SCHEDULE 14A
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act to 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 Rule 14a-11 (c) or Rule 14a-12
NN, 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:
April 12, 2002
Dear Stockholder:
You are cordially invited to attend the 2002 Annual Meeting of NN, Inc., which
will be held on May 16, 2002 at 10:00 a.m., local time, at the Greenville -
Spartanburg Airport Marriott, One Parkway East, Greenville, South Carolina,
29615.
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.
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,
/s/ Roderick R. Baty
Roderick R. Baty
Chairman
NN, Inc.
2000 Waters Edge Drive
Johnson City, TN 37604
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
Notice is hereby given that the Annual Meeting of Stockholders of NN, Inc., a
Delaware corporation, will be held on May 16, 2002, at 10:00 a.m., local time,
at the Greenville - Spartanburg Airport Marriott, One Parkway East, Greenville,
South Carolina 29615, for the following purposes:
(1) To elect three Class III directors, each to serve for a term of three
years;
(2) To ratify the selection of KPMG LLP as the Company's independent auditor
for the fiscal year ending December 31, 2002; and
(3) To conduct such other business as properly may come before the meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THESE PROPOSALS.
Details regarding these matters are contained in the accompanying Proxy
Statement.
Holders of record of Common Stock at the close of business on March 25, 2002,
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 in accordance with the instructions given in the accompanying
Proxy Statement.
By Order of the Board of Directors,
/s/ William C. Kelly, Jr.
William C. Kelly, Jr.
Secretary
Johnson City, Tennessee
April 12, 2002
NN, INC.
PROXY STATEMENT
FOR
2002 ANNUAL MEETING OF STOCKHOLDERS
Proxies are being solicited by the Board of Directors of NN, Inc. (the
"Company"), in connection with the annual meeting of stockholders to be held on
May 16, 2002 at the Greenville - Spartanburg Airport Marriott, One Parkway East,
Greenville, South Carolina 29615 (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, 2002, will be entitled to vote at the meeting. On
March 25, 2002 (the "Record Date"), 15,340,806 shares of Common Stock were
issued and outstanding.
The entire cost of this 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 2000 Waters
Edge Drive, Johnson City, Tennessee 37604. This Proxy Statement and the form of
proxy was mailed to stockholders on or about April 12, 2002.
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 is 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 KPMG LLP to serve as the Company's
independent auditor for 2002.
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.
Voting Rights and Outstanding Shares
Approval of Proposal I requires the affirmative vote of a majority of
the shares of Common Stock represented in person or by proxy at the meeting and
entitled to vote on such matter. Abstentions (shares not voted by a stockholder
present at the Annual Meeting) will be treated as "no" votes. Because directors
are elected by a plurality of the votes cast, votes withheld will not affect the
outcome of the election of directors.
BENEFICIAL OWNERSHIP OF COMMON STOCK
Security Ownership of Management
The following table shows, as of March 25, 2002, 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.
Name and Address of Number of Shares Percentage
Beneficial Owner (1) Beneficially Owned (2) Beneficially Owned (2)
-------------------- ---------------------- ----------------------
Richard D. Ennen (3) 2,788,868 18.2%
Michael D. Huff (3) 663,227 (4) 4.3%
James L. Earsley 224,428 (5) 1.5%
Roderick R. Baty 126,162 (6) *
Frank T. Gentry III 66,611 (7) *
Michael E. Werner 18,287 (8) *
G. Ronald Morris 18,000 (9) *
Steven T. Warshaw 15,000 (10) *
David L. Dyckman 35,083 (11) *
Robert R. Sams 23,783 (12) *
William C. Kelly, Jr. 16,433 (13) *
All directors and executive officers as a group 3,995,882 26.0%
- -------------------------------
* Less than 1%
1. The address of the beneficial owner is c/o NN, Inc., 2000 Waters Edge
Drive, Johnson City, Tennessee 37604.
2. Computed in accordance with Rule 13d-3.
3. See Note 1 to "Security Ownership of Certain Beneficial Owners" below for a
description of the stockholder group of which Messrs. Ennen and Huff are
members.
4. Includes 13,000 shares of Common Stock that Mr. Huff holds as an option to
purchase and 225,000 shares of Common Stock registered in the name of Mr.
Huff's wife.
5. Includes 2,818 shares of Common Stock registered in the name of Mr.
Earsley's son.
6. Includes 123,767 shares of Common Stock that Mr. Baty holds as an option to
purchase.
7. Includes 35,050 shares of Common Stock that Mr. Gentry holds as an option
to purchase.
8. Includes 13,000 shares of Common Stock that Mr. Werner holds as an option
to purchase and 5,287 shares of Common Stock reregistered in the name of
Mr. Werner's wife.
9. Includes 13,000 shares of Common Stock that Mr. Morris holds as an option
to purchase.
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10. Includes 13,000 shares that Mr. Warshaw holds as an option to purchase.
11. Includes 34,983 shares of Common Stock that Mr. Dyckman holds as an option
to purchase.
12. Includes 23,733 shares of Common Stock that Mr. Sams holds as an option to
purchase.
13. Includes 16,033 shares of Common Stock that Mr. Kelly 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.
Name and Address of Number of Shares Percentage
Beneficial Owner Beneficially Owned Beneficially Owned
---------------- ------------------- ------------------
Stockholder Group Disclosed in Form 13D, 4,463,935 (1) 29.0%
Filed on December 14, 2001
DePrince, Race & Zollo, Inc 3,861,350 (3) 25.2%
201 S. Orange Avenue
Suite 850
Orlando, FL 32801
Wellington Management Company, LLP 1,362,000 (2)(4) 8.9%
75 State Street
Boston, MA 02109
Royce & Associates, Inc. 913,400 (5) 6.0%
1414 Avenue of the Americas
New York, NY 10019
1. The stockholder group, which filed a Form 13D on December 14, 2001, is
comprised of the following individuals: Richard D. Ennen, Monica C. Ennen,
Leonard Bowman, Janet M. Huff, Michael D. Huff, Gerald Bagierek, Deborah E.
Bagierek and Charles Edmisten.
2. Includes 837,000 shares for which Wellington Management Company, LLP, an
investment adviser, reports shared voting power with the beneficial owners
of such shares and 1,362,000 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. Amount based on Schedule 13G filed on February 11, 2002.
4. Amount based on Schedule 13G filed on February 2, 2002.
5. Amount based on Schedule 13G filed on February 8, 2002.
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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, 2001, 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.
PROPOSAL I
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.
Nominees
Three Class III directors will be elected to the Board of Directors at
the Annual Meeting. The Company has nominated for election G. Ronald Morris,
Steven T. Warshaw and James L. Earsley, 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 any of them should 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.
PROPOSAL II
RATIFICATION OF SELECTION OF AUDITORS
The firm of KPMG LLP has been selected by the Board of Directors as the
Company's outside auditors for 2002. On November 27, 2000, the Company retained
the services of KPMG LLP as its principal accountant to audit the Company's
consolidated financial statements, replacing PricewaterhouseCoopers LLP. The
decision to retain KPMG was based upon a reevaluation by the Company of its
current professional relationships and was approved by the Company's Board of
Directors at the recommendation of the Company's Audit Committee. Although it is
not required to do so, the Board has determined that it is desirable to seek
stockholders' ratification of the selection of KPMG LLP.
During the Company's 1999 fiscal year and through November 27, 2000,
there were no disagreements with PricewaterhouseCoopers LLP on any matter of
accounting principles or practices, financial statement disclosure, or auditing
scope or procedure. PricewaterhouseCoopers LLP reports on the financial
statements of the Company during 1999 contained no adverse opinion or disclaimer
of opinion and were not qualified or modified as to uncertainty, audit scope or
accounting principles.
At the Company's request, PricewaterhouseCoopers LLP furnished it with
a letter addressed to the SEC stating that PricewaterhouseCoopers LLP agrees
with the above statements. A copy of this letter was filed as Exhibit 16 to Form
8-K filed with the SEC on December 4, 2000.
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A representative of KPMG 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 13, 2002 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,
Inc., Attention: Secretary, 2000 Waters Edge Drive, Johnson City, Tennessee
37604. 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 2002 proxy materials will have the discretionary
authority to vote on the proposal or nominee in accordance with their best
judgment without disclosure in this proxy statement of how they intend to vote
on the proposal.
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.
Director Term
Name Age Since Expires Positions with the Company
- ---- --- ----- ------- --------------------------
Roderick R. Baty 48 1995 2003 Chairman of the Board, Chief Executive
Officer, President and Director
Richard D. Ennen 74 1980 2003 Director
Michael D. Huff 54 1980 2004 Director
Michael E. Werner 57 1995 2004 Director
G. Ronald Morris 65 1994 2002 Director - nominee for re-election
Steven T. Warshaw 53 1997 2002 Director - nominee for re-election
James L. Earsley 56 1999 2002 Director - nominee for re-election
Roderick R. Baty became President and Chief Executive Officer in July
1997 and was elected Chairman of the Board in September 2001. 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.
Richard D. Ennen is the principal founder of the Company and has been a
director of the Company since its formation in 1980. He served as Chairman of
the Board of the Company from its inception until September 2001, Chief
Executive Officer of the Company from its inception until 1997, and as President
of the Company from its inception until 1990. 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.
Michael D. Huff has served as a director of the Company since its formation
in 1980. 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.
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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 Associates, a
management consulting firm that Mr. Werner co-founded in 1982 specializing in
manufacturing companies. 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 retired during 1999 from Western Industries, Inc., a
contract manufacturer of metal and plastic products. Mr. Morris had served as
President, Chief Executive Officer and director of Western Industries, Inc.
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.
Steven T. Warshaw served as President of Hexcel Schwebel, a global
producer of advanced structural materials, from April 2000 to November 2001.
Prior to this position, he served from February 1999 as Senior Vice President of
Photronics, Inc., a global supplier to the semiconductor industry. 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.
James L. Earsley has spent his entire career with Industrial Molding
Corporation (IMC) and was Chairman of the Board at the time of the Company's
acquisition of IMC on July 4, 1999.
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 which includes the immediate family members and
ex-spouse of Mr. Ennen, 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 25, 2002, members of the Ennen family held, in the
aggregate, approximately 20 percent of the outstanding shares of Common Stock,
and the other parties to the Agreement held, in the aggregate, approximately 12%
percent of the outstanding shares of Common Stock, for a combined total of 32%.
Compensation of Directors
Directors who are not employees of the Company are paid an annual
retainer of $17,000 and a fee of $1,000 for each Board meeting attended, $750
for each committee meeting attended and $500 for each teleconference meeting
attended. 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
September 17, 2001. The exercise price of the options was $8.09 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. These options
become fully vested on September 17, 2002. 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.
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Committees of the Board
Audit Committee. The Audit Committee of the Board of Directors consists of
Michael D. Huff, 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 regards to 2001.
Compensation Committee. The Compensation Committee of the Board of
Directors consists of G. Ronald Morris, Michael E. Werner, James L. Earsley 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, 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 one time in
regards to 2001.
Attendance at Board and Committee Meetings
The Board of Directors held six meetings in 2001. 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 with the exception of one missed Board
meeting by Richard D. Ennen.
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EXECUTIVE COMPENSATION
The following table sets forth for the years ended December 31, 1999,
2000 and 2001, 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 four most highly compensated
executive officers of the Company whose annual salary and bonus in 2001 exceeded
$100,000 (the "Named Executive Officers").
SUMMARY COMPENSATION TABLE
Long-Term
Compensation
Awards
Name and Annual Compensation -------- All Other
Principal ------------------- Options/ Compensation
Position Year Salary ($) Bonus ($) SARs (#) ($) (1)
- -------- ---- ---------- --------- -------- -------
Roderick R. Baty 2001 284,000 0 75,000 3,821(2)
Chairman/Chief Executive Officer/President 2000 248,312 80,000 141,300 1,023
1999 210,137 45,000 85,000 1,057
Frank T. Gentry III 2001 179,000 0 40,550 3,632(2)
Vice President - Manufacturing 2000 152,252 38,000 57,450 770
1999 124,667 21,000 15,900 650
David L. Dyckman 2001 179,000 0 40,050 3,539(2)
Chief Financial Officer/Vice President 2000 161,202 38,000 32,950 633
1999 132,478 23,000 18,000 609
Robert R. Sams 2001 154,000 0 21,600 3,205(2)
Vice President - Market Services 2000 136,200 29,000 32,400 640
1999 103,285 19,000 16,600 810
Richard D. Ennen 2001 140,763 0 0 99,869(2)(3)
Former Chairman 2000 200,604 40,000 0 42,220
1999 200,000 40,000 0 46,352
William C. Kelly, Jr 2001 114,000 0 20,825 2,357(2)
Chief Accounting Officer/Secretary/Treasurer 2000 102,153 21,000 19,800 584
1999 83,077 15,000 11,225 567
6. For all named executives other than Mr. Ennen, amounts for 2001 include
$3,400, $3,400, $3,400, $3,080 and $2,280 in Company matching contributions
under a "401(k)" savings plan for Messrs. Baty, Gentry, Dyckman, Sams and
Kelly, respectively. This plan is open to substantially all of the
Company's employees and officers who have met certain service and age
requirements.
7. Amounts reported for 2001 include $523, $5,237, $270, $133, $140 and $77 in
premiums paid by the Company for supplemental life insurance for the
benefit of Messrs. Baty, Ennen, Gentry, Dyckman, Sams and Kelly.
8. The amount for 2001 includes $35,395 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. Additionally, included in the amount is
$59,237 that represents compensation paid to Mr. Ennen after he no longer
served as Chairman of the Board from September 5, 2001 until December 31,
2001.
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OPTION GRANTS IN FISCAL YEAR 2001
The following table sets forth information with respect to options
granted during fiscal 2001 to Executive Officers named in the Summary
Compensation Table above.
Potential Realizable Value
At Assumed Annual Rates Of
Stock Price Appreciation
Individual Grants For Option Term (2)
Shares
Underlying % Of Total Options
Options Granted Granted To Employees Exercise Price Expiration
Name (#) in Fiscal 2001 Per Share (1) Date 5% 10%
---- --- ----------- --------- ---- -- ---
Roderick R. Baty 75,000 18.9% $ 8.09 9/17/11 $ 381,582 $ 967,003
Frank T. Gentry III 40,550 10.2% $ 8.09 9/17/11 $ 206,309 $ 522,828
David L. Dyckman 40,050 10.1% $ 8.09 9/17/11 $ 203,766 $ 516,381
Robert R. Sams 21,600 5.4% $ 8.09 9/17/11 $ 109,896 $ 278,497
William C. Kelly, Jr. 20,825 5.3% $ 8.09 9/17/11 $ 105,953 $ 268,504
Richard D. Ennen 0 -- -- -- -- --
(1) The exercise price is based on the Fair Market Value at the date of the
grant of the option. The options have various vesting periods, ranging
from one to three years, and the options terminate ten years from the
date of grant, subject to earlier termination in certain conditions.
The exercisability of the options is accelerated in the event of a
change of control (as defined in the option agreements).
(2) The amounts shown as potential realizable values are based on assumed
annualized rates of appreciation in the price of Common Stock of five
percent and ten percent over the term of the options, as set forth in
the rules of the Securities and Exchange Commission. Actual gains, if
any, on stock option exercises are dependent upon the future
performance of the Common Stock. There can be no assurance that the
potential realizable values reflected in this table will be achieved.
9
AGGREGATED OPTION EXERCISES IN 2001
AND YEAR-END OPTION VALUES
The following table sets forth certain information concerning stock
option exercises during 2001 and option values at year-end, with respect to
stock options granted to the executive officers named in the Summary
Compensation Table.
Value of Unexercised
In-The-Money
Number of Unexercised Options
Shares Options at Year-End at Year-End ($)
Acquired on Value Exercisable/ Exercisable/
Name Exercise (#) Realized ($) Unexercisable Unexercisable(1)
- ---- ------------ ------------ ------------- ----------------
Roderick R. Baty 0 - 123,767/177,533 $565,225/$604,501
Richard D. Ennen 0 - - -
Frank T. Gentry III 0 - 35,050/78,850 $150,247/$258,899
David L. Dyckman 0 - 34,983/76,017 $158,421/$269,296
Robert T. Sams 0 - 23,733/46,867 $105,399/$161,231
William C. Kelly, Jr. 0 - 16,033/35,817 $72,380/$119,523
9. On December 31, 2001, the market price of the Common Stock was $11.15 per
share.
Employment And Change Of Control Agreements With Executive Officers
Messrs. Baty, Gentry, Dyckman, Sams and Kelly have written employment
agreements to serve in their respective positions until July 31, 2001, March 31,
2001, January 20, 2004, January 20, 2004 and January 20, 2004, respectively.
Each agreement extends automatically for successive one-year terms unless either
party gives notice of termination. The Company may terminate each executive's
employment with or without cause, but if terminated without cause, he would
continue to receive his annual salary, paid on a monthly basis, for one year
from the date of termination. Additionally, each executive officer has a written
change of control agreement. These agreements state if an executive's employment
is terminated within two years following a change of control as defined in the
document that each executive will receive a lump sum payment of a multiple of
his annual salary. The multiple for each of the executive officers is as
follows: Mr. Baty - 2.5; Mr. Gentry - 2.0; Mr. Dyckman - 2.0; Mr. Sams - 2.0;
and Mr. Kelly 1.5. Additionally, certain benefits will continue to be paid by
the Company to each executive officer for a period of time of 30 months, 24
months, 24 months, 24 months and 18 months for Messrs. Baty, Gentry, Dyckman,
Sams and Kelly, respectively. Each executive has also agreed to a
non-competition agreement that ends two years after the conclusion of his
employment with the Company.
BOARD OF DIRECTOR'S AUDIT COMMITTEE
REPORT TO STOCKHOLDERS
In accordance with its written charter adopted by the Board of
Directors, the Audit Committee assists the Board in fulfilling its
responsibility for oversight of the quality and integrity of the accounting,
auditing and financial reporting practices of the Company. Management has
responsibility for preparation of the Company's financial statements and the
independent auditors have responsibility for the examination of those
statements. Each of the members of the Audit Committee meets the independence
requirements of the NASDAQ Stock Market.
The Audit Committee has reviewed and discussed with the Company's
management and KPMG LLP, the Company's independent auditor, the audited
financial statements of the Company for 2001; has discussed with KPMG LLP
matters required to be discussed by Statement on Auditing Standards No. 61; has
received from the independent auditors the written disclosures and letter
required by Independence Standards No. 1; and has discussed with the independent
auditor the auditor's independence, including whether KPMG LLP's provision of
non-audit services to the Company was compatible with maintaining KPMG LLP's
independence. Based on the review and discussions described above, the Audit
Committee recommended to the Company's Board of Directors that the audited
financial statements be included in the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 2001 for filing with the Securities and
Exchange Commission.
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On June 5, 2000, the Audit Committee presented to the Board and the
Board adopted a written charter for the Audit Committee.
Michael D. Huff
Michael E. Werner
Steven T. Warshaw
FEES PAID TO INDEPENDENT AUDITORS
Fees billed to the Company by KPMG LLP in fiscal year 2001 may be summarized as
follows:
Audit Fees. Audit fees billed or expected to be billed to the Company
by KPMG LLP for review of the Company's annual financial statements and those
financial statements included in the Company's quarterly reports on Form 10-Q
totaled $310,221.
Financial Information Systems Design and Implementation Fees. The
Company did not engage KPMG during fiscal year 2001 to provide services
regarding financial information systems.
All Other Fees. Non-audit fees billed to the Company by KPMG LLP for
other non-audit related work performed in 2002 equaled $167,617 which included
billings for tax consulting.
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 2001 consisted of G. Ronald Morris, Michael E.
Werner, Steven T. Warshaw and James L. Earsley. The report of the Committee on
executive officer compensation for 2001 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:
o attracting and retaining qualified and dedicated executives who are
essential to the long-term success of the Company;
o providing compensation packages that are competitive with the compensation
arrangements offered by comparable companies, including the Company's
competitors;
o tying a significant portion of an executive officer's compensation to the
Company's and the individual's performance; and
o directly aligning the interests of management with the interests of the
stockholders through stock-based compensation arrangements.
In 2001, the components of the Company's executive compensation arrangements
consisted of salary, cash bonus opportunities and stock option awards pursuant
to the Stock Incentive Plan.
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Executive Officer Compensation
As a general matter, the Company believes the interests of the Company and its
stockholders are best served by developing and maintaining compensation policies
that are consistent and market competitive with peer group industrial companies.
In this regard, the Compensation Committee of the Board of Directors
commissioned an independent compensation and benefits consulting firm to conduct
a review of the key executive positions within NN, Inc. This review incorporated
twenty-two distinct executive positions and over thirty individual executives
within the Company. The review benchmarked a peer group of public industrial
companies using the following criteria: performance (revenue growth, EPS growth,
return on net assets, return on equity, and total stockholder return), executive
pay, annual incentive/bonus, benefits, and stock incentive awards. NN, Inc.'s
performance and compensation plans were compared to the benchmarked companies
for purposes of establishing a more structured compensation program in the
Company
The Committee directed Mr. Baty to develop revisions to the Company's
compensation policies, (other than himself) based upon the recommendations of
the review. The major changes included a formal salary grade structure that
established five levels of executive compensation within the Company. Base
salary ranges (low, mid and high) were established for each salary grade. In
addition, the annual incentive bonus plan was formalized to include threshold,
target, and maximum awards based upon pre-established financial performance
criteria. For 2001, bonus objectives were established on the basis of achieving
net income goals for each operating business unit and the total Company.
Salary
The salary levels for the Company's executive officers and managers are
generally reviewed and determined biannually. On the basis of the overall
economic recession and corresponding reductions in the Company's profitability
in 2001, no adjustment to executive officer compensation occurred during 2001.
The Company also established a salary freeze in 2001 in response to the poor
economic climate in the U.S. Increases in base compensation amounts outlined in
the summary compensation table for 2001 are a result of full year adjustments to
salaries that occurred in August 2000.
Annual Bonus
The Company's established objectives for net income were not achieved for 2001;
therefore no bonus payments were made to the named executive officers as set
forth in the summary compensation table.
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 stock incentive plan was amended
at the 1999 and 2001 annual meetings by an affirmative vote of the holders of a
majority of the outstanding shares of the common stock to increase the number of
shares available for issuance pursuant to awards made under the plan from
1,125,000 to 1,625,000 and from 1,625,000 to 2,450,000 respectively.
The Company awarded options to purchase in aggregate 396,375 shares of common
stock to five of its executive officers and other key employees during 2001.
With respect to the options awarded, the committee utilized a newly established
structure based upon the following: recommendations from the independent
compensation review, Mr. Baty's recommendations (other than himself), and
rewards to 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.
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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 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 2001 will exceed the limit
imposed by Section 162(m).
G. Ronald Morris
Michael E. Werner
Steven T. Warshaw
James L Earsley
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 December 31, 1996 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 December
31, 1996 through December 31, 2001. 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 December 31, 1996. 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.
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Cumulative Total Stockholder Return
Dec. 31, 1996 Dec. 31, 1997 Dec. 31, 1998 Dec. 31, 1999 Dec. 31, 2000 Dec. 31, 2001
------------- ------------- ------------- ------------- ------------- --------
NN, Inc 100.00 59.95 41.08 54.09 74.49 93.03
Value Line Machinery Index 100.00 153.13 130.82 178.17 183.35 226.38
Standard & Poor's 500 100.00 133.23 171.07 205.77 184.90 160.79
ANNUAL REPORT
The Company's 2001 Annual Report to Stockholders, which includes its
Annual Report on Form 10-K for the year ended December 31, 2001, is being mailed
together with this Proxy Statement.
By Order of the Board of Directors,
/s/ William C. Kelly, Jr.
William C. Kelly, Jr.
Secretary
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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.
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THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HERIN
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 KPMG 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)
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DATE:
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SIGNATURE (S)
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DATE:
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NN, Inc.
2000 Waters Edge Drive, Bldg. C., Ste. 12
Johnson City, TN 37604
SOLICITED BY THE BOARD OF DIRECTORS FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE
HELD ON MAY 16, 2002, AT THE GREENVILLE - SPARTANBURG AIRPORT MARRIOTT, ONE
PARKWAY EAST, GREENVILLE, SOUTH CAROLINA 29615.
The undersigned stockholder hereby appoints Roderick R. Baty and David L.
Dyckman 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 KPMG 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 KPMG LLP AS INDEPENDENT AUDITORS.
Please mark your votes as indicated in the example |X|
1. Election of Directors.
Nominees: G. Ronald Morris, Steven T. Warshaw and James L. Earsley. For,
except vote withheld from the following nominee(s).
[ ] For [ ] Withheld [ ] For All Except _____________
2. For ratification of the selection of KPMG LLP as independent auditors.
[ ] For [ ] Against [ ] Abstain
