Exhbit 10.7

 

PERFORMANCE SHARE AWARD AGREEMENT

 

PURSUANT TO THE BARNES GROUP INC.

 

STOCK AND INCENTIVE AWARD PLAN

 

THIS DOCUMENT CONSTITUTES PART OF A PROSPECTUS COVERING SECURITIES THAT HAVE
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933.

 

PERFORMANCE SHARE AWARD AGREEMENT executed in duplicate as of March 7, 2005 (the
“Grant Date”), between Barnes Group Inc., a Delaware corporation (the
“Company”), and [NAME OF GRANTEE], an employee of the Company (the “Holder”).

 

In accordance with the provisions of the Barnes Group Inc. Stock and Incentive
Award Plan (the “Plan”), the Compensation and Management Development Committee
of the Company’s Board of Directors (the “Committee”) has authorized the
execution of this Agreement. Capitalized terms used in this Agreement and not
otherwise defined herein shall have the same meaning as provided for in the
Plan.

 

NOW, THEREFORE, in consideration of the mutual covenants hereinafter set forth
and for other good and valuable consideration, the parties hereto agree as
follows:

 

1. Grant of Performance Share Award. Subject to the terms and conditions of the
Plan and this Agreement, the Company hereby awards to the Holder             
performance share awards for the performance period commencing on January 1,
2005 and ending on December 31, 2006 (the “Performance Share Awards” or,
collectively, the “Award”). The Award entitles the Holder to receive, without
payment to the Company, shares of Common Stock equal to the number of
Performance Share Awards that are deemed earned in the future pursuant to
Section 2, Section 4(b) or Section 6 hereof, if any; provided, however, that,
except as provided otherwise in Section 4(b), the Holder must be an employee of
the Company on the future date as of which the Performance Share Awards are
deemed earned to receive such shares. Except in the event of a Change in Control
as provided in Section 4(b) and Section 6, no Performance Share Awards will be
deemed earned pursuant to this Agreement, nor will the Holder be entitled to
receive any shares of Common Stock under this Agreement, unless the applicable
Minimum Performance Goal set forth in Section 2 is attained or exceeded for one
or more of the Performance Years in the Award Period (as such terms are defined
in Section 2). In no event shall the Award entitle the Holder to receive more
than 58,000 shares of Common Stock, unless the excess is attributable solely to
an adjustment pursuant to Section 7.

 

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2. Performance Goal.

 

  (a) The maximum number of Performance Share Awards that may be earned pursuant
to this Agreement is              Performance Share Awards for the Company’s
2005 fiscal year, and              Performance Share Awards for the Company’s
2006 fiscal year (such two fiscal years being hereafter referred to,
collectively, as the “Award Period”, and each, individually, as a “Performance
Year”). Subject to the other provisions of this Section 2 (including but not
limited to Section 2(c) below) and this Agreement, (i) no Performance Share
Awards may be earned for a Performance Year unless the Company’s consolidated
basic earnings per share as determined in accordance with Section 6(b) of the
Plan (“EPS”) for that Performance Year equal or exceed $1.57, in the case of
Performance Year 2005, or $1.45, in the case of Performance Year 2006 (the
“Minimum Performance Goal”); (ii) all of the Performance Share Awards that may
be earned for a Performance Year will be earned if the Company’s EPS for that
Performance Year equal or exceed $1.85, in the case of Performance Year 2005, or
$1.70, in the case of each of Performance Year 2006 (the “Maximum Performance
Goal”); and (iii) the number of Performance Share Awards that will be earned for
a Performance Year will be calculated by multiplying the maximum number of
Performance Share Awards that may be earned in such Performance Year as stated
above in this Section 2(a) by the performance factor corresponding to the EPS
attained in that Performance Year in the applicable table below.

 

Table for Performance Year 2005:

 

EPS

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   Performance
Factor

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    Performance Factor x 29,000 =
# Performance Share Awards Earned*

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     100 %          75 %          50 %          -0-      

 

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Table for Performance Year 2006:

 

EPS

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   Performance
Factor

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    Performance Factor x 29,000 =
# Performance Share Awards Earned

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       100 %   * *      75 %   * *      50 %   * *      -0-     -0-  

 

Not later than ninety (90) days after the commencement of the Award Period, and
notwithstanding the foregoing provisions of this Section 2(a), the Committee may
change any or all of the foregoing EPS goals and/or performance factors and/or
the calculation of EPS in its discretion. Any such change shall be established
in writing by the Committee (within the meaning of Treasury Regulation section
1.162-27(e)(2)(i)).

 

  (b) More than ninety (90) days after the commencement of the Award Period, and
notwithstanding the provisions of Section 2(a) above, the Committee may in its
discretion, concurrently with its determination of Executive Office Group
Performance objectives for a Performance Year under the Company’s
Performance-Linked Bonus Plan for Selected Executive Officers or any successor
thereto, reduce the number of Performance Share Awards that will be earned in
the event the Minimum Performance Goal, the Maximum Performance Goal or any
particular level of EPS between the Minimum Performance Goal and the Maximum
Performance Goal is attained in such Performance Year. The Committee may
effectuate such reduction directly (e.g., by reducing the performance factor and
thus the number of Performance Share Awards that will be earned at the levels of
EPS shown in the applicable foregoing table) or indirectly (e.g., by increasing
the Maximum Performance Goal, the Minimum Performance Goal and/or any other
level of EPS at which a given number of Performance Share Awards will be earned
in accordance with the applicable foregoing table). In no event may the
Committee, directly or indirectly, increase the number of Performance Share
Awards that will be earned in the event the Minimum Performance Goal, the
Maximum Performance Goal or any particular level of EPS between the Minimum
Performance Goal and the Maximum Performance Goal is attained.

 

  (c) Any provision of Section 2(a) or 2(b) to the contrary notwithstanding,
Performance Share Awards that may be earned for any Performance Year pursuant to
this Section 2 shall not be deemed earned (i) until December 31 of such
Performance Year, and (ii) unless the Holder is employed by the Company on
December 31 of such Performance Year.

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** Subject to reduction in the discretion of the Committee, as provided below in
Section 2(b).

 

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3. Delivery of Shares. A share of Common Stock shall be delivered to the Holder
in payment of each Performance Share Award that is deemed earned pursuant to
Section 2 above or Section 4(b) below. Such delivery shall occur as of the first
day of March (and in no event shall occur later than the 15th day of March)
immediately following the date as of which such Performance Share Award is
deemed earned; provided, however, that if a Change in Control occurs after the
date on which such Performance Share Award is deemed earned and prior to the
first day of March that immediately follows such date, or if such Performance
Share Award is deemed earned at the time of a Change in Control pursuant to
Section 4(b) below, such share shall be delivered as of the date of such Change
in Control. Any provision of this Agreement to the contrary notwithstanding, in
no event, except a Change in Control as a result of which Performance Share
Awards are deemed earned pursuant to Section 4(b) or Section 6 hereof, shall any
shares be delivered in payment of Performance Share Awards unless and until the
Committee certifies in writing that the performance goals and any other material
terms (within the meaning of Treasury Regulation section 1.162-27(e)(5)) were in
fact satisfied with respect to such Performance Share Awards.

 

The shares of Common Stock delivered under this Agreement will be duly
authorized, validly issued, fully paid and non-assessable. The shares to be
delivered shall be credited to a book entry account with the Company’s transfer
agent in the name of the Holder. At the election of the Holder, stock
certificates representing such shares will be delivered to the Holder as soon as
practicable after the Company’s receipt of the Holder’s election.

 

4. Termination.

 

  (a) If the Holder’s employment terminates before December 31 of any
Performance Year other than (i) by the Company without “Cause”, or (ii) by
reason of the Holder’s death or “Disability”, including without limitation if
the Holder terminates his employment before December 31 of any Performance Year,
whether or not for “Good Reason” (as such terms are defined in the Employment
Agreement dated December 8, 1998 between the Company and the Holder), then the
Award shall terminate with respect to all of the Performance Share Awards that
have not been deemed earned as of the date of such termination, and the Holder
will not be entitled to any payout of shares for such Performance Share Awards.

 

  (b)

If the Holder’s employment terminates during the Award Period (i) by the Company
without “Cause”, or (ii) by reason of the Holder’s death or “Disability”, then
(A) the same number of Performance Share Awards will be deemed earned for the
Performance Year in which such employment termination occurs that would have
been deemed earned pursuant to Section 2 if the Holder’s employment by the
Company had continued through the end of such Performance Year; provided that if
a Change in Control occurs

 

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after such employment termination and during such Performance Year, then at the
time of such Change in Control the Holder shall be deemed to earn the maximum
number of Performance Share Awards that may be earned for such Performance Year
pursuant to the first sentence of Section 2(a) above, whether or not the Minimum
Performance Goal has been or is thereafter attained or exceeded for such
Performance Year; and (B) the Award shall terminate with respect to all
Performance Share Awards that have not otherwise been deemed earned as of the
date of such employment termination, and the Holder will not be entitled to any
payout of shares for such unearned Performance Share Awards.

 

5. Additional Condition. If the Holder, at any time while the Award is
outstanding: (i) directly or indirectly, whether as an owner, partner,
shareholder, consultant, agent, employee, investor or in any other capacity,
accepts employment, renders services or otherwise assists any other business
which competes with the business conducted by the Company or any of its
Subsidiaries in which the Holder has worked, during the Holder’s last two years
with the Company or any of its Subsidiaries; (ii) directly or indirectly, hires
or solicits or arranges for the hiring or solicitation of any employee of the
Company or any of its Subsidiaries, or encourages any such employee to leave
such employment; (iii) uses, discloses, misappropriates or transfers
confidential or proprietary information concerning the Company or any of its
Subsidiaries (except as required by the Holder’s work responsibilities with the
Company or any of its Subsidiaries); or (iv) is convicted of a crime against the
Company or any of its Subsidiaries; or (v) engages in any activity in violation
of the policies of the Company or any of its Subsidiaries, including without
limitation the Company’s Code of Business Ethics and Conduct, or, at any time,
engages in conduct adverse to the best interests of the Company or any of its
Subsidiaries; then should any of the foregoing events occur, the outstanding
portion of the Award shall be canceled, unless the Committee, in its sole
discretion, elects not to cancel it. The provisions of this Section 5 are in
addition to any other agreements related to non-competition, non-solicitation
and preservation of Company confidential and proprietary information entered
into between the Holder and the Company, and nothing herein is intended to
waive, modify, alter or amend the terms of any such other agreement.

 

6. Exception for Change in Control. Any provision of this Agreement to the
contrary notwithstanding, if the Holder remains in the continuous employ of the
Company from the Grant Date to the date, if any, on which a Change in Control
occurs before the last day of the Award Period, all of the Performance Share
Awards that may be earned pursuant to Section 2 hereof for the Performance Year
in which the Change in Control occurs and, if the Change in Control occurs in
Performance Year 2005, for Performance Year 2006 shall thereupon immediately be
deemed earned and non-forfeitable, and shares of Common Stock shall promptly be
delivered in payment thereof, whether or not the Minimum Performance Goal has
been or is thereafter attained or exceeded for any Performance Year and whether
or not the Holder is thereafter employed by the Company.

 

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7. Adjustments Upon the Occurrence of Certain Events.

 

  (a) In the case of a stock dividend or a stock split with respect to the
Common Stock, the number of shares subject to the Award shall be increased by
the number of shares the Holder would have received had he owned outright the
shares subject to the Award on the record date for payment of the stock dividend
or the stock split.

 

  (b) In the case of any reorganization or recapitalization of the Company (by
reclassification of its outstanding Common Stock or otherwise), or its
consolidation or merger with or into another corporation, or the sale,
conveyance, lease or other transfer by the Company of all or substantially all
of its property, pursuant to any of which events the then outstanding shares of
the Company’s Common Stock are combined, or are changed into or become
exchangeable for other shares of stock or property, the Holder shall be entitled
to earn and receive, in lieu of the shares that he would otherwise be entitled
to earn and receive pursuant to the Award, and without having to make any
payment to the Company or otherwise, the shares of stock or property which the
Holder would have received upon such reorganization, recapitalization,
consolidation, merger, sale or other transfer, if immediately prior thereto he
had owned the shares in respect of this Award and had exchanged such shares in
accordance with the terms of such reorganization, recapitalization,
consolidation, merger, sale or other transfer.

 

  (c) In case of any distribution by the Company of rights to stockholders, the
issuance of stock options to persons other than employees or directors of the
Company, the issuance by the Company of securities convertible into the
Company’s Common Stock or into shares of any stock or security into which such
Common Stock shall have been changed or for which it shall have been exchanged,
or any other change in the capital structure of the Company (other than as
specified above in this Section 7) which, in the judgment of the Committee,
would effect a dilution of the Holder’s rights hereunder, the Committee may make
such adjustment, if any, as it shall deem appropriate in the number or kind of
shares in respect of this Award, and such adjustment shall be effective and
binding for all purposes of this Award.

 

  (d) Any provision of this Section 7 to the contrary notwithstanding, only
adjustments that qualify for the treatment described in Treasury Regulation
section 1.162-27(e)(2)(iii)(C) may be made pursuant to this Section 7.

 

8.

General Restriction. If at any time the Board of Directors of the Company shall
determine, in its discretion, that the listing, registration or qualification of
any shares subject to this Award upon any securities exchange or under any state
or

 

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Federal law, or the consent or approval of any government regulatory body, is
necessary or desirable as a condition of, or in connection with, the granting of
this Award or the issue of shares hereunder, no rights under this Award may be
exercised and shares of Common Stock may not be delivered pursuant to this
Award, in whole or in part, unless such listing, registration, qualification,
consent or approval shall have been effected or obtained free of any conditions
not acceptable to the Board of Directors and any delay caused thereby shall in
no way affect the date of termination of this Award. The Board of Directors
shall use reasonable best efforts to effect or obtain such listing,
registration, qualification, consent or approval and will issue such shares as
soon as practicable thereafter.

 

9. No Assignment or Transferability. This Award shall not be (i) assignable or
subject to any encumbrance, pledge or charge of any nature, whether by operation
of law or otherwise, (ii) subject to execution, attachment or similar process,
or (iii) transferable by the Holder except by will or by the laws of descent and
distribution or to a Beneficiary as defined in Section 2(d) of the Plan.

 

10. Withholding of Taxes. The Committee may cause to be made, as a condition
precedent to any delivery or transfer of stock hereunder, appropriate
arrangements to satisfy any Federal, state or local taxes as required by law to
be withheld with respect to such payment or transfer of stock and the Holder may
be required to pay to the Company prior to delivery of such stock, the amount of
any such taxes which the Company is required to withhold, if any, with respect
to such stock. The Company will accept shares of Company stock of equivalent
Fair Market Value which would otherwise have been issued to the Holder
hereunder, in payment of the Company’s minimum statutory withholding tax
obligations if the Holder elects to make payment in such manner.

 

11. Notices. Any notice hereunder by the Holder shall be given to the Senior
Vice President, General Counsel and Secretary in writing and such notice by the
Holder hereunder shall be deemed duly given or made only upon receipt by the
Senior Vice President, General Counsel and Secretary at Barnes Group Inc., 123
Main Street, P. O. Box 489, Bristol, Connecticut 06011-0489, or at such other
address as the Company may designate by notice to the Holder. Any notice to the
Holder shall be in writing and shall be deemed duly given if mailed or otherwise
delivered to the Holder at such address as the Holder may have on file with the
Company or in care of the Company at its principal office in Bristol,
Connecticut.

 

12. Interpretation and Disputes. The Committee shall interpret and construe this
Agreement and determine whether the Holder has satisfied the performance goals
set forth in Section 2. Any such interpretation, construction or determination
shall be final, binding and conclusive on the Company and the Holder. In the
event there is any inconsistency between the provisions of this Agreement and
the Plan, the provisions of the Plan shall govern.

 

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Any claim, demand or controversy arising from such interpretation, construction
or determination by the Committee shall be submitted first to a mediator in
accordance with the rules of the American Arbitration Association (“AAA”) by
submitting a mediation request to the Administrator within thirty (30) days of
the date of the Committee’s interpretation or construction. The mediation
process shall conclude upon the earlier of: (i) the resolution of the dispute;
(ii) a determination by either the mediator or one or more of the parties that
all settlement possibilities have been exhausted and there is no possibility of
resolution; or (iii) thirty (30) days have passed since the filing of a request
to mediate with the AAA. A party who has previously submitted a dispute to
mediation, and which dispute has not been resolved, may submit such dispute to
binding arbitration pursuant to the rules of the AAA. Any arbitration proceeding
for such dispute must be initiated within fourteen (14) days from the date that
the mediation process has concluded. The prevailing party shall recover its
costs and reasonable attorney’s fees incurred in such arbitration proceeding.
The Holder and the Company specifically understand and agree that the failure of
a party to timely initiate a proceeding hereunder shall bar the party from any
relief or other proceeding and any such dispute shall be deemed to have been
finally and completely resolved. All mediation and arbitration proceedings shall
be conducted in Bristol, Connecticut or such other location as the Company may
determine and the Holder agrees that no objection shall be made to such
jurisdiction or venue, as a forum non conveniens or otherwise. The arbitrator’s
authority shall be limited to resolution of the legal disputes between the
parties and the arbitrator shall not have authority to modify or amend this
Agreement or the Committee’s interpretation or construction thereof, or abridge
or enlarge rights available under applicable law. Any court with jurisdiction
over the parties may enforce any award made hereunder.

 

13. General.

 

  (a) Nothing in this Agreement shall confer upon the Holder any right to
continue in the employ of the Company or any of its subsidiaries.

 

  (b) The Holder shall have no rights as a shareholder with respect to any
shares covered by this Agreement until the date of issuance to him of a stock
certificate for such shares or of entry of a credit for such shares in the
Holder’s book entry account.

 

  (c) This Agreement shall be binding upon the successors and assigns of the
Company and upon the Beneficiaries, personal representatives, legatees and heirs
of the Holder.

 

  (d) This Agreement shall be governed by and construed in accordance with the
laws of the State of Delaware, without regard to its conflicts of laws
provisions.

 

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  (e) Nothing in this Agreement is intended to be a substitute for, or shall
preclude or limit the establishment or continuation of, any plan, practice or
arrangement for the payment of compensation or fringe benefits to the Holder or
any other employee of the Company or any of its subsidiaries which the Company
or any of its subsidiaries now has or may hereafter put into effect, including
without limitation any retirement, pension, savings or thrift, insurance, death
benefit, stock purchase, incentive compensation or bonus plan.

 

  (f) Any shares that may be earned pursuant to Section 2 of this Agreement are
intended to qualify as “performance-based compensation” within the meaning of
Section 162(m)(4)(C) of the Code. Any provision of this Agreement that would
prevent any such shares from so qualifying shall be administered, interpreted
and construed to carry out such intention, and any provision that cannot be so
administered, interpreted and construed shall to that extent be disregarded.

 

  (g) Any shares that may be earned pursuant to this Agreement are intended to
qualify for the treatment applicable to short-term deferrals under Q&A-4(c) of
Section IV.A. of IRS Notice 2005-1 (guidance relating to Section 409A of the
Code), so that none of the shares that may be earned pursuant to this Agreement
will be includible in the Holder’s gross income pursuant to Section
409A(a)(1)(A) of the Code. The Award and this Agreement shall be administered,
interpreted and construed to carry out such intention, and any provision of this
Agreement that cannot be so administered, interpreted and construed shall to
that extent be disregarded. However, the Company does not represent, warrant or
guarantee that any shares that may be earned pursuant to this Agreement will not
be includible in the Holder’s gross income pursuant to Section 409A(a)(1)(A) of
the Code, nor does the Company make any other representation, warranty or
guaranty to the Holder as to the tax consequences of the Award or this
Agreement.

 

  (h) This Agreement is intended to document a Performance Share Award granted
pursuant to and subject to Section 5.II. and the other applicable terms and
conditions of the Plan, a copy of which has been or is herewith being supplied
to the Holder and the terms and conditions of which are hereby incorporated by
reference. Anything herein to the contrary notwithstanding, each and every
provision of this Agreement shall be subject to the terms and conditions of the
Plan.

 

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IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.

 

BARNES GROUP INC.           HOLDER BY:                

 

Approved by the Compensation and Management

Development Committee of the Board of Directors: 3/7/05

 

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