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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended SEPTEMBER 30, 1997
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
--------- ----------
Commission File Number 0-23486
NN BALL & ROLLER, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 62-1096725
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
800 TENNESSEE ROAD
ERWIN, TENNESSEE 37650
(Address of principal executive offices, including zip code)
(423) 743-9151
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
---- ----
As of November 12, 1997 there were 14,804,271 shares of the registrant's common
stock, par value $0.01 per share, outstanding.
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NN BALL & ROLLER, INC.
INDEX
Page No.
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements:
Condensed Statements of Income for the three and nine months
ended September 30, 1997 and 1996 2
Condensed Balance Sheets at September 30, 1997 and December 31, 1996 3
Condensed Statements of Changes in Stockholders' Equity
for the nine months ended September 30, 1997 and 1996 4
Condensed Statements of Cash Flows for the nine months
ended September 30, 1997 and 1996 5
Notes to Condensed Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 13
Signatures 14
Index to Exhibits 15
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PART I. FINANCIAL INFORMATION
NN BALL & ROLLER, INC.
CONDENSED STATEMENTS OF INCOME
(UNAUDITED)
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
THOUSANDS OF DOLLARS, EXCEPT PER SHARE DATA 1997 1996 1997 1996
- --------------------------------------------------------------------------------------------------------------
Net sales $ 17,231 $ 16,558 $ 58,514 $ 65,477
Cost of goods sold 12,386 10,828 40,531 43,759
------------- ------------ ------------- ------------
Gross profit 4,845 5,730 17,983 21,718
Selling, general and administrative 1,519 1,263 4,051 3,527
Depreciation 1,060 826 3,164 2,530
------------- ------------ ------------- ------------
Income from operations 2,266 3,641 10,768 15,661
Interest expense 2 87 21 274
------------- ------------ ------------- ------------
Income before provision for income taxes 2,264 3,554 10,747 15,387
Provision for income taxes 965 1,359 4,077 5,440
============= ============ ============= ============
Net income $ 1,299 $ 2,195 $ 6,670 $ 9,947
============= ============ ============= ============
Net income per common share: $ 0.09 $ 0.15 $ 0.45 $ 0.66
============= ============ ============= ============
Weighted average number of
shares outstanding 14,811,381 14,961,082 14,805,067 15,072,547
============= ============ ============= ============
SEE ACCOMPANYING NOTES.
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NN BALL & ROLLER, INC.
CONDENSED BALANCE SHEETS
SEPTEMBER 30, DECEMBER 31,
1997 1996
THOUSANDS OF DOLLARS (UNAUDITED)
- --------------------------------------------------------------------------------------------------------
ASSETS
Current assets:
Cash and cash equilvalents $ 1,875 $ --
Accounts receivable, net 12,362 15,754
Inventories, net (Note 2) 10,788 10,408
Income taxes refundable 329 --
Other current assets 1,220 565
------------ ------------
Total current assets 26,574 26,727
Property, plant and equipment, net 36,143 32,419
Other 102 146
============ ============
Total assets $ 62,819 $ 59,292
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 4,920 $ 4,054
Revolving credit facility -- 2,308
Accrued vacation expense 474 370
Income taxes payable -- 96
Other current liabilities 2,600 1,546
------------ ------------
Total current liabilities 7,994 8,374
Deferred income taxes 2,208 2,208
------------ ------------
Total liabilities 10,202 10,582
Total stockholders' equity 52,617 48,710
------------ ------------
Total liabilities and stockholders' equity $ 62,819 $ 59,292
============ ============
SEE ACCOMPANYING NOTES.
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NN BALL & ROLLER, INC.
CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(UNAUDITED)
COMMON STOCK ADDITIONAL RETAINED FOREIGN
NUMBER PAR PAID IN EARNINGS CURRENCY
THOUSANDS OF DOLLARS OF SHARES VALUE CAPITAL (DEFICIT) TRANSLATION TOTAL
- -------------------------------------------------------------------------------------------------------------------
Balance, January 1, 1996 14,473 $ 144 $ 25,289 $ 13,785 $ - $ 39,218
Net income 9,947 9,947
Dividends (3,497) (3,497)
Stock options exercised (Note 3) 156 2 1,694 1,696
======== ======= ========= ========== ====== ==========
Balance, September 30, 1996 14,629 $ 146 $ 26,983 $ 20,235 $ - $ 47,364
======== ======= ========= ========== ====== ==========
Balance, January 1, 1997 14,629 $ 146 $ 26,983 $ 21,581 $ - $ 48,710
Net income 6,670 6,670
Dividends (3,520) (3,520)
Stock options exercised (Note 3) 361 4 2,918 2,922
Stock repurchased (186) (1) (2,123) (2,124)
Cummulative currency translation (41) (41)
-------- ------- --------- ---------- ====== ----------
Balance, September 30, 1997 14,804 $ 149 $ 27,778 $ 24,731 $ (41) $ 52,617
======== ======= ========= ========== ====== ==========
SEE ACCOMPANYING NOTES.
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NN BALL & ROLLER, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
NINE MONTHS ENDED
SEPTEMBER 30,
THOUSANDS OF DOLLARS 1997 1996
- ----------------------------------------------------------------------------------------------------------
OPERATING ACTIVITIES:
Net income $ 6,670 $ 9,947
Adjustments to reconcile net income:
Depreciation 3,164 2,530
Changes in operating assets and liabilities:
Accounts receivable 3,392 2,250
Inventories (380) (1,420)
Income taxes (425) (196)
Other current assets (655) (376)
Accounts payable 866 (4,284)
Other liabilities 1,158 1,210
---------- ---------
Net cash provided by operating activities 13,790 9,661
---------- ---------
INVESTING ACTIVITIES:
Acquisition of plant, property, and equipment (6,888) (7,522)
Other assets 44 10
---------- ---------
Net cash used by investing activities (6,844) (7,512)
---------- ---------
FINANCING ACTIVITIES:
Payments under revolving credit facility (2,308) (348)
Dividends (3,520) (3,497)
Stock options exercised (Note 3) 2,922 1,696
Stock repurchased (2,124) --
Cummulative effect of currency translation (41) --
---------- ---------
Net cash (used) provided by financing activities (5,071) (2,149)
---------- ---------
NET CHANGE IN CASH AND CASH EQUIVALENTS 1,875 --
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD -- --
=========== =========
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 1,875 $ --
=========== =========
SEE ACCOMPANYING NOTES.
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NN BALL & ROLLER, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
NOTE 1. INTERIM FINANCIAL STATEMENTS
The accompanying condensed financial statements of NN Ball & Roller, Inc. have
not been audited by independent accountants, except for the balance sheet at
December 31, 1996. In the opinion of the Company's management, the financial
statements reflect all adjustments necessary to present fairly the results of
operations for the three and nine month periods ended September 30, 1997 and
1996, the Company's financial position at September 30, 1997 and December 31,
1996, and the cash flows for the nine month periods ended September 30, 1997
and 1996. These adjustments, except for the adjustments described below in Note
2, are of a normal recurring nature, and are, in the opinion of management,
necessary for fair presentation of the financial position and operating results
for the interim periods.
In February 1997, the FASB issued Statement No. 128 "Earnings Per Share" (FAS
128), which requires the computation and presentation of earnings per share
(EPS) for entities with publicly held common stock or potential common stock.
FAS 128 requires (a) presentation of basic and diluted EPS, if applicable, on
the face of the income statement and (b) reconciliation of the numerator and
denominator for each basic EPS computation and the numerator and denominator of
each diluted EPS computation. FAS 128 is effective for financial statements for
both interim and annual periods ending after December 15, 1997. The Company
will adopt FAS 128 in the fourth quarter of 1997. Had FAS 128 been effective
for the third quarter of 1997, basic and diluted EPS would have been $0.09 for
the three months ended September 30, 1997, and $0.15 for the three months ended
September 30, 1996. Basic and diluted EPS would have been $0.45 for the nine
months ended September 30, 1997 and $0.68 and $0.66 respectively, for the nine
months ended September 1996.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted from the interim financial statements presented
in this Quarterly Report on Form 10-Q.
The results for the first three quarters of 1997 are not necessarily indicative
of future results.
NOTE 2. INVENTORIES
Inventories are stated at the lower of cost or market, with cost being
determined by the first-in, first-out method.
Inventories are comprised of the following (in thousands):
SEPTEMBER 30, DECEMBER 31,
1997 1996
(UNAUDITED)
------------- --------------
Raw materials $ 1,360 $ 1,452
Work in process 2,308 2,586
Finished goods 7,180 6,430
------------ -------------
10,848 10,468
Less - Reserve for excess and obsolete inventory 60 60
============ =============
$ 10,788 $ 10,408
============ =============
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NOTE 3. STOCK OPTIONS EXERCISED
During the first nine months of 1997, certain employees exercised options to
purchase the Company's common stock under the Company's Stock Incentive Plan.
Options to purchase 358,404 shares were exercised at $6.22 per share, options
to purchase 1,125 shares were exercised at $9.39 per share and options to
purchase 1,500 shares were exercised at $11.50 per share.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 1997 COMPARED TO THE THREE MONTHS ENDED
SEPTEMBER 30, 1996
Net Sales. Net sales increased by approximately $673,000, or 4.1%, from $16.6
million for the third quarter of 1996 to $17.3 million for the third quarter of
1997. Although net sales in the third quater of 1997 were marginally better
than sales for the comparable period in 1996, the Company's current growth
prospects continue to reflect weaker business conditions impacting a Korean
customer, the fact that captive producers are ceasing to increase the
outsourcing of ball production, the continuing strengthening of the U.S. dollar
against foreign currencies, and an increasingly competitive marketplace.
Foreign sales increased $949,000, or 14.1%, from $6.7 million in the third
quarter of 1996 to $7.7 million during the third quarter of 1997. The increase
in foreign sales was due primarily to improved economic conditions in Europe.
Also, sales in the third quarter of 1996 were negatively impacted by the
over-building of inventories by customers in the first half of 1996. Similar
over-building did not occur in the first half of 1997. Domestic sales decreased
$276,000, or 2.8%, from $9.8 million in the third quarter of 1996 to $9.6
million in the third quarter of 1997. This decrease was due primarily to
decreased sales to one customer. With respect to 1998, according to preliminary
estimates, which are subject to change, and taking into account both the
negative factors that are driving the Company's short-term outloook as well as
the commitments for increased roller production, the Company anticipates net
sales will approximate $81 million.
Gross Profit. Gross profit decreased $885,000, or 15.4%, from $5.7 million for
the third quarter of 1996 to $4.8 million for the third quarter of 1997. As a
percentage of net sales, gross profit decreased from 34.6% in the third quarter
of 1996 to 28.1% for the same period in 1997. This decrease is due primarily to
costs related to the new facility start-up in Ireland and increased costs
associated with excess capacity. Additionally, in the third quarter of 1996,
the Company recorded $300,000 of duty drawback associated with 1995 imports of
raw material which had not been previously recorded. This amount is an offset
to export fees paid.
Selling, General and Administrative. Selling, general and administrative
expenses increased by 20.3%, from $1.3 million in the third quarter of 1996 to
$1.5 million in the third quarter of 1997. This increase was due primarily to
increased travel, legal, accounting and employee relocation expenses related to
the Ireland facility start-up as well as increased legal and consulting
expenses related to potential acquisitions and the Company's current strategic
development process. As a percentage of net sales, selling, general and
administrative expenses increased from 7.6% for the third quarter of 1996 to
8.8% for the same period in 1997.
Depreciation. Depreciation expense increased from $826,000 for the third
quarter of 1996 to $1.1 million for the same period in 1997. This increase was
due primarily to purchases of capital equipment. Also, new assets added in 1996
related to the new Mountain City facility were depreciated utilizing the
half-year convention in the prior year versus a full year of depreciation taken
during the current year. As a percentage of net sales, depreciation expense
increased from 5.0% for in the third quarter of 1996 to 6.2% in the third
quarter of 1997.
Net Income. Net income decreased by $896,000, or 40.8%, from $2.2 million for
the third quarter of 1996 to $1.3 million for the same period in 1997. As a
percentage of net sales, net income decreased from 13.3% in the third quarter
of 1996 to 7.5% for the third quarter of 1997. This decrease in net income as a
percentage of net sales was due primarily to costs associated with the new
Ireland facility start-up, excess capacity at the Company's plants, increased
selling, general and administrative expenses and the increased
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depreciation expenses discussed above. In addition, the Company increased the
provision for income taxes due to the decrease in foreign sales as a percentage
of total sales and the anticipated decrease in the level of tax benefit from
the Company's participation in a shared foreign sales corporation.
NINE MONTHS ENDED SEPTEMBER 30, 1997 COMPARED TO THE NINE MONTHS ENDED
SEPTEMBER 30, 1996
Net Sales. Net sales decreased by approximately $7.0 million, or 10.6%, from
$65.5 million for the first nine months of 1996 to $58.5 million for the same
period in 1997. Foreign sales decreased $5.5 million, or 16.7%, from $32.8
million in the first nine months of 1996 to $27.3 million during the same
period of 1997. This decrease was due primarily to a slowing in the overall
rate of outsourcing of captive production by the Company's customers
(including, as previously announced by the Company, one of the Company's major
customers bringing in house a portion of its business that was previously
outsourced to the Company) and general economic conditions in Europe. Domestic
sales decreased $1.5 million, or 4.6%, from $32.7 million in the first nine
months of 1996 to $31.2 million in the same period of 1997. This decrease was
due primarily to decreased sales to one customer.
Gross Profit. Gross profit decreased $3.7 million, or 17.2%, from $21.7 million
for the first nine months of 1996 to $18.0 million for the same period of 1997.
As a percentage of net sales, gross profit decreased from 33.2% in the first
nine months of 1996 to 30.7% in the same period of 1997. This decrease is due
primarily to costs related to the new facility start-up in Ireland and
increased costs associated with excess capacity. Additionally, in the third
quarter of 1996, the Company recorded $300,000 of duty drawback associated with
1995 imports of raw material which had not been previously recorded. This
amount is an offset to export fees paid.
Selling, General and Administrative. Selling, general and administrative
expenses increased by $524,000, or 14.9%, from $3.5 million in the first nine
months of 1996 to $4.1 million in the same period of 1997. This increase was
due primarily to increased travel, legal, accounting and employee relocation
expenses related to the Ireland facility start-up as well as increased legal
and consulting expenses related to potential acquisitions and the Company's
current strategic development process. As a percentage of net sales, selling,
general and administrative expenses increased from 5.4% in the first nine
months of 1996 to 6.9% for the same period in 1997.
Depreciation. Depreciation expense increased from $2.5 million for the first
nine months of 1996 to $3.2 million for the same period in 1997. This increase
was due primarily to purchases of capital equipment. Also, new assets added in
1996 related to the new Mountain City facility were depreciated utilizing the
half-year convention in the prior year versus a full year of depreciation taken
during the current year. As a percentage of net sales, depreciation expense
increased from 3.9% for the first nine months of 1996 to 5.4% for the same
period in 1997.
Net Income. Net income decreased by $3.3 million, or 32.9%, from $9.9 million
for the first nine months of 1996 to $6.7 million for the same period for 1997.
As a percentage of net sales, net income decreased from 15.2% for the first
nine months of 1996 to 11.4% for the same period for 1997. This decrease in net
income as a percentage of net sales was due primarily to costs associated with
the new Ireland facility start-up, excess capacity at the Company's plants,
increased selling, general and administrative expenses and the increased
depreciation expenses discussed above. In addition, the Company increased the
provision for income taxes due to the decrease in foreign sales as a percentage
of total sales and the anticipated decrease in the level of tax benefit from
the Company's participation in a shared foreign sales corporation.
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LIQUIDITY AND CAPITAL RESOURCES
In July 1997, the Company terminated its $10.0 million revolving credit
facility and entered into a loan agreement with First American National Bank
("First American"). This loan agreement provides for a revolving credit
facility of up to $25 million, which will expire on June 30, 2000.
Amounts outstanding under the revolving facility are unsecured and bear
interest at a floating rate equal to, at the Company's option, either LIBOR
plus 0.65% or the Fed Funds effective rate plus 1.5%. The loan agreement
contains customary financial and operating restrictions on the Company,
including covenants restricting the Company, without First American's consent,
from incurring additional indebtedness from, or pledging any of its assets to,
other lenders and from disposing of a substantial portion of its assets. In
addition, the Company is prohibited from declaring any dividend if a default
exists under the revolving credit facility at the time of, or would occur as a
result of, such declaration. The loan agreement also contains customary
financial covenants with respect to the Company, including a covenant that the
Company's earnings will not decrease in any year by more than fifty percent of
earnings in the Company's immediately preceding fiscal year. The Company, as of
November 12, 1997, was in compliance with all such covenants.
The Company's arrangements with its domestic customers typically provide that
payments are due within 30 days following the date of the Company's shipment of
goods, while arrangements with foreign customers (other than foreign customers
that have entered into an inventory management program with the Company)
generally provide that payments are due within either 90 or 120 days following
the date of shipment. Under the Company's inventory management program,
payments typically are due within 30 days after the product is used by the
customer. Due to the continuing expansion of the Company's foreign sales,
management believes that the Company's working capital requirements will
increase as a result of longer payment terms provided to foreign customers. The
Company's net sales historically have not been of a seasonal nature. However,
as foreign sales have increased as a percentage of total sales, seasonality has
become a factor for the Company in that many foreign customers cease production
during the month of August.
Currently, all foreign sales are billed and paid for in United States dollars.
To date, the Company has not been materially adversely affected by currency
fluctuations or foreign exchange restrictions, although a strengthening of the
US dollar against foreign currencies could impair the ability of the Company to
compete with international based competitors for foreign as well as domestic
sales. The Company is expected to commence production and shipment of goods
from its Kilkenny, Ireland facility in the fourth quarter of 1997. It is
expected that goods sold from this facility will be billed and paid for in the
customer's local currency, as opposed to U. S. dollars. As a result of these
sales, the Company's foreign exchange risk will increase. The Company is
currently considering various strategies to manage this risk.
Working capital, which consists principally of cash and cash equivalents,
accounts receivable and inventories was $18.6 million at September 30, 1997 as
compared to $18.4 million at December 31, 1996. The ratio of current assets to
current liabilities increased slightly to 3.3:1 at September 30, 1997 from
3.2:1 at December 31, 1996. Cash flow from operations increased from $9.7
million during the first nine months 1996 to $13.8 million during the first
nine months of 1997. This increase was primarily attributed to the decrease in
accounts receivable of $3.4 million and an increases in accounts payable of
$866,000 and $1.2 million in other liabilities.
During 1997, the Company plans to spend approximately $10.0 million on capital
expenditures (of which $6.9 million has been spent through September 30, 1997).
Of the $6.9 million spent through September 30, approximately $3.9 million was
spent on the purchase and renovation of, and installation of new equipment for
the Ireland facility. Production is anticipated to begin at this facility in
the fourth quarter of 1997. Capital expenditures in the fourth quarter will be
made for the further renovation of the Kilkenny facility and the purchase of
additional machinery and equipment for all four of the Company's facilities.
The Company intends to finance these activities with cash generated from
operations and funds available
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under the credit facility described above. The Company believes that funds
generated from operations and borrowings from the credit facility will be
sufficient to finance the Company's working capital needs and projected capital
expenditure requirements through December 1997.
CAUTIONARY STATEMENTS FOR PURPOSES OF THE "SAFE HARBOR" PROVISIONS OF THE
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
The Company wishes to caution readers that this report contains, and future
filings by the Company, press releases and oral statements made by the
Company's authorized representatives may contain, forward looking statements
that involve certain risks and uncertainties. The Company's actual results
could differ materially from those expressed in such forward looking statements
due to important factors bearing on the Company's business, many of which
already have been discussed in this filling and in the Company's prior
fillings.
The following paragraphs discuss the risk factors the Company regards as the
most significant, although the Company wishes to caution that other factors
that are currently not considered significant or that currently cannot be
foreseen may in the future prove to be important in affecting the Company's
results of operations. The Company undertakes no obligation to publicly update
or revise any forward looking statements, whether as a result of new
information, future events or otherwise.
Industry Risks. The precision ball and roller industry is cyclical and tends to
decline in response to overall declines in industrial production. The Company's
sales in the past have been negatively affected, and in the future very likely
would be negatively affected, by adverse conditions in the industrial
production sector of the economy or by adverse global or national economic
conditions generally.
Competition. The precision ball and roller market is highly competitive, and
many of the ball and roller manufacturers in the market are larger and have
substantially greater resources than the Company. The Company's competitors are
continuously exploring and implementing improvements in technology and
manufacturing processes in order to improve product quality, and the Company's
ability to remain competitive will depend, among other things, on whether it is
able, in a cost effective manner, to keep pace with such quality improvements.
In addition, the Company competes with many of its customers that, in addition
to producing bearings, also internally produce balls and rollers for sale to
third parties. The Company faces a risk that its customers will decide to
produce balls and rollers internally rather than outsourcing their needs to the
Company.
Rapid Growth. The Company has significantly expanded its production facilities
and capacity over the last several years, and during the third quarter of 1997
purchased an additional manufacturing plant in Kilkenny, Ireland. The Company
currently is not operating at full capacity and faces risks of further
under-utilization or inefficient utilization of its production facilities in
future years. The Company also faces risks associated with start-up expenses,
inefficiencies , delays and increased depreciation costs associated with its
plant expansions.
Raw Material Shortages. Because the balls and rollers manufactured by the
Company have highly-specialized applications, their production requires the use
of very particular types of steel. Due to quality constraints, the Company
obtains the majority of its steel from overseas suppliers. Steel shortages or
transportation problems, particularly with respect to 52100 Steel, could have a
detrimental effect on the Company's business.
Risks Associated with International Trade. Because the Company obtains a
majority of its raw materials from overseas suppliers and sells to a large
number of international customers, the Company faces risks associated with (i)
adverse foreign currency fluctuations, (ii) changes in trade, monetary and
fiscal policies, laws and regulations, and other activities of governments,
agencies and similar organizations, (iii) the imposition of trade restrictions
or prohibitions, (iv) the imposition of import or other duties or taxes,
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and (v) unstable governments or legal systems in countries in which the
Company's suppliers and customers are located. Currently, all foreign sales are
billed and paid for in United States dollars. An increase in the value of the
United States dollar relative to foreign currencies may adversely affect the
ability of the Company to compete with its foreign-based competitors for
international as well as domestic sales.
Dependence on Major Customers. During 1996, the Company's ten largest customers
accounted for approximately 78% of its net sales. Sales to various US and
foreign divisions of SKF, which is one of the largest bearing manufacturers in
the world, accounted for approximately 37% of net sales in 1996, and sales to
FAG accounted for approximately 10% of net sales. None of the Company's other
customers accounted for more than 10% of its net sales in 1996, but sales to
three of its customers each represented more than 5% of the Company's 1996 net
sales. The loss of all or a substantial portion of sales to these customers
would have a material adverse effect on the Company's business.
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PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits Required by Item 601 of Regulation S-K
Exhibit
Number Description
10.14 Employment Agreement, dated August 1, 1997, between
the Company and Roderick R. Baty
10.15 Severance Agreement, dated August 28, 1997, between
the Company and James J. Mitchell
27 EDGAR Financial Data Schedules (for SEC use only).
(b) No reports on Form 8-K were filed during the quarter ended September
30, 1997
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
NN Ball & Roller, Inc.
--------------------------------
(Registrant)
Date: November 12, 1997 /s/ Roderick R. Baty
----------------- --------------------------------
Roderick R. Baty, President
and Chief Executive
Officer
(Duly Authorized Officer)
Date: November 12, 1997 /s/ William C. Kelly, Jr.
----------------- --------------------------------
William C. Kelly, Jr.,
Treasurer, Assistant Secretary
and
Chief Accounting Officer
(Principal Financial and
Accounting Officer)
(Duly Authorized Officer)
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INDEX TO EXHIBITS
Exhibit
Number Description
10.14 Employment Agreement, dated August 1, 1997, between the Company and
Roderick R. Baty
10.15 Severance Agreement, dated August 28, 1997, between the Company and
James J. Mitchell
27 EDGAR Financial Data Schedules (for SEC use only).
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EXHIBIT 10.14
EMPLOYMENT AGREEMENT
This AGREEMENT is made as of August 1, 1997, by and between
NN Ball & Roller, Inc., a Delaware corporation, having its principal place of
business located at 800 Tennessee Road, Erwin, Tennessee 37650 (the "Company")
and Roderick R. Baty (the "Executive").
W I T N E S S E T H :
WHEREAS, the Company's Board of Directors (the "Board") has
determined that it is in the best interest of the Company and its shareholders
to employ the Executive as President and Chief Executive Officer of the Company
and the Executive desires to serve in that capacity;
NOW, THEREFORE, in consideration of the foregoing and of the
respective covenants and agreements of the parties herein contained, the
parties hereto, intending to be legally bound, agree as follows:
1. Employment. The Company agrees to continue to employ the
Executive and the Executive hereby agrees to continue to be employed for the
period of time set forth in Paragraph 2, subject to the terms and conditions
set forth herein.
2. Term. Subject to the terms hereof, Company agrees to
employ the Executive for a period of two years commencing upon August 1, 1997
and expiring on July 31, 1999 (the "Employment Term") (unless sooner terminated
as provided herein). The Employment Term shall be extended automatically from
time to time, on a rolling basis, for additional one year periods, unless
either party gives written notice of termination to the other at least six (6)
months prior to the date that the Employment Term is scheduled to expire.
3. Position and Responsibilities. The Executive shall serve
as the President and Chief Executive Officer of the Company, reporting only to
the Board, and shall have supervision and control over, and responsibility for,
the general management and operation of the Company. The Executive shall also
have such other powers and duties as may from time to time be prescribed by the
Board; provided, however, that such duties shall be consistent with the
Executive's position as the senior executive officer in charge of the general
management of the Company.
4. Diligence. Executive agrees to serve in the respective
positions referred to in Paragraph 3 and to perform diligently the duties and
services appertaining to each such office, as well as such additional duties
and services appropriate to each such office which the parties mutually may
agree upon from time to time.
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5. Time. Executive agrees to devote his entire working time
and efforts to the business and affairs of the Company and its affiliates and
not to engage, directly or indirectly, in any other business or businesses,
whether or not similar to that of the Company, except with the consent of the
Board. The foregoing notwithstanding, the parties recognize and agree that
Executive (i) may engage in personal investments, subject to any restrictions
set forth in the Non-Competition and Confidentiality Agreement referenced in
Paragraph 8 and (ii) subject to the prior consent of the Board, may serve on
the board of directors of other companies, provided such service does not
conflict with the business and affairs of the Company or interfere with
Executive's performance of his duties hereunder.
7. Compensation.
(a) Salary. During the Employment Term, the
Executive shall receive an annual salary of $200,000 per year, which annual
salary shall be subject to such increases as the Board in its sole discretion
may from time to time determine (the "Annual Salary"). The Annual Salary shall
be payable by the Company in accordance with its regular compensation policies
and practices for paying executives.
(b) Expenses. During the term of his employment
hereunder, the Executive shall be entitled to be reimbursed for all reasonable
business expenses incurred by him in connection with his services hereunder,
including but not limited to expenses for entertainment and travel, in
accordance with the policies and procedures from time to time in effect for the
Company's senior executive officers. The Company retains the right to establish
limits on the types or amounts of business expenses that the Executive may
incur.
(c) Employee Benefit Programs. The Executive shall
be entitled to participate in all of the Company's employee benefit plans and
programs (including life, disability, and health insurance plans and programs
and savings plans and programs) to the extent his position, tenure, salary,
age, health and other qualifications make him eligible to participate, subject
to the rules and regulations applicable thereto. The Company retains the right
to abolish or alter the terms of any employee benefit programs, plans or
policies that it may establish, provided such abolition or amendment shall be
applicable to the senior officers of the Company generally.
(d) Vacation and Other Absences. The Executive shall
be entitled to the number of paid vacation days in each calendar year
determined by the Company from time to time for its senior executive officers
generally. The Executive shall also be entitled to all paid absences for
holidays or illnesses in accordance with the Company's plans, policies or
provisions applicable to senior executive employees.
8. Confidentiality and Non-Competition. As a material
inducement to the Company entering into this Agreement, Executive hereby
reconfirms and agrees to continue to be bound in all respects by the terms of
that certain Non-Competition and Confidentiality
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Agreement, dated December 5, 1995, between Executive and the Company, a copy of
which is attached hereto as Exhibit A.
9. Termination of Employment.
(a) Death or Disability. The Executive's employment
shall terminate automatically upon the Executive's death during the Employment
Term. The Company shall be entitled to terminate the Executive's employment
because of the Executive's disability during the Employment Term if, as a
result of the Executive's incapacity due to physical or mental illness
(hereinafter "Disability"), the Executive shall have been absent from his
duties hereunder for one hundred and twenty (120) days during any three hundred
and sixty (360) day period.
(b) Termination by Company for Cause. (i) The
Company may terminate the Executive's employment during the Employment Term for
Cause. "Cause" means:
A. the failure of the Executive to perform the
Executive's duties under this Agreement (other than as a
result of physical or mental illness or injury), which
failure, if correctable, and provided it does not
constitute willful misconduct or gross negligence described
in Subsection B below, remains uncorrected for 10 days
following written notice to Executive by the Board of such
breach;
B. willful misconduct or gross negligence by the
Executive, in either case that results in material damage
to the business or reputation of the Company;
C. a material breach by Executive of either this
Agreement or that certain Non-Competition and
Confidentiality Agreement referenced in Paragraph 8 which,
if correctable, remains uncorrected for 10 days following
written notice to Executive by the Board of such breach; or
D. the Executive is convicted of a felony or any
other crime involving moral turpitude (whether or not in
connection with the performance by Executive of his duties
under this Agreement).
(c) Termination By Company Without Cause. The
Company may terminate the employment of Executive under this Agreement for any
reason at any time.
(d) Termination by Executive for Good Reason. (i)
The Executive may terminate employment for Good Reason. "Good Reason" means:
4
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A. assignment to the Executive of any duties
inconsistent with Executive's position, duties,
responsibilities, title or office, or any other action by
the Company that results in a material diminution in the
Executive's position, authority, duties or
responsibilities, excluding in each case any assignment or
action that is remedied by the Company within 10 days after
receipt of notice thereof from the Executive; or
B. any material failure by the Company to comply
with this Agreement, other than a failure that is remedied
by the Company within 10 days after receipt of notice
thereof from then Executive.
(e) Voluntary Termination by Executive Without Good
Reason. Executive may at any time terminate his employment under this Agreement
without Good Reason.
(f) Notice of Termination. If Company or Executive
desires to terminate Executive's employment hereunder at any time, it or he
shall do so by giving written notice to the other party (following the
expiration of any applicable cure periods) that it or he has elected to
terminate Executive's employment hereunder and stating the effective date and
reason for such termination. Any termination by Executive of his employment
without Good Reason shall be made on not less than 14 days' notice.
10. Effect of Termination.
(a) Voluntary Termination by Executive; Termination
for Cause; Death or Disability. In the event that Executive's employment is
terminated pursuant to Paragraphs 9(a), 9(b) or 9(e), on the date of
termination, the Company shall be liable to Executive as follows:
(i) Executive shall be entitled to receive the
Annual Salary due to him through the date of termination of
his employment.
(ii) Any vested rights of Executive shall be paid
to Executive in accordance with the Company's plans,
programs or policies. Without limiting the foregoing, in
the event of the termination of Executive's employment due
to death or disability (Paragraph 9(a)), the rights and
benefits of Executive (or his designated beneficiary or
representatives, as applicable) under any Company life,
health and long-term disability plans and policies shall be
determined in accordance with the terms and provisions of
such plans and policies.
(iii) The Company shall promptly reimburse
Executive for any and all reimbursable business expenses
(to the extent not already reimbursed) upon Executive's
properly accounting for the same.
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(b) Termination Without Cause; Termination by Executive for
Good Reason. In the event that the Company terminates Executive's employment
without Cause pursuant to Paragraph 9(c) or Executive terminates his employment
with the Company pursuant to Paragraph 9(d), the Company shall be liable as
follows:
(i) Executive shall be entitled to receive the Annual
Salary due to him through the date of termination of his Employment. In
addition, Executive shall be entitled to receive continued monthly payments of
his a Annual Salary, based on the Annual Salary in effect, on the date of
termination, until the first anniversary of the date of termination.
(ii) Any vested rights of Executive shall be paid to
Executive in accordance with the Company's plans, programs or policies.
(iii) The Company shall promptly reimburse Executive for
any and all reimbursable business expenses (to the extent not already
reimbursed) upon Executive's properly accounting for the same.
(iv) Executive and/or the Executive's family shall be
entitled to receive health benefits (as contemplated by Paragraph 7(c) hereof)
until the first anniversary of the date of termination at least equal to those
which would have been provided to them in accordance with this Agreement if
Executive's employment had not been terminated provided that the Company's
obligation to provide such benefits shall be reduced by any comparable benefits
(or amounts received by Executive in respect thereof) received by Executive
under the terms of new employment undertaken by Executive after termination and
prior to the first anniversary of the date of termination; and provided further,
that the terms of the Company's health insurance plans shall be subject to
amendment during such period, to the extent that such amendments are applicable
to the executive officers of the Company generally.
(c) Limit on Company Liability. Except as expressly set forth
in this Paragraph 10, the Company shall have no obligation to Executive under
this Agreement following a termination of Executive's employment with the
Company. Without limiting the generality of the provision of the foregoing
sentence, the Company shall not, following a termination of Executive's
employment with the Company, have any obligation to provide any further benefit
to Executive or make any further contribution for Executive's benefit except as
provided in this Paragraph 10.
11. Company Proprietary Rights.
(a) Company to Retain Rights. Executive agrees that all right, title
and interest of every kind and nature whatsoever in and to copyrights, patents,
ideas, business or strategic plans and concepts, studies, presentations,
creations, inventions, writings,
6
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properties, discoveries and all other intellectual property conceived by
Executive during the term of this Agreement and pertaining to or useful in or
to (directly or indirectly) the activities of the Company (collectively,
"Company Intellectual Property") shall become and remain the exclusive property
of the Company, and Executive shall have no interest therein.
(b) Further Assurances. At the request of the Company,
Executive shall, at the Company's expense but without additional consideration,
execute such documents and perform such other acts as the Company may deem
necessary or appropriate to vest in the Company or its designee such title as
Executive may have to all Company Intellectual Property in which Executive may
be able to claim any rights by virtue of his employment under this Agreement.
(c) Return of Material. Upon the termination of the Employment Term,
including any termination of employment described in Paragraph 9, the Executive
will promptly return to the Company all copies of information protected by
Paragraph 11(a) hereof or by Paragraph 3(a) of the Non-Competition and
Confidentiality Agreement referenced in Paragraph 8, which are in his
possession, custody or control, whether prepared by him or others, and the
Executive agrees that he shall not retain any of same.
12. Representation and Warranty of Executive. Executive
represents and warrants to the Company that he is not now under any obligation,
of a contractual nature or otherwise, to any person, partnership, company or
corporation that is inconsistent or in conflict with this Agreement or which
would prevent, limit or impair in any way the performance by him of his
obligations hereunder.
13. Assignment. This Agreement, and the rights and
obligations of the parties hereunder, are personal and neither this Agreement,
nor any right, benefit or obligation of either party hereto, shall be subject
to voluntary or involuntary assignment, alienation or transfer, whether by
operation of law or otherwise, without the prior written consent of the other
party; provided, however, that Company may assign this Agreement in connection
with a merger or consolidation involving Company or a sale of substantially all
its assets to the surviving corporation or purchaser, as the case may be, so
long as such assignee assumes Company's obligations hereunder.
14. Withholding. Payment of Executive's Annual Salary and
payment or provision of other compensation to Executive pursuant hereto shall
be subject to such reporting and withholding for applicable taxes as is
required by law.
15. Certain Expenses. Company, on or before the date hereof,
shall pay directly or reimburse Executive (at Executive's discretion) for the
actual legal fees and other costs and expenses, if any, incurred by Executive
in connection with the preparation, finalizing and execution of this Letter.
7
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16. Severability. In the event that any provision or portion
of this Agreement is determine to be invalid or unenforceable for any reason,
in whole or in part, the remaining provisions of this Agreement will be
unaffected thereby and will remain in full force and effect to the fullest
extent permitted by law.
17. Notices. For all purposes of this Agreement, notices and
all other communications provided for herein shall be in writing and shall be
deemed to have been duly given, in the case of a notice to the Company, when
delivered to the Company at the following address, and in the case of a notice
to Executive, when received by Executive, and in both cases addressed as
follows:
If to Company, to: NN Ball & Roller
800 Tennessee Road
Erwin, Tennessee 37650
Attention: Chairman of the Board
If to Executive, to: Mr. Roderick R. Baty
2007 Millbrook Drive
Johnson City, TN 37604
18. Modifications and Waivers. No provision of this Agreement
may be modified or discharged unless such modification or discharge is
authorized by the Board and is agreed to in writing, signed by the Executive
and by an officer of the Company duly authorized by the Board. No waiver by
either party hereto of any breach by the other party hereto of any condition or
provision of this Agreement to be performed by such other party will be deemed
a waiver of similar or dissimilar provisions or conditions at the time or at
any prior or subsequent time.
19. Entire Agreement. This Agreement and the Non-Competition
and Confidentially Agreement constitute the entire understanding of the parties
hereto with respect to their subject matter. This Agreement and the
Non-Competition and Confidentiality Agreement supersede all prior agreements
between the parties hereto with respect to their subject matter. Without
limiting the foregoing, this Agreement completely and entirely supersedes the
Letter, dated June 30, 1997 from Executive to James J. Mitchell, pursuant to
which Executive originally accepted employment with the Company, and the
Letter, dated June 30, 1995, from James J. Mitchell to Executive, outlining the
terms of the Executive's employment.
20. Governing Law. This Agreement will be governed by the
laws of the State of Tennessee without regard for its conflict of laws rules.
8
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21. Counterparts. This Agreement may be executed
simultaneously in one or more counterparts, each of which will be deemed to be
an original but all of which together will constitute one and the same
instrument.
22. Headings, Etc. The section headings contained in this
Agreement are for convenience of reference only and will not be deemed to
control or affect the meaning or construction of any provision of this
Agreement. Reference to Paragraphs are to Paragraphs in this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
NN BALL & ROLLER, INC.
By: /s/ Richard D. Ennen
------------------------
RODERICK R. BATY
By: /s/ Roderick R. Baty
------------------------
9
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EXHIBIT A
NON-COMPETITION AND CONFIDENTIALITY AGREEMENT
THIS NON-COMPETITION AND CONFIDENTIALITY AGREEMENT
("Agreement") is made as of December 5, 1995, by Roderick R. Baty ("Employee")
in favor of NN Ball & Roller, Inc., a Delaware corporation (the "Company").
WITNESSETH
WHEREAS, the Company manufactures and supplies precision
steel balls and rollers to anti-friction bearing manufacturers, automotive
original equipment manufacturers and the automotive aftermarket, the gas and
mining industries, producers of drilling bits for oil, gas, and water wells and
producers of stainless steel valves and pumps (the "Business"), and its
customers are located in more than 25 different countries;
WHEREAS, Employee is an employee "at will" with the Company
and currently holds a management or executive position with the Company;
WHEREAS, the Company is requiring that the Employee, as a
condition to and in consideration of his continued employment, enter into this
Agreement; and
WHEREAS, the Employee desires to enter into this Agreement in
order to maintain his employment with the Company.
NOW, THEREFORE, in consideration of the foregoing premises, the
continued employment of the Employee and other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the Employee
hereby agrees with the Company as follows:
1. TERM. For purposes of this Agreement, the "Term" shall mean the
period commencing on the date hereof and continuing through the second
anniversary of the date of the Employee's termination of employment with the
Company for any reason.
2. COVENANT NOT TO COMPETE.
2.1 EMPLOYEE'S KNOWLEDGE. Employee acknowledges and agrees that he
occupies a position of trust and confidence with Company and, in the course of
his engagement with the Company, has become and will continue to become
familiar with proprietary and confidential information concerning the Company.
Employee acknowledges and agrees that his services are of a special, unique and
extraordinary value to the Company and that the Company would be irreparably
damaged if Employee were to provide similar services to any person or entity in
violation of the provisions of this Agreement.
10
2.2 NON-COMPETE. Employee hereby agrees that, during the Term, he
shall not, directly or indirectly, as employee, agent, consultant, stockholder,
director, co-partner or in any other individual or representative capacity,
own, operate, manage, control, engage in, invest in or participate in any
manner in, act as a consultant or advisor to, render services for (alone or in
association with any person, firm, corporation or entity), or otherwise assist
any person or entity that engages in or owns, invests in, operates, manages or
controls any venture or enterprise that competes in the Business anywhere in
the world (the "Territory"); provided, however, that nothing contained herein
shall be construed to prevent Employee from investing in the stock of any
competing corporation listed on a national securities exchange or traded in the
over-the-counter market, but only if Employee is not involved in the business
of said corporation and if Employee does not own more than an aggregate of two
(2%) percent of the stock of such corporation.
2.3 NON-SOLICITATION. Without limiting the generality of the
provisions of Section 2.2 above, Employee hereby agrees that during the Term he
will not, directly or indirectly, solicit (or participate as employee, agent,
consultant, stockholder, director, partner or in any other individual or
representative capacity in any business which solicits), business from any
person, firm, corporation or other entity that is a customer of the Company at
the time of such solicitation, or from any successor in interest to any such
person, firm, corporation or other entity, for the purpose of securing business
or contracts relating to the Business.
2.4 INTERFERENCE WITH RELATIONSHIPS. During the Term, Employee shall
not, directly or indirectly, as employee, agent, consultant, stockholder,
director, co-partner or in any other individual or representative capacity: (a)
employ or engage, or solicit for employment or engagement, any person employed
or engaged by the Company, or otherwise seek to influence or alter any such
person's relationship with the Company, or (b) solicit or encourage any
customer of the Company to terminate or otherwise alter his, her or its
relationship with the Company.
3. CONFIDENTIAL INFORMATION. (a) During the Term and at all times
thereafter, Employee shall keep secret and retain in strictest confidence, and
shall not, without the prior written consent of the Company, furnish, make
available or disclose to any third party or use for the benefit of himself or
any third party, any "Confidential Information." As used in this Agreement,
Confidential Information shall mean any information held in confidence by the
Company and not freely available to the public which gives the Company an
advantage over competitors in the Business, including, without limitation,
sales or earnings figures, personnel matters, supplier and customer data and
information relating to the Company's manufacturing processes, equipment and
customer servicing methods; provided, however, that Confidential Information
shall not include any information which otherwise is in the public domain or
becomes known in the ball and roller industry through no wrongful act on the
part of Employee. Employee acknowledges that the Confidential Information is
vital, sensitive, confidential and proprietary to the Company.
11
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(b) Employee hereby represents and warrants to the Company
that at all times prior to the date hereof he has kept secret and retained in
strictest confidence, and has not furnished, made available or disclosed to any
third party or used for the benefit of himself or any third party, any
Confidential Information.
4. JUDICIAL MODIFICATION. If any court of competent jurisdiction shall
at any time deem the Term or any covenant contained herein too lengthy, or the
Territory too extensive, the other provisions of this Agreement shall
nevertheless stand, the Term shall be deemed to be the longest period
permissible by law under the circumstances and the Territory shall be deemed to
comprise the largest territory permissible by law under the circumstances. The
court in each case shall reduce the time period and/or Territory to permissible
duration or size.
5. REMEDIES. Employee acknowledges and agrees that the covenants set
forth in the Agreement are reasonable and necessary for the protection of the
Company's business interests, that irreparable injury will result to the
Company if Employee breaches any of the terms of said covenants, and that in
the event of Employee's actual or threatened breach of any such covenant, the
Company will have no adequate remedy at law. Employee accordingly agrees that
in the event of any actual or threatened breach by him of any of the covenants
contained herein, the Company shall be entitled to immediate temporary
injunctive and other equitable relief, without bond and without the necessity
of showing actual monetary damages, subject to hearing as soon thereafter as
possible. Nothing contained herein shall be construed as prohibiting the
Company from pursuing any other remedies available to it for such breach or
threatened breach, including the recovery of any damages which it is able to
prove.
6. CONDITION OF EMPLOYMENT. The Company shall have no obligation to
retain the Employee in its employ as a result of this Agreement, there shall be
no inference as to the length of employment implied hereby, and the Company
reserves the same rights to terminate the employment of the Employee as existed
prior to the date hereof.
7. MISCELLANEOUS. This Agreement sets forth the entire agreement and
understanding of the parties hereto with respect to the subject matter hereof
and supersedes any other agreements between the parties, written or oral,
relating to the subject matter hereof. No amendment or modification of this
Agreement and no waiver by any party of the breach of any covenant contained
herein shall be binding unless executed in writing by the party against whom
enforcement of such amendment, modification or waiver is sought. This Agreement
may be executed in two or more counterparts, each of which shall be deemed an
original without production of the others. This Agreement shall be governed by
and construed in accordance with the laws of the State of Tennessee, without
regard to its choice of law provisions. In the event any provision or portion
of any provision of this Agreement is held invalid or unenforceable by a court
of competent jurisdiction as applied to any fact or circumstance, the remaining
provisions and portions of this Agreement and the same
12
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provision as applied to any other fact or circumstance shall not be affected or
impaired thereby, and shall remain valid and enforceable. The terms "he", "his"
and "him" are used herein generically for convenience only, and may, as
appropriate, be considered to represent the terms "she", "hers" and "her".
IN WITNESS WHEREOF, the Employee has caused this agreement to be duly
executed in favor of the Company on the day and year first above written.
By: /s/ Roderick R. Baty
--------------------
Employee
ACKNOWLEDGED
NN BALL & ROLLER, INC.
By: /s/ William C. Kelly, Jr.
-------------------------
1
EXHIBIT 10.15
NN BALL & ROLLER
800 Tennessee Road
Erwin, TN 37650
August 28, 1997
Mr. James J. Mitchell
14 Sunsent View
Asheville, NC 28804
Dear Jim:
This letter sets forth the agreement between you and NN Ball
& Roller, Inc. (the "Company") relating to your resignation as the President,
Chief Operating Officer and a director of the Company effective July 28, 1997.
In consideration of your agreements set forth herein, the
Company agrees to: (i) continue payment of your current salary of $16,667 per
month until January 31, 1998; (ii) continue to provide group health and dental
insurance benefits to you and your wife under the terms of the Company's group
plans until January 31, 1998, provided that the terms of any such plans shall
be subject to amendment during such period to the extent such amendments apply
to the Company's executive officers generally; and (iii) provide you with a
lump sum payment of $10,000 on the date hereof to be used by you, if you so
choose, to retain an employment search firm. This letter agreement shall not
amend or otherwise affect the provisions of, or your rights under, the
Company's disability insurance plan, life insurance plan or 401(K) plan or
under any options held by you under the Company's stock incentive plan and, for
purposes of each of those plans, you shall be deemed to have resigned from the
Company's employ as of July 28, 1997.
In partial consideration for the Company's promises in the
preceding paragraph, you hereby reconfirm and agree to continue to be bound in
all respects by and comply with the terms of that certain Non-Competition and
Confidentiality Agreement, dated January 27, 1994, between you and the Company,
a copy of which is attached as Exhibit A. You further agree that any public
statements made by you with respect to the termination of your employment will
be subject to the prior approval of the Company.
You represent and agree that, as of your execution hereof,
you have returned to the Company all copies in your possession of written and
other physical materials and computer files and software that were generated or
acquired by you in connection with your employment with the Company. You agree
that all inventions, know-how, ideas, improvements, trade secrets,
2
Mr. James J. Mitchell
August 28, 1997
Page -2-
developments or confidential information (collectively, "Discoveries") that
relate to the business, research or development of the Company and which arose
in connection with, or of which you acquired knowledge during, your employment
with the Company belong to the Company, whether or not patent applications have
been filed thereon. You further agree that you have disclosed to the Company
all such Discoveries and that, if requested by the Company, you shall execute
appropriate documents assigning ownership of such Discoveries to the Company.
In exchange for and in partial consideration of the
agreements of the Company set forth in this letter agreement, you hereby
unconditionally release, acquit and discharge the Company and its past and
present officers, directors, employees, agents and consultants of and from all
actions, causes of action, claims, demands, obligations, liabilities, or
controversies known or unknown, which you may have against the Company by
reason of or relating to any cause, action or event whatsoever from the
beginning of the world to the date hereof, including, without limitation, any
actions, causes of action, claims, demands, obligations, liabilities or
controversies arising out of, or relating to, your employment with the Company
and the termination thereof. You understand and agree that this release shall
bind and inure to the benefit of the assigns, heirs, executors, subsidiaries
and affiliates of the Company and its directors, officers, employees, agents
and consultants. This release shall not include any claims you may have due to
the non-performance of the Company's obligations set forth in this letter
agreement.
You understand that as a consequence of your signing this
agreement you are giving up, with respect to your employment and the
termination of that employment, any and all rights you might otherwise have
under (1) the Age Discrimination in Employment Act of 1967, as amended; (2) all
other federal, state or municipal laws prohibiting discrimination in employment
on the basis of sex, race, national origin, religion, age, handicap or other
invidious factor; and (3) any and all theories of contract or tort law, whether
based on common law or otherwise. You acknowledge and agree that: (1) the
Company advised you in writing to consult with an attorney prior to signing
this agreement; (2) you were given a period of at least 21 days within which to
consider this agreement; and (3) the Company has advised you of your statutory
right to revoke your acceptance of this agreement at any time within seven (7)
days of you signing of this agreement. In the event you decide to exercise your
right to revoke within seven (7) days of your acceptance of this agreement, you
warrant and represent that you will do the following: (1) notify the Company in
writing of your intent to revoke the agreement, and (2) simultaneously return
in full any
3
Mr. James J. Mitchell
August 28, 1997
Page -3-
consideration previously received from the Company under this agreement (with
no further consideration being payable by the Company to you pursuant to the
terms hereof).
Upon your execution of this agreement, it will be binding
upon you and the Company and your and the Company's respective successors and
assigns; provided, however, that you shall not assign any of your rights
hereunder without the Company's prior written consent. This letter agreement
shall be construed and enforced according to the laws of the State of Tennessee
(irrespective of its conflicts of law provisions). In the event that any
provision of this letter agreement shall be invalid and legally unenforceable,
such provision shall not affect in any respect the validity and enforceability
of the remainder of this letter agreement.
The Company shall have the right to deduct from all amounts
payable hereunder all federal, state, local and other taxes required by law to
be withheld with respect to such payments. The Company also shall have the
right to set-off against amounts payable hereunder cash advances previously
made to you in the amount of $1,957.08 with respect to travel which you did not
ultimately undertake.
This letter agreement embodies the entire agreement and
understanding between you and the Company with respect to the subject matter
hereof and supersedes all prior agreements and understandings relating to the
subject matter hereof. By execution of this letter agreement, you certify that
you have read and fully understand the meaning and intent of its terms and have
had the opportunity to review it with legal counsel. You agree that you have
entered into this agreement voluntarily and knowingly, without coercion and
with full knowledge of the nature and consequences of signing it.
If the foregoing is acceptable to you, please sign the
enclosed copy of this letter and return it to me.
Very truly yours,
/s/ Richard D. Ennen
--------------------
Richard D. Ennen
Chairman
Accepted:
/s/ James J. Mitchell
- ---------------------
James J. Mitchell
4
EXHIBIT A
NON-COMPETITION AND CONFIDENTIALITY AGREEMENT
THIS NON-COMPETITION AND CONFIDENTIALITY AGREEMENT ("Agreement") is
made as of January 27, 1994, by James J. Mitchell ("Employee") in favor of NN
Ball & Roller, Inc., a Delaware corporation (the "Company").
WITNESSETH
WHEREAS, the Company manufactures and supplies precision
steel balls and rollers to anti-friction bearing manufacturers, automotive
original equipment manufacturers and the automotive aftermarket, the gas and
mining industries, producers of drilling bits for oil, gas, and water wells and
producers of stainless steel valves and pumps (the "Business"), and its
customers are located in more than 25 different countries;
WHEREAS, Employee is an employee "at will" with the Company
and currently holds a management or executive position with the Company;
WHEREAS, the Company is requiring that the Employee, as a
condition to and in consideration of his continued employment, enter into this
Agreement; and
WHEREAS, the Employee desires to enter into this Agreement in
order to maintain his employment with the Company.
NOW, THEREFORE, in consideration of the foregoing premises, the
continued employment of the Employee and other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the Employee
hereby agrees with the Company as follows:
1. TERM. For purposes of this Agreement, the "Term" shall mean the
period commencing on the date hereof and continuing through the second
anniversary of the date of the Employee's termination of employment with the
Company for any reason.
2. COVENANT NOT TO COMPETE.
2.1 EMPLOYEE'S KNOWLEDGE. Employee acknowledges and agrees that he
occupies a position of trust and confidence with Company and, in the course of
his engagement with the Company, has become and will continue to become
familiar with proprietary and
5
confidential information concerning the Company. Employee acknowledges and
agrees that his services are of a special, unique and extraordinary value to
the Company and that the Company would be irreparably damaged if Employee were
to provide similar services to any person or entity in violation of the
provisions of this Agreement.
2.2 NON-COMPETE. Employee hereby agrees that, during the Term, he
shall not, directly or indirectly, as employee, agent, consultant, stockholder,
director, co-partner or in any other individual or representative capacity,
own, operate, manage, control, engage in, invest in or participate in any
manner in, act as a consultant or advisor to, render services for (alone or in
association with any person, firm, corporation or entity), or otherwise assist
any person or entity that engages in or owns, invests in, operates, manages or
controls any venture or enterprise that competes in the Business anywhere in
the world (the "Territory"); provided, however, that nothing contained herein
shall be construed to prevent Employee from investing in the stock of any
competing corporation listed on a national securities exchange or traded in the
over-the-counter market, but only if Employee is not involved in the business
of said corporation and if Employee does not own more than an aggregate of two
(2%) percent of the stock of such corporation.
2.3 NON-SOLICITATION. Without limiting the generality of the
provisions of Section 2.2 above, Employee hereby agrees that during the Term he
will not, directly or indirectly, solicit (or participate as employee, agent,
consultant, stockholder, director, partner or in any other individual or
representative capacity in any business which solicits), business from any
person, firm, corporation or other entity that is a customer of the Company at
the time of such solicitation, or from any successor in interest to any such
person, firm, corporation or other entity, for the purpose of securing business
or contracts relating to the Business.
2.4 INTERFERENCE WITH RELATIONSHIPS. During the Term, Employee shall
not, directly or indirectly, as employee, agent, consultant, stockholder,
director, co-partner or in any other individual or representative capacity: (a)
employ or engage, or solicit for employment or engagement, any person employed
or engaged by the Company, or otherwise seek to influence or alter any such
person's relationship with the Company, or (b) solicit or encourage any
customer of the Company to terminate or otherwise alter his, her or its
relationship with the Company.
6
-7-
3. CONFIDENTIAL INFORMATION. (a) During the Term and at all times
thereafter, Employee shall keep secret and retain in strictest confidence, and
shall not, without the prior written consent of the Company, furnish, make
available or disclose to any third party or use for the benefit of himself or
any third party, any "Confidential Information." As used in this Agreement,
Confidential Information shall mean any information held in confidence by the
Company and not freely available to the public which gives the Company an
advantage over competitors in the Business, including, without limitation,
sales or earnings figures, personnel matters, supplier and customer data and
information relating to the Company's manufacturing processes, equipment and
customer servicing methods; provided, however, that Confidential Information
shall not include any information which otherwise is in the public domain or
becomes known in the ball and roller industry through no wrongful act on the
part of Employee. Employee acknowledges that the Confidential Information is
vital, sensitive, confidential and proprietary to the Company.
(b) Employee hereby represents and warrants to the Company
that at all times prior to the date hereof he has kept secret and retained in
strictest confidence, and has not furnished, made available or disclosed to any
third party or used for the benefit of himself or any third party, any
Confidential Information.
4. JUDICIAL MODIFICATION. If any court of competent jurisdiction shall
at any time deem the Term or any covenant contained herein too lengthy, or the
Territory too extensive, the other provisions of this Agreement shall
nevertheless stand, the Term shall be deemed to be the longest period
permissible by law under the circumstances and the Territory shall be deemed to
comprise the largest territory permissible by law under the circumstances. The
court in each case shall reduce the time period and/or Territory to permissible
duration or size.
5. REMEDIES. Employee acknowledges and agrees that the covenants set
forth in the Agreement are reasonable and necessary for the protection of the
Company's business interests, that irreparable injury will result to the
Company if Employee breaches any of the terms of said covenants, and that in
the event of Employee's actual or threatened breach of any such covenant, the
Company will have no adequate remedy at law. Employee accordingly agrees that
in the event of any actual or threatened breach by him of any of the covenants
contained herein, the Company shall be entitled to immediate temporary
injunctive and other equitable relief, without bond and without
7
the necessity of showing actual monetary damages, subject to hearing as soon
thereafter as possible. Nothing contained herein shall be construed as
prohibiting the Company from pursuing any other remedies available to it for
such breach or threatened breach, including the recovery of any damages which
it is able to prove.
6. CONDITION OF EMPLOYMENT. The Company shall have no obligation to
retain the Employee in its employ as a result of this Agreement, there shall be
no inference as to the length of employment implied hereby, and the Company
reserves the same rights to terminate the employment of the Employee as existed
prior to the date hereof.
7. MISCELLANEOUS. This Agreement sets forth the entire agreement and
understanding of the parties hereto with respect to the subject matter hereof
and supersedes any other agreements between the parties, written or oral,
relating to the subject matter hereof. No amendment or modification of this
Agreement and no waiver by any party of the breach of any covenant contained
herein shall be binding unless executed in writing by the party against whom
enforcement of such amendment, modification or waiver is sought. This Agreement
may be executed in two or more counterparts, each of which shall be deemed an
original without production of the others. This Agreement shall be governed by
and construed in accordance with the laws of the State of Tennessee, without
regard to its choice of law provisions. In the event any provision or portion
of any provision of this Agreement is held invalid or unenforceable by a court
of competent jurisdiction as applied to any fact or circumstance, the remaining
provisions and portions of this Agreement and the same provision as applied to
any other fact or circumstance shall not be affected or impaired thereby, and
shall remain valid and enforceable. The terms "he", "his" and "him" are used
herein generically for convenience only, and may, as appropriate, be considered
to represent the terms "she", "hers" and "her".
IN WITNESS WHEREOF, the Employee has caused this agreement to be duly
executed in favor of the Company on the day and year first above written.
By: /s/ James J. Mitchell
---------------------
Employee
ACKNOWLEDGED
NN BALL & ROLLER, INC.
By: /s/ Leonard Bowman
------------------
5
1,000
9-MOS
DEC-31-1997
JUL-01-1997
SEP-30-1997
1,875
0
12,362
240
10,788
26,574
36,143
3,164
62,819
7,994
0
0
0
149
52,468
62,819
58,514
58,514
40,531
47,746
0
240
21
10,747
4,077
6,670
0
0
0
6,670
0.45
0.45
