<PAGE> 1
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:
<PAGE> 2
[FLANDERS CORPORATION LETTERHEAD]
November 18, 1998
Dear Shareholders:
You are cordially invited to attend the annual meeting of the
shareholders of Flanders Corporation to be held at 531 Flanders Filters Road,
Washington, North Carolina 27889 on December 10, 1998, at 10:00 a.m. local time.
The purpose of the annual meeting is:
1. To elect four directors of the Company;
2. To ratify the appointment of McGladrey & Pullen, L.L.P. as the
Company's independent auditors for fiscal year 1998; 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
13, 1998, you may vote at the annual meeting. A plurality of the votes cast at
the annual meeting is required to elect a director. The affirmative vote of a
majority of the shares represented in person or by proxy at the annual 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 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,
/s/ ROBERT R. AMERSON
Robert R. Amerson
President and Chief Executive Officer
<PAGE> 3
[FLANDERS CORPORATION LOGO]
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
10, 1998, 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 McGladrey & Pullen, L.L.P. as the
Company's independent auditors for fiscal year 1998; 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
13, 1998, 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 18, 1998
<PAGE> 4
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 1998
annual meeting of shareholders to be held on Thursday, December 10, 1998 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 1997 Annual Report on Form 10-K will be mailed to shareholders
beginning on or about November 18, 1998.
REQUIRED VOTE
Record holders of shares of the Company's common stock, par value $.001
per share, at the close of business on November 13, 1998 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 13, 1998, there were
25,163,339 shares of common stock outstanding.
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.
VOTING OF PROXIES
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 McGladrey & Pullen, L.L.P. as the Company
independent auditors for the 1998 fiscal year. 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.
<PAGE> 5
PROPOSAL ONE -- ELECTION OF DIRECTORS
GENERAL
The Board has nominated four directors for election at the 1998 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 18, 1998.
INFORMATION REGARDING NOMINEES FOR DIRECTORS
The nominees for directors of the Company are as follows:
ROBERT R. AMERSON. Mr. Amerson, age 48, 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, age 45, 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.
WILLIAM H. CLARK. Mr. Clark, age 55, 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 C. GIBBS. Mr. Gibbs, age 40, is nominated to be an outside director of
the Company. As of December 1998, Mr. Gibbs is Vice President in charge of
Corporate Development at Evans & Sutherland Computer Corporation. From 1990
until December 1998, he was a partner in the law firm of Snell & Wilmer, LLP.
Mr. Gibbs has a Bachelor of Science Degree and Juris Doctorate, both from
University of Utah. He also obtained an LL.M. in Securities Regulations from
Georgetown University.
2
<PAGE> 6
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.
IDENTIFICATION OF EXECUTIVE OFFICERS
Set forth below is information regarding the current executive officers
of the Company who are not also directors of the Company.
STEPHEN D. KLOCKE. Mr. Klocke, age 37, 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 59, 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.
BENEFICIAL OWNERSHIP OF SECURITIES
The following table sets forth certain information regarding the
beneficial ownership of the Company's common stock, as of November 18, 1998,
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>
SHARES OF COMMON PERCENTAGE OF
NAME AND ADDRESS OF STOCK BENEFICIALLY OUTSTANDING SHARES OF
BENEFICIAL OWNER OWNED COMMON STOCK(1)
- ------------------------------------ ---------------------- ------------------------
<S> <C> <C>
Robert R. Amerson (2)
531 Flanders Filters Road
Washington, NC 27889 7,934,370 28.02%
</TABLE>
3
<PAGE> 7
<TABLE>
<CAPTION>
SHARES OF COMMON PERCENTAGE OF
NAME AND ADDRESS OF STOCK BENEFICIALLY OUTSTANDING SHARES OF
BENEFICIAL OWNER OWNED COMMON STOCK(1)
- ------------------------------------ ---------------------- ------------------------
<S> <C> <C>
Steven K. Clark(2)
531 Flanders Filters Road
Washington, NC 27889 5,213,088 18.41%
Dresdner Bank AG
Jurgen Ponto - Plaza 1
60301 Frankfurt, Germany 1,516,300 6.03%
Dresdner RCM Global Investors LLC
RCM Limited L.P.
RCM General Corporation
Four Embarcadero Center
San Francisco, CA 94111 1,513,800 6.02%
Stephen Klocke(3)
531 Flanders Filters Road
Washington, NC 27889 109,427 *
William H. Clark(4)
531 Flanders Filters Road
Washington, NC 27889 38,069 *
William C. Gibbs
531 Flanders Filters Road
Washington, NC 27889 0 *
Crabbe Huson Group, Inc.(5)
121 SW Morrison, Suite 1400
Portland, OR 97204 4,579,600 18.20%
C.W. "Andy" Wood
2399 26th Avenue North
St. Petersburg, FL 33734-7568 0 *
Officers and Directors as a 13,389,479 42.44%
Group (2), (3),(4)
</TABLE>
- ----------
* Represents less than 1% of the total issued and outstanding shares of
common stock.
(1) Applicable percentage of ownership is based on 25,163,339 shares of
common stock outstanding as of November 18, 1998, together with all
applicable options for unissued securities for such stockholders
exercisable within sixty days. Shares of common stock subject to options
exercisable within sixty 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
4
<PAGE> 8
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 5,000 shares which are subject to an option to purchase such
shares from the Company at $7.375 per share, and 5,000 shares which are
subject to an option to purchase such shares from the Company at $8.50
per share.
(5) Crabbe Huson Group, Inc. is an Investment Advisor and it does not
directly own any shares of the Company. It shares voting and dispositive
power with respect to the 4,579,600 shares owned by approximately 72 of
its clients.
OTHER INFORMATION REGARDING THE BOARD OF DIRECTORS
BOARD MEETINGS AND COMMITTEES
During the fiscal year ended December 31, 1997, 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 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 1997. The Compensation
Committee met two (2) times during the fiscal year 1997.
The sole member of the Audit Committee and the Compensation Committee
is Mr. W.H. Clark. Mr. Clark is a non-employee director. Thomas T. Allan was 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 certain outside directors receive options to purchase shares of common stock
of the Company pursuant to the Director Option Plan described below.
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 automatically will be granted an option to acquire up to 5,000
shares of common stock at an
5
<PAGE> 9
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 18,
1998, there are 10,000 options outstanding under the Director Option Plan.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth the aggregate cash compensation the
Company paid 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 1997.
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
--------------------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
---------------------------------------- ----------- ---------
OTHER
ANNUAL RESTRICTED
NAME AND PRINCIPAL COMPEN- STOCK LTIP
POSITION YEAR SALARY BONUS SATION AWARDS OPTIONS PAYOUTS
- --------------------- --------- ----------- -------- ----------- ----------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Robert R. Amerson 1997 $ 250,000(1) -- $5,500 -- -- --
Chief Executive 1996 212,550 -- -- -- 2,000,000 --
Officer 1995 128,846 -- $137,077(2) -- 1,150,000 --
Steven K. Clark 1997 $250,000(3) -- -- -- -- --
Chief Financial Officer 1996 150,192 -- -- -- 2,000,000 --
1995 15,000 -- -- -- 1,150,000 --
Gustavo Hernandez 1997 $250,000(4) -- -- -- -- --
Vice President of 1996 292,269 -- -- -- -- --
Operations 1995 218,049 -- -- -- -- --
C.W. "Andy" Wood 1997 $169,856 4,965 -- -- -- --
Vice President of Sales 1996 164,677 29,218 -- -- -- --
1995 155,071 12,500 -- -- -- --
</TABLE>
6
<PAGE> 10
(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) Represents compensation paid by the Company to Flanders Equity
Corporation, a company owned principally by Mr. Amerson.
(3) Mr. 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."
(4) Mr. Hernandez retired as the Vice President of Operations of the Company
and as the President of Precisionaire on December 31, 1997. Mr.
Hernandez retired as director of the Company on April 6, 1998.
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/-- $17,987,500/--
Steven K. Clark -- -- 3,150,000/-- 17,987,500/--
Gustavo Hernandez -- -- --/-- --/--
C.W. "Andy" Wood -- -- --/-- --/--
</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 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
7
<PAGE> 11
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.
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 18, 1998,
there are 424,520 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 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 18, 1998, 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 18, 1998, 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 18, 1998, no restricted
stock awards are outstanding under the LTI Plan.
8
<PAGE> 12
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 18, 1998, no dividend equivalents
are outstanding under the LTI Plan.
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 Securities Act of 1933, as amended (the "1933 Act") or
under the Securities Exchange Act of 1934, as amended (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 one independent director who
has no "interlocking relationships" (as defined by the SEC.)
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.
9
<PAGE> 13
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.
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:
- Base salary
- 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.
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 H. Clark
10
<PAGE> 14
COMPARATIVE STOCK PERFORMANCE GRAPH(1)
The following graph(2) 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, 1998. 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.
COMPARISON OF 31 MONTH CUMULATIVE TOTAL RETURN*
AMONG FLANDERS CORPORATION
THE NASDAQ STOCK MARKET (U.S.) INDEX
AND THE NASDAQ NON-FINANCIAL INDEX
[GRAPH]
<TABLE>
<CAPTION>
Cumulative Total Return
----------------------------------------------
2/27/96 12/31/96 12/31/97 9/30/98
------- -------- -------- -------
<S> <C> <C> <C> <C>
FLANDERS CORPORATION FLDR 100 380 370 160
NASDAQ STOCK MARKET (U.S.) INAS 100 122 150 164
NASDAQ NON-FINANCIAL INNF 100 121 142 158
</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.
11
<PAGE> 15
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In November 1995, Thomas T. Allan, a former director of the Company,
Robert R. Amerson and Steven K. Clark entered into an Indemnity Agreement with
Flanders whereby Messrs. Allan, Amerson and Clark agreed to collectively
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 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.
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. The purchase was entered into on terms believed
by the Company to be fair and reasonable and generally reflective of market
conditions.
At November 18, 1998, Steven K. Clark owed the Company $2,349,372.21
(not including interest) which he borrowed to settle claims, to make certain
payments under the Indemnity Agreement described above and to exercise options
with Thomas T. Allan. 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. On April 25,
1997, Mr. Clark issued a note to the Company in the amount of $250,000 at the
above-described interest rate and both the interest and principal due under the
note are payable on April 24, 1999. On September 5, 1997, Mr. Clark assumed
$409,750 of Mr. Allan's debt owed to the Company, in consideration for the
exercise of 163,900 options under certain option agreements between the parties.
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. On April 15, 1998, Mr. Clark issued a note to the Company in
the amount of $1,580,609.21 with interest at the rate of 7% 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 December 31, 1998.
At November 18, 1998, Robert R. Amerson owed the Company $1,208,956.95
(not including interest) which he borrowed to settle claims, to make certain
payments under the Indemnity Agreement described above and to exercise options
with Thomas T. Allan. 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. On April 25, 1997, Mr. Amerson issued a
note to the Company in the amount of $250,000 at the above-described interest
rate and both the interest and principal due under the note are payable on April
24, 1999. On September 25, 1997, Mr. Amerson assumed $409,750 of Mr. Allan's
debt owed to the Company, in consideration for the exercise of 163,900 options
under certain option agreements between the parties. The interest rate due on
the assumed loans is at the variable rate of LIBOR plus 1.25% per
12
<PAGE> 16
annum, and both the principal and interest due are payable on September 4, 1999.
On May 21, 1998, Mr. Amerson issued a note to the Company in the amount of
$440,193.95 with interest at the rate of 7% 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 December 31, 1998.
At November 18, 1998, the Board of Directors nominated William C. Gibbs
as a Company director. Mr. Gibbs is a partner in the law firm of Snell & Wilmer
which is counsel to the Company.
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, 1997. The Board of Directors,
on the recommendation of the Audit Committee, has selected that firm to continue
in the same capacity for the current fiscal year. The shareholders must ratify
this selection.
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.
Representatives of McGladrey & Pullen, L.L.P. may attend the meeting and may
make a statement if they desire to do so.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS
THAT SHAREHOLDERS VOTE FOR THE RATIFICATION OF
THE APPOINTMENT OF MCGLADREY & PULLEN, L.L.P. 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, 1997 with all Section 16(a) filing requirements applicable to the Company's
officers, directors, and greater than ten-percent beneficial owners.
SHAREHOLDER PROPOSALS FOR 1999 ANNUAL MEETING
If you wish to submit proposals to be included in the Company's 1999
proxy statement, we must receive them on or before Wednesday, July 21, 1999.
Please address your proposals to Corporate Secretary, Flanders Corporation, 531
Flanders Filters Road, Washington, North Carolina 27789.
13
<PAGE> 17
Under the Company's bylaws, if you wish to raise a matter before the
shareholders at the 1999 annual meeting:
- You must notify the Secretary in writing by not later than
September 19, 1999 but not prior to August 20, 1999.
- Your notice must contain the specific information required by
Flanders' 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.
ANNUAL REPORTS ON FORM 10-K
The Annual Report on Form 10-K for the fiscal year ended December 31,
1997 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.
Debra E. Hill
Corporate Secretary
Washington, North Carolina
November 18, 1998
14
<PAGE> 18
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 McGladrey & 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
substitution at the Annual Shareholders Meeting of Flanders Corporation, to be
held on December 10, 1998, 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 William H. Clark
William C. Gibbs
[ ] ABSTAIN
2. RATIFICATION OF McGLADREY & PULLEN, L.L.P. AS THE COMPANY'S INDEPENDENT
AUDITORS
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(Continued, and to be signed and dated on other side)
<PAGE> 19
(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 PROPOSALS.
DATED _________________ ,1998.
_____________________________
_____________________________
SIGNATURE OF SHAREHOLDER(S)
Note: Signature should agree
with the name on stock
certificate as printed
thereon. Executors,
administrators and 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.
