<PAGE> 1
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss. 240.14a-11(c) or ss. 240.14a-12
FLANDERS CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box) No fee required.
[X] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1. Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
2. Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
3. Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
- --------------------------------------------------------------------------------
4. Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
5. Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1. Amount Previously Paid:
- --------------------------------------------------------------------------------
2. Form, Schedule or Registration Statement No.:
- --------------------------------------------------------------------------------
3. Filing Party:
- --------------------------------------------------------------------------------
4. Date Filed:
- --------------------------------------------------------------------------------
<PAGE> 2
[FLANDERS LETTERHEAD]
November 17, 1997
Dear Shareholders:
You are cordially invited to attend the annual meeting (the
"Meeting") of the shareholders of Flanders Corporation (the "Company") to be
held at the corporate office of the Company located at 531 Flanders Filters
Road, Washington, North Carolina 27889 on December 4, 1997, at 10:00 a.m.,
Eastern Standard Time. The purpose of the Meeting is:
1. To elect the directors of the Company to serve until the next
Annual Meeting of Shareholders or until their respective
successors are elected and qualified.
2. To ratify the selection of McGladrey & Pullen, L.L.P. as the
Company's independent auditors for the current fiscal year.
3. To transact such other business as may properly come before
the Meeting.
The Board of Directors has fixed the close of business on November
12, 1997 as the record date (the "Record Date") for the determination of
shareholders entitled to notice of and to vote at the Meeting. Only holders of
common stock at the close of business on the Record Date will be entitled to
vote at the Meeting. The election of directors will be made by a plurality of
the votes cast at the meeting. The affirmative vote of a majority of the shares
represented in person or by proxy at the Meeting is needed for approval of any
other proposals. The Board of Directors believes the adoption of the above
described proposals is in the best interest of the Company and its shareholders.
Whether or not you expect to attend the Meeting, and regardless of
the number of shares you own, we urge you to read the attached proxy statement
and to promptly date, sign and mail the enclosed proxy in the envelope provided.
Sincerely,
/s/ ROBERT R. AMERSON
--------------------------------------
Robert R. Amerson
President and Chief Executive Officer
================================================================================
<PAGE> 3
FLANDERS CORPORATION
NOTICE OF
ANNUAL MEETING OF SHAREHOLDERS
AND PROXY STATEMENT*
TO BE HELD DECEMBER 4, 1997
To the Shareholders of Flanders Corporation:
NOTICE IS HEREBY GIVEN that the Annual Meeting of the Shareholders of Flanders
Corporation (the "Company") will be held at 531 Flanders Filters Road,
Washington, North Carolina 27889, on December 4, 1997, at 10:00 a.m., Eastern
Standard Time for the following purposes:
1. To elect the directors of the Company to serve until the next
Annual Meeting of Shareholders, or until their successors are
elected and qualified.
2. To ratify the selection of McGladrey & Pullen, L.L.P. as the
Company's independent auditors for the current fiscal year.
3. To transact such other business as may properly come before
the meeting.
The Board of Directors has fixed the close of business on November
12, 1997 as the record date (the "Record Date") for the determination of
shareholders entitled to notice of and to vote at this Annual Meeting. Only
holders of common stock at the close of business on the Record Date will be
entitled to vote at the Annual Meeting.
Please sign, date, and return your proxy in the enclosed envelope so
that your shares may be voted at the meeting. If the shares are held in more
than one name, all holders of record must sign. If you plan to attend the Annual
Meeting, please notify me so that identification can be prepared for you. Thank
you for your interest and consideration.
By Order of the Board of Directors,
Debra E. Hill, Corporate Secretary
THE VOTE OF EACH SHAREHOLDER WILL BE IMPORTANT AT THIS MEETING. YOU ARE URGED TO
COMPLETE AND SIGN THE ENCLOSED PROXY CARD AND RETURN IT IN THE ENCLOSED
POSTAGE-PAID ENVELOPE AS SOON AS POSSIBLE, WHETHER OR NOT YOU PLAN TO ATTEND THE
MEETING. SUCH ACTION WILL NOT AFFECT YOUR RIGHT TO VOTE IN PERSON SHOULD YOU
CHOOSE TO ATTEND THE MEETING.
*Approximate date of mailing to shareholders: November 17, 1997
2
<PAGE> 4
FLANDERS CORPORATION
531 Flanders Filters Road
Washington, North Carolina 27889
PROXY STATEMENT
------------------------------
ANNUAL MEETING OF SHAREHOLDERS
To Be Held December 4, 1997
------------------------------
GENERAL
This Proxy Statement is furnished in connection with the solicitation of Proxies
by the Board of Directors of Flanders Corporation, a North Carolina corporation,
(the "Company") to be voted at the Annual Meeting of Shareholders to be held on
December 4, 1997, and any adjournments thereof, for the purposes set forth
herein and in the accompanying Notice of Annual Meeting of Shareholders. The
Annual Meeting of Shareholders will be held at 531 Flanders Filters Road,
Washington, North Carolina 27889, at 10:00 a.m., Eastern Standard Time.
These proxy solicitation materials were mailed on or about November 17, 1997, to
all shareholders entitled to vote at the meeting. The cost of soliciting these
Proxies will be borne by the Company. These costs will include the expenses of
preparing and mailing the proxy materials for the Annual Meeting and
reimbursement paid to brokerage firms and others for their expenses incurred in
forwarding solicitation material regarding the Annual Meeting to beneficial
owners of the Company's Common Stock. The Company may conduct further
solicitation of Proxies by telephone, facsimile, mail or personal contact by
certain of its directors, officers and employees, none of whom will receive
additional compensation for assisting with the solicitation.
VOTING OF PROXIES
Proxies shall be voted in accordance with the directions of the Shareholders and
will be voted by Robert R. Amerson, President of the Company and Steven K.
Clark, Chief Financial Officer of the Company. Unless otherwise directed,
Proxies will be voted (i) FOR the persons named below as management's nominees
for directors of the Company, and (ii) FOR the ratification of McGladrey &
Pullen, L.L.P. as the Company's independent auditors for the fiscal year ending
December 31, 1997. Management knows of no other matter or motion to be presented
at the meeting. If any other matter or motion should be presented at the meeting
upon which a vote may be taken, it is the intention of the persons named in the
accompanying form of proxy to vote such proxy in accordance with their judgment,
including any matter or motion dealing with the conduct of the meeting.
REVOCABILITY OF PROXIES
Any stockholder giving a proxy may revoke it at any time before it is exercised
by delivering written notice of revocation to the Company, by delivering a duly
executed proxy bearing a later date, or by attending the meeting and voting in
person.
3
<PAGE> 5
REQUIRED VOTE
The Company's Board of Directors has set the close of business, November 12,
1997, as the record date for the determination of shareholders entitled to
notice of and to vote at the Annual Meeting. At such date, there were 24,888,690
shares of the Company's Common Stock, par value $0.001 per share (hereinafter
referred to as "Common Stock") issued and outstanding, each of which entitles
the holder thereof to one vote on all matters which may come before the meeting.
The Company's Bylaws provide that the holders of a majority of the issued and
outstanding shares of the Company entitled to vote, represented in person or by
Proxy, constitute a quorum at any shareholders' meeting. All elections of
directors will be decided by a plurality of the votes cast at the meeting in
respect thereof. The ratification of McGladrey & Pullen, L.L.P. as the Company's
independent auditors for the current fiscal year will be decided by a majority
of the votes cast at the meeting in respect thereof. Present management, which
beneficially holds approximately forty-five percent (45%) of the aggregate of
the Common Stock, has indicated its intention to vote in favor of all directors
and in favor of the ratification of McGladrey & Pullen, L.L.P. as the Company's
independent auditors. If no voting direction is indicated on the Proxy Card, the
shares will be considered voted FOR the election of the nominees for director
and FOR the ratification of McGladrey & Pullen, L.L.P. as the Company's
independent auditors.
PROPOSAL ONE
ELECTION OF DIRECTORS
General
At the Annual Meeting, the holders of Common Stock will elect the directors of
the Company. Each director will hold office until the next Annual Meeting or
until his successor is elected and qualified. Cumulative voting is not permitted
in the election of directors. IN THE ABSENCE OF INSTRUCTION TO THE CONTRARY, THE
PERSONS NAMED IN THE ACCOMPANYING PROXY WILL VOTE IN FAVOR OF THE PERSONS NAMED
BELOW AS THE COMPANY'S NOMINEES FOR DIRECTORS OF THE COMPANY. All of the
nominees are presently members of the Board of Directors. Each of the nominees
has consented to be named herein and to serve if elected. It is not anticipated
that any nominee will become unable or unwilling to accept nomination or
election, but if such should occur, the persons named in the proxy intend to
vote for the election in his stead of such other person as management of the
Company may recommend.
Nominees for Directors
The nominees for Directors of the Company and their ages as of November 7, 1997,
are as follows:
<TABLE>
<CAPTION>
Name Age
- ---- ---
<S> <C>
Thomas T. Allan 60
Robert R. Amerson 47
Steven K. Clark 44
Gustavo Hernandez 63
</TABLE>
4
<PAGE> 6
<TABLE>
<CAPTION>
Name Age
- ---- ---
<S> <C>
William H. Clark 54
William M. Claytor 56
</TABLE>
Directors are elected annually and serve until their successor is elected and
qualified or until earlier resignation.
THOMAS T. ALLAN. Mr. Allan is Chairman of the Board of the Company, a position
he has held since 1989. Mr. Allan has been with the Company since 1964, and is
familiar with all aspects of the Company's business. Mr. Allan holds a Bachelor
of Arts degree in Journalism from the University of Pennsylvania.
ROBERT R. AMERSON. Mr. Amerson has been President and Chief Executive Officer of
the Company since 1987. Mr. Amerson is also a Director, a position he has held
since 1988. Mr. Amerson joined the Company in 1987 as Chief Financial Officer.
Mr. Amerson has a Bachelor of Science degree in Business Administration from
Atlantic Christian College.
STEVEN K. CLARK. Mr. Clark was named as Vice President and Chief Financial
Officer of the Company as of December 15, 1995, and a Director of the Company as
of December 29, 1995. Mr. Clark acted as a consultant to the Company from
November 15, 1995 through December 15, 1995. From July 1992 through October
1995, he was the Chief Financial Officer of Daw Technologies, Inc., a specialty
cleanroom contractor and major customer of the Company. While Chief Financial
Officer of Daw Technologies, Mr. Clark was late in filing a Form 3 amendment and
certain Form 4s and Form 5s. He agreed to a cease and desist order with respect
to these violations. No violations other than the timeliness of filing those
reports were alleged by the Securities and Exchange Commission. Prior to this he
was a senior partner of Miller & Clark, an accounting and management services
firm. Mr. Clark spent four years with Price Waterhouse, and an additional four
years with Arthur Andersen, both accounting firms. He is a Certified Public
Accountant, has Bachelor of Arts degrees in Accounting and Political Science and
a Master of Business Administration degree, all from the University of Utah.
GUSTAVO HERNANDEZ. Mr. Hernandez has been President of Precisionaire since 1979,
and became a Director and Vice President of Operations of the Company
contemporaneously with the Company's acquisition of Precisionaire in September
1996. Mr. Hernandez joined Precisionaire in 1969 as Vice President of Finance.
Mr. Hernandez has a Bachelor of Arts degree in Accounting from the University of
South Florida.
WILLIAM H. CLARK. Mr. Clark has been an outside Director of the Company since
June 1996. He is and has been since 1977, the President and owner of Bill Clark
Construction Company, Inc., a construction company located in Greenville, North
Carolina specializing in residential development. He is currently a member of
the Business Advisory Counsel of the East Carolina University School of
Business. Mr. Clark has a Bachelor of Arts degree and a Master of Business
Administration degree, both from East Carolina University.
WILLIAM M. CLAYTOR. Mr. Claytor has been an outside Director of the Company
since 1990. He is a partner in the law firm of Baucom, Claytor, Benton, Morgan,
Wood & White, P.A., and has held such position since 1973. Mr. Claytor graduated
from Memphis State University School of Law in 1969 and from the University of
Missouri in 1963.
5
<PAGE> 7
Board Meetings and Committees
During the fiscal year ended December 31, 1996, the Company's Board of Directors
met six (6) times and also executed various resolutions and written actions in
lieu of meeting. All directors were in attendance at each of these meetings. The
Board of Directors has an Audit Committee and a Compensation Committee. The
Audit Committee reviews the results and scope of the audit and other services
provided by the Company's independent auditors, reviews and evaluates the
Company's internal audit and control functions, and monitors transactions
between the Company and its employees, officers and directors. The Compensation
Committee administers the Company's equity incentive plans and designates
compensation levels for officers and directors of the Company. The Audit
Committee met two (2) times during the fiscal year 1996. The Compensation
Committee met four (4) times during the fiscal year 1996.
The members of the Audit Committee are Mr. W.H. Clark and Mr. W. M. Claytor. The
members of the Compensation Committee are Mr. Claytor and Mr. Allan. Both Mr.
Claytor and Mr. Clark are non-employee directors. Mr. Allan is the Chairman of
the Board, his compensation is fixed at $71,000 per year, and he is not eligible
for bonuses.
Compensation of Directors
Directors who are Company employees receive no additional or special
remuneration for serving as directors. The Company's non-employee directors are
paid $500 plus out-of-pocket expenses for each meeting of the Board of Directors
and certain outside directors receive options to purchase shares of Common Stock
of the Company pursuant to the Director Option Plan described below.
VOTE REQUIRED
The affirmative vote of a plurality of a quorum of shareholders is required for
the election of each of the nominee directors.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF EACH OF THE NOMINEE
DIRECTORS STATED ABOVE AS THE COMPANY'S DIRECTORS FOR THE FISCAL YEAR ENDING
DECEMBER 31, 1997. PROXIES SOLICITED BY THE BOARD OF DIRECTORS WILL BE SO VOTED
UNLESS THE SHAREHOLDERS SPECIFY OTHERWISE ON THEIR PROXY CARDS.
PROPOSAL TWO
RATIFICATION OF APPOINTMENT OF
INDEPENDENT AUDITORS
The firm of McGladrey & Pullen, L.L.P. served as independent auditors of the
Company for the fiscal year ended December 31, 1996. The Board of Directors, on
the recommendation of the Audit Committee, has selected that firm to continue in
this capacity for the current fiscal year. The Company is asking the
shareholders to ratify the selection by the Board of Directors of McGladrey &
Pullen, L.L.P. as independent auditors to audit the consolidated financial
statements of the Company for the current fiscal year ending December 31, 1997
and to perform other appropriate services.
6
<PAGE> 8
Neither McGladrey & Pullen, L.L.P., nor any of its members has any financial
interest, direct or indirect, in the Company, nor has McGladrey & Pullen,
L.L.P., nor any of its members ever been connected with the Company as promoter,
underwriter, voting trustee, director, officer, or employee. In the event the
shareholders do not ratify such appointment, the Board of Directors will
reconsider its selection. Representatives of McGladrey & Pullen, L.L.P. may
attend the meeting and may make a statement if they desire to do so.
VOTE REQUIRED
The affirmative vote of a majority of a quorum of shareholders is required for
the ratification of the appointment of McGladrey & Pullen, L.L.P.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE RATIFICATION OF MCGLADREY &
PULLEN, L.L.P. AS THE COMPANY'S INDEPENDENT ACCOUNTANTS FOR THE FISCAL YEAR
ENDED DECEMBER 31, 1997. PROXIES SOLICITED BY THE BOARD OF DIRECTORS WILL BE SO
VOTED UNLESS SHAREHOLDERS SPECIFY OTHERWISE ON THEIR PROXY CARDS.
OTHER INFORMATION
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the
beneficial ownership of the Company's Common Stock, as of November 7, 1997, with
respect to (i) each person known by the Company to own beneficially more than 5%
of the Common Stock, (ii) each of the Company's directors, (iii) each of the
executive officers, and (iv) all directors and executive officers of the Company
as a group.
<TABLE>
<CAPTION>
NUMBER OF COMMON STOCK PERCENTAGE OF OUTSTANDING
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIALLY OWNED SHARES OF COMMON STOCK(1)
- ------------------------------------ ------------------ --------------------------
<S> <C> <C>
Thomas T. Allan(2)(4) 4,399,567 17.57%
531 Flanders Filters Road
Washington, NC 27889
Robert R. Amerson(2)(3) 8,160,759 29.11%
531 Flanders Filters Road
Washington, NC 27889
Steven K. Clark(2)(3) 5,364,014 19.13%
531 Flanders Filters Road
Washington, NC 27889
Gustavo Hernandez(5) 65,393 *
2399 26th Avenue North
St. Petersburg, FL 33734
Steven Klocke(6) 109,427 *
531 Flanders Filters Road
Washington, NC 27889
</TABLE>
7
<PAGE> 9
<TABLE>
<CAPTION>
<S> <C> <C>
Knox Oakley(6) 94,525 *
531 Flanders Filters Road
Washington, NC 27889
William H. Clark 12,101 *
531 Flanders Filters Road
Washington, NC 27889
William M. Claytor(7) 164,172 *
531 Flanders Filters Road
Washington, NC 27889
Officers and Directors as a Group 14,155,058 44.99%
(2)(3)(4)(5)(6)(7)
</TABLE>
--------------
* Represents less than 1% of the total issued and outstanding shares of
Common Stock.
(1) Applicable percentage of ownership is based on 24,888,690 shares of
Common Stock outstanding as of November 7, 1997, together with all
applicable options for unissued securities for such stockholders
exercisable within 60 days. Shares of Common Stock subject to options
exercisable within 60 days are deemed outstanding for computing the
percentage ownership of the person holding such options, but are not
deemed outstanding for computing the percentage of any other person.
(2) Shares beneficially owned include shares subject to an original option
in favor of Messrs. Amerson and Clark (3,321,021 shares and 2,214,014
shares, respectively), from Thomas T. Allan and A. Russell Allan, III
(4,713,000 shares and 822,035 shares, respectively). As of November 7,
1997, Messrs. Amerson and Clark have exercised 263,900 options each
under the above option agreement; collectively 498,100 from Thomas T.
Allan and 29,700 from A. Russell Allan, III.
(3) Includes 1,150,000 shares which are subject to an option to purchase
such shares from the Company at $1.00 per share, 1,000,000 shares which
are subject to an option to purchase such shares from the Company at
$2.50 per share; and 1,000,000 shares which are subject to an option to
purchase such shares from the Company at $7.50 per share.
(4) Includes 150,000 shares which are subject to an option to purchase such
shares from the Company at $1.00 per share.
(5) Includes 46,791 shares which will be released from escrow only if
Precisionaire meets certain revenue targets during the next two years.
(6) Includes 16,800 shares which are subject to an option to purchase such
shares from the Company at $2.50 per share, 10,000 shares which are
subject to an option to purchase such shares from the Company at $7.50
per share, and 10,000 shares which are subject to an option to purchase
such shares from the Company at $7.125 per share.
(7) Includes 50,000 shares which are subject to an option to purchase such
shares from the Company at $1.00 per share.
8
<PAGE> 10
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation Long-Term Compensation
----------------------------------------------- ---------------------------------
Other Awards Payout
Annual Restricted
Compen- Stock LTIP
Name and Principal Position(1) Year Salary Bonus sation (2) Awards Options Payouts
- ---------------------------- ---- --------- ------ ---------- ------ --------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Robert R. Amerson 1996(3) $ 212,550 $ -- $ -- $ -- 2,000,000 $ --
President 1995 128,846 -- 137,077 -- 1,150,000 --
1994 100,000 -- 124,500 -- -- --
Steven K. Clark 1996(4) 150,192 -- -- -- 2,000,000 --
Chief Financial Officer 1995 15,000 -- -- -- 1,150,000 --
1994 -- -- -- -- -- --
</TABLE>
- ----------
(1) Gustavo Hernandez, a Director of the Company, is the President of
Precisionaire. He commenced his employment with the Company in September
1996. Mr. Hernandez will receive an annual salary of $250,000, plus a
possible bonus, commencing in September 1996, under his Employment
Agreement. See "Employment Agreements." During 1996, Mr. Hernandez was
paid a total of $292,269 by the Company and Precisionaire and during
1995 and 1994, Mr. Hernandez was paid $218,049 and $188,714,
respectively by Precisionaire.
(2) Represents compensation paid by the Company to Flanders Equity
Corporation, a company owned principally by Messrs. Allan and Amerson.
(3) Robert R. Amerson's annual salary is $250,000, plus a possible bonus
each year, under his Employment Agreement, as amended. See "Employment
Agreements."
(4) Steven K. Clark commenced his employment with the Company as of December
15, 1995. Mr. Clark's annual salary is $250,000, plus a possible bonus
each year, under his Employment Agreement, as amended. See "Employment
Agreements."
Options Granted in Last Fiscal Year
The following table sets forth the aggregate number and value of stock options
granted by the Company for services rendered during 1996 to the Company's Chief
Executive Officer and to each of the Company's other executive officers whose
annual salary, bonus and other compensation exceeded $100,000.
9
<PAGE> 11
<TABLE>
<CAPTION>
Potential Realizable Value at
Assumed Annual Rates of
Stock Price Appreciation
for Option Term(1)
% of Total -----------------------------
Options
Granted to Exercise or
Options Employees in Base Price Expiration
Name Granted Fiscal Year ($/Sh) Date 5% 10%
- --------------------- --------- ------------- -------- ------ ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
Robert R. Amerson 1,000,000 23.6% $ 2.50 02/01 $ 708,397 $1,613,272
1,000,000 23.6% 7.50 06/01 2,125,190 4,839,817
Steven K. Clark 1,000,000 23.6% 2.50 02/01 708,397 1,613,272
1,000,000 23.6% 7.50 06/01 2,125,190 4,839,817
</TABLE>
- ----------
(1) The potential realizable value portion of the foregoing table
illustrates value that might be realized upon exercise of the options
immediately prior to the expiration of their term, assuming the
specified compounded rates of appreciation on the Common Stock over the
term of the options.
Aggregate Option Exercises in Last Fiscal Year and Fiscal Year-End Option Values
The following table sets forth the aggregate number and value of stock options
exercised during the last year by the Company's Chief Executive Officer and by
each of the Company's other executive officers whose annual salary, bonus and
other compensation exceeded $100,000.
<TABLE>
<CAPTION>
Value of
Number of Unexercised
Unexercised In-the-Money
Options at Options at Fiscal
Fiscal Year-End Year-End
Shares Acquired Exercisable/ Exercisable/
Name on Exercise Value Realized Unexercisable Unexercisable
- ----------------- ------------ --------------- ------------- -------------
<S> <C> <C> <C> <C>
Robert R. Amerson -- -- 3,150,000/- $18,381,250/-
Steven K. Clark -- -- 3,150,000/- 18,381,250/-
</TABLE>
EMPLOYMENT AGREEMENTS
The Company has entered into employment agreements with Messrs. Amerson and S.
K. Clark effective as of December 15, 1995 ("Employment Agreements"). The
Employment Agreements, as amended, provide for an annual base salary of $250,000
for both Mr. Amerson and Mr. Clark. The Employment Agreements each have an
initial five year term. The Employment Agreements also provide that the
executive shall be entitled to the following termination payments: (i) 100% of
his current base salary if the employment is terminated as a result of his death
or disability, (ii) up to 200% of his current base salary if the employment is
terminated by the Company for any reason other than death, disability or for
Cause (as defined in his Employment Agreement), or (iii) up to 250% of the
executive's gross income during the year preceding his termination if the
Employment Agreement is terminated by the executive for Good Reason (as defined
in the Employment
10
<PAGE> 12
Agreement) or by the Company for any reason other than death, disability or
Cause and the termination occurs within two years after a Change of Control (as
defined in the Employment Agreement) of the Company has occurred.
The Company has also entered into an employment agreement with Mr. Hernandez
effective September 23, 1996. This agreement currently provides for a base
salary of $250,000 and has an initial five (5) year term. The employment
agreement also provides that the executive shall be entitled to the following
termination payments: (i) 100% of his current base salary if the employment is
terminated as a result of his death or disability, and (ii) up to 200% of his
current base salary, if the employment is terminated by the Company for any
reason other than death, disability or for cause (as defined in his employment
agreement).
DIRECTOR OPTION PLAN
The 1996 Director Option Plan provides for the grant of stock options to outside
directors of the Company who were elected or appointed after February 1, 1996,
and who were not existing directors on the effective date of the plan. Each such
outside director who is serving as a director on January 1 of each calendar year
will automatically be granted an option to acquire up to 5,000 shares of Common
Stock at an exercise price per share not less than the fair market value per
share of Common Stock on such date, assuming such outside director had been
serving for at least six months prior to the date of grant.
Payment of the exercise price for options granted under the Director Option Plan
may be made in cash, check or in shares of the Company's Common Stock. Options
under the Director Option Plan are fully exercisable upon six months of the
anniversary of receipt. Options granted under the Director Option Plan are not
transferrable, except under limited circumstances. If the outside director
optionee ceases to be an outside director other than by reason of death or
disability, all unexercised options terminate three months thereafter.
The Company has reserved 500,000 shares of its Common Stock for issuance under
the Director Option Plan. The Director Option Plan terminates in 2006. On July
21, 1997, the Company filed a registration statement on Form S-8 registering the
shares underlying the options under the Director Option Plan, which means that
upon exercise of the options under the Director Option Plan the holders will
receive Common Stock which may be sold in compliance with Rule 144 volume
limitations and the Company's insider trading policy. As of November 7, 1997,
the Company has granted options to purchase 5,000 shares of Common Stock under
the Director Option Plan.
LONG-TERM INCENTIVE PLAN
In 1996, the Company adopted the Long-Term Incentive Plan ("LTI Plan") to assist
the Company in securing and retaining key employees and consultants. The LTI
Plan authorizes grants of incentive stock options, nonqualified stock options,
stock appreciation rights ("SARs"), performance shares, restricted stock awards,
dividend equivalents or other stock-based awards to individuals who are
officers, key employees or outside consultants of the Company. There are
1,986,800 shares of Common Stock reserved for award under the LTI Plan. On July
21, 1997, the Company filed a registration statement on Form S-8 registering the
shares underlying the options under the LTI Plan, which means that upon exercise
of the options granted under the LTI Plan (i) certain holders will receive
unrestricted stock, which may be sold at any time so long as the sale is in
compliance with the Company's insider trading policy, if applicable and (ii)
certain holders will receive Common Stock which may be sold in compliance with
Rule 144 volume limitations and the Company's insider trading policy.
11
<PAGE> 13
The Plan is administered by the Compensation Committee of the Board of
Directors. The Compensation Committee determines the total number and type of
award granted in any year, the number and selection of employees or consultants
to receive awards, the number and type of awards granted to each grantee and the
other terms and provisions of the awards, subject to the limitations set forth
in the LTI Plan.
Stock Option Grants. The Compensation Committee has the authority to select
individuals who are to receive options under the LTI Plan and to specify the
terms and conditions of each option so granted (incentive or nonqualified), the
exercise price (which must be at least equal to the fair market value of the
Common Stock on the date of grant with respect to incentive stock options), the
vesting provisions and the option term. Unless otherwise provided by the
Compensation Committee, any option granted under the LTI Plan expires the
earlier of ten years from the date of grant or, three months after the
optionee's termination of service with the Company if the termination of
employment is attributable to (i) disability, (ii) retirement, or (iii) any
other reason, or 15 months after the optionee's death. As of November 7, 1997,
the Company has granted options to purchase 332,120 shares of Common Stock under
the LTI Plan, 19,200 which have been exercised or canceled.
Stock Appreciation Rights. The Compensation Committee may grant SARs separately
or in tandem with a stock option award. A SAR is an incentive award that permits
the holder to receive (per share covered thereby) an amount equal to the amount
by which the fair market value of a share of Common Stock on the date of
exercise exceeds the fair market value of such share on the date the SAR was
granted (the "base price"). Under the LTI Plan, the Company may pay such amount
in cash, in Common Stock or a combination of both. Unless otherwise provided by
the Compensation Committee at the time of grant, the provisions of the LTI Plan
relating to the termination of employment of a holder of a stock option will
apply equally, to the extent applicable, to the holder of a SAR. A SAR granted
in tandem with a related option will generally have the same terms and
provisions as the related option with respect to exercisability. A SAR granted
separately will have such terms as the Compensation Committee may determine,
subject to the provisions of the LTI Plan. As of November 7, 1997, no SARs have
been granted under the LTI Plan.
Performance Shares. The Compensation Committee is authorized under the LTI Plan
to grant performance shares to selected employees. Performance shares are rights
granted to employees to receive cash, stock, or other property, the payment of
which is contingent upon achieving certain performance goals established by the
Compensation Committee. As of November 7, 1997, no performance shares have been
awarded under the LTI Plan.
Restricted Stock Awards. The Compensation Committee is authorized under the LTI
Plan to issue shares of restricted Common Stock to eligible participants on such
terms and conditions and subject to such restrictions, if any, as the
Compensation Committee may determine. As of November 7, 1997, no restricted
stock awards have been granted under the LTI Plan.
Dividend Equivalents. The Compensation Committee may also grant dividend
equivalent rights to participants subject to such terms and conditions as may be
selected by the Compensation Committee. Dividend equivalent rights entitle the
holder to receive payments equal to dividends with respect to all or a portion
of the number of shares of stock subject to an option award or SARs, as
determined by the Committee. As of November 7, 1997, no dividend equivalents
have been awarded under the LTI Plan.
12
<PAGE> 14
401(K) PLAN
The Company has a defined contribution 401(k) salary reduction plan ("401 (k)
Plan"). Company employees who are at least 21 years of age are eligible to
participate in the 401(k) Plan after six months of service. Eligible employees
become participants in the 401(k) Plan on the earlier of the first day of the
plan year or the first day of the seventh month of the plan year coinciding with
or next following the date on which the employee meets the 401(k) Plan's
eligibility requirements. By electing to defer a portion of his or her
compensation, a participating employee may make pre-tax contributions to the
401(k) Plan, subject to limitations under the Internal Revenue Code of 1986, as
amended, of up to 15% of his or her total compensation. The Company may make
matching contributions to the 401 (k) Plan at the discretion of its Board of
Directors, up to the first 4% of compensation deferred. Participant
contributions and earnings are 100% vested, while Company matching contributions
vest in increments over a six-year period. Participants may alter their
contribution amounts as of January 1st, April 1st, July 1st or October 1st of
any year. Contributions may be withdrawn only after the participant reaches the
age of 59 1/2 or in the event of retirement, death, disability, termination of
service or financial hardship, with possible penalties for certain early
withdrawals. The Company pays all expenses associated with administration of the
401(k) Plan.
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
GENERAL
The following report shall not be deemed incorporated by reference into any
filing under the 1933 Act or under the Securities Exchange Act of 1934 (the
"1934 Act"), except to the extent that the Company specifically incorporates
this information by reference, and shall not otherwise be deemed filed under
either the 1933 Act or the 1934 Act.
The Compensation Committee is composed of two independent directors who have no
"interlocking relationships" (as defined by the Securities and Exchange
Commission.)
Flanders operates in highly competitive businesses and competes nationally for
personnel at the executive and technical staff level. Outstanding candidates are
aggressively recruited, often at premium salaries. Highly qualified employees
are essential to the success of the Company. The Company is committed to
providing competitive compensation that helps attract, retain, and motivate the
highly skilled people it requires. The Committee strongly believes that a
considerable portion of the compensation for the Chief Executive Officer and
other top executives must be tied to the achievement of business objectives,
completing acquisitions, and to business unit and overall company performance,
both current and long-term.
EXECUTIVE COMPENSATION
The Company's executive compensation program is administered by the Compensation
Committee of the Board of Directors. The role of the Compensation Committee is
to review and approve salaries and other compensation of the executive officers
of the Company, to administer the Executive Officer Bonus Plan (the "Bonus
Plan") and stock option plans, and to review and approve stock option grants to
all employees including the executive officers of the Company.
13
<PAGE> 15
General Compensation Philosophy
The Company's compensation philosophy is that total cash compensation should
vary with the performance of the Company and any long-term incentive should be
closely aligned with the interest of the stockholders. Total cash compensation
for the executive officers consists of the following components:
o Base salary
o An executive officer bonus that is related to growth in
sales and operating earnings of the Company.
Long-term incentives are realized through the granting of stock options to
executives and key employees through the LTI Plan, which was adopted by the
Board and approved by a majority of the Company's shareholders in January of
1996. The Company also has granted certain non-qualified options to its
executive officers. The Company has no other long-term incentive plans for its
officers and employees.
Base Salary and Executive Officer Bonus Target
Current base salaries for the executive officers of the Company were determined
by arms' length negotiations with the Board of Directors. Certain executive
officers have employment contracts with the Company. See "Employment
Agreements."
Stock Options
Stock options are granted to aid in the retention of executive and key employees
and to align the interests of executive and key employees with those of the
stockholders. The level of stock options granted (i.e., the number of shares
subject to each stock option grant) is based on the employee's ability to impact
future corporate results. An employee's ability to impact future corporate
results depends on the level and amount of job responsibility of the individual.
Therefore, the level of stock options granted is proportional to the
Compensation Committee's evaluation of each employee's job responsibility. For
example, Robert R. Amerson, as the Chief Executive Officer, has the highest
level of responsibility and would typically be awarded the highest level of
stock options. Stock options are granted at a price not less than the fair
market value on the date granted.
Respectfully submitted,
COMPENSATION COMMITTEE:
Thomas T. Allan
William M. Claytor
14
<PAGE> 16
COMPARATIVE STOCK PERFORMANCE GRAPH1
The following graph2 shows a comparison of cumulative total returns for the
Company, the NASDAQ Stock Market -- U.S. Index and the Standard & Poor's
Specialized Manufacturing Index during the period commencing February 27, 1996
and ending September 30, 1997. The comparison assumes $100 was invested on
February 27, 1996 in the Company's Common Stock with the reinvestment of all
dividends, if any. Total shareholder returns for prior periods are not an
indication of future returns.
[GRAPH]
<TABLE>
<CAPTION>
CUMULATIVE TOTAL RETURN
-------------------------------------
2/7/96 12/31/96 9/30/97
<S> <C> <C> <C> <C>
FLANDERS CORPORATION FLDR 100 380 310
NASDAQ STOCK MARKET (U.S.) INAS 100 122 160
NASDAQ NON-FINANCIAL INNF 100 121 156
</TABLE>
- --------
(1) Note: This Section of this proxy statement shall not be deemed to be
incorporated by reference into any filing by the Company with the SEC
under the Securities Act of 1933 or the Securities Exchange Act of 1934,
notwithstanding any such incorporation by reference of any other portions
of this proxy statement.
(2) The Company did not have a public market for its stock prior to its
listing on the OTC Bulletin Board in February 1996.
15
<PAGE> 17
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In November 1995, Thomas T. Allan, Robert R. Amerson and Steven K. Clark entered
into an Indemnity Agreement with Flanders whereby Messrs. Allan, Amerson and
Clark agreed to collectively deposit up to $1,500,000 into an escrow fund to
indemnify the Company for the payment of any claims, judgments, and expenses
arising from potential environmental claims made by the EPA, and $525,000 due
for the settlement of the following lawsuits against the Company: Hartford
Casualty Insurance Co. v. Flanders, Filters, Inc., and St. Paul Fire and Marine
Insurance Co. v. Flanders Filters, Inc. The Company waived the escrow fund
requirement. The indemnification is limited to $1,500,000 and in no event will
any of the individuals named be required to contribute more than $500,000 each.
Messrs. Allan, Amerson and Clark have complied with the Indemnity Agreement
whereby payments of $525,000 were made to the respective insurance companies
who are the plaintiffs in the above-described lawsuits. Messrs. Allan, Amerson
and Clark have collectively borrowed $327,039 from the Company to make payments
due under the Indemnity Agreement; the parties have paid the remainder in cash.
In November 1995, Steven K. Clark and Robert R. Amerson entered into an option
to acquire 5,535,035 shares of Common Stock of the Company (representing
approximately 80% of the Common Stock of the Company owned by Thomas T. Allan
and A. Russell Allan, III) for an aggregate price of approximately $13,838,000.
As of April 1997, the Company purchased certain property located in Selma, North
Carolina from ABB Partnership for $250,000 and assumed approximately $622,000 in
debt related to the property. ABB Partnership is controlled by Robert R.
Amerson, President of the Company. The purchase was entered into on terms
believed by the Company to be fair and reasonable and generally reflective of
market conditions.
As of June 1997, the Company purchased certain property located in Auburn,
Pennsylvania from LHB Realty for $910,000. As of August 1997, the Company
purchased certain property located in Bartow, Florida from POF Realty for
$2,975,000. As of August 1997, the Company purchased certain property located in
St. Petersburg, Florida from Gustavo and Ana Hernandez for $150,000. Gustavo
Hernandez, a director of the Company, is a principal of POF Realty and LHB
Realty. These purchases were entered into as part of the Precisionaire
acquisition on terms believed by the Company to be fair and reasonable and
generally reflective of market conditions.
At June 30, 1997, Steven K. Clark, an officer and director of the Company, owed
the Company $359,013 which he borrowed to settle claims and to make certain
payments under the Indemnity Agreement described above. To evidence the amount
owed, effective February 11, 1997, Mr. Clark issued a note to the Company in the
amount of $109,013 with interest at the variable rate of LIBOR plus 1.25% per
annum (6.9% at September 5, 1997), calculated on the basis of a 360-day year and
a 30-day month. Both the interest and principal due under the note are payable
on February 10, 1999. Mr. Clark also issued a note to the Company in the amount
of $250,000 at the same interest rate on April 25, 1997 and both the interest
and principal due under the note are payable on April 24, 1999.
At June 30, 1997, Robert R. Amerson, an officer and director of the Company,
owed the Company $359,013 which he borrowed to settle claims and to make certain
payments under the Indemnity Agreement described above. To evidence the amount
owed, effective February 11, 1997, Mr. Amerson issued a note to the Company in
the amount of $109,013 with interest at the variable rate of LIBOR plus 1.25%
per annum, calculated on the basis of a 360-day year and a 30-day month. Both
the interest and principal due under the note are payable on February 10, 1999.
Mr. Amerson also issued a note to the Company in the amount of $250,000 at the
same interest rate on April 25, 1997 and both the interest and principal due
under the note are payable on April 24, 1999.
16
<PAGE> 18
At June 30, 1997, Thomas T. Allan, a director of the Company, owed the Company
$759,013 which he borrowed to settle claims and to make certain payments under
the Indemnity Agreement described above and for personal purposes. To evidence
the amount owed, effective July 3, 1996, Mr. Allan issued a note to the Company
in the amount of $650,000 at an interest rate of 7% per annum. Both the interest
and principal due under the note were payable on July 3, 1997, which payment
date was extended by the Company until July 3, 1999. Effective February 11,
1997, Mr. Allan also issued a note in the amount of $109,013 with interest at
the variable rate of LIBOR plus 1.25% per annum, calculated on the basis of a
360-day year and a 30-day month. Both interest and principal due under the note
are payable on February 10, 1999. On September 5, 1997, the combined principal
and interest due on Mr. Allan's notes was $819,500. On such date, Mr. Clark and
Mr. Amerson each assumed $409,750 of Mr. Allan's notes in consideration for the
exercise of 163,900 options under the option agreement described above. The
interest rate due on the assumed loans is at the variable rate of LIBOR plus
1.25% per annum, and both the principal and interest due are payable on
September 4, 1999.
The Board of Directors of the Company has adopted a policy of not entering into
additional transactions with officers or directors or their affiliates, unless
the independent directors made a specific finding that such transactions are in
the best interest of the Company and its public shareholders and that the terms
thereof are no less favorable to the Company than those that could be obtained
from unaffiliated parties.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors, executive officers, and persons who own more than ten percent of a
registered class of the Company's equity securities to file with the Securities
and Exchange Commission (the "SEC") initial reports of ownership and reports of
changes in ownership of Common Stock and other equity securities of the Company.
Officers, directors, and greater than ten-percent beneficial owners are required
by SEC regulation to furnish the Company with copies of all Section 16(a)
reports they file.
Based solely upon review of the copies of such reports furnished to the Company
and written representations that no other reports were required, the Company
believes that there was compliance for the fiscal year ended December 29, 1996
with all Section 16(a) filing requirements applicable to the Company's officers,
directors, and greater than ten-percent beneficial owners, except that William
H. Clark was late in filing a Form 3.
SHAREHOLDER PROPOSALS
Under the present rules of the Commission, the deadline for shareholders to
submit proposals to be considered for inclusion in the Company's Proxy Statement
for next year's Annual Meeting of Shareholders is June 18, 1998. Such proposals
may be included in next year's Proxy Statement if they comply with certain rules
and regulations promulgated by the Commission.
OTHER MATTERS
The Board of Directors is not aware of any other matter which may be presented
for action at the Annual Meeting. Should any other matter requiring a vote of
the shareholders be presented at the Annual Meeting, it is intended that the
proxy holders will vote on such matters in accordance with their best judgment.
17
<PAGE> 19
ANNUAL REPORTS ON FORM 10-K
The Annual Report on Form 10-K for the fiscal year ended December 31, 1996 has
been enclosed with this Proxy Statement. Unless specifically indicated in this
Proxy Statement, the Annual Report is not incorporated in the Proxy Statement
and is not considered as part of the soliciting material.
Flanders Corporation
Debra E. Hill
Corporate Secretary
Washington, North Carolina
November 17, 1997
18
<PAGE> 20
PROXY FLANDERS CORPORATION PROXY
ANNUAL MEETING OF THE SHAREHOLDERS
This Proxy is solicited on behalf of the Board of Directors which
recommends a vote for all nominees and ratification of McGladery & Pullen,
L.L.P. as the Company's independent auditors.
The undersigned hereby appoints Robert R. Amerson and Steven K. Clark, and
each of them, proxies to represent the undersigned with full power of subscriber
at the Annual Shareholders Meeting of Flanders Corporation, to be held on
December 4, 1997, at 10:00 a.m. local time at 531 Flanders Filters Road,
Washington, North Carolina 27889 and at any and all adjournments thereof.
UNLESS OTHERWISE INDICATED
THIS PROXY WILL BE VOTED FOR EACH PROPOSAL SET FORTH BELOW
1. ELECTION OF DIRECTORS This proxy will be voted FOR each of the nominees
identified in the Proxy Statement at the Annual Meeting of Shareholders unless
authority to vote for one or more nominees is expressly withheld. To withhold
authority for one or more individual nominees, cross out the name or names of
such persons.
[ ] FOR all nominees
[ ] WITHHOLD AUTHORITY to vote for any individual nominee, strike a
line through the nominee's name in the list below:
Thomas T. Allan, Robert R. Amerson, Steven K. Clark, Gustavo
Hernandez, William H. Clark, William M. Claytor
2. RATIFICATION OF McGLADREY & PULLEN, L.L.P. AS THE COMPANY'S INDEPENDENT
AUDITORS
[ ] FOR [ ] AGAINST
(Continued and to be signed and dated on the other side)
<PAGE> 21
(Continued from other side)
THE PROXIES ARE AUTHORIZED TO VOTE OR OTHERWISE ACT WITH RESPECT TO SUCH OTHER
BUSINESS AS IN THEIR DISCRETION MAY PROPERLY COME BEFORE THIS MEETING. THIS
PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY THE
UNDERSIGNED SHAREHOLDERS. UNLESS OTHERWISE SPECIFIED, THE SHARES WILL BE VOTED
FOR ALL NOMINEES.
Dated , 1997
---------------------------------
---------------------------------------------
---------------------------------------------
Signature of Shareholder(s)
Note: Signature should agree with the name on
stock certificates as printed thereon. Executors,
administrators, and other fiduciaries should
so indicate when signing.
___________ I plan to personally attend the
Annual Meeting of the Shareholders.
PLEASE DATE, SIGN AND RETURN THIS PROXY IN THE ENCLOSED ENVELOPE.
THANK YOU
