<PAGE>
[NN BALL & ROLLER, INC. LETTERHEAD]
April 5, 1999
Dear Stockholder:
You are cordially invited to attend the 1999 Annual Meeting of NN Ball
& Roller, Inc., which will be held on May 13, 1999 at 10:00 a.m., local time, at
the Renaissance Hotel Atlanta - Concourse, One Hartsfield Centre Parkway,
Atlanta, Georgia 30354.
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 27650
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 13, 1999, at
10:00 a.m., local time, at the Renaissance Hotel Atlanta - Concourse, One
Hartsfield Centre Parkway, Atlanta, Georgia 30354, for the following purposes:
(1) To elect two Class II directors, each to serve for a term of
three years;
(2) To consider and act upon a proposal that the stockholders
approve an amendment of the Company's Stock Incentive Plan;
(3) To consider and act upon a proposal that the stockholders
ratify the selection of PricewaterhouseCoopers LLP as the
Company's independent auditor for the fiscal year ending
December 31, 1999; and
(4) 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
19, 1999, are entitled to notice of and to vote at the Annual 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.
Secretary
Erwin, Tennessee
April 5, 1999
<PAGE>
NN BALL & ROLLER, INC.
PROXY STATEMENT
FOR
1999 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 13, 1999 (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 19, 1999, will be entitled to vote at the meeting. On
March 19, 1999 (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 5, 1999.
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, for the amendment
to the Company's Stock Incentive Plan to increase by 500,000 the number of
authorized shares under the Stock Incentive Plan to 1,625,000 and for the
proposal to ratify the selection of PricewaterhouseCoopers LLP to serve as the
Company's independent auditor for 1999.
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 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 19, 1999, 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>
NAME AND ADDRESS OF NUMBER OF SHARES PERCENTAGE
BENEFICIAL OWNER (1) BENEFICIALLY OWNED (2) BENEFICIALLY OWNED (3)
-------------------- ---------------------- ----------------------
<S> <C> <C>
Richard D. Ennen ................................... 2,843,420 19.2%
Michael D. Huff .................................... 639,217(4) 4.3%
Charles I. Edmisten ................................ 443,553(5) 3.0%
G. Ronald Morris ................................... 0 *
Frank T. Gentry .................................... 47,761(6) *
Roderick R. Baty ................................... 92,395(7) *
Michael E. Werner .................................. 5,287(8) *
Steven T. Warshaw .................................. 2,000 *
David L. Dyckman ................................... 0 *
All directors and executive officers as a group .... 4,083,983 27.6%
</TABLE>
- ------------------------
* Less than 1%
(1) 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 19, 1999, 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 19, 1999, 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.
(5) Includes 10,800 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 16,200 shares of Common Stock that Mr. Gentry holds an option
to purchase.
(7) Includes 90,000 shares of Common Stock that Mr. Baty holds an option to
purchase.
(8) Includes 4,287 shares of Common Stock registered in the name of Mr.
Werner's wife.
2
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth, as of December 31, 1998, 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>
NAME AND ADDRESS OF NUMBER OF SHARES PERCENTAGE
BENEFICIAL OWNER BENEFICIALLY OWNED (1) BENEFICIALLY OWNED (2)
------------------- ---------------------- ----------------------
<S> <C> <C>
Wellington Management Company, LLP ................ 1,429,450(3) 9.6%
75 State Street
Boston, MA 02109
Deprince, Race & Zollo, Inc. ...................... 1,009,200(4) 6.8%
201 S. Orange Avenue
Suite 850
Orlando, FL 32801
Capital Guardian Trust Company .................... 885,200(5) 6.0%
1110 Santa Monica Boulevard
Los Angeles, CA 90025
Neuberger & Berman ................................ 832,101(6) 5.6%
605 Third Avenue
New York, NY 10158
Royce & Associates, Inc. .......................... 828,400(7) 5.6%
1414 Avenue of the Americas
New York, NY 10019
</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) 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 19, 1999, 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 19, 1999, or which will
become exercisable within 60 days thereafter.
(3) Includes 733,750 shares for which Wellington Management Company, LLP,
an investment adviser, reports shared voting power with the beneficial
owners of such shares and 1,429,450 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.
(4) Deprince, Race & Zollo, Inc. reports sole voting power and sole
dispositive power for all shares.
3
<PAGE>
(5) Capital Guardian Trust Company reports sole voting power and sole
dispositive power for all shares.
(6) Includes 597,101 shares for which Neuberger & Berman, a broker-dealer
and investment adviser, reports sole voting power and 235,000 shares
for which Neuberger & Berman reports shared voting power with the
beneficial owners of 832,101 shares. Neuberger & Berman reports that it
shares dispositive power with the beneficial owners of all 832,101
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 its 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.
(7) Royce & Associates, Inc. reports sole voting power and sole dispositive
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 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, 1998, and on the written
representations made by such persons that no other reports were required, the
Company is not aware of any instance of noncompliance with Section 16(a) by its
directors, executive officers or owners of more than 10% of the Common Stock,
except for one inadvertent late filing by each of Mr. Morris and Mr. Dyckman.
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 II directors will be elected to the Board of Directors at the
Annual Meeting. The Company has nominated for election G. Ronald Morris and
Steven T. Warshaw, 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.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR EACH OF THE NOMINEES.
4
<PAGE>
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 . . . . . . . . . . 71 1980 2000 Chairman of the Board and Director
Roderick R. Baty . . . . . . . . . . 45 1995 2000 Chief Executive Officer, President
and Director
Michael D. Huff . . . . . . . . . . . 51 1980 2001 Director
Michael E. Werner . . . . . . . . . 54 1995 2001 Director
G. Ronald Morris . . . . . . . . . . 62 1994 1999 Director
Steven T. Warshaw . . . . . . . . . 50 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 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.
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.
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.
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.
5
<PAGE>
Steven T. Warshaw has served as Senior Vice President of Photronics,
Inc., a global supplier to the semiconductor industry since February 1999. From
1996 to 1999, he served 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 $115,000 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 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 19, 1999, members of the Ennen family held, in the
aggregate, approximately 21.6 percent of the outstanding shares of Common Stock,
and the other parties to the Agreement held, in the aggregate, approximately
13.3 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.
Directors may elect to defer some or all of the compensation they are provided
by the Company. In addition, each Director who is not an employee of the Company
received 5,000 stock options on December 7, 1998. The exercise price of the
options was $6.375 per share, which was the closing price of the stock on Nasdaq
on the date the option was granted. The term of the options is ten years from
the date of grant. One third of these options vest on December 7, 1999, two
thirds vest on December 7, 2000, and the balance of the options become vested on
December 7, 2001. In the event of termination of service due to death or
disability, the options become fully vested. 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
1998.
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 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
1998.
6
<PAGE>
The Board of Directors does not have a nominating committee.
ATTENDANCE AT BOARD AND COMMITTEE MEETINGS
The Board of Directors held five meetings in 1998. 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.
EXECUTIVE COMPENSATION
The following table sets forth for the years ended December 31, 1996,
1997 and 1998, 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 1998 exceeded
$100,000 (the "Named Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
NAME AND ANNUAL COMPENSATION (1) ------------ ALL OTHER
PRINCIPAL ----------------------- OPTIONS/ COMPENSATION
POSITION YEAR SALARY ($) BONUS ($) SARS (#) ($) (2)
- -------- ---- ---------- --------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Roderick R. Baty ................................ 1998 200,000 0 0 1,196(3)
Chief Executive Officer/President 1997 154,063 20,000 0 712
1996 120,016 30,000 643
Richard D. Ennen ................................ 1998 200,000 0 0 47,408(3)(4)
Chairman 1997 174,720 20,000 0 46,587
1996 163,488 0 0 50,421
Frank T. Gentry ................................. 1998 114,000 0 0 733(3)
Vice President--Manufacturing 1997 106,307 13,000 0 612
1996 100,546 17,000 15,000 603
Charles L. Edmisten ............................. 1998 105,020 0 0 1,105(3)
Vice President 1997 105,020 10,000 0 317
1996 101,030 16,000 18,000 294
</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, amounts for 1998 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 1998 include $696, $9,023, $233, and $605, in
premiums paid by the Company for supplemental life insurance for the
benefit of Messrs. Baty, Ennen, Gentry and Edmisten.
(4) This amount for 1998 includes of $38,385 in premiums paid by the
Company on a $1,200,000 life insurance policy for Mr. Ennen, the
proceeds of which are payable to his named beneficiaries.
7
<PAGE>
The following table sets forth certain information concerning stock
option exercises during 1998 and option values at year-end, with respect to
stock options granted to the executive officers named in the Summary
Compensation Table.
AGGREGATED OPTION EXERCISES IN 1998
AND YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
IN-THE-MONEY
NUMBER OF UNEXERCISED OPTIONS
SHARES OPTIONS AT YEAR-END (#) AT YEAR-END ($)(1)
ACQUIRED ON VALUE EXERCISABLE/ EXERCISABLE/
NAME EXERCISE (#) REALIZED ($) UNEXERCISABLE UNEXERCISABLE
- ---- ------------ ------------ ----------------------- --------------------
<S> <C> <C> <C> <C>
Roderick R. Baty ................. 0 -- 90,000/60,000 --
Richard D. Ennen ................. 0 -- 0 --
Frank T. Gentry .................. 0 -- 16,200/23,550 --
Charles I. Edmisten .............. 0 -- 10,800/7,200 --
</TABLE>
- ------------------------
(1) On December 31, 1998, 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.
EMPLOYMENT AGREEMENT WITH MR. GENTRY
Mr. Gentry has a written employment agreement to serve as Vice
President - Manufacturing until March 31, 2000 that extends automatically for
successive one-year terms unless either party gives notice of termination. The
Company may terminate Mr. Gentry's employment with or without cause, but if Mr.
Gentry is terminated without cause, he would continue to receive his annual
salary, paid on a monthly basis, for one year from the date of termination. Mr.
Gentry 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 1998 consisted of G. Ronald Morris, Michael E.
Werner and Steven T. Warshaw. The report of the Committee on executive officer
compensation for 1998 is set forth below.
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
the Company's and the individual's performance; and
- -- directly aligning the interests of management with the interests of the
stockholders through stock-based compensation arrangements.
In 1998, 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 a preestablished formula. 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 1998, the Compensation Committee requested that Mr. Ennen, the
Chairman of the Company, and Mr. Baty, the Chief Executive 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 biannually. 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 Value Line 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
9
<PAGE>
subjective factors, including the executive's scope of 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. No bonuses were paid to the named executive
officers in 1998.
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
other key employees, as determined by the Compensation Committee. The Company
awarded options to purchase, in the aggregate, 77,250 shares of Common Stock to
five of its executive officers and other key employees during 1998. With respect
to the options awarded, the Committee determined, on a subjective basis, and
based upon the recommendations of Messrs. Ennen and Baty, that such awards were
appropriate to reward such officers and other key employees for superior
performance and to provide financial incentives for such officers and employees
to continue to perform in a superior manner. No awards were made to the Named
Executive Officers in 1998.
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. 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.
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 1999 will exceed the limit
imposed by Section 162(m).
G. Ronald Morris
Michael E. Werner
Steven T. Warshaw
<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, 1998. The Value Line Machinery Industry Index is an industry index
comprised of 49 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.
[GRAPH}
<TABLE>
<CAPTION>
CUMULATIVE TOTAL STOCKHOLDER RETURN
----------------------------------------------------------------------------------------------
MARCH 14, 1994 DEC. 31, 1994 DEC. 31, 1995 DEC. 31, 1996 DEC. 31, 1997 DEC. 31, 1998
-------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
NN Ball & Roller, Inc ............. 100.00 136.78 288.25 255.65 153.26 105.02
Value Line Machinery Index ........ 100.00 100.77 138.56 170.78 227.79 292.49
Standard & Poor's 500 ............. 100.00 100.50 142.41 181.14 277.39 236.98
</TABLE>
11
<PAGE>
APPROVAL OF AMENDMENT TO STOCK INCENTIVE PLAN
The Company is submitting to a vote of the stockholders an amendment to
the Company's Stock Incentive Plan (the "Plan") to increase the number of shares
available for issuance pursuant to awards made under the Plan from 1,125,000 to
1,625,000.
The Plan was adopted in connection with the Company's initial public
offering in 1994. The Plan has a ten-year term. Under the Plan, the Company may
grant various awards (including incentive stock options, nonqualified stock
options, stock appreciation rights, limited stock appreciation rights,
restricted shares, and other stock-based awards) to officers and key employees
of the Company. Currently, there are approximately 50 employees eligible to
participate in the Plan. The Plan is administrated by a committee appointed by
the Board (the "Committee"). The Committee has authority, among other things, to
determine who will receive a grant and the amount of an award under the Plan.
OPTIONS.
No option granted under the Plan may have a term of greater than ten
years from the date of grant and the option price per share may not be less than
the fair market value of a share of the Company's Common Stock on the date of
grant. If the grantee's service for the Company is terminated for any reason
other than retirement, disability or death, options vested on the date of
termination may only be exercised within three months of termination. A grantee
whose service terminates because of retirement or disability has only 12 months
from the date of termination to exercise his or her vested options. If the
grantee's service for the Company is terminated because of death, or if the
grantee dies after termination but while an option is exercisable, options held
on the date of death are exercisable only within 24 months of the death. An
option granted under the Plan may be either (i) an incentive stock option that
complies with Section 422(b) of the Internal Revenue Code (an "Incentive Stock
Option") or (ii) a nonqualified stock option, which term encompasses any stock
option that does not qualify as an Incentive Stock Option (a "Nonqualified Stock
Option").
STOCK APPRECIATION RIGHTS.
The Company may also award stock appreciation rights ("SARs") under the
Plan. An SAR may be issued in tandem with a stock option, or it may be issued
independent of a stock option. An SAR entitles the holder to receive upon
exercise cash in an amount equal to the difference between the market price of a
share of Common Stock and the exercise price of the SAR. The Committee may
impose a prohibition on the exercise of SARs for such periods as it may
determine is in the best interest of the Company. The right of a grantee to
exercise a tandem SAR shall be canceled if the shares subject to the SAR are
purchased upon the exercise of the related option. A grantee's rights upon
termination of service with regard to SARs are the same as a grantee's rights
with regard to stock options under the Plan.
RESTRICTED SHARES.
The Company may award restricted shares under the Plan. The Committee
may determine the terms and conditions of each grant of restricted shares. To
the extent required by law, the purchase price of a restricted share shall not
be less than the par value per share of the Company's Common Stock on the date
of grant. A grantee of a restricted share will have beneficial ownership of the
shares, including the right to receive dividends and the right to vote.
Restricted shares may not be transferred until the restrictions imposed by the
Committee lapse or are removed. A grantee's rights to restricted shares
terminates on his termination of employment with the Company, except as
determined by the Committee.
OTHER AWARDS.
The Company may grant other awards that are based on or related to the
Company's Common Stock. Such awards may include phantom shares, performance
units, or performance bonus awards.
TAX CONSEQUENCES OF OPTIONS.
In general, a grantee of a Nonqualified Stock Option or an Incentive
Stock Option will not recognize income on the grant of that option. When a
grantee exercises a Nonqualified Stock Option and pays the purchase price of the
shares, the grantee generally will recognize ordinary income (or loss) equal to
the excess (or shortfall)
12
<PAGE>
of the fair market value of the stock on the exercise date over the purchase
price of the stock. A grantee generally will not recognize income of purposes of
regular federal income tax liability when he or she exercises an Incentive Stock
Option, unless the employee makes a "disqualifying disposition" of the Incentive
Stock Option shares.
The Company generally will be entitled to a tax deduction in an amount
equal to the ordinary income that a grantee recognizes under an option, provided
that the amount qualifies as an ordinary and necessary business expense. The
Company also will be entitled to a deduction in the amount of ordinary income
that the grantee recognizes when he or she makes a so-called "disqualifying
disposition" of Incentive Stock Option shares. The Company ordinarily will not
be entitled to a deduction when it grants an option, or when the grantee
exercises an Incentive Stock Option.
REASONS FOR THE AMENDMENT.
When the Plan was adopted, it provided for the issuance of up to
500,000 shares of the Company's Common Stock. As a result of two 3-for-2 stock
splits, this number was increased to 1,125,000 shares. The only awards that have
been made under the Plan have consisted of Nonqualified Stock Options. Through
the date of this proxy statement, approximately 1,060,000 shares have been
issued or reserved for issuance upon the exercise of stock options granted under
the Plan. Accordingly, only approximately 65,000 shares remain available for
future awards. On March 18, 1999, the Board of Directors of the Company
approved, subject to stockholder approval, an amendment to increase the number
of shares of Common Stock authorized for issuance under the Stock Incentive Plan
from 1,125,000 to 1,625,000. The fair market value of a share of the Company's
Common Stock on March 19, 1999 was $5.375.
The amendment has been proposed to assure that the Company has
sufficient shares available under the Stock Incentive Plan to provide proper
inducements to encourage grantees to either serve or remain employed with the
Company, to perform in a superior manner, and to share in the future success of
the Company's business. No awards have been made with respect to the shares of
Common Stock that are subject to the proposed amendment. Because all awards
under the Plan are subject to the discretion of the Committee, any future awards
are not determinable at this time.
Approval of the amendment requires the affirmative vote of the holders
of a majority of the outstanding shares of Common Stock that are present in
person or represented by proxy and entitled to vote at a meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THIS PROPOSAL
RATIFICATION OF SELECTION OF AUDITORS
The firm of PricewaterhouseCoopers LLP has been selected by the Board
of Directors as the Company's outside auditors for 1999. PricewaterhouseCoopers
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 PricewaterhouseCoopers LLP.
If the Company's selection is not ratified by the holders of a majority of the
shares present in person or represented by proxy at the meeting and entitled to
vote at the meeting, the Board will reconsider its selection.
A representative of PricewaterhouseCoopers 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.
13
<PAGE>
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 6, 1999 in order to be considered for inclusion in the Company's proxy
statement and form of proxy for such meeting. All notices should be sent to NN
Ball & Roller, Inc., Attention: Secretary, 800 Tennessee Road, Erwin, Tennessee
37650. If the proposal is received by the Company 45 days or fewer prior to the
anniversary of the mailing date of this proxy statement, the persons named as
proxy in the Company's 2000 proxy materials will have the discretionary
authority to vote on the proposal in accordance with their best judgement
without disclosure in this proxy statement of how they indent to vote on the
proposal.
ANNUAL REPORT
The Company's 1998 Annual Report to Stockholders, which includes its
Annual Report on Form 10-K for the year ended December 31, 1998, is being mailed
together with this Proxy Statement.
By Order of the Board of Directors,
William C. Kelly, Jr.
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.
14
<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 13, 1999
AT THE RENAISSANCE HOTEL - CONCOURSE, ONE HARTSFIELD CENTRE PARKWAY, ATLANTA,
GEORGIA 30354
The undersigned stockholder hereby appoints Richard D. Ennen, Roderick R.
Baty and David Dyckman 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, FOR THE AMENDMENT TO THE STOCK INCENTIVE PLAN AND FOR THE
RATIFICATION OF THE SELECTION OF PRICEWATERHOUSECOOPERS LLP AS INDEPENDENT
AUDITORS.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR EACH OF THE DIRECTOR NOMINEES,
FOR THE AMENDMENT TO THE STOCK INCENTIVE PLAN AND FOR THE RATIFICATION OF THE
SELECTION OF PRICEWATERHOUSECOOPERS LLP AS INDEPENDENT AUDITORS.
Please mark your votes as indicated in this example /X/
1. Election of Directors.
Nominees: G. Ronald Morris, Steven T. Warshaw. For, except vote withheld
from
the following nominee(s) _______________________________________________________
/ / FOR / / WITHHELD
(Continued and to be signed on the other side)
<PAGE>
2. To approve the amendment to the Company's Stock Incentive Plan to increase
the number of shares of Common Stock authorized for issuance under such plan
from 1,125,000 to 1,625,000.
/ / FOR / / AGAINST / / ABSTAIN
3. For ratification of the selection of PricewaterhouseCoopers LLP as
independent auditors.
/ / FOR / / AGAINST / / ABSTAIN
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, FOR THE AMENDMENT TO THE STOCK
INCENTIVE PLAN AND FOR THE RATIFICATION OF THE SELECTION OF
PRICEWATERHOUSECOOPERS 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 ___
