERFORMANCE GRAPH
A stock performance graph based on cumulative total returns (price change plus
reinvested dividends) for $100 invested on December 31, 1988, is set forth
below.
[STOCK PERFORMANCE GRAPH DISCRIPTION]
[THE ABOVE REFERENCED STOCK PERFORMANCE GRAPH IS A LINE GRAPH. THE HORIZONTAL
AXIS DENOTES, FROM LEFT TO RIGHT, THE YEARS 1988 THROUGH 1993 IN ONE YEAR
INCREMENTS. THE VERTICAL AXIS DENOTES, FROM BOTTOM TO TOP, 0% THROUGH 250% IN
INCREMENTS OF 50%. THREE LINES IN THE BODY OF THE GRAPH, REPRESENTATING THE
PERFORMANCE OF THE THREE INVESTMENT COMPARISONS, CONNECT THE POINTS WHERE THE
YEARS AND PERCENTAGES INTERSECT. THE FOLLOWING TABLE DENOTES THOSE POINTS
WHERE THE YEAR AND PERCENTAGE LINES INTERSECT]
<TABLE>
Comparison of Five Year Cumulative Total Return
Between Barnes Group Inc., the S&P 500 Index, and
the S&P Manufacturing (Industrial Diversified) Index
<CAPTION>
S & P
BGI Manufacturing
Common S & P (Industrial
Year Stock 500 Diversified)
------- ------- ------- -------------
<C> <C> <C> <C>
1988 100 % 100 % 100 %
1989 85 % 131 % 112 %
1990 80 % 127 % 111 %
1991 113 % 166 % 136 %
1992 102 % 179 % 147 %
1993 109 % 197 % 178 %
</TABLE>
14
<PAGE>
APPROVAL OF CHANGE OF
INDEPENDENT AUDITORS
In the fourth quarter of each year the Audit Committee of the Board of Directors
makes a recommendation to the Board of Directors concerning the selection of
independent auditors for the next fiscal year. Although not required by the
Company's Restated Certificate of Incorporation or its By-Laws, it has been the
practice for many years to have the stockholders act on a proposal of the Board
of Directors relating to the selection of independent auditors.
As part of its ordinary procedure, the Audit Committee met in the fourth quarter
of 1993 to consider the selection of independent auditors for 1994. The Audit
Committee, upon the recommendation of management, decided that it was in the
Company's best interests to change its independent auditors. The Committee
recommended to the Board of Directors that Price Waterhouse be selected as the
Company's independent auditors for 1994. At a meeting held on December 15,
1993, the Board of Directors accepted the recommendation of the Audit Committee
and proposed that the stockholders approve the selection of Price Waterhouse as
the Company's independent auditors for 1994.
The reports of Ernst & Young dated January 26, 1993 and January 28, 1994 for the
fiscal years ended December 31, 1992 and December 31, 1993 contained no adverse
opinion, disclaimer of opinion, or qualification or modification as to
uncertainty, audit scope or accounting principles except that the reports
reflected that the Company adopted effective January 1, 1992 Financial
Accounting Standards 109, 106, and 112 relating to income tax and certain
post-retirement and post-employment benefits. Ernst and Young agreed with the
adoption of these accounting standards. With respect to the fiscal years ended
December 31, 1992 and December 31, 1993, there were no disagreements between the
Company and Ernst & Young on any matter of accounting principles or practices,
financial statement disclosure or auditing scope or procedure which if not
resolved to the satisfaction of Ernst & Young would have caused it to make
reference to the subject matter of the disagreement in connection with its
report. No reportable event described in paragraph (a)(1)(v) of Item 304 of
Regulation S-K has occurred during the Company's fiscal years ended December 31,
1992 and December 31, 1993.
The Company did not consult with Price Waterhouse during the fiscal years ended
December 31, 1992 and December 31, 1993 on any matter which was the subject of
any disagreement or any reportable event or on the application of accounting
principles to a specified transaction, either completed or proposed.
The accompanying proxy will be voted for approval of selection of Price
Waterhouse as independent auditors unless otherwise specified by the
stockholder. A representative of Price Waterhouse is expected to be present at
the meeting with the opportunity to make a statement if the representative
wishes and to be available to respond to appropriate questions.
PROPOSED AMENDMENT TO STOCK INCENTIVE PLAN
The 1991 Barnes Group Stock Incentive Plan (the "SIP") was adopted by the
stockholders in 1991. The SIP provides for the grant of stock options, stock
appreciation rights, incentive stock rights, and performance units payable in
stock or cash. The SIP is administered by the Incentive and Compensation
Committee of the Board of Directors, which is made up of outside directors (the
"Committee"). Participants are officers and other senior executives of the
Company who in the judgment of the Committee can contribute significantly to the
growth and successful operation of the Company or a subsidiary. Currently,
approximately 70 people participate in the SIP.
The maximum number of shares of the Company's common stock which may be issued
subject to incentives under the SIP may not exceed 619,217 shares plus the
number of shares of stock underlying outstanding options under the predecessor
plan which may terminate or expire without being exercised
15
<PAGE>
after December 31, 1993. As of December 31, 1993, 296,162 shares were covered
by these outstanding options.
Under the SIP, the per share exercise price of an option may not be less than
85% of the per share market value of the underlying common stock on the date of
the grant, and no option may have an expiration date of more than ten years
after the date of grant. As of February 1, 1994, the market value per share of
the Company's common stock was $31.13.
The Committee determines the timing and amount of grants under the SIP.
Accordingly, the amount of any such grant is not determinable at this point.
The following is a general summary of the federal income tax treatment of
incentives under the SIP. Recipients of stock options are not subject to tax at
the time of the grant. Upon exercise of an option, an optionee will include in
ordinary income an amount equal to the difference between the exercise price and
the fair market value of the Company's common stock on the date of exercise.
The market value of shares of common stock received as a result of a grant of
incentive stock rights is includable in ordinary income when the shares are
received. No amount will be includable in an employee's income in connection
with the grant of a Stock Appreciation Right ("SAR") or performance unit award.
In the taxable year in which the recipient of an SAR or performance unit award
receives cash pursuant to either such right, the recipient generally must
include in ordinary income the amount of the cash received. If the recipient of
an SAR or performance unit award receives shares of common stock of the Company
pursuant to either such right, the federal income tax treatment upon such
receipt will be identical to that applicable to shares of common stock of the
Company acquired pursuant to the exercise of a stock option. With respect to
each of the incentives discussed above, the Company generally will be entitled
to a deduction in an amount equal to a recipient's ordinary income related to
the incentive (other than dividend income) in the Company's taxable year in
which the recipient includes such amount in income.
The SIP currently provides that if an optionee's employment terminates as a
result of death or disability or if the optionee terminates employment for any
reason after attaining age 55, the optionee's options shall terminate one year
after the termination of employment. The Board of Directors believes that the
current one year termination period in many situations unfairly penalizes
persons who retire or otherwise terminate employment after attaining age 55.
This would be particularly true under the provision of the special stock option
grant made in July 1993 and described on page 9 of this proxy statement.
Therefore, the Board of Directors recommends that the SIP be amended so that
options shall terminate five years after termination of employment if
termination is the result of death or disability, or if the optionee is age 55
or older upon termination; provided, however, that (a) if the optionee's
employment is terminated upon the request of the Company, the option may be
terminated by the Committee effective 90 days after the termination of
employment, and (b) the Committee may elect a shorter termination for any
specific option grant.
A vote of the majority of the Company's stockholders present or represented at
the Company's Annual Meeting is required to approve the proposed amendment to
the SIP.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE APPROVAL OF THE
PROPOSED AMENDMENT TO THE SIP.
STOCKHOLDER PROPOSAL ON
COMPENSATION OF EXECUTIVE OFFICERS
Mr. David Shelly, 620 N. Center Street, Corry, Pennsylvania 16407, holder of 145
shares of common stock, has given notice of his intention to present the
following proposal for action at the Annual Meeting:
"Resolved, that the stockholders recommend that the Board of Directors
adopt a policy pursuant to which the Incentive and Compensation
Committee of the Board of Directors would
16
<PAGE>
limit the total incentive and bonus compensation of A. S. Wells and the
other executive officers of the Company to a maximum of 25% of the annual
base salary of such executive officer."
The Company's compensation program for executive officers is designed to
attract, retain, and motivate superior executive talent in a manner which aligns
the interests of the officers with those of the stockholders. In furtherance of
these goals, the Board of Directors has determined to make a significant portion
of each executive officer's potential total compensation contingent upon
attaining specified levels of financial performance in his or her area of
responsibility. The Board of Directors believes the result is an overall
compensation program that provides aggregate compensation which is competitive,
and not excessive, in the market for executive talent and which is successful in
aligning the interests of stockholders and executives.
More specifically, as discussed in the Report of the Incentive and Compensation
Committee included elsewhere herein, total compensation for executive officers
consists of base salary, annual bonuses and long-term incentive compensation.
The nature of, and criteria for determining, the various forms of an executive
officer's base salary and incentive compensation are set forth in detail in
the Report of the Incentive and Compensation Committee. This structure, as
implemented in practice, results in over 50% of an officer's total potential
compensation being "at risk." This means that individual compensation is
highly contingent on corporate, business, and personal performance. The Board
of Directors believes it is advisable and in the best interests of the Company
and its stockholders to link executive pay to performance in this matter.
The stockholder proposal would result in a compensation program in which at
least 75% of the total potential compensation is fixed and not dependent on
Company performance. The Board of Directors believes that this is not
consistent with current competitive compensation structures and is not in the
best interests of the Company and its stockholders.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST THE PROPOSAL.
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 regular
officers and employees personally or by telephone, fascimile 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 Georgeson & Company Inc., Wall Street Plaza, New York, NY
10005, to aid in the solicitation of proxies. Georgeson & Company will solicit
proxies by personal interview, telephone, fascimile telegraph, 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 $7,000,
plus expenses.
The Company had outstanding 6,293,493 shares of common stock as of February 8,
1994, each of which is entitled to one vote. Only holders of record at the
close of business February 8, 1994 will be entitled to vote.
Directors are elected by a plurality of the vote cast in the election of
directors. Under applicable Delaware law, abstentions and broker non-votes will
be disregarded and have no effect on the outcome of the election.
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 has no reason to believe the
17
<PAGE>
persons nominated will be unable to serve if elected. The Board does not
know of any matters to be presented for consideration at the meeting other
than the matters described in items 1, 2, 3, and 4 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.
[signature]
Mary Louise Beardsley
Secretary
March 4, 1994
18
<PAGE>
[TOP OF BACK COVER OF THE PROXY]
Barnes Group Inc.
Executive Office
123 Main Street
Bristol, CT 06011-0489 U.S.A.
BARNES
GROUP INC [CORPORATED LOGO]
[BOTTOM OF BACK COVER OF THE PROXY]
