<PAGE>
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:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
NN BALL & ROLLER, 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)(1)
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:
------------------------------------------------------------------------
<PAGE>
April 6, 1997
Dear Stockholder:
You are cordially invited to attend the 1998 Annual Meeting of NN Ball &
Roller, Inc., which will be held on May 7, 1998, at 10:00 A.M., local time, at
the Charleston Place Hotel, 130 Market Street, Charleston, South Carolina 29401.
The business to be conducted at the Annual Meeting is described in the
attached Notice of Meeting and Proxy Statement. You are urged to read the Proxy
Statement carefully before completing the enclosed proxy card. The Annual
Meeting will include a report on the affairs of the Company presented by
management and an opportunity for questions and comments by stockholders.
To assure your representation at the meeting, please mark, date and sign the
proxy card and return it in the enclosed envelope at your earliest convenience,
whether or not you plan to attend the meeting. If you attend the Annual Meeting,
you may revoke your proxy and vote in person if you so desire.
Sincerely,
Richard D. Ennen
Chairman
<PAGE>
NN BALL & ROLLER, INC.
800 TENNESSEE ROAD
ERWIN, TN 37650
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
Notice is hereby given that the Annual Meeting of Stockholders of NN Ball &
Roller, Inc., a Delaware corporation, will be held on May 7, 1998, at 10:00
A.M., local time, at the Charleston Place Hotel, 130 Market Street, Charleston,
South Carolina 29401, for the following purposes:
(1) To elect two Class I directors, each to serve for a term of three years;
(2) To consider and act upon a proposal that the stockholders ratify the
selection of Price Waterhouse LLP as the Company's independent auditor
for the fiscal year ending December 31, 1998; and
(3) To conduct such other business as properly may come before the meeting.
Details regarding these matters are contained in the accompanying Proxy
Statement.
Holders of record of the Common Stock at the close of business on March 25,
1998, are entitled to notice of and to vote at the meeting.
Please mark, date and sign the enclosed proxy card and return it in the
envelope provided. You may revoke your proxy at any time before the votes are
cast at the Annual Meeting.
By Order of the Board of Directors,
William C. Kelly, Jr.
Assistant Secretary
Erwin, Tennessee
April 6, 1998
<PAGE>
NN BALL & ROLLER, INC.
PROXY STATEMENT
FOR
1998 ANNUAL MEETING OF STOCKHOLDERS
Proxies are being solicited by the Board of Directors of NN Ball & Roller,
Inc. (the "Company"), in connection with the annual meeting of stockholders to
be held on May 7, 1998 (the "Annual Meeting"), for the purpose of considering
and acting upon the matters set forth in the foregoing Notice of Annual Meeting
of Stockholders (the "Notice"). Stockholders of record of the Company's common
stock, par value $.01 per share ("Common Stock"), as of the close of business on
March 25, 1998, will be entitled to vote at the meeting. On March 25, 1998 (the
"Record Date"), 14,804,271 shares of Common Stock were issued and outstanding.
The entire cost of the proxy solicitation is being paid by the Company. In
addition to solicitation by mail, officers and employees of the Company, without
additional remuneration, may solicit proxies by telephone, facsimile
transmission or personal contact. Brokerage houses, banks, nominees, fiduciaries
and other custodians will be requested to forward soliciting material to the
beneficial owners of shares held by them of record and will be reimbursed by the
Company for their expenses in so doing.
The mailing address of the Company's executive office is 800 Tennessee Road,
Erwin, Tennessee, 37650. This Proxy Statement and the form of proxy will be
mailed to stockholders on or about April 6, 1998.
VOTING; QUORUM; PROXIES
Each share of Common Stock outstanding on the Record Date is entitled to one
vote on each matter submitted to a vote of stockholders at the Annual Meeting. A
quorum for the conduct of business is established when the holders of at least a
majority of the outstanding shares of Common Stock entitled to vote in the
election of directors are present at the meeting or are represented by proxy.
Representatives of the Company will serve as inspectors of election for the
Annual Meeting.
Shares represented by a properly-executed proxy will be voted at the Annual
Meeting in the manner specified. In the absence of specific instructions, shares
represented by a properly-executed proxy will be voted for each of the nominees
for election to the Board of Directors named herein and for the proposal to
ratify the selection of Price Waterhouse LLP to serve as the Company's
independent auditor for 1998.
The Board of Directors does not now intend to bring before the Annual
Meeting any matters other than those disclosed in the Notice, and it is not
aware of any business that any other persons intend to bring before the Annual
Meeting. Should any such matter requiring a vote of the stockholders arise, the
enclosed form of proxy confers upon the persons named therein the discretionary
authority to vote the shares represented by the proxy as they deem appropriate.
A proxy may be revoked at any time before it is exercised by delivery to the
Assistant Secretary of the Company of a written revocation or a subsequently
dated proxy and will be deemed revoked if the stockholder votes in person at the
Annual Meeting.
<PAGE>
BENEFICIAL OWNERSHIP OF COMMON STOCK
SECURITY OWNERSHIP OF MANAGEMENT
The following table shows, as of March 25, 1998, the beneficial ownership of
Common Stock by each director, each executive officer named in the Summary
Compensation Table and all directors and executive officers as a group, in each
case as reported to the Company by such persons.
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENTAGE
NAME AND ADDRESS OF BENEFICIALLY OWNED BENEFICIALLY OWNED
BENEFICIAL OWNER (1) (2) (3)
- ------------------------------------------------------------------ -------------------- ---------------------
<S> <C> <C>
Richard D. Ennen.................................................. 2,897,015 19.6%
Michael D. Huff................................................... 639,227(4) 4.3%
James J. Mitchell................................................. -- *
Charles I. Edmisten............................................... 430,953(5) 2.9%
Deborah Ennen Bagierek............................................ 164,969(6) 1.1%
G. Ronald Morris.................................................. 7,000 *
Frank T. Gentry................................................... 45,631(7) *
Roderick R. Baty.................................................. 62,395(8) *
Michael E. Werner................................................. 4,287(9) *
Steven T. Warshaw................................................. 1,000 *
Corby W. Self..................................................... 7,500(10) *
All directors and executive officers as a group................... 4,267,402 28.8%
</TABLE>
- ------------------------
* Less than 1%
(1) Unless otherwise indicated, the address of the beneficial owner is c/o NN
Ball & Roller, Inc., 800 Tennessee Road, Erwin, Tennessee 37650.
(2) Beneficial ownership for this purpose has been determined in accordance with
Rule 13d-3 under the Securities Exchange Act of 1934, as amended, and is
based on the possession of either sole or shared power to vote or to direct
the voting of, or sole or shared power to dispose or to direct the
disposition of, the shares of Common Stock indicated. Beneficial ownership
as determined in this manner does not necessarily mean that such person has
or shares in the economic benefits associated with ownership of the shares
of Common Stock. Except as otherwise indicated, each person has reported
that he or she has sole voting and sole dispositive power with respect to
the shares of Common Stock shown as beneficially owned.
(3) The percentage shown as beneficially owned by each person or group
represents the total number of shares of Common Stock shown in the adjacent
column divided by the sum of (i) the number of issued and outstanding shares
of Common Stock as of March 25, 1998, and (ii) all shares of Common Stock,
if any, issuable upon the exercise of stock options held by such person (but
no other person) or group, as applicable, that were exercisable on March 25,
1998, or which will become exercisable within 60 days thereafter.
(4) Includes 225,000 shares of Common Stock registered in the name of Mr. Huff's
wife. Mr. Huff disclaims beneficial ownership of such shares.
(5) Includes 7,200 shares of Common Stock that Mr. Edmisten holds as an option
to purchase and 9,000 shares of Common Stock registered in the name of Mr.
Edmisten's wife.
(6) Includes 750 shares of Common Stock registered in the name of Ms. Bagierek's
husband, 375 shares registered in the name of a minor son and 375 shares
registered in the name of a minor daughter.
(7) Includes 14,070 shares of Common Stock that Mr. Gentry holds an option to
purchase.
(8) Includes 60,000 shares of Common Stock that Mr. Baty holds an option to
purchase.
2
<PAGE>
(9) Includes 3,287 shares of Common Stock registered in the name of Mr. Werner's
wife.
(10) Consists solely of shares of Common Stock that Mr. Self holds as an option
to purchase.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth the number of shares of the Company's Common
Stock beneficially owned by the only parties known to the Company's management
to own more than 5% of the Company's Common Stock (other than Richard D. Ennen,
for whom information is shown on the preceding table).
<TABLE>
<CAPTION>
NUMBER OF SHARES
NAME AND ADDRESS OF BENEFICIALLY OWNED PERCENTAGE
BENEFICIAL OWNER (1) BENEFICIALLY OWNED
- ------------------------------------------------------------------------ -------------------- ---------------------
<S> <C> <C>
Wellington Management................................................... 1,304,450(2) 8.8%
Company, LLP
75 State Street
Boston, MA 02109
Neuberger & Berman...................................................... 1,011,315(3) 7.2%
605 Third Avenue
New York, NY 10158
The Capital Group....................................................... 827,000(4) 5.6%
Companies, Inc.
333 South Hope Street
Los Angeles, CA 90071
</TABLE>
- ------------------------
(1) Beneficial ownership for this purpose has been determined in accordance with
Rule 13d-3 under the Securities Exchange Act of 1934, as amended, and is
based on the possession of either sole or shared power to vote or to direct
the voting of, or sole or shared power to dispose or to direct the
disposition of, the shares of Common Stock indicated. Beneficial ownership
as determined in this manner does not necessarily mean that such person has
or shares in the economic benefits associated with ownership of the shares
of Common Stock.
(2) Includes 729,750 shares for which Wellington Management Company, LLP, an
investment adviser, reports shared voting power with the beneficial owners
of such shares and 1,304,450 shares for which Wellington Management Company,
LLP reports shared dispositive power with the beneficial owners of such
shares. Wellington Management Company, LLP, holds all such shares on behalf
of its clients and disclaims any economic interest in the shares.
(3) Includes 738,190 shares for which Neuberger & Berman, a broker-dealer and
investment adviser, reports sole voting power and 332,000 shares for which
Neuberger & Berman reports shared voting power with the beneficial owners of
1,070,190 shares. Neuberger & Berman reports that it shares dispositive
power with the beneficial owners of all 1,070,190 shares. Neuberger & Berman
holds all such shares on behalf of its clients and disclaims any economic
interest in the shares. Principal(s) of Neuberger & Berman, LLC, own 26,900
shares in their own personal securities accounts. Neuberger & Berman, LLC,
disclaims beneficial ownership of these shares since they were purchased
with each principal(s)' personal funds and each principal has exclusive
dispositive and voting power over shares held in their respective accounts.
(4) The Capital Group Companies reports sole voting power for all shares.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Under Section 16(a) of the Securities Exchange Act of 1934, as amended, each
of the Company's directors and executive officers, and any beneficial owner of
more than 10% of the Common Stock, is required to file with the Securities and
Exchange Commission (the "SEC") initial reports of beneficial
3
<PAGE>
ownership of the Common Stock and reports of changes in beneficial ownership of
the Common Stock. Such persons also are required by SEC regulations to furnish
the Company with copies of all such reports.
Based solely on its review of the copies of such reports furnished to the
Company for the year ended December 31, 1997, and on the written representations
made by such persons that no other reports were required, the Company is not
aware of any instances of noncompliance with Section 16(a) by its directors,
executive officers or owners of more than 10% of the Common Stock.
ELECTION OF DIRECTORS
The Company's Certificate of Incorporation provides for the division of the
Board of Directors into three classes: Class I, Class II and Class III. Only one
class of directors is elected at each annual meeting. Each director so elected
serves for a three-year term and until his or her successor is elected and
qualified, subject to such director's earlier death, resignation or removal.
Directors are elected by a plurality of the votes cast. Cumulative voting for
the election of directors is not permitted.
NOMINEES
Two Class I directors will be elected to the Board of Directors at the
Annual Meeting. The Company has nominated for election Michael D. Huff and
Michael E. Werner, each of whom currently is a director. Each of the nominees
has indicated a willingness to continue to serve as a director if elected, but
if either of them shall decline or be unable to serve, the persons named as
proxies intend to vote all shares in favor of the election of such other person
who may be nominated as a replacement by the Board of Directors. If no such
other person is nominated as a replacement, the Board of Directors will reduce
the number of directors to be elected at the Annual Meeting. Ms. Bagierck has
decided not to seek election as director when her term expires.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR EACH OF THE NOMINEES.
INFORMATION ABOUT THE DIRECTORS
The following table sets forth the names of each current director (including
the nominees for election), their age, their years of service as a director, the
year in which their current term expires and their current positions with the
Company. The table is followed by a more detailed biographical description for
each director.
<TABLE>
<CAPTION>
DIRECTOR TERM
NAME AGE SINCE EXPIRES POSITIONS WITH THE COMPANY
- ------------------------------------------- --- ----------- ----------- -------------------------------------------
<S> <C> <C> <C> <C>
Richard D. Ennen........................... 70 1980 2000 Chairman of the Board and
Director
Roderick R. Baty........................... 44 1995 2000 President, Chief Executive
Officer and Director
Deborah Ennen Bagierek..................... 46 1994 1998 Director
Michael D. Huff............................ 50 1980 1998 Director
G. Ronald Morris........................... 61 1994 1999 Director
Michael E. Werner.......................... 53 1995 1998 Director
Steven T. Warshaw.......................... 49 1997 1999 Director
</TABLE>
Richard D. Ennen is the principal founder of the Company and has been the
Chairman of the Board and a director of the Company since its formation in 1980.
He served as Chief Executive Officer of the Company from its inception until
1997 and as President of the Company from its inception until 1990. In recent
years, Mr. Ennen has focused on the development and implementation of the
Company's business strategy rather than the day-to-day operations of the
Company. Prior to forming the Company, Mr. Ennen
4
<PAGE>
held various management and executive positions with Hoover Precision Products,
Inc. (formerly Hoover Universal, Inc.), a division of Tsubakimoto Precision
Products Co. Ltd, including Corporate Vice President and General Manager of the
ball and roller division. Mr. Ennen has over 40 years of experience in the anti-
friction bearing industry.
Roderick R. Baty became President and Chief Executive Officer in July 1997.
He joined the Company in July 1995 as Vice President and Chief Financial Officer
and was elected to the Board of Directors to fill a vacant seat in August 1995.
Prior to joining the Company, Mr. Baty served as President and Chief Operating
Officer of Hoover Precision Products from 1990 to January 1995, and as Vice
President and General Manager of Hoover Precision Products from 1985 to 1990.
Deborah Ennen Bagierek is the eldest daughter of Richard D. Ennen. Although
Ms. Bagierek currently is not employed outside the home, she has over 12 years
of management experience in banking, including branch, trust and personnel
management.
Michael D. Huff has served as a director of the Company since its formation
in 1980 and as a consultant to the Company since January 1995. From 1980 until
his retirement in January 1995, Mr. Huff served as the Chief Financial Officer,
Treasurer and Secretary of the Company. Before joining the Company, Mr. Huff
served as a division controller of Hoover Precision Products, Inc. from 1975
until 1980. Mr. Huff is a member of the American Institute of Certified Public
Accountants and the Tennessee Society of Certified Public Accountants.
G. Ronald Morris has served as President, Chief Executive Officer and
director of Western Industries, Inc., a contract manufacturer of metal and
plastic products, since July 1991. From 1989 to 1991, Mr. Morris served as
Chairman of the Board of Integrated Technologies, Inc., a manufacturer of
computer software, and from 1988 to 1989, he served as Vice Chairman of Rexnord
Corporation, a manufacturer of mechanical power transmission components and
related products, including anti-friction bearings. From 1982 to 1988, Mr.
Morris served as President and Chief Executive Officer of PT Components, Inc., a
manufacturer of mechanical power transmission components and related products
that was acquired by Rexnord Corporation in 1988.
Michael E. Werner is a management consultant with Werner Gershon Associates,
a management consulting firm specializing in manufacturing companies that Mr.
Werner co-founded in 1982. During the five years prior to starting his business,
Mr. Werner served as Director of Strategic Planning and Business Development for
the Uniroyal Chemical Company. He also has held positions with the New York
Central Company, Western Electric Company and the Continental Group.
Steven T. Warshaw has served since 1996 as President of Olin Microelectronic
Materials, a company supplying technologically advanced chemicals, products, and
services to semiconductor manufacturers. Prior to his current position, Mr.
Warshaw served in a variety of positions at Olin since 1974, including President
of OCG Microelectronic Materials and Vice President of Olin's Chemicals
Division.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Michael E. Werner, a director of the Company, is a principal of Werner
Gershon Associates, which was retained by the Company to help develop a
long-range business strategy. Over a four month period in 1997 and 1998, Werner
Gershon Associates worked with the Company to study their markets and
competitors, and defining new business opportunities. The result of this work
was a long range business plan. The Company paid Werner Gershon Associates
approximately $158,000 for its services.
STOCKHOLDERS AGREEMENT
The Company and the persons who were stockholders of the Company prior to
its initial public offering are parties to an agreement which provides that, so
long as the Ennen family continues to hold at least 10 percent of the Common
Stock, in the event that Mr. Ennen for any reason ceases to serve as a
5
<PAGE>
director of the Company, such individuals will vote their shares of Common Stock
in favor of a director nominee who is designated by the Ennen family. To the
Company's knowledge, as of March 25, 1998, members of the Ennen family held, in
the aggregate, approximately 22.7 percent of the outstanding shares of Common
Stock, and the other parties to the Agreement held, in the aggregate,
approximately 10.3 percent of the outstanding shares of Common Stock.
COMPENSATION OF DIRECTORS
Directors who are not employees of the Company are paid an annual retainer
of $15,000 and a fee of $1,000 for each Board or Committee meeting attended,
except that directors do not receive fees for attendance at Committee meetings
held on the same day as a Board meeting. Directors who are employees of the
Company do not receive any compensation for their service as directors. The
Company also reimburses all directors for out-of-pocket expenses incurred in
attending Board and Committee meetings.
COMMITTEES OF THE BOARD
AUDIT COMMITTEE. The Audit Committee of the Board of Directors consists of
G. Ronald Morris, Michael E. Werner, and Steven T. Warshaw. The Audit Committee
is responsible for recommending the independent certified public accountants to
be selected by the Board of Directors to conduct the annual audit of the books
and accounts of the Company and for reviewing the adequacy and effectiveness of
the internal auditing, accounting and financial controls of the Company with the
independent certified public accountants and the Company's internal financial
and accounting staff. The Audit Committee met two times in 1997.
COMPENSATION COMMITTEE. The Compensation Committee of the Board of
Directors consists of G. Ronald Morris, Michael E. Werner, and Steven T.
Warshaw. The Compensation Committee is responsible for reviewing and approving
the Company's executive compensation policies and practices and supervising the
administration of the Company's employee benefit plans, including the NN Ball &
Roller, Inc. Stock Incentive Plan (the "Stock Incentive Plan"). The functions of
the Compensation Committee are discussed in further detail in the section
entitled "Report of the Compensation Committee" herein. The Compensation
Committee met four times in 1997.
The Board of Directors does not have a nominating committee.
ATTENDANCE AT BOARD AND COMMITTEE MEETINGS
The Board of Directors held five meetings in 1997. Each director of the
Company was present for all of the meetings of the Board of Directors and each
Committee on which such director served. After becoming a member of the Board of
Directors in October 1997, Mr. Warshaw was present for all meetings of the Board
of Directors and each committee on which he served.
6
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth for the years ended December 31, 1995, 1996
and 1997, certain information concerning the compensation paid for services
rendered in all capacities by the Company to each individual who served as the
Chief Executive Officer and to each of the other most highly compensated
executive officers of the Company whose annual salary and bonus in 1997 exceeded
$100,000.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
NAME AND (1) ------------- ALL OTHER
PRINCIPAL ------------------------ OPTIONS/ COMPENSATION
POSITION YEAR SALARY ($) BONUS ($) SARS (#) ($) (2)
- ----------------------------------------------------- --------- ----------- ----------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Richard D. Ennen..................................... 1997 174,720 20,000 0 46,587(3)(4)
Chairman (5) 1996 163,488 -- 0 50,421
1995 157,944 46,000 0 49,912
Roderick R. Baty..................................... 1997 154,063 20,000 0 712(3)
President/Chief Executive Officer (6) 1996 120,016 30,000 643
1995 60,008 13,000 150,000 25
James J. Mitchell.................................... 1997 199,533 -- -- 1,288(3)
President/Chief Operating Officer (7) 1996 165,034 35,000 0 1,536
1995 194,490 55,000 45,000 2,485
Frank T. Gentry...................................... 1997 106,307 13,000 -- 612(3)
Vice President--Human Resources/Materials 1996 100,546 17,000 15,000 603
1995 75,860 19,000 24,750 622
Corby T. Self........................................ 1997 105,110 13,000 10,000 612(3)
1996 83,353 17,000 -- 560
1995 63,415 12,000 -- 555
</TABLE>
- ------------------------
(1) None of the above-named executive officers received perquisites or other
personal benefits in excess of the lesser of $50,000 or 10% of such
individual's salary plus annual bonus.
(2) For all named executives other than Mr. Ennen and Mr. Mitchell, amounts for
1997 include $500 in Company matching contributions under a "401(k)" savings
plan that is open to substantially all of the Company's employees and
officers who have met certain service and age requirements.
(3) Amounts reported for 1997 include $3,143, $212, $1,288, $112, and $112 in
premiums paid by the Company for supplemental life insurance for the benefit
of Messrs. Ennen, Baty, Mitchell, Gentry, and Self.
(4) This amount includes for 1997 $43,444 in premiums paid by the Company on a
$1.2 million life insurance policy for Mr. Ennen, the proceeds of which are
payable to his named beneficiaries.
(5) Mr. Ennen served as Chief Executive Officer until August 1997.
(6) Line items for Mr. Baty in 1995 reflect partial year amounts; Mr. Baty
joined the Company in July 1995. Mr. Baty became President and Chief
Executive Officer in August 1997. He served as Vice President--Chief
Financial Officer up to the time he became President & CEO.
(7) Mr. Mitchell resigned his position in July 1997.
The following table sets forth certain information concerning grants of
stock options during the year ended December 31, 1997 to the executive officers
named in the Summary Compensation Table. All such grants were made pursuant to
the Stock Incentive Plan.
7
<PAGE>
OPTION GRANTS IN 1997
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
INDIVIDUAL GRANTS ANNUAL RATES OF
------------------------------ STOCK PRICE
PERCENT OF TOTAL APPRECIATION FOR
OPTIONS OPTIONS GRANTED EXERCISE OPTION TERM (1)
GRANTED TO EMPLOYEES IN PRICE EXPIRATION --------------------
NAME (#) FISCAL YEAR ($/SH) DATE 5% ($) 10% ($)
- ----------------------------------------------- ----------- ----------------- ----------- ----------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Richard D. Ennen............................... 0 -- -- -- -- --
Roderick R. Baty............................... 0 -- -- -- -- --
James J. Mitchell.............................. 0 -- -- -- -- --
Frank Gentry................................... 0 -- -- -- -- --
Corby W. Self.................................. 10,000 23.4 $ 12.50 7/31/07 78,600 199,200
</TABLE>
- ------------------------
(1) Amounts represent hypothetical gains that could be achieved if options are
exercised at the end of the option term. The gains are based on assumed
rates of stock price and appreciation of 5% and 10%, compounded annually
from the date of grant to the expiration date. Actual gains, if any, upon
the exercise of the option will depend upon the future performance of the
Common Stock and the date on which the option is exercised.
The following table sets forth certain information concerning stock option
exercises during 1997 and option values at year-end, with respect to stock
options granted to the executive officers named in the Summary Compensation
Table.
AGGREGATED OPTION EXERCISES IN 1997
AND YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT YEAR-END IN-THE-MONEY OPTIONS
SHARES (#) AT YEAR-END ($)(1)
ACQUIRED ON VALUE EXERCISABLE/ EXERCISABLE/
NAME EXERCISE (#) REALIZED ($) UNEXERCISABLE UNEXERCISABLE
- ---------------------------------------- ------------ ------------ ---------------------- -------------------------
<S> <C> <C> <C> <C>
Richard D. Ennen........................ 0 -- 0 0
Rodrick R. Baty......................... 0 -- 60,000/90,000 0
James J. Mitchell....................... 358,404 2,250,777 0 0
Frank Gentry............................ 0 -- 12,900/39,750 0
Corby W. Self........................... 0 6,600/26,500 0
</TABLE>
- ------------------------
(1) On December 31, 1997, the exercise price of all options exceeded the market
price of the Common Stock.
EMPLOYMENT AGREEMENT WITH MR. BATY
Mr. Baty has a written agreement to serve as President and Chief Executive
Officer until July 31, 1999 which extends automatically for successive one-year
terms unless either party gives notice of termination. The Company may terminate
the employment of Mr. Baty with or without cause, but if terminated without
cause, Mr. Baty would continue to receive his annual salary, paid on a monthly
basis, for one year from the date of termination. Mr. Baty has also agreed to a
non-competition agreement that ends two years after the conclusion of his
employment with the Company.
8
<PAGE>
REPORT OF THE COMPENSATION COMMITTEE
The Compensation Committee of the Board of Directors is responsible for the
oversight of the Company's compensation policies. The membership of the
Compensation Committee during 1997 consisted of G. Ronald Morris, Michael E.
Werner and Steven T. Warshaw. Mr. Morris, Mr. Werner and Mr. Warshaw are not
former or current officers or employees of the Company. Set forth below is the
report of the Committee on executive officer compensation for 1997.
COMPENSATION PRINCIPLES
The goal of the Company is to structure its compensation arrangements for
executive officers in a manner that will promote the Company's profitability and
enhance stockholder value. In designing its compensation arrangements to achieve
this goal, the Company is guided by the following objectives:
- attracting and retaining qualified and dedicated executives who are
essential to the long-term success of the Company;
- providing compensation packages that are competitive with the compensation
arrangements offered by comparable companies, including the Company's
competitors;
- tying a significant portion of an executive officer's compensation to
Company and individual performance; and
- directly aligning the interests of management with the interests of the
stockholders through stock-based compensation arrangements.
In 1997, the components of the Company's executive compensation arrangements
consisted of salary, cash bonuses and stock option awards pursuant to the Stock
Incentive Plan.
EXECUTIVE OFFICER COMPENSATION
As a general matter, the Company believes that the interests of the Company
and its stockholders are best served by maintaining a flexible approach to
executive compensation. In this regard, the Company tends to rely on subjective
criteria rather than preestablished formulae. The Committee currently is
considering, however, the implementation of a more formal compensation structure
whereby, for example, specific salary ranges would be prescribed for particular
positions within the Company and bonus awards would be tied to preestablished
criteria.
In 1997, the Compensation Committee requested that Mr. Ennen, the Chairman
and Chief Executive Officer of the Company, and Mr. Mitchell, the President and
Chief Operating Officer of the Company, make recommendations as to the
appropriate salary and number of stock options, if any, to be granted to each of
the Company's executive officers. The Compensation Committee, following due
consideration, adopted substantially all such recommendations. The Committee
delegated authority to Mr. Baty to set the annual bonus amounts for each of the
executive officers of the Company, other than Mr. Ennen and himself, without
further formal approval by the Committee.
SALARY. The salary level for the Company's executive officers generally is
determined bi-annually. A base salary level is established for each executive
officer by reference to salaries historically paid by the Company to its
executive officers and to salaries paid to executive officers holding comparable
positions with comparable companies in the Company's geographic region. From
time to time the Company also consults published reports that compile salary and
bonus information for small-to-medium sized companies (some but not all of which
may be companies that comprise the Valueline Machinery Industry Stock Index the
performance of which are presented in the "Stock Performance Graph"). The
Company typically targets its base salary levels approximately at the midpoint
of the competitive salary range. The target levels are then adjusted based on a
number of subjective factors, including the executive's scope of
9
<PAGE>
responsibility and individual performance, and to maintain equity within the
Company's overall salary structure.
ANNUAL BONUS. Decisions regarding bonuses to executives are made annually.
As with the Company's other compensation practices, the receipt of a bonus is
dependent, for the most part, upon a subjective evaluation of corporate
performance and of the contribution of the particular individual to the
attainment of such performance. In 1997 the bonus plan was revised to better
protect shareholder value by limiting overall bonus payments and by examining
quality and financial performance in a more systematic way.
The bonuses paid to the named executive officers for 1997 are set forth in
the Summary Compensation Table. The most significant considerations underlying
the award of bonuses for 1997 were continued improvement in the quality of the
Company's products and services and the Company's continued profitability.
STOCK INCENTIVE PLAN. Prior to its initial public offering in 1994, the
Company adopted the Stock Incentive Plan under which 1,125,000 shares of the
Company's Common Stock have been reserved for issuance to executive officers and
key employees, as determined by the Compensation Committee. The Company awarded
options to purchase, in the aggregate, 42,750 shares of Common Stock to one of
its executive officers and other key employees during 1997. With respect to the
options awarded, the Committee determined, on a subjective basis, and based upon
the recommendations of Messrs. Ennen and Mitchell, that such awards were
appropriate to reward such officer and key employees for superior performance
and to provide financial incentives for such officers and employees to continue
to perform in a superior manner.
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER
The Company's decisions regarding compensation of its Chief Executive
Officer are guided by the same policies and considerations that govern
compensation of the Company's other executive officers. Mr. Ennen's salary in
1997 was set at a level that the Committee, after consideration of Mr. Ennen's
and Mr. Mitchell's recommendations, determined was appropriate in light of the
Company's superior performance in 1996. Mr. Baty's salary was set at a level
that the Committee, after consideration of Mr. Ennen's recommendation,
determined was appropriate in light of the Company's performance and to make his
salary comparable to the previous Chief Executive Officer.
COMPLIANCE WITH INTERNAL REVENUE CODE SECTION 162(M)
Section 162(m) of the Internal Revenue Code of 1986, as amended, precludes
any public corporation from taking a deduction for compensation in excess of $1
million paid to its chief executive officer or any of its other executive
officers. Certain performance-based compensation, however, is exempt from the
deduction limit. No formal policy has been adopted by the Company with respect
to minimizing the risk that compensation paid to its executive officers will
exceed the deduction limit. The Company does not anticipate that any
compensation paid to its executive officers in 1998 will exceed the limit
imposed by Section 162(m).
G. Ronald Morris
Michael E. Werner
Steven T. Warshaw
10
<PAGE>
PERFORMANCE GRAPH
The following graph compares the cumulative total stockholder return on the
Company's Common Stock (consisting of stock price performance and reinvested
dividends) from March 14, 1994, the date of the initial public offering of the
Common Stock, with the cumulative total return (assuming reinvestment of all
dividends) of (i) the Value Line Machinery Industry Stock Index and (ii) the
Standard & Poor's 500 Stock Index, for the period March 14, 1994 through
December 31, 1997. The Value Line Machinery Industry Index is an industry index
comprised of 43 companies engaged in manufacturing of machinery and machine
parts, a list of which is available from the Company. The comparison assumes
$100 was invested in the Company's Common Stock and in each of the foregoing
indices on March 14, 1994. There can be no assurances that the performance of
the Common Stock will continue in the future with the same or similar trend
depicted on the graph.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
NN BALL & ROLLER,
INC. STANDARD & POOR'S 500 VALUE LINE MACHINERY INDEX
<S> <C> <C> <C>
3/14/94 $ 100.00 $100.00 $100.00
1994 $ 136.78 $100.50 $100.77
1995 $ 288.25 $138.56 $142.41
1996 $ 255.65 $170.78 $181.14
1997 $ 153.26 $227.79 $277.39
</TABLE>
<TABLE>
<CAPTION>
CUMULATIVE TOTAL STOCKHOLDER RETURN
------------------------------------------
<S> <C> <C> <C> <C> <C>
DEC. 31, DEC. 31, DEC. 31, DEC. 31,
MARCH 14, 1994 1994 1995 1996 1997
-------------- ------------ ------------ ------------ ------------
NN Ball & Roller, Inc.................. $ 100.00 $ 136.78 $ 288.25 $ 255.65 $ 153.26
Value Line Machinery Index............. 100.00 100.50 142.41 181.14 277.39
Standard & Poor's 500.................. 100.00 100.77 138.56 170.78 227.79
</TABLE>
11
<PAGE>
RATIFICATION OF SELECTION OF AUDITORS
The firm of Price Waterhouse LLP has been selected by the Board of Directors
as the Company's outside auditors for 1998. Price Waterhouse LLP has served as
the independent auditors of the Company since 1990. Although it is not required
to do so, the Board has determined that it is desirable to seek stockholders'
ratification of the selection of Price Waterhouse LLP. If the Company's
selection is not ratified by a plurality of votes cast, the Board will
reconsider its selection.
A representative of Price Waterhouse LLP is expected to be present at the
Annual Meeting and will have an opportunity to make a statement, if he or she so
desires, and will be available to respond to appropriate questions.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THIS PROPOSAL.
SUBMISSION OF STOCKHOLDER PROPOSALS
Any stockholder proposal intended to be presented at next year's Annual
Meeting must be received by the Company at its executive offices not later than
December 5, 1998 in order to be considered for inclusion in the Company's proxy
statement and form of proxy for such meeting.
ANNUAL REPORT
The Company's 1997 Annual Report to Stockholders, which includes its Annual
Report on Form 10-K for the year ended December 31, 1997, is being mailed
together with this Proxy Statement.
By Order of the Board of Directors,
William C. Kelly, Jr.
Assistant Secretary
STOCKHOLDERS ARE REQUESTED TO MARK, DATE AND SIGN THE ENCLOSED PROXY CARD
AND RETURN IT IN THE ENCLOSED ENVELOPE. YOUR PROMPT RESPONSE WILL BE HELPFUL,
AND YOUR COOPERATION WILL BE APPRECIATED.
12
<PAGE>
NN BALL & ROLLER, INC.
800 TENNESSEE ROAD
ERWIN, TENNESSEE 37650
SOLICITED BY THE BOARD OF DIRECTORS FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 7, 1998
AT THE CHARLESTON PLACE HOTEL 130 MARKET STREET CHARLESTON, SOUTH CAROLINA 29401
The undersigned stockholder hereby appoints Richard D. Ennen and Roderick R.
Baty and each of them, with full power of substitution and revocation, the
proxies of the undersigned to vote all shares registered in the name of the
undersigned on all matters set forth in the proxy statement and on any other
matters that may properly come before the Annual Meeting and all adjournments
thereof.
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS DIRECTED BY THE
STOCKHOLDER. IF NO DIRECTION IS GIVEN, SHARES WILL BE VOTED FOR EACH OF THE
DIRECTOR NOMINEES AND FOR THE RATIFICATION OF THE SELECTION OF PRICE WATERHOUSE
LLP AS INDEPENDENT AUDITORS.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR EACH OF THE DIRECTOR NOMINEES
AND FOR THE RATIFICATION OF THE SELECTION OF PRICE WATERHOUSE LLP AS INDEPENDENT
AUDITORS.
Please mark your votes as indicated in this example /X/
1. Election of Directors.
Nominees: Michael D. Huff, Michael E. Werner. For, except vote withheld from
the following nominee(s) _______________________________________________________
/ / FOR / / WITHHELD
2. For ratification of the selection of Price Waterhouse LLP as independent
auditors.
/ / FOR / / AGAINST / / ABSTAIN
(Continued and to be signed on the other side)
<PAGE>
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR EACH OF THE DIRECTOR NOMINEES AND FOR THE RATIFICATION OF THE
SELECTION OF PRICE WATERHOUSE LLP AS INDEPENDENT AUDITORS.
In their discretion, the
proxies are authorized to vote
upon such other matters as may
properly come before the
meeting.
Note: Please sign exactly as
name appears hereon. Joint
owners should each sign. When
signing as an attorney,
executor, administrator,
trustee or guardian, please
give full title as such. If a
corporation, please sign in
full corporate name by
President or other authorized
officer. If a partnership,
please sign in partnership name
by authorized person.
SIGNATURE(S) __________DATE ___
SIGNATURE(S) __________DATE ___
