<PAGE> 1
SCHEDULE 14A INFORMATION
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:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
[x] Definitive Proxy Statement Only (as permitted by Rule 14a-6(e)(2))
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a
</TABLE>
Barnes Group Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[x] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
[ ] 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 number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
------------------------------------------------------------------------
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<PAGE> 2
Barnes Group Inc.
Executive Office
123 Main Street
Post Office Box 489
Bristol, Connecticut 06011-0489
U.S.A.
Tel. (860) 583-7070
[Barnes Group LOGO]
March 17, 1999
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD APRIL 14, 1999
The Annual Meeting of Stockholders of Barnes Group Inc. will be held at
Associated Spring Headquarters, Winding River Office Park, 80 Scott Swamp Road,
Farmington, Connecticut 06032, at 10:30 a.m. on Wednesday, April 14, 1999, for
the following purposes:
1. to elect three directors for a three-year term;
2. to ratify the selection of independent accountants for 1999; and
3. 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 on February 16, 1999 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 944, New York, New York 10138-0744; or,
stockholders may vote their stock by telephone as described in the enclosed
proxy.
/s/ Charles E. Lindsey Jr.
Charles E. Lindsey Jr.
Assistant Secretary
<PAGE> 3
PROXY STATEMENT FOR ANNUAL MEETING OF STOCKHOLDERS
APRIL 14, 1999
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 14, 1999 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 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 17, 1999.
ELECTION OF DIRECTORS FOR A THREE-YEAR TERM
Three directors are nominated for election at the 1999 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). William S. Bristow, Jr., Robert J. Callander
and Edmund M. Carpenter are nominated for re-election to the Board of Directors
for terms expiring at the Annual Meeting in 2002.(1)
Pertinent information concerning the nominees for re-election as 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. 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
<TABLE>
<S> <C>
WILLIAM S. BRISTOW, JR.
[William S. Bristow, Jr. Director since 1978
Photo] Current term expires 1999
Mr. Bristow, 45, is President of W. S. Bristow & Associates,
Inc., which is engaged in small business development. From
1992 to 1995, Mr. Bristow was New England Region Manager of
Roberts Express, Inc., a provider of expedited
transportation services. He is Chairman of the Committee on
Directors and a member of the Audit Committee.
ROBERT J. CALLANDER
[Robert J. Callander Director since 1991
Photo] Current term expires 1999
Mr. Callander, 68, is Executive in Residence at Columbia
University School of Business. He retired as Vice Chairman
of Chemical Banking Corporation in 1992. He is a member of
the Compensation Committee and the Committee on Directors.
He is a director of Aramark Corporation, a worldwide food
service company; Omnicom Group, Inc., an advertising holding
company; and the Scudder New Asia, Global High Income, and
Korea Funds.
</TABLE>
- ---------------
(1)Mr. E.M. Carpenter was elected to the Board of Directors on December 8, 1998,
by action of the Board of Directors as provided in the Company's By-Laws, to
fill the vacancy in the class of 1999 created by the retirement of Theodore E.
Martin.
1
<PAGE> 4
<TABLE>
<S> <C>
EDMUND M. CARPENTER
[Edmund M. Carpenter Director since 1998
Photo] Current term expires 1999
Mr. Carpenter, 57, became President and Chief Executive
Officer of the Company in 1998. From 1997 to 1998, he was a
Senior Managing Director of Clayton, Dubilier & Rice, Inc.,
a private equity firm. From 1988 to 1995, he was Chairman
and Chief Executive Officer of General Signal Corporation, a
manufacturer of capital equipment and instruments for the
process control, electrical, semi-conductor, and
telecommunications industries. Prior to serving with General
Signal, he was President and Chief Operating Officer of ITT
Corporation. He is a director of Campbell Soup Company; Dana
Corporation; and Texaco Inc.
</TABLE>
CONTINUING DIRECTORS
<TABLE>
<S> <C>
THOMAS O. BARNES
[Thomas O. Barnes Photo] Director since 1978
Current term expires 2000
Mr. Barnes, 50, is Chairman of the Board of Directors and an
employee of the Company. From 1993 through May 1997, Mr.
Barnes also served as Senior Vice President-Administration.
Prior to joining the Company he was President of The Olson
Brothers Company, a manufacturer of machined metal parts.
GARY G. BENANAV
[Gary G. Benanav Photo] Director since 1994
Current term expires 2000
Mr. Benanav, 53, is Chairman and Chief Executive Officer of
New York Life International, Inc. and Executive Vice
President of New York Life Insurance Company. Prior to this
appointment 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 Chairman of the Compensation
Committee and a member of the Audit Committee. He is a
director of Executive Risk, a professional liability
insurer.
GEORGE T. CARPENTER
[George T. Carpenter Director since 1985
Photo] Current term expires 2001
Mr. Carpenter, 58, is President of The S. Carpenter
Construction Company, which is involved in general
contracting, and The Carpenter Realty Company, which is
involved in real estate management. He is a member of the
Audit Committee and the Committee on Directors. He is a
director of Webster Financial Corp.
</TABLE>
2
<PAGE> 5
<TABLE>
<S> <C>
DONNA R. ECTON
[Donna R. Ecton Photo] Director since 1987
Current term expires 2001
Ms. Ecton, 51, is Chairman, President and Chief Executive
Officer of EEI Inc., consultants to management and
investors. From 1996 to 1998, she was Chief Operating
Officer and a Director of PETsMART, Inc. From 1995 to 1996,
she was Chairman, President and Chief Executive Officer of
Business Mail Express, Inc. From 1991 to 1994, she was
President and Chief Executive Officer of Van Houten North
America, Inc. and Andes Candies Inc. She is Chairman of the
Audit Committee and a member of the Compensation Committee.
She is a director of Vencor Inc., a long-term healthcare
network; and H & R Block, Inc.
</TABLE>
<TABLE>
<S> <C>
ROBERT W. FIONDELLA
[Robert W. Fiondella Photo] Director since 1997
Current term expires 2000
Robert W. Fiondella, 56, is Chairman, President and Chief
Executive Officer of Phoenix Home Life Mutual Insurance
Company, in which position he has served since 1994. In
1992, he was elected President and Principal Operating
Officer of that company. He is a member of the Committee on
Directors and the Audit Committee. He is a director of The
Advest Group, Inc., a financial investment firm; Phoenix
Investment Partners, an investment company; and PXRE
Corporation, a property and casualty reinsurance company.
FRANK E. GRZELECKI
[Frank E. Grzelecki Director since 1997
Photo] Current term expires 2001
Mr. Grzelecki, 61, retired as Vice Chairman of Handy &
Harman, a diversified industrial manufacturing company in
1998. From 1992 to 1997, he served as President and Chief
Operating Officer of that company. He is a member of the
Compensation Committee and the Committee on Directors. He is
a director of Chartwell Re Corporation, an insurance holding
company; The Morgan Group, Inc., which provides delivery
services for the prefabricated housing and motor home
industries; and Spinnaker Industries, Inc., a diversified
manufacturer of adhesive-backed materials and process
equipment.
MARCEL P. JOSEPH
[Marcel P. Joseph Photo] Director since 1991
Current term expires 2000
Mr. Joseph, 64, retired as Chairman of the Board of Augat
Inc., a multi-national manufacturer of electromechanical
connectors and other components, in December 1995, and as
President and Chief Executive Officer of that company in
1994. He is a member of the Audit Committee and the
Compensation Committee.
</TABLE>
Directors are elected by a plurality of the votes cast in the election of
directors. The Board of Directors unanimously recommends a vote FOR Messrs.
Bristow, Callander and E.M. Carpenter (proposal 1 on the proxy card).
3
<PAGE> 6
THE BOARD AND ITS COMMITTEES
In 1998, the Board held ten meetings. Each incumbent director of the Company
attended in excess of 80% of the meetings of the Board of Directors and Board
committees on which he or she served during 1998, except Mr. Martin who attended
70% of such 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 accountants to audit the financial statements of the Company. It
reviews with representatives of the independent accountants 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
accountants and periodically meets with or receives reports from principal
executive officers and the Internal Audit Director of the Company. The Audit
Committee held four meetings in 1998. The Compensation 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 Committee held three meetings in 1998. The
Committee on Directors makes recommendations concerning Board membership,
functions and compensation. The Committee on Directors will consider director
nominations submitted by stockholders in accordance with the procedures
described below under the caption "Stockholder Proposals for 2000 Annual
Meeting." The Committee on Directors held two meetings in 1998. 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 chairman receives an additional $500 for each meeting at which he or
she presides. Messrs. Barnes and E.M. Carpenter do not receive a retainer or
meeting fees for service as directors. Mr. Barnes receives $250,000 for serving
as Chairman and performing various other duties as a nonexecutive employee of
the Company. The other duties performed by Mr. Barnes include working with the
President and Chief Executive Officer to develop relationships with possible
strategic partners, participating in the process of acquiring other businesses
or entities and engaging in various operational corporate activities when
requested, chairing the Barnes Group Foundation, 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. In 1999, Mr. Barnes
was paid a bonus of $150,000 for services performed in 1998 in connection with
the CEO management transition. 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 or her 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 1998, each
non-employee director was granted stock options to acquire 4,000 shares of
Company common stock under the 1991 Barnes Group Stock Incentive Plan. In 1998,
Mr. Barnes was granted stock options to acquire 35,000 shares of Company common
stock under the 1991 Barnes Group Stock Incentive Plan for services performed in
connection with the CEO management transition. Under the 1991 Barnes Group Stock
Incentive Plan, options become exercisable in increments of 25% over a four-
year period beginning with the first year anniversary following the date of the
grant.
- ---------------
(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
<PAGE> 7
MANAGEMENT'S STOCK OWNERSHIP
As of January 31, 1999, the Company's directors, nominees for director, 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:
<TABLE>
<CAPTION>
Amount and
Nature of Percent of
Name of Person Beneficial Common
or Group Ownership(1) Stock
- -------------------------------------------------------------------------------------------------
<S> <C> <C>
Thomas O. Barnes..................................... 606,165 3.1%
Cedric D. Beckett.................................... 20,656 *
Gary G. Benanav...................................... 7,997 *
William S. Bristow, Jr. ............................. 623,886 3.1%
Robert J. Callander.................................. 9,754 *
Leonard M. Carlucci.................................. 41,685 *
Edmund M. Carpenter.................................. 0 --
George T. Carpenter.................................. 153,995 *
Donna R. Ecton....................................... 9,491 *
Ali A. Fadel(2)...................................... 25,893 *
Robert W. Fiondella.................................. 9,000 *
Frank E. Grzelecki................................... 6,000 *
Marcel P. Joseph..................................... 9,454 *
Theodore E. Martin(3)................................ 453,286 2.2%
Terry M. Murphy...................................... 12,871 *
- -------------------------------------------------------------------------------------------------
Directors & officers as a group (17 persons)(4)...... 1,578,191 7.9%
</TABLE>
- --------------------------------------------------------------------------------
* Less than 1% of Common Stock beneficially owned.
NOTES 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 331,037
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 481,680 shares. The
remainder of Mr. Bristow's shares are held in a trust which he has the power
to revoke.
The shares listed for Messrs. Barnes, Beckett, Carlucci, Fadel, Martin,
Murphy, and the directors and officers as a group include 29,400, 16,950,
28,500, 18,300, 398,910, 12,000 and 109,475 shares, respectively, which they
have the right to acquire within 60 days after January 31, 1999. The shares
listed for Messrs. Barnes, Beckett, Carlucci, Fadel, Martin, Murphy, and the
directors and officers as a group also include 3,955, 2,991, 12,104, 7,593,
10,214, 547 and 62,344 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. Barnes, Benanav, Bristow, Callander, G.T.
Carpenter, Ecton, Fiondella, Grzelecki, and Joseph include 6,000 shares each
that each of them have 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. Beckett, Carlucci, E.M. Carpenter, Fadel, and
the directors and officers as a group do not include 40,000, 46,500,
120,000, 52,500, and 222,500 incentive stock units, respectively, that they
currently may have the right to receive on a future date pursuant to
Incentive Stock Right Agreements. In 1999, Mr. Fadel's Incentive Stock Right
Agreement was terminated and he received 16,144 shares of common stock in
accordance with his Severance Agreement with the Company
5
<PAGE> 8
(which is described below under the heading "Severance Arrangements").
Descriptions of Incentive Stock Right Agreements are contained in Note 4 to
the Summary Compensation Table.
Except for the shares under the Non-Employee Director Deferred Stock Plan,
the number of shares reported as beneficially owned have 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.
(2) Mr. Fadel ceased to be an officer effective January 25, 1999. Information
shown is based on sources available to the Company as of January 25, 1999.
(3) Mr. Martin ceased to be an officer and director effective December 8, 1998.
Information shown is based on sources available to the Company as of
December 8, 1998.
(4) Does not include shares beneficially owned by Messrs. Fadel and Martin.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
The Company believes that its officers and directors, and individuals who own
more than ten percent of the outstanding shares of Common Stock, have complied
in 1998 with the filing requirements of the Exchange Act, except that three
reports filed on behalf of Mr. Wallace Barnes concerning ten transactions were
not timely filed; also, with respect to each of two of the Company's officers,
Messrs. Francis C. Boyle, Jr. and John J. Locher, a report concerning a
transaction involving the sale of Common Stock was not timely filed.
BENEFICIAL OWNERS OF MORE THAN 5% OF SHARES
As of December 31, 1998, 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:
<TABLE>
<CAPTION>
Amount and
Nature of Percent of
Name and Address Beneficial Common
of Beneficial Owner Ownership Stock
- -------------------------------------------------------------------------------------------
<S> <C> <C>
Mr. Wallace Barnes(1) 2,016,678 10.2%
1875 Perkins Street
Bristol, Connecticut 06010
Fleet National Bank(2,3) 5,555,779 28.0%
777 Main Street
Hartford, Connecticut 06115
</TABLE>
NOTES TO THE ABOVE TABLE:
(1) As of December 31, 1998, Mr. Wallace Barnes reported that he beneficially
owned 2,016,678 (10.2%) shares of Common Stock. He has sole voting and
investment power with respect to 1,158,038 shares; and sole voting power and
shared investment power with respect to 828,640 shares; and shared voting
and shared investment 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, 1998, Fleet National Bank ("Fleet") reported that it was
the beneficial owner of 2,524,712 (12.7%) shares of Common Stock. Fleet
reported that it had sole voting power with respect to 405,319 shares; sole
investment power with respect to 409,596 shares; and shared investment power
with respect to 2,114,066 shares.
(3) As of December 31, 1998, Fleet reported that it held 3,031,067 (15.3%)
shares of Common Stock in its capacity as trustee for the Company's
Guaranteed Stock Plan (an employee stock ownership plan).
6
<PAGE> 9
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.
REPORT OF THE 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 the Company's
stockholders. To this end, the Company has implemented a competitive total
compensation program for executive officers composed of the following elements,
each of which are separately discussed below: base salary; annual bonus; and
long-term compensation, including both awards under the Company's Long Term
Incentive Plan and Stock Incentive Plan.(1)
BASE SALARY
Base salaries for the President and Chief Executive Officer and other executive
officers are established by considering competitive levels for positions of
similar responsibility, the experience of the individual and the executive's
expected contribution to the Company. Merit increases are determined based upon
both the overall performance of the individual and the Company as a whole and
changes in competitive compensation levels.
Mr. E.M. Carpenter became President and Chief Executive Officer on December 8,
1998. He was paid a base salary of $38,077 in 1998 which was based on an annual
rate of $550,000 in accordance with his Employment Agreement with the Company
dated as of December 8, 1998 (which is described below under the heading
"Employment Agreement"). In entering the Employment Agreement, the Committee
considered his relevant experience and the salaries of chief executive officers
of companies similar to the Company in size and complexity.
ANNUAL BONUS
Annual bonuses may be earned by executive officers under the Company's
Management Incentive Compensation Plan ("MICP"). MICP payments are based on the
performance of the Company as a whole or the business unit over which the
executive has a direct influence. The measurements for the Company which are
applicable to the President and Chief Executive Officer and executive staff
officers are based on the attainment by the Company of specified levels of
earnings per share. The measurements which are applicable to executive officers
having direct responsibility for operating units are based on a combination of
the operating profit of the applicable unit, less a charge for the capital
employed by the unit, and the attainment by the Company of specified levels of
earnings per share.
Each of the Company's executive officers is eligible to receive a percentage of
his base salary as a bonus if the Company achieves its financial goals. The
percentage varies depending on the individual's position with the Company. In
1998, the maximum amount of base salary payable as a bonus under the MICP to
each of the Company's executive officers was: 150% for the President and Chief
Executive Officer; 135% for the Group Presidents; 120% for the Senior Vice
Presidents; and 75% for the Company's other executive officers. Mr. E.M.
Carpenter did not receive a bonus for calendar year 1998 because he joined the
Company in December. Beginning January 1, 1999, Mr. E.M. Carpenter became a
participant in the MICP in accordance with his Employment Agreement (which is
described below).
- ---------------
(1)Effective December 8, 1998, Theodore E. Martin retired from the position of
President and Chief Executive Officer of the Company. His annual base salary as
of his retirement date was $565,008. In February 1998, the Committee granted Mr.
Martin a stock option for 90,000 shares at fair market value on the date of the
grant. In determining Mr. Martin's salary and the size of the stock option
grant, the Committee considered the salaries and magnitude of grants to chief
executive officers of companies similar to the Company in size and complexity.
Mr. Martin received a bonus of $847,512 for fiscal 1998 which reflected the
performance of the Company and the terms of Mr. Martin's Retirement Agreement
(which is described below under the heading "Severance Arrangements"). In 1998,
additional benefits were paid to Mr. Martin in accordance with his Retirement
Agreement (which is described below).
7
<PAGE> 10
LONG-TERM COMPENSATION
The Committee believes that stockholder value is created by the generation of
cash flow in excess of the risk-adjusted cost of stockholders' equity. The
Company's Long Term Incentive Plan ("LTIP") rewards executive officers for
increasing the excess of cash flow from operations over the risk-adjusted cost
of equity.
Under the LTIP, the Committee grants 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 cash flow from operations, minus 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 1998 were based on an increase in the value of
performance units over the three-year period from 1995 to 1997. Beginning
January 1, 1999, Mr. E.M. Carpenter became a participant in the LTIP in
accordance with his Employment Agreement (which is described below).
Under the 1991 Barnes Group Stock Incentive Plan, the Committee grants stock
options and other stock-based awards to executive officers and other key
employees in an effort to align the interests of employees with those of
stockholders. Except for one-time initial grants (which are typically awarded at
85% of market value) to certain senior 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 1998, Mr. E.M. Carpenter was granted options to
acquire Common Stock and incentive stock units to acquire restricted shares of
Common Stock in accordance with his Employment Agreement (which is described
below). In determining the size of the grant the Committee 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.
OTHER
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 (the "Million Dollar
Cap") for certain compensation paid to each of its Chief Executive Officer
("CEO") and the four highest compensated executives other than the CEO named in
the proxy statement (the "Covered Executives"). Regulations issued under the
Code exclude from the Million Dollar Cap compensation that is calculated based
on attainment of pre-established, objective performance goals, if certain other
requirements are met. The Committee's policy is to structure compensation awards
for Covered Executives that will be deductible without limitation where doing so
will further the purposes of the Company's executive compensation programs. The
Committee also considers it important, however, to retain flexibility to design
compensation programs that recognize a full range of performance criteria
important to the Company's success, even where compensation payable under such
programs may not be fully deductible.
CONCLUSION
The Committee believes that the elements of the compensation programs described
above provide a competitive total compensation package 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 executive with those of stockholders over the long term.
COMPENSATION COMMITTEE:
Gary G. Benanav, Chairman
Robert J. Callander
Donna R. Ecton
Frank E. Grzelecki
Marcel P. Joseph
8
<PAGE> 11
COMPENSATION
The following table sets forth compensation paid by the Company to the persons
who served as Chief Executive Officer and to the four remaining most highly-paid
persons who were executive officers at the end of 1998.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long Term Compensation
------------------------------------
Annual Compensation Awards(3) Payouts
------------------------------- ----------------------- ----------
Other Restricted Securities All
Annual Stock Underlying Other
Compen- Awards(4) Options(5) LTIP Compen-
Name and Principal Position(1) Year Salary Bonus sation(2) ($) (#) Payouts(6) sation(7)
- ------------------------------ ---- -------- -------- --------- ---------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
E.M. CARPENTER 1998 $ 38,077 $ -0- $ 54,247 $3,712,500 75,000 $ -0- $66,302
President and Chief Executive Officer
C.D. BECKETT 1998 206,667 252,215 3,985 1,007,250 21,000 -0- 14,847
Vice President, Barnes Group Inc. 1997 141,755 92,615 3,366 -0- 42,000 -0- -0-
And President, Barnes Aerospace
L.M. CARLUCCI 1998 262,100 102,752 21,887 -0- 30,000 129,870 30,104
Vice President, Barnes Group Inc. 1997 220,500 202,965 42,161 -0- 21,600 156,020 50,424
And President, Bowman 1996 210,000 189,000 4,377 643,250 -0- 38,880 11,642
Distribution
T.M. MURPHY 1998 217,500 135,720 12,702 -0- 9,000 -0- 72,295
Senior Vice President, Finance 1997 71,667 77,525 8,454 -0- 39,000 -0- 37,529
A.A. FADEL 1998 256,937 149,954 11,322 -0- 30,000 160,839 19,437
Former Vice President, Barnes Group Inc. 1997 249,012 -0- 19,117 -0- 21,600 177,002 28,116
and President, Associated Spring 1996 240,012 183,202 1,248 726,250 -0- 34,500 6,536
T.E. MARTIN 1998 553,340 847,512 59,128 -0- 90,000 436,178 73,474
Former President and 1997 525,004 709,901 133,289 -0- 75,000 397,582 163,797
Chief Executive Officer 1996 500,004 575,000 18,764 1,660,000 -0- 72,480 29,984
</TABLE>
NOTES TO THE ABOVE TABLE:
(1) Mr. Carpenter joined the Company in December 1998; accordingly, no
information is provided for him in 1997 and 1996. Mr. Beckett became an
officer in November 1997; accordingly, no information is provided for him in
1996. Mr. Murphy joined the Company in September 1997; accordingly, no
information is provided for him in 1996.
(2) Other annual compensation includes reimbursement for taxes paid on insurance
premiums and financial planning services paid by the Company. The figures
for Mr. Martin also include $3,159 and $3,145 of "above-market" interest
paid on deferred compensation for the years 1997 and 1996, respectively.
(3) Awards to the executives were granted under the 1991 Barnes Group Stock
Incentive Plan, except for 75,000 stock options and 60,000 incentive stock
units that were granted to Mr. E.M. Carpenter in accordance with his
Employment Agreement (which is described below under the heading "Employment
Agreement").
(4) Messrs. Beckett, Carlucci, Fadel 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: Beckett, 6,000 on 2/16/96 and 14,000 on
2/20/98; Carlucci, 23,250 on 2/16/96; Fadel, 26,250 on 2/16/96; and E.M.
Carpenter 60,000 on 12/8/98. Incentive stock units are denominated in shares
of Common Stock. The right awarded to each executive (other than Mr. E.M.
Carpenter) entitles the holder to receive, without payment to the Company,
shares of Common Stock equal to the number of incentive stock units credited
to the holder on the date five years from the date of the award, provided
that the holder is
9
<PAGE> 12
an employee of the Company on that date. Units underlying these rights were
credited to each executive (other than Mr. E.M. Carpenter) 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 anniversary
of the date of the award. Units underlying these rights will be credited to
Mr. E.M. Carpenter on the third and fifth anniversary of the date of the
award, in each case, provided that he is an employee of the Company on such
anniversary. In addition Messrs. Beckett, Carlucci, Fadel 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:
Beckett, 20,000 on 2/20/98; Carlucci, 23,250 on 2/16/96; Fadel, 26,250 on
2/16/96; and E.M. Carpenter, 60,000 on 12/8/98. The right awarded to each
executive entitles the holder to receive, without payment to the Company,
shares of Common Stock equal to the number of incentive stock units credited
to the holder on the date five years from the date of the award or, solely
with regard to Mr. E.M. Carpenter, on the third and fifth anniversary of the
date of the holder's award, provided that, in each case with respect to each
executive, the holder 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 holder 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 holder
immediately prior to the dividend payment date divided by the market price
of the Common Stock on the dividend payment date. As of December 31, 1998,
Messrs. Beckett, Carlucci and Fadel were credited with 20,875, 34,958, and
39,469 incentive stock units, respectively, having a value of $29.25 per
share as of December 31, 1998, of $610,594, $1,022,522, and $1,154,468,
respectively.
Mr. Fadel's incentive stock rights were terminated in 1999 when he ceased to
be an employee of the Company as provided in his Severance Agreement (which
is described below under the heading "Severance Arrangements").
Mr. Martin's incentive stock rights were terminated in 1998 when he ceased
to be an employee of the Company as provided in his Retirement Agreement
(which is described below under the heading "Severance Arrangements").
(5) Adjusted for 3-for-1 stock split effective April 25, 1997.
(6) Payment in the designated year is with respect to the three-year performance
period ending the prior year. For example, the payment made in 1998 covered
the three-year period ending in 1997. The 1998 figure for Mr. Martin also
includes payments totaling $113,501 for deferred LTIP associated with the
three-year performance periods 1989-1991, 1991-1993, and 1993-1995. Mr.
Martin received a settlement of his interest under the LTIP in accordance
with his Retirement Agreement (which is described below).
(7) Includes matching contributions by the Company under the Guaranteed Stock
Plan and premiums paid for life insurance. The figures for Mr. Murphy
include $48,219 and $23,735 for the reimbursement of moving expenses and the
applicable taxes paid by the Company in 1998 and 1997, respectively.
STOCK OPTIONS
The following table provides information on grants of stock options in 1998
pursuant to the 1991 Barnes Group Stock Incentive Plan to the executive officers
listed in the Summary Compensation Table.
10
<PAGE> 13
OPTION GRANTS IN 1998
<TABLE>
<CAPTION>
Number of Percent of Potential Value at Assumed
Securities Total Annual Rates of Stock Price
Underlying Options Market Appreciation to End of Option
Options Granted to Exercise Price on Term in 2008(3)
Granted(2) Employees Price Date of Expiration ----------------------------------
Name (#) in 1998 ($/Sh) Grant ($/Sh) Date 0% 5% 10%
- ----------------- ---------- ---------- -------- ------------ ---------- -------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
E.M. Carpenter(1) 75,000 13.3% $ 26.30 $30.94 12/07/08 $348,000 $1,806,750 $4,045,500
C.D. Beckett 21,000 3.7% 29.63 29.63 2/19/08 -0- 391,230 991,620
L.M. Carlucci 30,000 5.3% 29.63 29.63 2/19/08 -0- 558,900 1,416,600
T.M. Murphy 9,000 1.6% 29.63 29.63 2/19/08 -0- 167,670 424,980
A.A. Fadel.(4) 30,000 5.3% 29.63 29.63 2/19/08 -0- 558,900 1,416,600
T.E. Martin 90,000 15.9% 29.63 29.63 2/19/08 -0- 1,676,700 4,249,800
</TABLE>
NOTES TO THE ABOVE TABLE:
(1) Options were granted to Mr. E.M. Carpenter pursuant to his Employment
Agreement (which is described below under the heading "Employment
Agreement").
(2) Other than Mr. Martin's options, options become exercisable in increments of
25% over a four-year period beginning with the first year anniversary
following the date of the grant. All options granted to Mr. Martin in 1998
became fully vested as of December 8, 1998 in accordance with his Retirement
Agreement (which is described below under the heading "Severance
Arrangements").
(3) With respect to options expiring on December 7, 2008, the stock price per
share in 2008 would be $30.94 based on 0% annual appreciation from the
market price on the date of the grant, $50.39 based on 5% annual
appreciation, and $80.24 based on 10% annual appreciation. With respect to
options expiring on February 19, 2008, the stock price per share in 2008
would be $48.26 based on 5% annual appreciation, and $76.85 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) 75% of the options granted to Mr. Fadel in 1998 were forfeited when he
ceased to be an employee in 1999.
The following table provides information relating to stock option exercises in
1998 by the named executive officers and the number and value of each such
officer's unexercised in-the-money options on December 31, 1998, based on the
difference between the exercise price and the $29.25 per share year-end market
price of the Common Stock.
AGGREGATED OPTION EXERCISES IN 1998 AND YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying In-The-Money
Unexercised Options Options
Shares at Fiscal Year-End(#) At Fiscal Year-End($)
Acquired on Value --------------------------- ---------------------------
Name Exercise(#) Realized($) Exercisable Unexercisable Exercisable Unexercisable
- -------------- ----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
E.M. Carpenter -0- $ -0- -0- 75,000 $ -0- $221,250
C.D. Beckett -0- -0- 10,500 52,500 56,310 168,930
L.M. Carlucci -0- -0- 15,600 46,200 226,236 112,055
T.M. Murphy -0- -0- 9,750 38,250 43,178 129,533
A.A. Fadel(1) 38,350 856,499 5,400 46,200 37,352 112,055
T.E. Martin(2) -0- -0- 398,910 -0- 4,652,986 -0-
</TABLE>
NOTES TO THE ABOVE TABLE:
(1) All of Mr. Fadel's unvested options were forfeited when he ceased to be an
employee in 1999.
(2) All outstanding stock options held by Mr. Martin became fully vested on
December 8, 1998 pursuant to his Retirement Agreement (which is described
below under the heading "Severance Arrangements").
11
<PAGE> 14
LONG-TERM INCENTIVE PLAN AWARDS
The following table provides information relating to grants of performance units
in 1998 for the performance period 1998-2000 under the LTIP.
LONG-TERM INCENTIVE PLANS -- AWARDS IN 1998
<TABLE>
<CAPTION>
Performance or
Number of Other Period
Shares, Units Until
or Other Maturation
Name Rights(#) or Payout(1)
- -------------- ------------- --------------
<S> <C> <C>
E.M. Carpenter 63,100 1998-2000
C.D. Beckett 19,500 1998-2000
L.M. Carlucci 29,200 1998-2000
T.M. Murphy 57,000 1998-2000
A.A. Fadel 24,600 1998-2000
T.E. Martin 94,600 1998-2000
</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. The value of a performance unit over the three-year
period ending December 31, 1998 increased by $4.09. However, this is not
necessarily representative of the increase, if any, that will occur during
the period 1998-2000. Payments under the LTIP made in the prior three years
are shown in the Summary Compensation Table.
PENSION PLANS
The Company's named executive officers 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
had retired in 1998 at age 65 in specified compensation and years of service
classifications.
PENSION PLAN TABLE
<TABLE>
<CAPTION>
15 or More
Remuneration Years of Service
- ------------ ----------------
<S> <C>
$ 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
1,100,000 605,000
1,200,000 660,000
1,300,000 715,000
</TABLE>
12
<PAGE> 15
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, 1998, rounded to the nearest whole year, for
the named executive officers are as follows: E.M. Carpenter, 0 years; C.D.
Beckett, 5 years; L.M. Carlucci, 23 years; T.M. Murphy, 1 year; A.A. Fadel, 7
years; and T.E. Martin, 8 years.
EMPLOYMENT AGREEMENT
On December 8, 1998, the Company entered into an employment agreement (the
"Agreement") with Edmund M. Carpenter under which Mr. E.M. Carpenter 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 will purchase 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 were terminated without
cause or good reason, he would be entitled to continue receiving his salary and
welfare plan benefits for a severance period extending through the end of the
remaining employment period or two years, whichever is longer. He also would
receive other benefits, including the payment of his target bonus under the
MICP, continued vesting of his stock options and incentive stock units,
continued service credits under the Company's non-qualified plans through the
end of the severance period, and full payment of the amount owed pursuant to his
LTIP awards if applicable performance goals were achieved. Payments to Mr. E.M.
Carpenter would be subject to reduction under certain circumstances if necessary
to avoid imposition of the golden parachute excise tax. In the event Mr. E.M.
Carpenter were to terminate his employment without good reason and accept a
comparable position with a company of equal or larger size during the employment
period, he would be
13
<PAGE> 16
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 and is incorporated by reference into this document in its
entirety.
CHANGE-IN-CONTROL AGREEMENTS
The Company has entered into change-in-control severance agreements (the "CIC
Agreements") with Mr. E.M. Carpenter as of December 8, 1998 and with each of the
other named executive officers as of November 1, 1997. Each of the CIC
Agreements has an initial term ending on December 31, 1999, with automatic
annual extensions commencing on January 1, 1999 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 and is incorporated by reference into this
document in its entirety.
SEVERANCE ARRANGEMENTS
Set forth below is a description of the material terms of the agreements which
the Company entered into with Theodore E. Martin and Ali A. Fadel in connection
with their respective retirement and resignation as executive officers of the
Company. Readers desiring more complete information may examine the agreements,
which were filed as exhibits to the Company's Form 10-Q for the quarter ended
June 30, 1998 and the Form 10-K for the Fiscal Year Ended December 31, 1998,
respectively, and which are incorporated by reference into this document in
their entirety.
THEODORE E. MARTIN
On July 6, 1998, Mr. Martin entered into an agreement with the Company relating
to his retirement, effective December 8, 1998, as President and Chief Executive
Officer. The agreement provides for the
14
<PAGE> 17
following benefits for Mr. Martin: (i) payment of his monthly base salary at the
rate of $47,084 from the date of retirement through August 21, 2001; (ii)
payment of a short-term incentive award for 1998 of $847,512, (iii) payment of a
monthly bonus of $70,626 from January 5, 1999 through August 21, 2001, except
that the payment in respect of August 2001 shall be $47,843; (iv) continuation
of participation in the Company's medical and dental plans for Mr. Martin and
his spouse until August 21, 2001, and eligibility for continued participation in
the health insurance plan after that date; (v) payment of life insurance
premiums under the Company's Enhanced Life Insurance Program until Mr. Martin's
65th birthday; (vi) payment of $1,305,420 in satisfaction of all outstanding
performance units under the Company's Long Term Incentive Plan; (vii) payment of
a monthly lifetime benefit of $33,576 under the Company's Supplemental Senior
Officer Retirement Plan and, if Mr. Martin dies before September 1, 2001 and is
survived by his spouse, a monthly lifetime benefit of $16,788 to his spouse;
(viii) payment of a monthly lifetime benefit of $4,977 under the Company's
Supplemental Executive Retirement Plan; (ix) transfer to Mr. Martin of title to
the Company-provided automobile utilized by him on his retirement date; (x) an
offer to purchase Mr. Martin's primary residence at the price established by a
third party appraiser and expenses for relocating within the 48 contiguous
states; (xi) financial planning services through August 21, 2001 of up to $5,000
annually; (xii) vesting of all outstanding employee stock options held as of
December 8, 1998, with a five-year exercise period; (xiii) payment of $3,907,904
in settlement of all incentive stock units held; (xiv) attorney's fees up to
$1,000; and (xv) a tax gross-up payment equal to 35% plus the applicable state
income tax rate of the taxable income arising from items (v), (ix), (x), (xi),
and (xiv). Mr. Martin provided a release of all claims against the Company in
consideration of the benefits received by him under the agreement and agreed
until August 21, 2001 not to (a) solicit the employment of Company employees,
(b) discourage parties from doing business with the Company, (c) compete with
the Company, or (d) disclose confidential Company information.
ALI A. FADEL
On February 22, 1999, Mr. Fadel entered into an agreement with the Company
relating to his resignation as an executive officer of the Company effective on
February 21, 1999. The agreement provides for the following benefits for Mr.
Fadel: (i) severance under the Company's Executive Separation Pay Plan
consisting of twelve monthly payments totaling $260,000; (ii) continued
participation in the Company's medical, dental, group life insurance and
long-term disability plans for a period of twelve months; (iii) a bonus of
$149,954 for 1998 under the Company's Management Incentive Compensation Plan;
(iv) awards under the Company's Long-Term Incentive Plan for the three-year
cycles ending 1998, 1999 and 2000 in the amount of $179,140, and the estimated
amounts of $87,800 and $25,500, respectively; (v) retirement benefits payable at
age 65 under the Company's Salaried Retirement Income Plan and Retirement
Benefit Equalization Plan consisting of monthly payments in the amount of
$2,841; (vi) 18,300 vested employee stock options, which will expire on May 22,
1999 unless exercised by that date; (vii) 16,144 shares of Company common stock
in settlement of previously granted incentive stock units; and (viii) other
benefits, consisting of the payment through September 30, 1999 of life insurance
premiums under the Company's Enhanced Life Insurance Program, a financial
planning allowance of $4,000, and the use of a leased automobile through May 31,
1999. Mr. Fadel agreed not to solicit any Company employee for employment, not
to disparage the Company, and to cooperate with the Company in connection with
any investigations or lawsuits involving the Company.
15
<PAGE> 18
PERFORMANCE GRAPH
A stock performance graph based on cumulative total returns (price change plus
reinvested dividends) for $100 invested on December 31, 1993 is set forth below.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN OF BARNES GROUP INC.,
THE S&P 500 INDEX, AND THE S&P MANUFACTURING (INDUSTRIAL DIVERSIFIED) INDEX
<TABLE>
<CAPTION>
BGI S&P 500 MFG. INDEX DIVERSIFIED
--- ------- ----------------------
<S> <C> <C> <C>
'1993' 100.00 100.00 100.00
'1994' 126.70 101.30 103.40
'1995' 124.80 139.30 145.70
'1996' 215.70 171.30 194.20
'1997' 251.70 228.50 267.50
'1998' 331.60 293.70 328.10
</TABLE>
RATIFICATION OF SELECTION OF INDEPENDENT ACCOUNTANTS
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. 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.
The Board of Directors unanimously recommends a vote FOR ratification of the
selection of PricewaterhouseCoopers LLP as independent accountants (proposal 2
on the proxy card).
STOCKHOLDER PROPOSALS FOR 2000 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, 1999.
Stockholders wishing to submit proposals for inclusion in the Company's proxy
statement and form of proxy for the 2000 Annual Meeting of Stockholders must
submit proposals to the Company at such address by December 1, 1999.
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 2000
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
16, 1999 and January 15, 2000. 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
16
<PAGE> 19
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 15, 2000 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 ChaseMellon Shareholder Services, L.L.C., 450 West 33rd Street, New
York, New York 10001, to aid in the solicitation of proxies. ChaseMellon 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 $5,000, plus
expenses.
The Company had outstanding 19,763,789 shares of Common Stock as of February 16,
1999, each of which is entitled to one vote. Only holders of record at the close
of business on February 16, 1999 will be entitled to vote.
Under applicable Delaware law, abstentions and broker non-votes as to any
proposal will not be counted as having been voted on the proposal and will have
no effect on the outcome of the vote thereon.
If a nominee for director should become unavailable for any reason, it is
intended that votes will be cast for a substitute nominee designated by the
Board of Directors. The Board of Directors has no reason to believe the persons
nominated will be unable to serve if elected. The Board of Directors does not
know of any matters to be presented for consideration at the meeting other than
the matters described in proposals 1 and 2 of the Notice of Annual Meeting.
However, if other matters are presented, it is the intention of the persons
named in the accompanying proxy to vote on such matters in accordance with their
judgment. All shares represented by the accompanying proxy, if the proxy is
given prior to the meeting, will be voted in the manner specified therein.
By order of the Board of Directors.
/s/ Charles E. Lindsey Jr.
Charles E. Lindsey Jr.
Assistant Secretary
March 17, 1998
17
<PAGE> 20
Barnes Group Inc.
Executive Office
123 Main Street
Post Office Box 489
Bristol, Connecticut 06011-0489 U.S.A.
[Barnes Group Logo]
<PAGE> 21
1999 - BARNES GROUP INC.
ANNUAL MEETING OF STOCKHOLDERS
APRIL 14, 1999 - 10:30 A.M.
ASSOCIATED SPRING GROUP HEADQUARTERS
WINDING RIVER OFFICE PARK, 80 SCOTT SWAMP ROAD, FARMINGTON, CT 06032
The undersigned stockholder(s) of Barnes Group Inc. hereby appoints Charles E.
Lindsey Jr. and Holly V. LeBlanc, each with the power to appoint his/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 14, 1999, or at any adjournment thereof, upon the matters
set forth in the Notice of such meeting with all the powers the undersigned
would possess if personally present. Either person is individually authorized to
vote as specified on proposals 1 and 2 and otherwise in his 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
voting a proportionate share of the unallocated stock in the plan and the
allocated 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 unallocated stock in the plan
and the allocated stock for which no voting instructions are 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 VERY IMPORTANT!
For your convenience, you can now 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, ChaseMellon
Shareholder Services, L.L.C., 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 on 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 the Company save on expenses.
OR
2. Vote by Mail: Mark, sign and date your proxy and return it promptly in the
enclosed envelope. Please sign exactly as 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 titles. When a corporation gives
the proxy, an authorized officer should sign it.
THANK YOU FOR VOTING
<PAGE> 22
1999 - BARNES GROUP INC. - PROXY
Please mark
your votes as [X]
indicated in
this example.
The Board of Directors unanimously recommends a vote FOR each of the following
nominees and proposals:
<TABLE>
<CAPTION>
FOR WITHHOLD
All Nominees AUTHORITY
Except as Indicated For All Nominees
<S> <C> <C>
1. ELECTION OF DIRECTORS FOR A THREE-YEAR TERM [ ] [ ]
</TABLE>
(01) William S. Bristow, Jr.,
(02) Robert J. Callander and
(03) Edmund M. Carpenter
(INSTRUCTION: To withhold authority to vote for any individual nominee, write
that nominee's name on the line provided below.)
________________________________
FOR AGAINST ABSTAIN
2. RATIFICATION OF SELECTION OF INDEPENDENT ACCOUNTS: [ ] [ ] [ ]
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS. THIS PROXY WILL BE VOTED IN
THE MANNER SPECIFIED HEREIN BY THE UNDERSIGNED STOCKHOLDER(S). UNLESS OTHERWISE
DIRECTED, THIS PROXY SHALL BE VOTED FOR PROPOSALS 1 AND 2.
I plan to attend the meeting. [ ]
Signature:______________________ Signature:______________________ Date:_________
- --------------------------------------------------------------------------------
- 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. Please note that
voting by telephone rather than by mail will help the Company save on expenses.
TO VOTE BY TELEPHONE (FOR TOUCH TONE TELEPHONES ONLY):
- - Dial the following toll-free telephone number AT ANY TIME: 1-800-840-1208
- The call goes directly to our proxy tabulator, ChaseMellon Shareholder
Services, L.L.C., 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.
OR
- - 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: Selection of 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
<PAGE> 23
1999 - BARNES GROUP INC.
ANNUAL MEETING OF STOCKHOLDERS
APRIL 14, 1999 - 10:30 A.M.
ASSOCIATED SPRING GROUP HEADQUARTERS
WINDING RIVER OFFICE PARK, 80 SCOTT SWAMP ROAD, FARMINGTON, CT 06032
The undersigned stockholder(s) of Barnes Group Inc. hereby appoints Charles E.
Lindsey Jr. and Holly V. LeBlanc, each with the power to appoint his/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 14, 1999, or at any adjournment thereof, upon the matters
set forth in the Notice of such meeting with all the powers the undersigned
would possess if personally present. Either person is individually authorized to
vote as specified on proposals 1 and 2 and otherwise in his 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
voting a proportionate share of the unallocated stock in the plan and the
allocated 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 unallocated stock in the plan
and the allocated stock for which no voting instructions are 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.
- --------------------------------------------------------------------------------
<PAGE> 24
1999 - BARNES GROUP INC. - PROXY
Please mark
your votes as [X]
indicated in
this example.
The Board of Directors unanimously recommends a vote FOR each of the following
nominees and proposals:
<TABLE>
<CAPTION>
FOR WITHHOLD
All Nominees AUTHORITY
Except as Indicated For All Nominees
<S> <C> <C>
1. ELECTION OF DIRECTORS FOR A THREE-YEAR TERM [ ] [ ]
</TABLE>
(01) William S. Bristow, Jr.,
(02) Robert J. Callander and
(03) Edmund M. Carpenter
(INSTRUCTION: To withhold authority to vote for any individual nominee, write
that nominee's name on the line provided below.)
____________________________________
FOR AGAINST ABSTAIN
2. RATIFICATION OF SELECTION OF INDEPENDENT ACCOUNTS: [ ] [ ] [ ]
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS. THIS PROXY WILL BE VOTED IN
THE MANNER SPECIFIED HEREIN BY THE UNDERSIGNED STOCKHOLDER(S). UNLESS OTHERWISE
DIRECTED, THIS PROXY SHALL BE VOTED FOR PROPOSALS 1 AND 2.
I plan to attend the meeting. [ ]
Signature:______________________ Signature:______________________ Date:_________
- --------------------------------------------------------------------------------
