Schedule 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant |X|
Filed by a Party other than the Registrant |_|
Check the appropriate box:
|_| Preliminary Proxy Statement |_| Confidential, For Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
|X| Definitive Proxy Statement |_| Definitive Additional Materials
|_| Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
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):
|X| No fee required.
|_| Fee computed on the table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
(1) Title of each class of securities to which transaction applies:
- -------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- -------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed pursuant to
Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was determined):
- -------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- -------------------------------------------------------------------------------
(5) Total fee paid:
- -------------------------------------------------------------------------------
|_| ______Fee paid previously with preliminary materials:
- -------------------------------------------------------------------------------
|_| Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the form or schedule and the date of its filing.
(1) Amount previously paid:
- -------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
- -------------------------------------------------------------------------------
(3) Filing Party:
- -------------------------------------------------------------------------------
(4) Date Filed:
1
<PAGE>
[Flanders Letterhead]
November 26, 1999
Dear Shareholders:
You are cordially invited to attend the annual meeting of the shareholders
of Flanders Corporation (the "Company") to be held at 531 Flanders Filters Road,
Washington, North Carolina 27889 on December 21, 1999, at 10:00 a.m. local time.
The purposes of the annual meeting are:
1. To elect four directors of the Company;
2. To ratify the appointment of Grant Thornton LLP as the Company's
independent auditors for fiscal year 1999; and
3. To transact any other business that may properly be presented at the
annual meeting.
If you were a shareholder of record at the close of business on November 15,
1999, you may vote at the annual meeting. The foregoing items of business are
more fully described in the proxy statement attached to this notice.
Whether or not you expect to attend the annual 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 card in the envelope
provided.
Sincerely,
Robert R. Amerson
President and Chief Executive Officer
2
<PAGE>
FLANDERS CORPORATION
531 Flanders Filters Road, Washington, North Carolina 27889
----------------------------------------
NOTICE OF
ANNUAL MEETING OF SHAREHOLDERS
----------------------------------------
The annual meeting of the shareholders of Flanders Corporation will be held
at 531 Flanders Filters Road, Washington, North Carolina 27889, on December 21,
1999, at 10:00 a.m. local time. At the annual meeting, you will be asked to:
1. Elect four directors of the Company;
2. Ratify the appointment of Grant Thornton LLP as the Company's
independent auditors for fiscal year 1999; and
3. Transact any other business that may properly be presented at the annual
meeting.
If you were a shareholder of record at the close of business on November 15,
1999, you may vote at the annual meeting and at any postponements or
adjournments thereof.
You are cordially invited to attend the annual meeting. Your vote is
important. If you plan to attend the annual meeting, please notify me so that I
can prepare identification for you. Whether you plan to attend or not, please
mark, sign, date and promptly return the enclosed proxy card. A return envelope,
which requires no postage if mailed in the United States, has been provided for
your use.
Debra E. Hill
Corporate Secretary
November 26, 1999
3
<PAGE>
FLANDERS CORPORATION
531 Flanders Filters Road
Washington, North Carolina 27889
------------------------------
PROXY STATEMENT
------------------------------
GENERAL
Flanders Corporation, a North Carolina corporation (the "Company"), is
soliciting this proxy on behalf of its Board of Directors for use at the 1999
annual meeting of shareholders to be held on Tuesday, December 21, 1999 at 10:00
a.m. local time, at 531 Flanders Filters Road, Washington, North Carolina 27889,
and at any adjournments thereof. This proxy statement, the proxy card, and the
Company's 1999 Annual Report on Form 10-K will be mailed to shareholders
beginning on or about November 26, 1999.
VOTING PROCEDURES
Record holders of shares of the Company's common stock, par value $.001 per
share, at the close of business on November 15, 1999 may vote at the meeting.
Each shareholder has one vote for each share of common stock the shareholder
owns. At the close of business on November 15, 1999, there were 25,435,583
shares of common stock outstanding and entitled to vote at the meeting.
Votes cast by proxy or in person at the annual meeting will be tabulated by
the inspectors of election appointed for the meeting who will also determine
whether or not a quorum is present. 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. Abstentions and broker non-votes are counted as present
for establishing a quorum but as unvoted for determining the approval of any
matter submitted to the shareholders for a vote. A broker non-vote occurs when a
broker votes on some matters on the proxy card but not on others because he does
not have the authority to do so.
Your shares will be voted as you direct on your signed proxy card. If you do
not specify on your proxy card how you want to vote your shares, we will vote
signed returned proxies "for " the Board's nominees and "for" the ratification
of the appointment of Grant Thornton LLP as the Company's independent certified
public accountants for 1999. The Company does not know of any other business
that may be presented at the annual meeting. If a proposal other than the two
listed in the Notice is presented at the annual meeting, your signed proxy card
gives authority to Robert R. Amerson and Steven K. Clark to vote your shares on
such matters in their discretion.
4
<PAGE>
PROPOSAL ONE -- ELECTION OF DIRECTORS
General
The Board of Directors current consists of four directors and the Board has
nominated four directors for election at the 1999 annual meeting. If you elect
them, they will hold office until the next annual meeting, until their
successors are elected and qualified, or until they retire. Cumulative voting is
not permitted in the election of directors. Unless you specify otherwise, your
returned signed proxy will be voted in favor of each of the nominees. If any of
the nominees is unable to serve as a director, your proxy may be voted for
another person nominated by the Board to fill that vacancy, or the Board may
reduce the number of directors to be elected. The following information
concerning each nominee is as of November 26, 1999.
Information Regarding Nominees for Directors
The nominees for directors of the Company are as follows:
Robert R. Amerson. Mr. Amerson, age 49, 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 has a Bachelor of Science degree in Business
Administration from Atlantic Christian College.
Steven K. Clark. Mr. Clark, age 47, 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 ("SEC"). 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.
Linwood Allen Hahn Mr. Hahn, age 51, is nominated to be an outside director of
the Company. Mr. Hahn practices Real Property Law, Estates, Municipal Law and
Corporate Law in Greenville, North Carolina. Mr. Hahn graduated from the
University of North Carolina at Chapel Hill with a BA degree in 1970, the
University of Tennessee College of Law, JD degree in 1973. He is currently a
member of the North Carolina State Bar Association and the North Carolina Trial
Lawyer's Association as well as serving on the advisory boards of several
private charitable organizations.
J. Russell Fleming Mr. Fleming, age 50, is nominated to be an outside director
of the Company. Mr. Fleming is Owner/President of Cape Point Development Co.,
Inc., located in Greenville, North Carolina, specializing in land development
and commercial/multi-family construction. Mr. Fleming is also Owner/President of
New East Management & Realty, Inc., also located in Greenville, NC, which
manages residential and commercial rental properties. Mr. Fleming attended East
Carolina University prior to obtaining his General Contractor and Real Estate
Broker licenses.
Vote Required
A plurality of the shares represented at the meeting is required to elect a
director.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT
SHAREHOLDERS VOTE FOR EACH OF THE NOMINEES FOR DIRECTOR.
5
<PAGE>
EXECUTIVE OFFICERS
Set forth below is information regarding the current executive officers of
the Company (in addition to Messrs. Amerson and Clark) who are not also
directors of the Company.
Stephen D. Klocke. Mr. Klocke, age 38, has been Vice President of Engineering
for the Company since March 1997. He is responsible for all aspects of filter
and equipment design, directs the engineering staff and is directly in charge of
all product and technical literature. Mr. Klocke is a member of the Institute of
Environmental Science, the primary technical standards body for this industry,
where he has chaired many of the committees which make filtration and cleanroom
standards. He has been with the Company since 1986 serving in various
engineering capacities. Mr. Klocke received a Bachelor of Science degree in
Mechanical Engineering from the University of Kentucky and a Bachelor of Arts
degree in Physics from Thomas Moore College.
C.W. "Andy" Wood. Mr. Wood, age 60, has been Vice President of Sales for the
Company since 1998 and Vice President of Sales for Precisionaire, Inc., a
subsidiary of the Company, since 1982. Mr. Wood oversees all marketing and sales
efforts of the Company. Mr. Wood has more than thirty years experience in the
air filtration industry. Mr. Wood has an Associates Degree in Industrial
Management from the Georgia Institute of Technology.
BENEFICIAL OWNERSHIP OF SECURITIES
The following table sets forth certain information regarding the beneficial
ownership of the Company's common stock, as of November 15, 1999, 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. Beneficial ownership of shares, as determined in accordance with
applicable SEC rules, includes shares as to which a person has sole or shared
voting power or sole or shared investment power.
<TABLE>
<CAPTION>
Shares of Common Percentage of
Name and Address of Stock Beneficially Outstanding Shares
Beneficial Owner Owned of Common Stock(1)
- ---------------------------------------- ------------------ ------------------
<S> <C> <C>
Robert R. Amerson (2) 7,914,370 27.69%
531 Flanders Filters Road
Washington, NC 27889
Steven K. Clark (2) 5,193,088 18.17%
531 Flanders Filters Road
Washington, NC 27889
Stephen Klocke (3) 109,427 *
531 Flanders Filters Road
Washington, NC 27889
Linwood Allen Hahn (4) 52,500 *
531 Flanders Filters Road
Washington, NC 27889
J. Russell Fleming(4) 70,000 *
531 Flanders Filters Road
Washington, NC 27889
Dimensional Fund Advisors Inc. 1,418,800 5.58%
1299 Ocean Avenue, 11th Floor
Santa Monica, CA 90401
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
Shares of Common Percentage of
Name and Address of Stock Beneficially Outstanding Shares
Beneficial Owner Owned of Common Stock(1)
- ---------------------------------------- ------------------ ------------------
<S> <C> <C>
Becker Capital Management, Inc. 2,032,100 7.99%
1211 SW 5th Avenue, Suite 2185
Portland, OR 97204
Investment Advisers Inc. 1,349,500 5.31%
P.O. Box 357
Minneapolis, MN 55440
Crabbe Huson Group, Inc. 2,528,600 9.94%
121 SW Morrison, Suite 1400
Portland, OR 97204
C.W. "Andy" Wood
2399 26th Avenue North 700 *
St. Petersburg, FL 33734-7568
Officers and Directors as a
Group (6 persons) (2), (3),(4) 13,339,785 41.85%
- -------------------------------------------------------------------------------
</TABLE>
* Represents less than 1% of the total issued and outstanding shares of
common stock.
(1) Applicable percentage of ownership is based on 25,435,583 shares of
common stock outstanding as of November 15, 1999, together with all
applicable options for unissued securities for such shareholders
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) 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.
(3) 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.
(4) Includes 50,000 shares which are subject to an option to purchase such
shares from the Company at $2.50 per share.
OTHER INFORMATION REGARDING THE BOARD OF DIRECTORS
Board Meetings and Committees
During the fiscal year ended December 31, 1998, the Board of Directors met
two (2) 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
7
<PAGE>
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 1998. The Compensation Committee met two (2)
times during the fiscal year 1998.
Currently, all directors serve on both the Audit Committee and the
Compensation Committee. Thomas T. Allan was also a member of the Compensation
Committee until he retired on April 21, 1998.
Director Compensation
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 upon meeting certain qualifications receive an option to purchase 5,000
shares of the Company's common stock at or above the market price of the common
stock on the date of the grant for every year they remain a director. During
1998, each of the non-employee directors received an option to purchase 50,000
shares of the Company's common stock at an exercise price of $3.9375 per share.
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth the aggregate cash compensation paid by the
Company for services rendered during the last three years 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 $100,000 in 1998.
<TABLE>
<CAPTION>
Annual Compensation Long-Term Compensation
--------------------------------------- -----------------------------------
Awards Payouts
------------------------- --------
Other Restricted
Annual Stock Options/ LTIP
Compen- Award(s) SARs Payouts
Name and Principal Position Year Salary ($) Bonus ($) sation ($) ($) (#) ($)
- --------------------------- ------- ----------- ----------- ------------ ----------- ------------ --------
<S> <C> <C> <C> <C> <C> <C> <C>
Robert R. Amerson 1998(1) $ 250,000 $ - $ - $ - - $ -
President and CEO 1997 250,000 - 5,500 - - -
1996 212,550 - - - 2,000,000 -
Steven K. Clark 1998(2) 250,000 - - - - -
Vice President Finance, 1997 250,000 - - - - -
CFO and COO 1996 150,192 - - - 2,000,000 -
C.W. "Andy" Wood 1998 183,558 - - - - -
Vice President Sales 1997 169,856 - 4,965 - - -
1996 164,677 - 27,218 - - -
</TABLE>
1 Mr. Amerson's annual salary is $250,000, plus a possible bonus each
year, under his Employment Agreement, as amended. See "Employment
Agreements."
2 Mr. Clark's annual salary is $250,000, plus a possible bonus each year,
under his Employment Agreement, as amended. See "Employment Agreements."
8
<PAGE>
Aggregated Option/SAR Exercises in Last Fiscal Year and Fiscal Year-End Option
Values
The following table sets forth the aggregate number and value of stock options
and SAR's 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 exceed $100,000.
<TABLE>
<CAPTION>
Shares Number of Unexercised Value of Unexercised
Acquired Options/SARs at Fiscal In-the-Money Options/
On Value Year-End (#) SARs at Fiscal Year-End
Name Exercise (#) Realized ($) Exercisable/Unexercisable Exercisable/Unexercisable
- -------------------- ------------ ------------ -------------------------- --------------------------
<S> <C> <C> <C> <C>
Robert R. Amerson - $ - 3,150,000 / - $ 5,084,375 / -
Steven K. Clark - - 3,150,000 / - 5,084,375 / -
C.W. "Andy" Wood - - -- / - -- / -
</TABLE>
Employment Agreements
The Company has entered into employment agreements with Messrs. Amerson and
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 and terminate in 2005. 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, 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 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 of the Company has occurred.
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.
The Plan is administered by the Compensation Committee. 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 15, 1999,
there are 503,870 options outstanding under the LTI Plan.
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
9
<PAGE>
exceeds the fair market value of such share on the date the SAR was granted.
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 15, 1999, no SARs are outstanding 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 15, 1999, no
performance shares are outstanding 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 15, 1999, no restricted
stock awards are outstanding 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 15, 1999, no dividend equivalents
are outstanding under the LTI Plan.
REPORT OF THE BOARD OF DIRECTORS ON EXECUTIVE COMPENSATION
General
The Board of Directors is composed of two independent directors who have no
"interlocking relationships" (as defined by the SEC) and two executive officers
and directors, who recuse themselves from matters concerning their own
compensation. The entire Board functioned as the "Compensation Committee" during
1998 and 1999.
The Company 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. 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 and stock option plans,
and to review and approve stock option grants to all employees including the
executive officers of the Company.
10
<PAGE>
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. 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. During 1998, none
of the executive officers, including the Chief Executive Officer, reached their
bonus target, and hence no bonuses were awarded to executive officers in 1998.
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:
William C. Gibbs W. H. Clark
Robert R. Amerson Steven K. Clark
11
<PAGE>
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 NASDAQ Non-Financial
Index during the period commencing February 27, 1996 and ending September 30,
1999. 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.
[Graphic Omitted]
<TABLE>
<CAPTION>
2/96 12/96 12/97 12/98 9/99
<S> <C> <C> <C> <C> <C>
Flanders Corporation 100 380 370 163 104
Nasdaq Stock Market (U.S.) 100 122 150 223 279
Nasdaq Non-Financial 100 121 142 193 207
</TABLE>
- ----------------------------
1 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 1933 Act or the 1934 Act, 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.
12
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
At November 26, 1999, Steven K. Clark owed the Company $2,663,124 (including
interest) which he borrowed to settle claims, to make certain payments under an
indemnity agreement he entered into with the Company and to purchase certain
shares from Thomas T. Allan, a former officer and director. 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, payable in full on February 10, 1999. On April 25, 1997, Mr. Clark
issued a note to the Company in the amount of $250,000 at the above interest
rate, payable in full on April 24, 1999. On September 5, 1997, Mr. Clark assumed
a note between Thomas Allan, a former director, and the Company, for a principal
amount of $409,750, at the above interest rate, payable in full on September 4,
1999. On April 15, 1998, Mr. Clark issued a note to the Company in the amount of
$1,580,609 with interest at the rate of 7% per annum, payable in full on
December 31, 2003. On April 24, 1999, the Board of Directors agreed to
consolidate and refinance Mr. Clark's debt to the Company, whereby Mr. Clark
issued a note to the Company in the amount of $2,569,871 with interest at the
rate of LIBOR plus 1%, payable in full on December 31, 2010, and canceled all of
the other above-described notes.
At November 26, 1999, Robert R. Amerson owed the Company $1,612,257
(including interest) which he borrowed to settle claims, to make certain
payments under an indemnity agreement he entered into with the Company and to
purchase certain shares from Thomas T. Allan, a former officer and director of
the Company. 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 rate of LIBOR plus 1.25% per annum, payable in full on February 10, 1999. On
April 25, 1997, Mr. Amerson issued a note to the Company in the amount of
$250,000 at the above-described interest rate, payable in full on April 24,
1999. On September 25, 1997, Mr. Amerson assumed a note between Thomas Allan, a
former director, and the Company, for a principal amount of $409,750, at the
above interest rate, payable in full on September 4, 1999. On April 15, 1998,
Mr. Amerson issued a note to the Company in the amount of $440,194 with interest
at the rate of 7% per annum, payable in full on December 31, 2003. On April 24,
1999, the Board of Directors agreed to consolidate and refinance Mr. Amerson's
debt to the Company, whereby Mr. Amerson issued a note to the Company in the
amount of $1,555,802 with interest at the rate of LIBOR plus 1%, payable in full
on December 31, 2010, and canceled all of the other above-described notes.
PROPOSAL TWO -- RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
On November 23, 1999, the Board of Directors approved the (i) engagement of
Grant Thornton LLP as the independent auditors for Flanders Corporation and (ii)
dismissal of McGladrey & Pullen LLP as such independent auditors. The
shareholders are being asked to ratify this selection.
During the three fiscal years ended December 31, 1998 and the subsequent
interim period through November 23, 1999, (i) there were no disagreement with
McGladrey & Pullen LLP on any matter of accounting principles or practices,
financial statement disclosure, or auditing scope or procedures, which
disagreements if not resolved to its satisfaction would have caused it to make
reference in connection with its report to the subject matter of the
disagreement, and (ii) McGladrey & Pullen LLP did not advise the registrant
regarding any "reportable events" as defined in Item 304 (a)(1)(v) of Regulation
S-K. During the past two years, Grant Thornton LLP has not advised the
registrant regarding any "reportable event" as defined in Item 304 (a)(1)(v) of
Regulation S-K.
The accountants' report of McGladrey & Pullen LLP on the consolidated
financial statements of Flanders Corporation and subsidiaries as of and for the
years ended December 31, 1998, 1997 and 1996 did not contain any adverse opinion
or disclaimer of opinion, and was not qualified or modified as to uncertainty,
audit scope, or accounting principles.
Neither Grant Thornton LLP or its members has any finanical interest, direct
or indirect in the company nor does Grant Thornton LLP or any of its members
ever been connected with the Company as a promoter, underwriter, trustee,
director, officer or employee. Representatives of Grant Thornton LLP are
expected to attended the meeting, and may make a statement if they so desire.
McGladrey & Pullen, LLP, has not elected to include a statement regarding this
change of independent auditors in this proxy.
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THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE
FOR THE RATIFICATION OF THE APPOINTMENT OF GRANT THORNTON LLP AS THE
COMPANY'S INDEPENDENT AUDITORS.
COMPLIANCE WITH SECTION 16(A) OF THE 1934 ACT
Section 16(a) of the 1934 Act 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 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
31, 1998 with all Section 16(a) filing requirements applicable to the Company's
officers, directors, and greater than ten-percent beneficial owners, except that
C. W. Wood, Leonard Fetcho and William Gibbs each filed a Form 3, reporting
initial ownership, late, and Steve Klocke filed a Form 5 reporting an option
grant late.
SHAREHOLDER PROPOSALS FOR 2000 ANNUAL MEETING
If you wish to submit proposals to be included in the Company's 2000 proxy
statement, we must receive them on or before Wednesday, July 21, 2000. Please
address your proposals to Corporate Secretary, Flanders Corporation, 531
Flanders Filters Road, Washington, North Carolina 27789.
Under the Company's bylaws, if you wish to raise a matter before the
shareholders at the 2000 annual meeting:
o You must notify the Secretary in writing by not later than September 19,
2000 but not prior to August 20, 2000.
o Your notice must contain the specific information required by the
Company's bylaws.
Please note that these requirements relate only to matters you wish to bring
before your fellow shareholders at the annual meeting. They are separate from
the SEC's requirements to have your proposal included in the proxy statement.
REVOCABILITY OF PROXIES
You may revoke your proxy by filing a written notice of revocation with the
Company. You may also revoke your proxy by (1) filing a new proxy bearing a
later date with the Company, or (2) by attending the meeting and voting in
person.
METHOD OF PROXY SOLICITATION
The Company is soliciting this proxy on behalf of its Board of Directors.
The Company will pay the costs of soliciting the proxies. 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 the proxy materials. Directors, officers and regularly
engaged employees of the Company may also solicit proxies without additional
compensation therefor.
A list of shareholders entitled to vote will be available for examination at
the meeting by any shareholder for any purpose germane to the meeting. The list
will also be available on the same basis for ten days prior to the meeting at
our corporate headquarters, 531 Flanders Filters Road, Washington, North
Carolina 27889.
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ANNUAL REPORTS ON FORM 10-K
The Company's Annual Report on Form 10-K for the fiscal year ended December
31, 1998 has been enclosed with this proxy statement. The Form 10-K includes a
list of exhibits on page 32. The Company will furnish copies of any of the
exhibits to its 1998 Annual Report on Form 10-K upon the request of any
shareholder, upon the payment of $25 to the Company in reimbursement for the
Company's reasonable expenses of furnishing the exhibit. Requests should be
directed to Debra Hill at (252) 946-8081.
Debra E. Hill
Corporate Secretary
Washington, North Carolina
November 26, 1999
15
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PROXY
FLANDERS CORPORATION
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 Grant Thornton, 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 21, 1999, 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:
Robert R. Amerson
Steven K. Clark
L. Allen Hahn
J. Russell Fleming
|_| ABSTAIN
2. RATIFICATION OF GRANT THORNTON, L.L.P. AS THE COMPANY'S INDEPENDENT AUDITORS
|_| FOR
|_| AGAINST
|_| ABSTAIN
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 PROPOSALS.
Dated ________________, 1999. ______________________________________
--------------------------------------
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.
