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☒
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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☐
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
|
|
Delaware
|
|
62-1096725
|
(State or other jurisdiction of
incorporation or organization)
|
|
(I.R.S. Employer
Identification Number)
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Large accelerated filer
|
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☐
|
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Accelerated filer
|
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☒
|
|
|
|
|
|||
Non-accelerated filer
|
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☐ (Do not check if a smaller reporting company)
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|
Smaller reporting company
|
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☐
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|
|
|
|||
|
|
|
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Emerging growth company
|
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☐
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Item 1.
|
||
|
|
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Item 2.
|
||
|
|
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Item 3.
|
||
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|
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Item 4.
|
||
|
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Item 1.
|
||
|
|
|
Item 1A.
|
||
Item 2.
|
||
Item 3.
|
||
Item 4.
|
||
Item 5.
|
||
Item 6.
|
||
Item 1.
|
Financial Statements
|
|
|
Three Months Ended
March 31, |
||||||
|
|
2019
|
|
2018
|
||||
Net sales
|
|
$
|
213,256
|
|
|
$
|
169,148
|
|
Cost of sales (exclusive of depreciation and amortization shown separately below)
|
|
161,269
|
|
|
126,444
|
|
||
Selling, general and administrative expense
|
|
28,125
|
|
|
22,177
|
|
||
Acquisition related costs excluded from selling, general and administrative expense
|
|
—
|
|
|
1,776
|
|
||
Depreciation and amortization
|
|
23,425
|
|
|
14,281
|
|
||
Restructuring and integration expense
|
|
(12
|
)
|
|
755
|
|
||
Other operating (income) expense, net
|
|
(152
|
)
|
|
22
|
|
||
Income from operations
|
|
601
|
|
|
3,693
|
|
||
Interest expense
|
|
13,801
|
|
|
11,996
|
|
||
Loss on extinguishment of debt and write-off of debt issuance costs
|
|
2,699
|
|
|
—
|
|
||
Other (income) expense, net
|
|
729
|
|
|
(313
|
)
|
||
Loss before (provision) benefit for income taxes and share of net income from joint venture
|
|
(16,628
|
)
|
|
(7,990
|
)
|
||
(Provision) benefit for income taxes
|
|
(2,241
|
)
|
|
1,176
|
|
||
Share of net income from joint venture
|
|
269
|
|
|
831
|
|
||
Net loss
|
|
$
|
(18,600
|
)
|
|
$
|
(5,983
|
)
|
Other comprehensive income (loss):
|
|
|
|
|
||||
Change in fair value of interest rate swap, net of tax
|
|
(3,856
|
)
|
|
—
|
|
||
Foreign currency translation gain
|
|
1,262
|
|
|
5,465
|
|
||
Other comprehensive income (loss)
|
|
$
|
(2,594
|
)
|
|
$
|
5,465
|
|
Comprehensive loss
|
|
$
|
(21,194
|
)
|
|
$
|
(518
|
)
|
Basic net loss per share
|
|
|
|
|
||||
Net loss per share
|
|
$
|
(0.44
|
)
|
|
$
|
(0.22
|
)
|
Weighted average shares outstanding
|
|
41,972
|
|
|
27,597
|
|
||
Diluted net loss per share
|
|
|
|
|
||||
Net loss per share
|
|
$
|
(0.44
|
)
|
|
$
|
(0.22
|
)
|
Weighted average shares outstanding
|
|
41,972
|
|
|
27,597
|
|
|
|
March 31, 2019
|
|
December 31, 2018
|
||||
Assets
|
|
|
|
|
||||
Current assets:
|
|
|
|
|
||||
Cash and cash equivalents
|
|
$
|
20,269
|
|
|
$
|
17,988
|
|
Accounts receivable, net
|
|
147,131
|
|
|
133,421
|
|
||
Inventories
|
|
128,922
|
|
|
122,615
|
|
||
Income tax receivable
|
|
653
|
|
|
946
|
|
||
Other current assets
|
|
17,475
|
|
|
21,901
|
|
||
Total current assets
|
|
314,450
|
|
|
296,871
|
|
||
Property, plant and equipment, net
|
|
352,923
|
|
|
361,028
|
|
||
Finance lease right-of-use assets
|
|
12,886
|
|
|
—
|
|
||
Operating lease right-of-use assets
|
|
68,458
|
|
|
—
|
|
||
Goodwill
|
|
440,169
|
|
|
439,452
|
|
||
Intangible assets, net
|
|
363,608
|
|
|
376,248
|
|
||
Investment in joint venture
|
|
21,087
|
|
|
20,364
|
|
||
Other non-current assets
|
|
7,412
|
|
|
7,607
|
|
||
Total assets
|
|
$
|
1,580,993
|
|
|
$
|
1,501,570
|
|
Liabilities and Stockholders’ Equity
|
|
|
|
|
||||
Current liabilities:
|
|
|
|
|
||||
Accounts payable
|
|
$
|
74,348
|
|
|
$
|
65,694
|
|
Accrued salaries, wages and benefits
|
|
27,990
|
|
|
24,636
|
|
||
Current maturities of long-term debt
|
|
33,444
|
|
|
31,280
|
|
||
Current portion of operating lease liability
|
|
7,630
|
|
|
—
|
|
||
Other current liabilities
|
|
21,700
|
|
|
23,420
|
|
||
Total current liabilities
|
|
165,112
|
|
|
145,030
|
|
||
Deferred tax liabilities
|
|
87,993
|
|
|
93,482
|
|
||
Non-current income tax payable
|
|
3,875
|
|
|
3,875
|
|
||
Long-term debt, net of current portion
|
|
826,274
|
|
|
811,471
|
|
||
Operating lease liability, net of current portion
|
|
66,975
|
|
|
—
|
|
||
Other non-current liabilities
|
|
35,855
|
|
|
29,417
|
|
||
Total liabilities
|
|
1,186,084
|
|
|
1,083,275
|
|
||
Commitments and contingencies (Note 12)
|
|
|
|
|
||||
Stockholders’ equity:
|
|
|
|
|
||||
Common stock - $0.01 par value, authorized 45,000 shares, 42,367 and 42,104 shares issued and outstanding at March 31, 2019 and December 31, 2018, respectively
|
|
424
|
|
|
421
|
|
||
Additional paid-in capital
|
|
512,274
|
|
|
511,545
|
|
||
Retained deficit
|
|
(83,570
|
)
|
|
(62,046
|
)
|
||
Accumulated other comprehensive loss
|
|
(34,219
|
)
|
|
(31,625
|
)
|
||
Total stockholders’ equity
|
|
394,909
|
|
|
418,295
|
|
||
Total liabilities and stockholders’ equity
|
|
$
|
1,580,993
|
|
|
$
|
1,501,570
|
|
|
|
Common Stock
|
|
|
|
|
|
|
|
|
|||||||||||||
|
|
Number
of shares |
|
Par
value |
|
Additional
paid in capital |
|
Retained
deficit |
|
Accumulated other comprehensive loss
|
|
Total
|
|||||||||||
Balance, December 31, 2018
|
|
42,104
|
|
|
$
|
421
|
|
|
$
|
511,545
|
|
|
$
|
(62,046
|
)
|
|
$
|
(31,625
|
)
|
|
$
|
418,295
|
|
Net loss
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(18,600
|
)
|
|
—
|
|
|
(18,600
|
)
|
|||||
Cash dividends declared
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(2,942
|
)
|
|
—
|
|
|
(2,942
|
)
|
|||||
Share-based compensation expense
|
|
281
|
|
|
3
|
|
|
870
|
|
|
—
|
|
|
—
|
|
|
873
|
|
|||||
Restricted shares forgiven for taxes and forfeited
|
|
(18
|
)
|
|
—
|
|
|
(141
|
)
|
|
—
|
|
|
—
|
|
|
(141
|
)
|
|||||
Change in fair value of interest rate swap, net of tax of $1,104
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(3,856
|
)
|
|
(3,856
|
)
|
|||||
Foreign currency translation gain
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,262
|
|
|
1,262
|
|
|||||
Adoption of new accounting standard (Note 1)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
18
|
|
|
—
|
|
|
18
|
|
|||||
Balance, March 31, 2019
|
|
42,367
|
|
|
$
|
424
|
|
|
$
|
512,274
|
|
|
$
|
(83,570
|
)
|
|
$
|
(34,219
|
)
|
|
$
|
394,909
|
|
|
|
Common Stock
|
|
|
|
|
|
|
|
|
|||||||||||||
|
|
Number
of shares |
|
Par
value |
|
Additional
paid in capital |
|
Retained
earnings |
|
Accumulated other comprehensive loss
|
|
Total
|
|||||||||||
Balance, December 31, 2017
|
|
27,572
|
|
|
$
|
275
|
|
|
$
|
292,494
|
|
|
$
|
211,080
|
|
|
$
|
(17,745
|
)
|
|
$
|
486,104
|
|
Net loss
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(5,983
|
)
|
|
—
|
|
|
(5,983
|
)
|
|||||
Cash dividends declared
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,955
|
)
|
|
—
|
|
|
(1,955
|
)
|
|||||
Share-based compensation expense
|
|
87
|
|
|
1
|
|
|
1,255
|
|
|
—
|
|
|
—
|
|
|
1,256
|
|
|||||
Shares issued for option exercises
|
|
23
|
|
|
—
|
|
|
242
|
|
|
—
|
|
|
—
|
|
|
242
|
|
|||||
Restricted shares and performance shares forgiven for taxes and forfeited
|
|
(16
|
)
|
|
—
|
|
|
(287
|
)
|
|
—
|
|
|
—
|
|
|
(287
|
)
|
|||||
Foreign currency translation gain
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
5,465
|
|
|
5,465
|
|
|||||
Adoption of new accounting standard
|
|
—
|
|
|
—
|
|
|
—
|
|
|
17
|
|
|
—
|
|
|
17
|
|
|||||
Balance, March 31, 2018
|
|
27,666
|
|
|
$
|
276
|
|
|
$
|
293,704
|
|
|
$
|
203,159
|
|
|
$
|
(12,280
|
)
|
|
$
|
484,859
|
|
|
|
Three Months Ended
March 31, |
||||||
|
|
2019
|
|
2018
|
||||
Cash flows from operating activities
|
|
|
|
|
||||
Net loss
|
|
$
|
(18,600
|
)
|
|
$
|
(5,983
|
)
|
Adjustments to reconcile net loss to net cash provided by (used by) operating activities:
|
|
|
|
|
||||
Depreciation and amortization
|
|
23,425
|
|
|
14,281
|
|
||
Amortization of debt issuance costs
|
|
1,191
|
|
|
1,088
|
|
||
Loss on extinguishment of debt and write-off of debt issuance costs
|
|
2,699
|
|
|
—
|
|
||
Share of net income from joint venture, net of cash dividends received
|
|
(269
|
)
|
|
(831
|
)
|
||
Compensation expense from issuance of share-based awards
|
|
873
|
|
|
1,256
|
|
||
Deferred income taxes
|
|
(4,373
|
)
|
|
—
|
|
||
Other
|
|
182
|
|
|
347
|
|
||
Changes in operating assets and liabilities, net of acquisitions:
|
|
|
|
|
||||
Accounts receivable
|
|
(13,963
|
)
|
|
(9,433
|
)
|
||
Inventories
|
|
(6,302
|
)
|
|
(7,791
|
)
|
||
Accounts payable
|
|
7,236
|
|
|
(296
|
)
|
||
Income taxes receivable and payable, net
|
|
248
|
|
|
(613
|
)
|
||
Other
|
|
4,941
|
|
|
7,001
|
|
||
Net cash used by operating activities
|
|
(2,712
|
)
|
|
(974
|
)
|
||
Cash flows from investing activities
|
|
|
|
|
||||
Acquisition of property, plant and equipment
|
|
(14,073
|
)
|
|
(11,860
|
)
|
||
Proceeds from liquidation of short-term investment
|
|
8,000
|
|
|
—
|
|
||
Cash paid to acquire businesses, net of cash received
|
|
—
|
|
|
(14,676
|
)
|
||
Cash paid for earnest money for Paragon Medical acquisition
|
|
—
|
|
|
(6,000
|
)
|
||
Other
|
|
2,394
|
|
|
(282
|
)
|
||
Net cash used by investing activities
|
|
(3,679
|
)
|
|
(32,818
|
)
|
||
Cash flows from financing activities
|
|
|
|
|
||||
Cash paid for debt issuance or prepayment costs
|
|
(738
|
)
|
|
—
|
|
||
Dividends paid
|
|
(2,947
|
)
|
|
(1,931
|
)
|
||
Proceeds from long-term debt
|
|
19,025
|
|
|
10,000
|
|
||
Repayment of long-term debt
|
|
(7,522
|
)
|
|
(13,000
|
)
|
||
Proceeds from (repayments of) short-term debt, net
|
|
1,982
|
|
|
(52
|
)
|
||
Other
|
|
(924
|
)
|
|
(1,278
|
)
|
||
Net cash provided by (used by) financing activities
|
|
8,876
|
|
|
(6,261
|
)
|
||
Effect of exchange rate changes on cash flows
|
|
(204
|
)
|
|
562
|
|
||
Net change in cash and cash equivalents
|
|
2,281
|
|
|
(39,491
|
)
|
||
Cash and cash equivalents at beginning of period
|
|
17,988
|
|
|
224,446
|
|
||
Cash and cash equivalents at end of period
|
|
$
|
20,269
|
|
|
$
|
184,955
|
|
Supplemental schedule of non-cash operating, investing and financing activities
|
|
|
|
|
||||
Non-cash additions to property, plant and equipment
|
|
$
|
4,071
|
|
|
$
|
2,992
|
|
|
|
Three Months Ended
March 31, 2018
|
||
Pro forma net sales
|
|
$
|
209,830
|
|
Pro forma net loss
|
|
$
|
(8,077
|
)
|
Basic net loss per share
|
|
$
|
(0.29
|
)
|
Diluted net loss per share
|
|
$
|
(0.29
|
)
|
|
|
Mobile
Solutions
|
|
Power
Solutions
|
|
Life
Sciences
|
|
Corporate
and
Consolidations
|
|
|
|
Total
|
||||||||||
Three Months Ended March 31, 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Net sales
|
|
$
|
78,075
|
|
|
$
|
49,657
|
|
|
$
|
86,008
|
|
|
$
|
(484
|
)
|
|
(a)
|
|
$
|
213,256
|
|
Income (loss) from operations
|
|
$
|
4,107
|
|
|
$
|
3,824
|
|
|
$
|
3,846
|
|
|
$
|
(11,176
|
)
|
|
|
|
$
|
601
|
|
Interest expense
|
|
|
|
|
|
|
|
|
|
|
|
(13,801
|
)
|
|||||||||
Other
|
|
|
|
|
|
|
|
|
|
|
|
(3,428
|
)
|
|||||||||
Loss before provision for income taxes and share of net income from joint venture
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(16,628
|
)
|
||||||||
Three Months Ended March 31, 2018
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Net sales
|
|
$
|
89,794
|
|
|
$
|
48,682
|
|
|
$
|
31,200
|
|
|
$
|
(528
|
)
|
|
(a)
|
|
$
|
169,148
|
|
Income (loss) from operations
|
|
$
|
9,785
|
|
|
$
|
5,233
|
|
|
$
|
4,204
|
|
|
$
|
(15,529
|
)
|
|
|
|
$
|
3,693
|
|
Interest expense
|
|
|
|
|
|
|
|
|
|
|
|
(11,996
|
)
|
|||||||||
Other
|
|
|
|
|
|
|
|
|
|
|
|
313
|
|
|||||||||
Loss before benefit for income taxes and share of net income from joint venture
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(7,990
|
)
|
(a)
|
Includes elimination of intersegment transactions occurring during the ordinary course of business.
|
|
|
Total Assets as of
|
||||||
|
|
March 31, 2019
|
|
December 31, 2018
|
||||
Mobile Solutions
|
|
$
|
392,100
|
|
|
$
|
356,387
|
|
Power Solutions
|
|
311,771
|
|
|
297,947
|
|
||
Life Sciences
|
|
824,891
|
|
|
802,770
|
|
||
Corporate and Consolidations
|
|
52,231
|
|
|
44,466
|
|
||
Total
|
|
$
|
1,580,993
|
|
|
$
|
1,501,570
|
|
|
|
March 31, 2019
|
|
December 31, 2018
|
||||
Raw materials
|
|
$
|
55,286
|
|
|
$
|
52,930
|
|
Work in process
|
|
47,372
|
|
|
42,578
|
|
||
Finished goods
|
|
26,264
|
|
|
27,107
|
|
||
Total inventories
|
|
$
|
128,922
|
|
|
$
|
122,615
|
|
|
|
Mobile
Solutions
|
|
Power
Solutions
|
|
Life
Sciences
|
|
Total
|
||||||||
Balance as of December 31, 2018
|
|
$
|
—
|
|
|
$
|
94,505
|
|
|
$
|
344,947
|
|
|
$
|
439,452
|
|
Currency impacts
|
|
—
|
|
|
198
|
|
|
519
|
|
|
717
|
|
||||
Balance as of March 31, 2019
|
|
$
|
—
|
|
|
$
|
94,703
|
|
|
$
|
345,466
|
|
|
$
|
440,169
|
|
|
|
Mobile
Solutions
|
|
Power
Solutions
|
|
Life
Sciences
|
|
Total
|
||||||||
Balance as of December 31, 2018
|
|
$
|
35,892
|
|
|
$
|
95,991
|
|
|
$
|
244,365
|
|
|
$
|
376,248
|
|
Amortization
|
|
(885
|
)
|
|
(2,748
|
)
|
|
(9,017
|
)
|
|
(12,650
|
)
|
||||
Other
|
|
2
|
|
|
—
|
|
|
8
|
|
|
10
|
|
||||
Balance as of March 31, 2019
|
|
$
|
35,009
|
|
|
$
|
93,243
|
|
|
$
|
235,356
|
|
|
$
|
363,608
|
|
Balance as of December 31, 2018
|
$
|
20,364
|
|
Share of earnings
|
269
|
|
|
Foreign currency translation gain
|
454
|
|
|
Balance as of March 31, 2019
|
$
|
21,087
|
|
|
|
March 31, 2019
|
|
December 31, 2018
|
||||
Senior Secured Term Loan
|
|
$
|
530,625
|
|
|
$
|
532,063
|
|
Incremental Term Loan
|
|
276,000
|
|
|
279,000
|
|
||
Senior Secured Revolver
|
|
56,184
|
|
|
38,720
|
|
||
International lines of credit and other loans
|
|
10,601
|
|
|
9,810
|
|
||
Total principal
|
|
873,410
|
|
|
859,593
|
|
||
Less
—
current maturities of long-term debt
|
|
33,444
|
|
|
31,280
|
|
||
Principal, net of current portion
|
|
839,966
|
|
|
828,313
|
|
||
Less
—
unamortized debt issuance costs
|
|
13,692
|
|
|
16,842
|
|
||
Long-term debt, net of current portion
|
|
$
|
826,274
|
|
|
$
|
811,471
|
|
•
|
Equipment used in the manufacturing process as well as office equipment with terms between
thirteen months
and
five years
.
|
•
|
Manufacturing plants and office facilities with terms between
thirteen months
and
25 years
.
|
|
|
Financial Statement Line Item
|
|
Three Months Ended
March 31, 2019
|
||
Lease cost:
|
|
|
|
|
||
Finance lease cost
|
|
|
|
|
||
Amortization of right-of-use assets
|
|
Depreciation and amortization
|
|
$
|
322
|
|
Interest expense
|
|
Interest expense
|
|
53
|
|
|
Operating lease cost
|
|
Cost of sales and selling, general and administrative expense
|
|
3,434
|
|
|
Short-term lease cost
(1)
|
|
Cost of sales and selling, general and administrative expense
|
|
107
|
|
|
Total lease cost
|
|
|
|
$
|
3,916
|
|
|
|
Financial Statement Line Item
|
|
March 31, 2019
|
||
Lease assets and liabilities:
|
|
|
|
|
||
Assets
|
|
|
|
|
||
Operating lease assets
|
|
Operating lease right-of-use assets
|
|
$
|
68,458
|
|
Finance lease asset
|
|
Finance lease right-of-use assets
|
|
12,886
|
|
|
Total lease assets
|
|
|
|
$
|
81,344
|
|
|
|
|
|
|
||
Liabilities
|
|
|
|
|
||
Current liabilities
|
|
|
|
|
||
Operating lease liabilities
|
|
Current portion of operating lease liability
|
|
$
|
7,630
|
|
Finance lease liabilities
|
|
Other current liabilities
|
|
2,401
|
|
|
Non-current liabilities
|
|
|
|
|
||
Operating lease liabilities
|
|
Operating lease liability, net of current portion
|
|
66,975
|
|
|
Finance lease liabilities
|
|
Other non-current liabilities
|
|
6,150
|
|
|
Total lease liabilities
|
|
|
|
$
|
83,156
|
|
Supplemental Cash Flows Information
|
|
Three Months Ended
March 31, 2019
|
||
Cash paid for amounts included in the measurement of lease liabilities
|
|
|
||
Operating cash flows from finance leases
|
|
$
|
53
|
|
Operating cash flows from operating leases
|
|
5,288
|
|
|
Financing cash flows from finance leases
|
|
792
|
|
|
Right-of-use assets obtained in exchange for new operating lease liabilities
|
|
$
|
2,836
|
|
|
|
Weighted-Average Remaining Lease Term (years)
|
|
Weighted-Average Discount Rate
|
|
Finance leases
|
|
4.1
|
|
2.4
|
%
|
Operating leases
|
|
10.5
|
|
8.5
|
%
|
|
|
Operating Leases
|
|
Finance Leases
|
||||
2019
(1)
|
|
$
|
10,104
|
|
|
$
|
2,190
|
|
2020
|
|
11,979
|
|
|
2,033
|
|
||
2021
|
|
11,118
|
|
|
2,020
|
|
||
2022
|
|
10,812
|
|
|
1,853
|
|
||
2023
|
|
9,264
|
|
|
962
|
|
||
Thereafter
|
|
59,946
|
|
|
17
|
|
||
Total future minimum lease payments
|
|
113,223
|
|
|
9,075
|
|
||
Less: imputed interest
|
|
38,618
|
|
|
524
|
|
||
Total lease liabilities
|
|
$
|
74,605
|
|
|
$
|
8,551
|
|
(1)
|
For the period from April 1,
2019
to December 31,
2019
.
|
Year Ending December 31,
|
|
|
||
2019
|
|
$
|
13,337
|
|
2020
|
|
11,515
|
|
|
2021
|
|
10,557
|
|
|
2022
|
|
10,293
|
|
|
2023
|
|
8,752
|
|
|
Thereafter
|
|
53,945
|
|
|
Total minimum payments
|
|
$
|
108,399
|
|
|
|
Three Months Ended March 31, 2019
|
||||||||||||||||||
|
|
Mobile
Solutions |
|
Power
Solutions |
|
Life
Sciences |
|
Corporate and
Consolidations |
|
Total
|
||||||||||
Severance and other employee costs
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Site closure and other associated costs
|
|
(12
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(12
|
)
|
|||||
Total
|
|
$
|
(12
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(12
|
)
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
|
Three Months Ended March 31, 2018
|
||||||||||||||||||
|
|
Mobile
Solutions |
|
Power
Solutions |
|
Life
Sciences |
|
Corporate and
Consolidations |
|
Total
|
||||||||||
Severance and other employee costs
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
728
|
|
|
$
|
728
|
|
Site closure and other associated costs
|
|
27
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
27
|
|
|||||
Total
|
|
$
|
27
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
728
|
|
|
$
|
755
|
|
|
|
Reserve
Balance as of December 31, 2018 |
|
Charges
|
|
Non-cash
Adjustments
|
|
Cash
Reductions
|
|
Reserve
Balance as of March 31, 2019 |
||||||||||
Severance and other employee costs
|
|
$
|
1,122
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(274
|
)
|
|
$
|
848
|
|
Site closure and other associated costs
|
|
24
|
|
|
(12
|
)
|
|
—
|
|
|
(12
|
)
|
|
—
|
|
|||||
Total
|
|
$
|
1,146
|
|
|
$
|
(12
|
)
|
|
$
|
—
|
|
|
$
|
(286
|
)
|
|
$
|
848
|
|
|
|
Three Months Ended March 31, 2019
|
||||||||||||||||||
|
|
Mobile
Solutions |
|
Power
Solutions |
|
Life
Sciences |
|
Intersegment
Sales Eliminations |
|
Total
|
||||||||||
United States
|
|
$
|
44,457
|
|
|
$
|
41,115
|
|
|
$
|
68,343
|
|
|
$
|
(484
|
)
|
|
$
|
153,431
|
|
China
|
|
9,153
|
|
|
1,838
|
|
|
1,692
|
|
|
—
|
|
|
12,683
|
|
|||||
Mexico
|
|
5,378
|
|
|
2,709
|
|
|
127
|
|
|
—
|
|
|
8,214
|
|
|||||
Brazil
|
|
8,382
|
|
|
69
|
|
|
—
|
|
|
—
|
|
|
8,451
|
|
|||||
Germany
|
|
1,406
|
|
|
16
|
|
|
8,885
|
|
|
—
|
|
|
10,307
|
|
|||||
Switzerland
|
|
1,359
|
|
|
16
|
|
|
3,265
|
|
|
—
|
|
|
4,640
|
|
|||||
Poland
|
|
1,913
|
|
|
4
|
|
|
6
|
|
|
—
|
|
|
1,923
|
|
|||||
Italy
|
|
1,856
|
|
|
63
|
|
|
421
|
|
|
—
|
|
|
2,340
|
|
|||||
Czech Republic
|
|
1,509
|
|
|
188
|
|
|
—
|
|
|
—
|
|
|
1,697
|
|
|||||
France
|
|
44
|
|
|
—
|
|
|
1,225
|
|
|
—
|
|
|
1,269
|
|
|||||
Africa
|
|
—
|
|
|
1,156
|
|
|
—
|
|
|
—
|
|
|
1,156
|
|
|||||
Other
|
|
2,618
|
|
|
2,483
|
|
|
2,044
|
|
|
—
|
|
|
7,145
|
|
|||||
Total net sales
|
|
$
|
78,075
|
|
|
$
|
49,657
|
|
|
$
|
86,008
|
|
|
$
|
(484
|
)
|
|
$
|
213,256
|
|
|
|
Three Months Ended March 31, 2018
|
||||||||||||||||||
|
|
Mobile
Solutions
|
|
Power
Solutions
|
|
Life
Sciences
|
|
Intersegment
Sales
Eliminations
|
|
Total
|
||||||||||
United States
|
|
$
|
49,655
|
|
|
$
|
40,128
|
|
|
$
|
30,553
|
|
|
$
|
(528
|
)
|
|
$
|
119,808
|
|
China
|
|
11,581
|
|
|
1,485
|
|
|
126
|
|
|
—
|
|
|
13,192
|
|
|||||
Mexico
|
|
7,236
|
|
|
3,197
|
|
|
172
|
|
|
—
|
|
|
10,605
|
|
|||||
Brazil
|
|
9,885
|
|
|
50
|
|
|
—
|
|
|
—
|
|
|
9,935
|
|
|||||
Poland
|
|
2,052
|
|
|
14
|
|
|
—
|
|
|
—
|
|
|
2,066
|
|
|||||
Czech Republic
|
|
1,810
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,810
|
|
|||||
Italy
|
|
1,577
|
|
|
98
|
|
|
—
|
|
|
—
|
|
|
1,675
|
|
|||||
Germany
|
|
1,534
|
|
|
7
|
|
|
1
|
|
|
—
|
|
|
1,542
|
|
|||||
Switzerland
|
|
1,406
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,406
|
|
|||||
Netherlands
|
|
—
|
|
|
974
|
|
|
—
|
|
|
—
|
|
|
974
|
|
|||||
Other
|
|
3,058
|
|
|
2,729
|
|
|
348
|
|
|
—
|
|
|
6,135
|
|
|||||
Total net sales
|
|
$
|
89,794
|
|
|
$
|
48,682
|
|
|
$
|
31,200
|
|
|
$
|
(528
|
)
|
|
$
|
169,148
|
|
|
|
Deferred
Revenue
|
||
Balance at January 1, 2019
|
|
$
|
2,974
|
|
Balance at March 31, 2019
|
|
$
|
2,890
|
|
•
|
The performance obligation is part of a contract that has an original expected duration of one year or less.
|
|
|
Three Months Ended
March 31, |
||||||
|
|
2019
|
|
2018
|
||||
Stock options
|
|
$
|
192
|
|
|
$
|
205
|
|
Restricted stock
|
|
459
|
|
|
460
|
|
||
Performance share units
|
|
222
|
|
|
591
|
|
||
Share-based compensation expense
|
|
$
|
873
|
|
|
$
|
1,256
|
|
|
2019
|
|
Expected term
|
6 years
|
|
Risk free interest rate
|
2.47
|
%
|
Dividend yield
|
3.53
|
%
|
Expected volatility
|
49.53
|
%
|
Expected forfeiture rate
|
4.00
|
%
|
|
|
Number of Options
(in thousands)
|
|
Weighted-
Average
Exercise
Price
(per share)
|
|
Weighted-
Average
Remaining
Contractual
Term (years)
|
|
Aggregate
Intrinsic
Value
|
|
|
|||||
Outstanding at January 1, 2019
|
|
771
|
|
|
$
|
15.17
|
|
|
|
|
|
|
|
||
Granted
|
|
210
|
|
|
7.93
|
|
|
|
|
|
|
|
|||
Exercised
|
|
—
|
|
|
|
|
|
|
|
$
|
—
|
|
|
|
|
Forfeited or expired
|
|
(3
|
)
|
|
24.41
|
|
|
|
|
|
|
|
|||
Outstanding at March 31, 2019
|
|
978
|
|
|
$
|
13.58
|
|
|
6.3
|
|
$
|
—
|
|
|
(1)
|
Exercisable at March 31, 2019
|
|
701
|
|
|
$
|
14.27
|
|
|
5.0
|
|
$
|
—
|
|
|
(1)
|
(1)
|
The aggregate intrinsic value is the sum of intrinsic values for each exercisable individual option grant. The intrinsic value is the amount by which the closing market price of our stock at
March 31, 2019
, was greater than the exercise price of any individual option grant.
|
|
|
Nonvested
Restricted
Shares
(in thousands)
|
|
Weighted
Average
Grant-Date
Fair Value
(per share)
|
|||
Nonvested at January 1, 2019
|
|
146
|
|
|
$
|
22.07
|
|
Granted
|
|
281
|
|
|
$
|
7.93
|
|
Vested
|
|
(70
|
)
|
|
$
|
20.92
|
|
Forfeited
|
|
(18
|
)
|
|
$
|
18.98
|
|
Nonvested at March 31, 2019
|
|
339
|
|
|
$
|
10.74
|
|
TSR Awards:
|
|
Threshold Performance
(50% of Shares) |
|
Target Performance
(100% of Shares) |
|
Maximum Performance
(150% of Shares) |
|||
2019 grants
|
|
35th Percentile
|
|
50th Percentile
|
|
75th Percentile
|
|||
|
|
|
|
|
|
|
|||
ROIC Awards:
|
|
Threshold Performance
(35% of Shares) |
|
Target Performance
(100% of Shares) |
|
Maximum Performance
(150% of Shares) |
|||
2019 grants
(1)
|
|
4.7
|
%
|
|
5.8
|
%
|
|
7.0
|
%
|
(1)
|
For the ROIC Awards granted in 2019, the denominator of the calculation is different than in prior years, and therefore the target percentages are not comparable to historical target percentages.
|
|
|
TSR Awards
|
|
ROIC Awards
|
||||||||||
Award Year
|
|
Shares
(in thousands)
|
|
Grant Date
Fair Value
(per share)
|
|
Shares
(in thousands)
|
|
Grant Date Fair
Value (per share)
|
||||||
2019
|
|
136
|
|
|
$
|
9.28
|
|
|
174
|
|
|
$
|
7.93
|
|
|
|
Nonvested TSR Awards
|
|
Nonvested ROIC Awards
|
||||||||||
|
|
Shares
(in thousands)
|
|
Weighted
Average
Grant-Date
Fair Value
(per share)
|
|
Shares
(in thousands)
|
|
Weighted
Average
Grant-Date
Fair Value
(per share)
|
||||||
Nonvested at January 1, 2019
|
|
94
|
|
|
$
|
26.84
|
|
|
100
|
|
|
$
|
24.39
|
|
Granted
|
|
136
|
|
|
$
|
9.28
|
|
|
174
|
|
|
$
|
7.93
|
|
Forfeited
|
|
—
|
|
|
$
|
—
|
|
|
—
|
|
|
$
|
—
|
|
Nonvested at March 31, 2019
|
|
230
|
|
|
$
|
16.47
|
|
|
274
|
|
|
$
|
13.93
|
|
|
|
Three Months Ended
March 31, |
||||||
|
|
2019
|
|
2018
|
||||
Numerator:
|
|
|
|
|
||||
Net loss
|
|
$
|
(18,600
|
)
|
|
$
|
(5,983
|
)
|
Denominator:
|
|
|
|
|
||||
Weighted average shares outstanding
|
|
41,972
|
|
|
27,597
|
|
||
Effect of dilutive stock options
|
|
—
|
|
|
—
|
|
||
Diluted shares outstanding
|
|
41,972
|
|
|
27,597
|
|
||
Per common share net loss:
|
|
|
|
|
||||
Basic net loss per share
|
|
$
|
(0.44
|
)
|
|
$
|
(0.22
|
)
|
Diluted net loss per share
|
|
$
|
(0.44
|
)
|
|
$
|
(0.22
|
)
|
Cash dividends declared per share
|
|
$
|
0.07
|
|
|
$
|
0.07
|
|
|
|
Notional Amount
|
||
February 12, 2019 - December 30, 2020
|
|
$
|
700,000
|
|
December 31, 2020 - December 30, 2021
|
|
466,667
|
|
|
December 31, 2021 - October 19, 2022
|
|
233,333
|
|
|
|
Fair Value Measurements as of March 31, 2019
|
||||||||||
Description
|
|
Quoted Prices in Active Markets for Identical Assets
(Level 1)
|
|
Significant Other Observable Inputs
(Level 2)
|
|
Significant Unobservable Inputs
(Level 3)
|
||||||
Derivative liability - other current liabilities
|
|
$
|
—
|
|
|
$
|
543
|
|
|
$
|
—
|
|
Derivative liability - other non-current liabilities
|
|
—
|
|
|
4,417
|
|
|
—
|
|
|||
Total
|
|
$
|
—
|
|
|
$
|
4,960
|
|
|
$
|
—
|
|
Item 2.
|
Management’s Discussion and Analysis of Financial Condition and Results of Operations
|
|
|
Three Months Ended March 31,
|
|||||||||||||
|
|
2019
|
|
2018
|
|
$ Change
|
|||||||||
Net sales
|
|
$
|
213,256
|
|
|
$
|
169,148
|
|
|
$
|
44,108
|
|
|
||
Acquisitions
|
|
|
|
|
|
|
$
|
55,224
|
|
||||||
Volume
|
|
|
|
|
|
|
(7,999
|
)
|
|||||||
Foreign exchange effects
|
|
|
|
|
|
|
(2,820
|
)
|
|||||||
Price/mix/inflation/other
|
|
|
|
|
|
|
(297
|
)
|
|||||||
Cost of sales (exclusive of depreciation and amortization shown separately below)
|
|
161,269
|
|
|
126,444
|
|
|
34,825
|
|
|
|||||
Acquisitions
|
|
|
|
|
|
|
$
|
37,862
|
|
||||||
Volume
|
|
|
|
|
|
|
(4,300
|
)
|
|||||||
Foreign exchange effects
|
|
|
|
|
|
|
(2,346
|
)
|
|||||||
Cost reduction projects
|
|
|
|
|
|
|
(3,008
|
)
|
|||||||
Inflation
|
|
|
|
|
|
|
1,691
|
|
|||||||
Mix/other
|
|
|
|
|
|
|
4,926
|
|
|||||||
Selling, general and administrative expense
|
|
28,125
|
|
|
22,177
|
|
|
5,948
|
|
|
|||||
Acquisition related costs excluded from selling, general and administrative expense
|
|
—
|
|
|
1,776
|
|
|
(1,776
|
)
|
|
|||||
Depreciation and amortization
|
|
23,425
|
|
|
14,281
|
|
|
9,144
|
|
|
|||||
Other operating (income) expense, net
|
|
(152
|
)
|
|
22
|
|
|
(174
|
)
|
|
|||||
Restructuring and integration expense
|
|
(12
|
)
|
|
755
|
|
|
(767
|
)
|
|
|||||
Income from operations
|
|
601
|
|
|
3,693
|
|
|
(3,092
|
)
|
|
|||||
Interest expense
|
|
13,801
|
|
|
11,996
|
|
|
1,805
|
|
|
|||||
Loss on extinguishment of debt and write-off of debt issuance costs
|
|
2,699
|
|
|
—
|
|
|
2,699
|
|
|
|||||
Other (income) expense, net
|
|
729
|
|
|
(313
|
)
|
|
1,042
|
|
|
|||||
Loss before (provision) benefit for income taxes and share of net income from joint venture
|
|
(16,628
|
)
|
|
(7,990
|
)
|
|
(8,638
|
)
|
|
|||||
(Provision) benefit for income taxes
|
|
(2,241
|
)
|
|
1,176
|
|
|
(3,417
|
)
|
|
|||||
Share of net income from joint venture
|
|
269
|
|
|
831
|
|
|
(562
|
)
|
|
|||||
Net loss
|
|
$
|
(18,600
|
)
|
|
$
|
(5,983
|
)
|
|
$
|
(12,617
|
)
|
|
|
|
Three Months Ended March 31,
|
||||||
|
|
2019
|
|
2018
|
||||
Interest on debt
|
|
$
|
13,119
|
|
|
$
|
10,802
|
|
Amortization of debt issuance costs
|
|
1,191
|
|
|
1,088
|
|
||
Capitalized interest
|
|
(553
|
)
|
|
(205
|
)
|
||
Other
|
|
44
|
|
|
311
|
|
||
Total interest expense
|
|
$
|
13,801
|
|
|
$
|
11,996
|
|
|
|
Three Months Ended March 31,
|
|||||||||||||
|
|
2019
|
|
2018
|
|
$ Change
|
|||||||||
Net sales
|
|
$
|
78,075
|
|
|
$
|
89,794
|
|
|
$
|
(11,719
|
)
|
|
||
Volume
|
|
|
|
|
|
|
$
|
(9,529
|
)
|
||||||
Foreign exchange effects
|
|
|
|
|
|
|
(2,642
|
)
|
|||||||
Price/mix/inflation/other
|
|
|
|
|
|
|
452
|
|
|||||||
Income from operations
|
|
$
|
4,107
|
|
|
$
|
9,785
|
|
|
$
|
(5,678
|
)
|
|
|
|
Three Months Ended March 31,
|
|||||||||||||
|
|
2019
|
|
2018
|
|
$ Change
|
|||||||||
Net sales
|
|
$
|
49,657
|
|
|
$
|
48,682
|
|
|
$
|
975
|
|
|
||
Acquisitions
|
|
|
|
|
|
|
$
|
1,612
|
|
||||||
Volume
|
|
|
|
|
|
|
359
|
|
|||||||
Foreign exchange effects
|
|
|
|
|
|
|
(178
|
)
|
|||||||
Price/mix/inflation/other
|
|
|
|
|
|
|
(818
|
)
|
|||||||
Income from operations
|
|
$
|
3,824
|
|
|
$
|
5,233
|
|
|
$
|
(1,409
|
)
|
|
|
|
Three Months Ended March 31,
|
|||||||||||||
|
|
2019
|
|
2018
|
|
$ Change
|
|||||||||
Net sales
|
|
$
|
86,008
|
|
|
$
|
31,200
|
|
|
$
|
54,808
|
|
|
||
Acquisitions
|
|
|
|
|
|
|
$
|
53,612
|
|
||||||
Volume
|
|
|
|
|
|
|
1,171
|
|
|||||||
Price/mix/inflation/other
|
|
|
|
|
|
|
25
|
|
|||||||
Income from operations
|
|
$
|
3,846
|
|
|
$
|
4,204
|
|
|
$
|
(358
|
)
|
|
Item 3.
|
Quantitative and Qualitative Disclosures About Market Risk
|
Item 4.
|
Controls and Procedures
|
Item 1.
|
Legal Proceedings
|
Item 1A.
|
Risk Factors
|
Item 2.
|
Unregistered Sales of Equity Securities and Use of Proceeds
|
Period
|
|
Total Number of
Shares Purchased
(1)
|
|
Average Price Paid
Per Share
|
|
Total Number of
Shares Purchased
as Part of Publicly
Announced Plans
or Programs
(1)
|
|
Maximum Number (or
Approximate Dollar Value)
of Shares That May Yet
Be Purchased Under the
Plan or Programs
(1)
|
|||||
January 2019
|
|
—
|
|
|
$
|
—
|
|
|
—
|
|
|
—
|
|
February 2019
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
March 2019
|
|
18,311
|
|
|
7.71
|
|
|
—
|
|
|
—
|
|
|
Total
|
|
18,311
|
|
|
$
|
7.71
|
|
|
—
|
|
|
—
|
|
(1)
|
Shares were withheld to pay for tax obligations due upon the vesting of restricted stock held by certain employees granted under the NN, Inc. 2016 Omnibus Incentive Plan (the “Plan”). The Plan provides for the withholding of shares to satisfy tax obligations. It does not specify a maximum number of shares that can be withheld for this purpose. These shares may be deemed to be “issuer purchases” of shares that are required to be disclosed pursuant to this Item.
|
Item 3.
|
Defaults upon Senior Securities
|
Item 4.
|
Mine Safety Disclosures
|
Item 5.
|
Other Information
|
Item 6.
|
Exhibits
|
Exhibit
No.
|
|
Description
|
|
|
|
10.1*
|
|
|
|
|
|
10.2*
|
|
|
|
|
|
31.1
|
|
|
|
|
|
31.2
|
|
|
|
|
|
32.1
|
|
|
|
|
|
32.2
|
|
|
|
|
|
101.INS
|
|
XBRL Instance Document
|
|
|
|
101.SCH
|
|
XBRL Taxonomy Extension Service
|
|
|
|
101.CAL
|
|
Taxonomy Calculation Linkbase
|
|
|
|
101.LAB
|
|
XBRL Taxonomy Label Linkbase
|
|
|
|
101.PRE
|
|
XBRL Presentation Linkbase Document
|
|
|
|
101.DEF
|
|
XBRL Definition Linkbase Document
|
*
|
Management contract or compensatory plan or arrangement.
|
|
NN, Inc.
|
|
(Registrant)
|
|
|
Date: May 10, 2019
|
/s/ Richard D. Holder
|
|
Richard D. Holder
|
|
President, Chief Executive Officer and Director
|
|
(Principal Executive Officer)
|
|
(Duly Authorized Officer)
|
|
|
Date: May 10, 2019
|
/s/ Thomas C. Burwell, Jr.
|
|
Thomas C. Burwell, Jr.
|
|
Senior Vice President—Chief Financial Officer
|
|
(Principal Financial Officer)
|
|
(Duly Authorized Officer)
|
|
|
Date: May 10, 2019
|
/s/ Michael C. Felcher
|
|
Michael C. Felcher
|
|
Vice President—Chief Accounting Officer
|
|
(Principal Accounting Officer)
|
|
|
1.
|
Compensation and Benefits in the Event of Separation from Service
. In the event of the Executive’s Separation from Service, compensation and benefits shall be paid as set forth below.
|
(a)
|
Qualifying Termination Prior To A Change In Control.
If the Executive has a Qualifying Termination after the Effective Date and prior to a Change in Control, then upon such Qualifying Termination the Executive shall be entitled to receive the following:
|
(i)
|
The Executive’s annual salary through the effective date of Separation from Service, at the annual rate in effect at the time the Notice of Termination is given (or death occurs), to the extent unpaid prior to such Separation from Service.
|
(ii)
|
In consideration of Executive’s prior service to the Company an amount equal to 18 months of his annual base salary in effect on the date of his Separation from Service. These amounts shall be payable in accordance with the Company’s regular payroll procedures over the 18 month period following the Executive’s Separation from Service.
|
(iii)
|
Any vested rights of Executive in accordance with the Company’s plans, programs or policies. A payment equal to the target annual bonus to which the Executive would have been entitled but for the Qualifying Termination, prorated for the portion of the year during which the Executive was employed by the Company (which bonus will be determined in accordance with the Company’s corporate guidelines and distributed after completion of the Company’s fiscal year end audit).
|
(iv)
|
Prompt reimbursement for any and all reimbursable business expenses (to the extent not already reimbursed) upon Executive’s properly accounting for the same.
|
(v)
|
$12,000.00 payable in a single lump sum to assist with the Executive’s transition from employment.
|
(b)
|
Termination By The Company For Cause Or By The Executive Without Good Reason
. In the event Executive’s Separation from Service is terminated (A) by action of the Company for Cause; (B) by action of the Executive without Good Reason; or (C) by reason of the Executive’s death, Disability or retirement, the following compensation and benefits shall be paid and provided the Executive (or his beneficiary):
|
(i)
|
The Executive’s annual salary provided through the effective date of Separation from Service, at the annual rate in effect at the time the Notice of Termination is given (or death occurs), to the extent unpaid prior to such Separation from Service.
|
(ii)
|
Any vested rights of Executive in accordance with the Company’s plans, programs or policies.
|
(iii)
|
Prompt reimbursement for any and all reimbursable business expenses (to the extent not already reimbursed) upon Executive’s properly accounting for the same.
|
(1)
|
The annual salary due to the Executive through the date of his Separation from Service.
|
(2)
|
A lump sum payment equal to an amount set forth on
Schedule A
to this Agreement (the “
Severance Payment
”). The Severance Payment shall be made by wire transfer or immediately available funds to an account designated by Executive following the date of the Separation from Service.
|
(3)
|
A payment equal to the target annual bonus to which Executive would have been entitled but for Executive’s Separation from Service, for the year of Executive’s termination; pro-rated for the portion of the year during which he was employed by the Company (“
Pro-rated Bonus
”).
|
(4)
|
Any vested rights of Executive in accordance with the Company’s plans, programs or policies.
|
(5)
|
Prompt reimbursement for any and all reimbursable business expenses (to the extent not already reimbursed) upon Executive’s properly accounting for the same.
|
(6)
|
$12,000.00 payable in a single lump sum to assist with the Executive’s transition from employment.
|
(1)
|
If it is determined that any payment or distribution in the nature of compensation (within the meaning of Section 280G(b)(2) of the Code) to or for the benefit of the Executive, whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise (the “
Change in Control Payment
”), would constitute an “excess parachute payment” within the meaning of Section 280G of the Code, then the Company shall pay to the Executive whichever of the following gives the Executive the highest net after-tax amount (after taking into account all applicable federal, state, local and social security taxes): (i) the Change in Control Payment, or (ii) the amount that would not result in the imposition of excise tax on the Executive under Section 4999 of the Code. Any required reduction in the Change in Control Payment pursuant to the foregoing shall be accomplished solely by reducing the amount of severance payment payable pursuant to paragraph 1(c)(i)(1) of this Agreement and then, to the extent necessary, paragraph 1(c)(i)(2) of this Agreement.
|
(2)
|
All determinations to be made under this paragraph 1(c)(ii) shall be made by an independent public accounting firm selected by the Company immediately prior to the Change in Control (the “
Accounting Firm
”), which shall provide its determinations and any supporting calculations both to the Company and the Executive within ten (10) days of the Change in Control. Any such determination by the Accounting Firm shall be binding upon the Company and the Executive. All of the fees and expenses of the Accounting Firm in performing the determinations referred to in this paragraph 1(c)(iii) shall be borne solely by the Company.
|
(d)
|
Continuation of Benefits.
Following Executive’s Separation from Service, the Executive shall have the right to continue in the Company’s group health insurance plan or other Company benefit program, at his or her own cost and without any contribution by the Company, as may be required by COBRA or any other federal or state law or regulation.
|
(e)
|
Limit on Company Liability.
Except as expressly set forth in this paragraph 1, the Company shall have no obligation to Executive under this Agreement following Executive’s Separation from Service. Without limiting the generality of the provision of the foregoing sentence, the Company shall not, following Executive’s Separation from Service, have any obligation to provide any further benefit to Executive under this Agreement or make any further
|
2.
|
Disclosure of Confidential Information
. The Company has developed confidential information, strategies and programs, which include customer lists, prospects, lists, expansion and acquisition plans, market research, sales systems, marketing programs, computer systems and programs, product development strategies, manufacturing strategies and techniques, budgets, pricing strategies, identity and requirements of national accounts, customer lists, methods of operating, service systems, training programs and methods, other trade secrets and information about the business in which the Company is engaged that is not known to the public and gives the Company an opportunity to obtain an advantage over competitors who do not know of such information (collectively, “
Confidential Information
”), provided that the term “Confidential Information” shall not include (i) any such information that, prior to its use or disclosure by Executive, can be shown to have been in the public domain or generally known or available to customers, suppliers or competitors of the Company through no breach of the provisions of this Agreement or other non-disclosure covenants; (ii) any such information that, prior to its disclosure by the Executive, was rightfully in the receiving third party’s possession, without violation of the provisions of this Agreement or other non-disclosure covenants; and (iii) any such information that, prior to its disclosure by the Executive, was independently developed by the receiving third party without violation of the provisions of this Agreement or other non-disclosure covenants. In performing duties for the Company, Executive regularly will be exposed to and work with Confidential Information of the Company. Executive may also be exposed to and work with Confidential Information of the Company’s affiliates and subsidiaries. Executive acknowledges that Confidential Information of the Company and its affiliates and subsidiaries is critical to the Company’s success and that the Company and its affiliates and subsidiaries have invested substantial sums of money in developing the Confidential Information. While Executive is employed by the Company and after such employment ends for any reason, Executive will never reproduce, publish, disclose, use, reveal, show or otherwise communicate to any person or entity any Confidential Information of Company, its affiliates, and/or its subsidiaries unless specifically directed by the Company to do so in writing, provided that nothing herein shall prohibit the Executive from disclosing Confidential Information as required by law or pursuant to legal process. Executive agrees that whenever Executive’s employment with the Company ends for any reason, all documents containing or referring to Confidential Information of the Company, its affiliates, and/or its subsidiaries that may be in Executive’s possession or control will be delivered by Executive to the Company promptly upon the Company’s request.
|
3.
|
Non-Interference with Personnel Relations
. At any time while Executive is employed by the Company and at any time during the Restrictive Period after such employment ends for any reason, Executive acting either directly or indirectly, or through any other person, firm, or corporation, will not then, at such time, hire, contract with or employ any then employee of the Company, and/or any then employee of an affiliate or subsidiary of the Company with which Executive interacted or about which Executive gained Confidential Information during his employment with Company (“
Restricted Employees
”). Further, Executive will not induce or attempt to induce or influence any of the Restricted Employees to terminate employment with the Company, affiliate, and/or subsidiary.
|
4.
|
Non-Competition
. While Executive is employed by the Company and for the Restrictive Period after such employment ends, Executive will not, directly or indirectly, or through any other person, firm or corporation (i) be employed by, consult for, have any ownership interest in or engage in any activity on behalf of any company that engages in a Competing Business, as defined below, or (ii) call on, solicit or communicate with any of the Company’s customers or suppliers for any purpose related to a Competing Business, as defined below. A “
Competing Business
” is one that engages in the production, sale, or marketing of a product or service that is substantially similar to, or serves the same purpose as, any product or service produced, sold or marketed by the Company or any parent, subsidiary or affiliate of the Company with which Executive interacted or about which Executive gained Confidential Information during his employment with the Company. The term “customer” or “supplier” means any customer or supplier (whether actual or potential) with whom Executive or any other employee of the Company or any parent, subsidiary or affiliate of the Company had business contact during the eighteen (18) months immediately before Executive’s employment with the Company ended. Notwithstanding the foregoing, this paragraph shall not be construed to prohibit Executive from owning less than five percent (5%) of the outstanding securities of a corporation which is publicly traded on a securities exchange or over-the-counter.
|
5.
|
Notification to Subsequent Employers
. Executive grants the Company the right to notify any future employer or prospective employer of Executive concerning the existence of and terms of this Agreement and grants the Company the right to provide a copy of this Agreement to any such subsequent employer or prospective employer.
|
6.
|
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, 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 and/or any parent, subsidiary or affiliate of the Company (collectively, “
Company Intellectual Property
”) shall become and remain the exclusive property of the Company and/or such parent, subsidiary or affiliate, 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 Executive’s employment under this Agreement at the Company’s written request, the Executive will promptly return to the Company all copies of information protected by paragraph 6(a) hereof 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.
|
7.
|
Withholding
. Any provision of this Agreement to the contrary notwithstanding, all payments made by the Company hereunder to the Executive or his estate or beneficiaries shall be subject to the withholding of such amounts, if any, relating to tax and other payroll deductions as the Company may reasonably determine should be withheld pursuant to any applicable law or regulation. In lieu of withholding such amounts, the Company may accept other provisions, provided that it has sufficient funds to pay all taxes required by law to be withheld in respect of any or all such payments.
|
8.
|
Mitigation
. The Company’s obligation to make the payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be subject to set off for any reason and shall not be affected by any set-off, counterclaim, recoupment, defense or other claim, right or action which the Company may have against Executive or others. In no event shall Executive be obligated to seek other employment or take any other action by way of mitigation of the amounts payable to Executive under any of the provisions of this agreement and such amounts shall not be reduced whether or not Executive obtains other employment.
|
9.
|
Notices
. All notices, requests, demands and other communications provided for by this Agreement shall be in writing and shall be sufficiently given if and when mailed in the continental United States by registered or certified mail, or personally delivered to the party entitled thereto, at the address stated below or to such changed address as the addressee may have given by a similar notice:
|
10.
|
Successors: Binding Agreement
. The Company shall require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company, by agreement in the form and substance satisfactory to the Executive, to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. Failure of the Company to obtain such agreement prior to the effectiveness of any such succession shall be a breach of this Agreement. For purposes of this Agreement, “Company” shall include any successor
|
11.
|
Modification, Waiver or Discharge
. No provision of this Agreement may be modified or discharged unless such modification or discharge is authorized by the Board of Directors of the Company and is agreed to in writing, signed by the Executive and by an officer of the Company duly authorized by the Board. However, the Company may unilaterally revise the provisions of this Agreement governed by the provisions of Section 409A of the Code in order to make the Agreement compliant therewith, and as necessary under any provision of the Code or any other federal or state statute or regulation to prevent the imposition of any federal or state fine, tax, or penalty upon Company or Executive that would result from the performance of any provisions of this Agreement. 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 time or at any prior or subsequent time.
|
12.
|
Entire Agreement
. This Agreement constitutes the entire understanding of the parties hereto with respect to its subject matter and supersedes all prior agreements between the parties hereto with respect to its subject matter, including, but not limited to, all employment agreements, change of control agreements, non-competition agreements or any other agreement related to Executive’s employment with the Company; provided, however, nothing herein shall affect the terms of any indemnification agreement by and between the Company and Executive or any general indemnification policy in favor of Executive, which shall continue and remain in full force and effect.
|
13.
|
Governing Law
. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of Tennessee, without regard to its conflict of laws principles, to the extent federal law does not apply.
|
14.
|
Resolution of Disputes
. Any dispute or claim arising out of or relating to this Agreement shall be settled by final and binding arbitration in Johnson City, Tennessee in accordance with the Commercial Arbitration rules of the American Arbitration Association, and judgment upon the award rendered by the arbitrators may be entered in any court having jurisdiction thereof. The fees and expenses of the arbitration panel shall be equally borne by the Company and Executive. Each party shall be liable for its own costs and expenses as a result of any dispute related to this Agreement.
|
15.
|
Validity
. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of the other provisions of this Agreement, which latter provisions shall remain in full force and effect.
|
16.
|
Compliance with Section 409A
.
|
(a)
|
General.
It is intended that the Agreement will comply with Section 409A of the Code and the regulations and other guidance thereunder (“
Section 409A
”), and the Agreement shall be interpreted consistent with such intent. As permitted by Section 409A, each installment or other payment made or benefit provided hereunder shall be treated as “separate payment” for purposes of Section 409A and the available exemptions under Section 409A shall be stacked to the maximum extent possible. This Agreement may be amended in any respect deemed necessary (including retroactively) by the Company in order to pursue compliance with Section 409A. The foregoing shall not be construed as a guarantee of any particular tax effect for benefits under this Agreement. The Executive or any beneficiary, as applicable, is solely responsible and liable for the satisfaction of all taxes, interest and penalties that may be imposed on the Executive or any beneficiary in connection with any payments to the Executive or beneficiary under the Agreement, including any taxes, interest and penalties under Section 409A, and neither the Company nor any director, officer or affiliate shall have any obligation to indemnify or otherwise hold the Executive or a beneficiary harmless from any and all of such taxes, interest and penalties. To the extent Executive is entitled to be paid or reimbursed for any taxable expenses under this Agreement, and such payments or reimbursements are includible in Executive’s federal gross taxable income, the amount of such expenses reimbursable in any one calendar year shall not affect the amount reimbursable in any other calendar year, and the reimbursement of an eligible expense shall be made no later than December 31 of the year after the year in which the expense was incurred. Executive’s right to reimbursement of expenses under this Agreement shall not be subject to liquidation or exchange for another benefit.
|
(b)
|
Six Month Delay for Specified Employees.
Notwithstanding anything in the Agreement to the contrary, if the Executive is determined to be a “specified employee” (as defined in Section 409A) for the year in which the Executive incurs a Separation from Service, any payment due under the Agreement that is not permitted to be paid on the date of such separation without the imposition of additional taxes, interest and penalties under Section 409A shall be paid on the first business day following the six-month anniversary of the Executive's date of separation or, if earlier, the Executive's death.
|
17.
|
No Adequate Remedy At Law
. The Company and the Executive recognize that each party may have no adequate remedy at law for breach by the other of any of the agreements contained herein, and particularly a breach of paragraphs 2, 3, 4, and 6, and, in the event of any such breach, the Company and the Executive hereby agree and consent that the other shall be entitled to injunctive relief or other appropriate remedy to enforce performance of such agreements.
|
18.
|
Non-Assignability
. 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
|
19.
|
Headings
. 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.
|
20.
|
Counterparts
. This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original, but of which together will constitute one and the same instrument.
|
21.
|
Definitions
. For purposes of this Agreement, the following terms shall have the following meanings:
|
(i)
|
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, remains uncorrected for 10 days following written notice to Executive by the Chief Executive Officer or the Board of Directors of the Company of such breach;
|
(ii)
|
willful misconduct or gross negligence by the Executive in either case that results in material damage to the business or reputation of the Company;
|
(iii)
|
a material breach by Executive of this Agreement which, if correctable, remains uncorrected for 10 days following written notice to Executive by the Chief Executive Officer or the Board of Directors of the Company of such breach; or
|
(iv)
|
the Executive is convicted of a felony or any other crime (other than traffic violations) involving moral turpitude (whether or not in connection with the performance by Executive of his duties under this Agreement).
|
(i)
|
A person, corporation, entity or group (1) makes a tender or exchange offer for the issued and outstanding voting stock of NN, Inc., (“
NN
”) and beneficially owns fifty percent (50%) or more of the issued and outstanding voting stock of NN after such tender or exchange offer, or (2) acquires (or has acquired during the 12-month period ending on the date of the most recent acquisition by such person, corporation, entity or group), directly or indirectly, the beneficial ownership of fifty percent (50%) or
|
(ii)
|
NN is a party to a merger, consolidation or similar transaction and following such transaction, fifty percent (50%) or more of the issued and outstanding voting stock of the resulting entity is not beneficially owned by those persons, corporations or entities that constituted the stockholders of NN immediately prior to the transaction;
|
(iii)
|
NN sells fifty percent (50%) or more of its assets to any other person or persons (other than an affiliate or affiliates of NN); or
|
(iv)
|
Individuals who, during any 12-month period, constitute the Board (the “
Incumbent Board
”) cease for any reason to constitute at least seventy-five percent (75%) of the Board of Directors of NN; provided, however, that any individual becoming a director whose election or nomination was approved by a majority of the directors than comprising the Incumbent Board, shall be considered a member of the Incumbent Board, but not including any individual whose initial board membership is a result of an actual or threatened election contest (as that term is used in Rule 14a-11 promulgated under the Securities Act of 1934, as amended) or an actual or threatened solicitation of proxies or consents by or on behalf of a party other than the Board.
|
(c)
|
“
Code
” means the Internal Revenue Code of 1986 as amended.
|
(d)
|
“
Disability
” means the Executive (i) is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months; or (ii) is, by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months, receiving income replacement benefits for a period of not less than three (3) months under an accident and health plan covering employees or directors of the Company. Executive will be deemed Disabled if he is determined to be totally disabled by the Social Security Administration, or if Executive is determined to be disabled in accordance with a disability insurance program maintained by the Company if the definition of “disability” applied under such disability insurance program complies with the requirements of the preceding sentence. Upon the request of the plan administrator, the Executive must submit proof to the plan administrator of the Social Security Administration’s or the provider’s determination.
|
(e)
|
“
Good Reason
” means any of the following events if not remedied by the Company within 30 days after receipt of notice thereof from the Executive: (i) assignment to the Executive of any duties inconsistent with Executive’s position duties, responsibilities, office, or any other action by the Company that results in a material diminution in the Executive’s position, authority, duties or responsibilities; (ii) any material failure by the Company to comply with this Agreement; (iii) any material adverse change in Executive’s annual compensation and other benefits; or (iv) a requirement to relocate Executive’s place of employment in excess of fifty (50) miles from the current principal office of the Company as of the date hereof.
|
(f)
|
“
Notice of Termination
” means a written notice which shall include the specific termination provision under this Agreement relied upon, and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive’s employment. Any purported termination of the Executive’s employment hereunder by action of either party shall be communicated by delivery of a Notice of Termination to the other party. Any termination by Executive of his employment without Good Reason shall be made on not less than 14 days’ notice.
|
(g)
|
“
Qualifying Termination
” means a Separation from Service by action of the Company that is not for Cause, or a Separation from Service by action of the Executive that is for Good Reason.
|
(h)
|
“
Restrictive Period
” means (i) a number of months following Executive’s termination of employment pursuant to paragraph 1(a) or 1(c) above which is equal to the number of months for which the Executive is entitled to receive his base salary under paragraph 1(a) or 1(c) above, or a period of 12 months following Executive’s termination of employment pursuant to paragraph 1(b) above.
|
(i)
|
“
Separation from Service
” means Executive’s “separation from service” as defined in Treasury Regulation Section 1.409A-1(h).
|
1.
|
2.0 times Executive’s base salary (as of the date of Executive’s termination); plus
|
2.
|
1.0 times Executive’s target bonus.
|
1.
|
Compensation and Benefits in the Event of Separation from Service
. In the event of the Executive’s Separation from Service, compensation and benefits shall be paid as set forth below.
|
(a)
|
Qualifying Termination Prior To A Change In Control.
If the Executive has a Qualifying Termination after the Effective Date and prior to a Change in Control, then upon such Qualifying Termination the Executive shall be entitled to receive the following:
|
(i)
|
The Executive’s annual salary through the effective date of Separation from Service, at the annual rate in effect at the time the Notice of Termination is given (or death occurs), to the extent unpaid prior to such Separation from Service.
|
(ii)
|
In consideration of Executive’s prior service to the Company an amount equal to 18 months of his annual base salary in effect on the date of his Separation from Service. These amounts shall be payable in accordance with the Company’s regular payroll procedures over the 18 month period following the Executive’s Separation from Service.
|
(iii)
|
Any vested rights of Executive in accordance with the Company’s plans, programs or policies. A payment equal to the target annual bonus to which the Executive would have been entitled but for the Qualifying Termination, prorated for the portion of the year during which the Executive was employed by the Company (which bonus will be determined in accordance with the Company’s corporate guidelines and distributed after completion of the Company’s fiscal year end audit).
|
(iv)
|
Prompt reimbursement for any and all reimbursable business expenses (to the extent not already reimbursed) upon Executive’s properly accounting for the same.
|
(v)
|
$12,000.00 payable in a single lump sum to assist with the Executive’s transition from employment.
|
(b)
|
Termination By The Company For Cause Or By The Executive Without Good Reason
. In the event Executive’s Separation from Service is terminated (A) by action of the Company for Cause; (B) by action of the Executive without Good Reason; or (C) by reason of the Executive’s death, Disability or retirement, the following compensation and benefits shall be paid and provided the Executive (or his beneficiary):
|
(i)
|
The Executive’s annual salary provided through the effective date of Separation from Service, at the annual rate in effect at the time the Notice of Termination is given (or death occurs), to the extent unpaid prior to such Separation from Service.
|
(ii)
|
Any vested rights of Executive in accordance with the Company’s plans, programs or policies.
|
(iii)
|
Prompt reimbursement for any and all reimbursable business expenses (to the extent not already reimbursed) upon Executive’s properly accounting for the same.
|
(1)
|
The annual salary due to the Executive through the date of his Separation from Service.
|
(2)
|
A lump sum payment equal to an amount set forth on
Schedule A
to this Agreement (the “
Severance Payment
”). The Severance Payment shall be made by wire transfer or immediately available funds to an account designated by Executive following the date of the Separation from Service.
|
(3)
|
A payment equal to the target annual bonus to which Executive would have been entitled but for Executive’s Separation from Service, for the year of Executive’s termination; pro-rated for the portion of the year during which he was employed by the Company (“
Pro-rated Bonus
”).
|
(4)
|
Any vested rights of Executive in accordance with the Company’s plans, programs or policies.
|
(5)
|
Prompt reimbursement for any and all reimbursable business expenses (to the extent not already reimbursed) upon Executive’s properly accounting for the same.
|
(6)
|
$12,000.00 payable in a single lump sum to assist with the Executive’s transition from employment.
|
(1)
|
If it is determined that any payment or distribution in the nature of compensation (within the meaning of Section 280G(b)(2) of the Code) to or for the benefit of the Executive, whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise (the “
Change in Control Payment
”), would constitute an “excess parachute payment” within the meaning of Section 280G of the Code, then the Company shall pay to the Executive whichever of the following gives the Executive the highest net after-tax amount (after taking into account all applicable federal, state, local and social security taxes): (i) the Change in Control Payment, or (ii) the amount that would not result in the imposition of excise tax on the Executive under Section 4999 of the Code. Any required reduction in the Change in Control Payment pursuant to the foregoing shall be accomplished solely by reducing the amount of severance payment payable pursuant to paragraph 1(c)(i)(1) of this Agreement and then, to the extent necessary, paragraph 1(c)(i)(2) of this Agreement.
|
(2)
|
All determinations to be made under this paragraph 1(c)(ii) shall be made by an independent public accounting firm selected by the Company immediately prior to the Change in Control (the “
Accounting Firm
”), which shall provide its determinations and any supporting calculations both to the Company and the Executive within ten (10) days of the Change in Control. Any such determination by the Accounting Firm shall be binding upon the Company and the Executive. All of the fees and expenses of the Accounting Firm in performing the determinations referred to in this paragraph 1(c)(iii) shall be borne solely by the Company.
|
(d)
|
Continuation of Benefits.
Following Executive’s Separation from Service, the Executive shall have the right to continue in the Company’s group health insurance plan or other Company benefit program, at his or her own cost and without any contribution by the Company, as may be required by COBRA or any other federal or state law or regulation.
|
(e)
|
Limit on Company Liability.
Except as expressly set forth in this paragraph 1, the Company shall have no obligation to Executive under this Agreement following Executive’s Separation from Service. Without limiting the generality of the provision of the foregoing sentence, the Company shall not, following Executive’s Separation from Service, have any obligation to provide any further benefit to Executive under this Agreement or make any further
|
2.
|
Disclosure of Confidential Information
. The Company has developed confidential information, strategies and programs, which include customer lists, prospects, lists, expansion and acquisition plans, market research, sales systems, marketing programs, computer systems and programs, product development strategies, manufacturing strategies and techniques, budgets, pricing strategies, identity and requirements of national accounts, customer lists, methods of operating, service systems, training programs and methods, other trade secrets and information about the business in which the Company is engaged that is not known to the public and gives the Company an opportunity to obtain an advantage over competitors who do not know of such information (collectively, “
Confidential Information
”), provided that the term “Confidential Information” shall not include (i) any such information that, prior to its use or disclosure by Executive, can be shown to have been in the public domain or generally known or available to customers, suppliers or competitors of the Company through no breach of the provisions of this Agreement or other non-disclosure covenants; (ii) any such information that, prior to its disclosure by the Executive, was rightfully in the receiving third party’s possession, without violation of the provisions of this Agreement or other non-disclosure covenants; and (iii) any such information that, prior to its disclosure by the Executive, was independently developed by the receiving third party without violation of the provisions of this Agreement or other non-disclosure covenants. In performing duties for the Company, Executive regularly will be exposed to and work with Confidential Information of the Company. Executive may also be exposed to and work with Confidential Information of the Company’s affiliates and subsidiaries. Executive acknowledges that Confidential Information of the Company and its affiliates and subsidiaries is critical to the Company’s success and that the Company and its affiliates and subsidiaries have invested substantial sums of money in developing the Confidential Information. While Executive is employed by the Company and after such employment ends for any reason, Executive will never reproduce, publish, disclose, use, reveal, show or otherwise communicate to any person or entity any Confidential Information of Company, its affiliates, and/or its subsidiaries unless specifically directed by the Company to do so in writing, provided that nothing herein shall prohibit the Executive from disclosing Confidential Information as required by law or pursuant to legal process. Executive agrees that whenever Executive’s employment with the Company ends for any reason, all documents containing or referring to Confidential Information of the Company, its affiliates, and/or its subsidiaries that may be in Executive’s possession or control will be delivered by Executive to the Company promptly upon the Company’s request.
|
3.
|
Non-Interference with Personnel Relations
. At any time while Executive is employed by the Company and at any time during the Restrictive Period after such employment ends for any reason, Executive acting either directly or indirectly, or through any other person, firm, or corporation, will not then, at such time, hire, contract with or employ any then employee of the Company, and/or any then employee of an affiliate or subsidiary of the Company with which Executive interacted or about which Executive gained Confidential Information during his employment with Company (“
Restricted Employees
”). Further, Executive will not induce or attempt to induce or influence any of the Restricted Employees to terminate employment with the Company, affiliate, and/or subsidiary.
|
4.
|
Non-Competition
. While Executive is employed by the Company and for the Restrictive Period after such employment ends, Executive will not, directly or indirectly, or through any other person, firm or corporation (i) be employed by, consult for, have any ownership interest in or engage in any activity on behalf of any company that engages in a Competing Business, as defined below, or (ii) call on, solicit or communicate with any of the Company’s customers or suppliers for any purpose related to a Competing Business, as defined below. A “
Competing Business
” is one that engages in the production, sale, or marketing of a product or service that is substantially similar to, or serves the same purpose as, any product or service produced, sold or marketed by the Company or any parent, subsidiary or affiliate of the Company with which Executive interacted or about which Executive gained Confidential Information during his employment with the Company. The term “customer” or “supplier” means any customer or supplier (whether actual or potential) with whom Executive or any other employee of the Company or any parent, subsidiary or affiliate of the Company had business contact during the eighteen (18) months immediately before Executive’s employment with the Company ended. Notwithstanding the foregoing, this paragraph shall not be construed to prohibit Executive from owning less than five percent (5%) of the outstanding securities of a corporation which is publicly traded on a securities exchange or over-the-counter.
|
5.
|
Notification to Subsequent Employers
. Executive grants the Company the right to notify any future employer or prospective employer of Executive concerning the existence of and terms of this Agreement and grants the Company the right to provide a copy of this Agreement to any such subsequent employer or prospective employer.
|
6.
|
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, 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 and/or any parent, subsidiary or affiliate of the Company (collectively, “
Company Intellectual Property
”) shall become and remain the exclusive property of the Company and/or such parent, subsidiary or affiliate, 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 Executive’s employment under this Agreement at the Company’s written request, the Executive will promptly return to the Company all copies of information protected by paragraph 6(a) hereof 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.
|
7.
|
Withholding
. Any provision of this Agreement to the contrary notwithstanding, all payments made by the Company hereunder to the Executive or his estate or beneficiaries shall be subject to the withholding of such amounts, if any, relating to tax and other payroll deductions as the Company may reasonably determine should be withheld pursuant to any applicable law or regulation. In lieu of withholding such amounts, the Company may accept other provisions, provided that it has sufficient funds to pay all taxes required by law to be withheld in respect of any or all such payments.
|
8.
|
Mitigation
. The Company’s obligation to make the payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be subject to set off for any reason and shall not be affected by any set-off, counterclaim, recoupment, defense or other claim, right or action which the Company may have against Executive or others. In no event shall Executive be obligated to seek other employment or take any other action by way of mitigation of the amounts payable to Executive under any of the provisions of this agreement and such amounts shall not be reduced whether or not Executive obtains other employment.
|
9.
|
Notices
. All notices, requests, demands and other communications provided for by this Agreement shall be in writing and shall be sufficiently given if and when mailed in the continental United States by registered or certified mail, or personally delivered to the party entitled thereto, at the address stated below or to such changed address as the addressee may have given by a similar notice:
|
10.
|
Successors: Binding Agreement
. The Company shall require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company, by agreement in the form and substance satisfactory to the Executive, to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. Failure of the Company to obtain such agreement prior to the effectiveness of any such succession shall be a breach of this Agreement. For purposes of this Agreement, “Company” shall include any successor
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11.
|
Modification, Waiver or Discharge
. No provision of this Agreement may be modified or discharged unless such modification or discharge is authorized by the Board of Directors of the Company and is agreed to in writing, signed by the Executive and by an officer of the Company duly authorized by the Board. However, the Company may unilaterally revise the provisions of this Agreement governed by the provisions of Section 409A of the Code in order to make the Agreement compliant therewith, and as necessary under any provision of the Code or any other federal or state statute or regulation to prevent the imposition of any federal or state fine, tax, or penalty upon Company or Executive that would result from the performance of any provisions of this Agreement. 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 time or at any prior or subsequent time.
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12.
|
Entire Agreement
. This Agreement constitutes the entire understanding of the parties hereto with respect to its subject matter and supersedes all prior agreements between the parties hereto with respect to its subject matter, including, but not limited to, all employment agreements, change of control agreements, non-competition agreements or any other agreement related to Executive’s employment with the Company; provided, however, nothing herein shall affect the terms of any indemnification agreement by and between the Company and Executive or any general indemnification policy in favor of Executive, which shall continue and remain in full force and effect.
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13.
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Governing Law
. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of Tennessee, without regard to its conflict of laws principles, to the extent federal law does not apply.
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14.
|
Resolution of Disputes
. Any dispute or claim arising out of or relating to this Agreement shall be settled by final and binding arbitration in Johnson City, Tennessee in accordance with the Commercial Arbitration rules of the American Arbitration Association, and judgment upon the award rendered by the arbitrators may be entered in any court having jurisdiction thereof. The fees and expenses of the arbitration panel shall be equally borne by the Company and Executive. Each party shall be liable for its own costs and expenses as a result of any dispute related to this Agreement.
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15.
|
Validity
. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of the other provisions of this Agreement, which latter provisions shall remain in full force and effect.
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16.
|
Compliance with Section 409A
.
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(a)
|
General.
It is intended that the Agreement will comply with Section 409A of the Code and the regulations and other guidance thereunder (“
Section 409A
”), and the Agreement shall be interpreted consistent with such intent. As permitted by Section 409A, each installment or other payment made or benefit provided hereunder shall be treated as “separate payment” for purposes of Section 409A and the available exemptions under Section 409A shall be stacked to the maximum extent possible. This Agreement may be amended in any respect deemed necessary (including retroactively) by the Company in order to pursue compliance with Section 409A. The foregoing shall not be construed as a guarantee of any particular tax effect for benefits under this Agreement. The Executive or any beneficiary, as applicable, is solely responsible and liable for the satisfaction of all taxes, interest and penalties that may be imposed on the Executive or any beneficiary in connection with any payments to the Executive or beneficiary under the Agreement, including any taxes, interest and penalties under Section 409A, and neither the Company nor any director, officer or affiliate shall have any obligation to indemnify or otherwise hold the Executive or a beneficiary harmless from any and all of such taxes, interest and penalties. To the extent Executive is entitled to be paid or reimbursed for any taxable expenses under this Agreement, and such payments or reimbursements are includible in Executive’s federal gross taxable income, the amount of such expenses reimbursable in any one calendar year shall not affect the amount reimbursable in any other calendar year, and the reimbursement of an eligible expense shall be made no later than December 31 of the year after the year in which the expense was incurred. Executive’s right to reimbursement of expenses under this Agreement shall not be subject to liquidation or exchange for another benefit.
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(b)
|
Six Month Delay for Specified Employees.
Notwithstanding anything in the Agreement to the contrary, if the Executive is determined to be a “specified employee” (as defined in Section 409A) for the year in which the Executive incurs a Separation from Service, any payment due under the Agreement that is not permitted to be paid on the date of such separation without the imposition of additional taxes, interest and penalties under Section 409A shall be paid on the first business day following the six-month anniversary of the Executive's date of separation or, if earlier, the Executive's death.
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17.
|
No Adequate Remedy At Law
. The Company and the Executive recognize that each party may have no adequate remedy at law for breach by the other of any of the agreements contained herein, and particularly a breach of paragraphs 2, 3, 4, and 6, and, in the event of any such breach, the Company and the Executive hereby agree and consent that the other shall be entitled to injunctive relief or other appropriate remedy to enforce performance of such agreements.
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18.
|
Non-Assignability
. 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
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19.
|
Headings
. 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.
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20.
|
Counterparts
. This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original, but of which together will constitute one and the same instrument.
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21.
|
Definitions
. For purposes of this Agreement, the following terms shall have the following meanings:
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(i)
|
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, remains uncorrected for 10 days following written notice to Executive by the Chief Executive Officer or the Board of Directors of the Company of such breach;
|
(ii)
|
willful misconduct or gross negligence by the Executive in either case that results in material damage to the business or reputation of the Company;
|
(iii)
|
a material breach by Executive of this Agreement which, if correctable, remains uncorrected for 10 days following written notice to Executive by the Chief Executive Officer or the Board of Directors of the Company of such breach; or
|
(iv)
|
the Executive is convicted of a felony or any other crime (other than traffic violations) involving moral turpitude (whether or not in connection with the performance by Executive of his duties under this Agreement).
|
(i)
|
A person, corporation, entity or group (1) makes a tender or exchange offer for the issued and outstanding voting stock of NN, Inc., (“
NN
”) and beneficially owns fifty percent (50%) or more of the issued and outstanding voting stock of NN after such tender or exchange offer, or (2) acquires (or has acquired during the 12-month period ending on the date of the most recent acquisition by such person, corporation, entity or group), directly or indirectly, the beneficial ownership of fifty percent (50%) or
|
(ii)
|
NN is a party to a merger, consolidation or similar transaction and following such transaction, fifty percent (50%) or more of the issued and outstanding voting stock of the resulting entity is not beneficially owned by those persons, corporations or entities that constituted the stockholders of NN immediately prior to the transaction;
|
(iii)
|
NN sells fifty percent (50%) or more of its assets to any other person or persons (other than an affiliate or affiliates of NN); or
|
(iv)
|
Individuals who, during any 12-month period, constitute the Board (the “
Incumbent Board
”) cease for any reason to constitute at least seventy-five percent (75%) of the Board of Directors of NN; provided, however, that any individual becoming a director whose election or nomination was approved by a majority of the directors than comprising the Incumbent Board, shall be considered a member of the Incumbent Board, but not including any individual whose initial board membership is a result of an actual or threatened election contest (as that term is used in Rule 14a-11 promulgated under the Securities Act of 1934, as amended) or an actual or threatened solicitation of proxies or consents by or on behalf of a party other than the Board.
|
(c)
|
“
Code
” means the Internal Revenue Code of 1986 as amended.
|
(d)
|
“
Disability
” means the Executive (i) is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months; or (ii) is, by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months, receiving income replacement benefits for a period of not less than three (3) months under an accident and health plan covering employees or directors of the Company. Executive will be deemed Disabled if he is determined to be totally disabled by the Social Security Administration, or if Executive is determined to be disabled in accordance with a disability insurance program maintained by the Company if the definition of “disability” applied under such disability insurance program complies with the requirements of the preceding sentence. Upon the request of the plan administrator, the Executive must submit proof to the plan administrator of the Social Security Administration’s or the provider’s determination.
|
(e)
|
“
Good Reason
” means any of the following events if not remedied by the Company within 30 days after receipt of notice thereof from the Executive: (i) assignment to the Executive of any duties inconsistent with Executive’s position duties, responsibilities, office, or any other action by the Company that results in a material diminution in the Executive’s position, authority, duties or responsibilities; (ii) any material failure by the Company to comply with this Agreement; (iii) any material adverse change in Executive’s annual compensation and other benefits; or (iv) a requirement to relocate Executive’s place of employment in excess of fifty (50) miles from the current principal office of the Company as of the date hereof.
|
(f)
|
“
Notice of Termination
” means a written notice which shall include the specific termination provision under this Agreement relied upon, and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive’s employment. Any purported termination of the Executive’s employment hereunder by action of either party shall be communicated by delivery of a Notice of Termination to the other party. Any termination by Executive of his employment without Good Reason shall be made on not less than 14 days’ notice.
|
(g)
|
“
Qualifying Termination
” means a Separation from Service by action of the Company that is not for Cause, or a Separation from Service by action of the Executive that is for Good Reason.
|
(h)
|
“
Restrictive Period
” means (i) a number of months following Executive’s termination of employment pursuant to paragraph 1(a) or 1(c) above which is equal to the number of months for which the Executive is entitled to receive his base salary under paragraph 1(a) or 1(c) above, or a period of 12 months following Executive’s termination of employment pursuant to paragraph 1(b) above.
|
(i)
|
“
Separation from Service
” means Executive’s “separation from service” as defined in Treasury Regulation Section 1.409A-1(h).
|
1.
|
2.0 times Executive’s base salary (as of the date of Executive’s termination); plus
|
2.
|
1.0 times Executive’s target bonus.
|
1)
|
I have reviewed this quarterly report on Form 10-Q of NN, Inc.;
|
2)
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3)
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4)
|
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c)
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d)
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of the annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5)
|
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
May 10, 2019
|
|
|
|
/s/ Richard D. Holder
|
|
|
|
|
Richard D. Holder
|
|
|
|
|
President, Chief Executive Officer and Director
|
|
|
|
|
(Principal Executive Officer)
|
1)
|
I have reviewed this quarterly report on Form 10-Q of NN, Inc.;
|
2)
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3)
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4)
|
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c)
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d)
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of the annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5)
|
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
May 10, 2019
|
|
|
|
/s/ Thomas C. Burwell, Jr.
|
|
|
|
|
Thomas C. Burwell, Jr.
|
|
|
|
|
Senior Vice President – Chief Financial Officer
|
|
|
|
|
(Principal Financial Officer)
|
|
|
|
|
|
May 10, 2019
|
|
|
|
/s/ Richard D. Holder
|
|
|
|
|
Richard D. Holder
|
|
|
|
|
President, Chief Executive Officer and Director
(Principal Executive Officer)
|
|
|
|
|
|
May 10, 2019
|
|
|
|
/s/ Thomas C. Burwell, Jr.
|
|
|
|
|
Thomas C. Burwell, Jr.
|
|
|
|
|
Senior Vice President – Chief Financial Officer
(Principal Financial Officer)
|