Exhibit 99.1
SETTLEMENT AGREEMENT
AND MUTUAL RELEASE
THIS SETTLEMENT AGREEMENT AND MUTUAL RELEASE (the
“Agreement”) is made and entered this 3 rd
day of October, 2007, effective as of September 30, 2007, by and
between STEVEN K. CLARK (“Clark”); ROBERT R. AMERSON
(“Amerson”); HARRY L. SMITH, JR. (“Smith”);
WAL-PAT, LLC, a North Carolina limited liability company
(“Wal-Pat”); MERCURY DIECUTTING, LLC, a Florida limited
liability company (“Mercury”); and FLANDERS
CORPORATION, a North Carolina corporation ("Flanders").
W I T N E S S E T H:
WHEREAS, Amerson, Smith and Clark are shareholders
in Flanders; and
WHEREAS, Clark and Amerson are members of the Board
of Directors of Flanders; and
WHEREAS, Amerson and Clark each own a fifty percent
(50%) membership interest in Wal-Pat, LLC, a North Carolina limited
liability company; and
WHEREAS, Amerson and Clark each own a fifty percent
(50%) membership interest in Mercury Diecutting, LLC, a Florida
limited liability company; and
WHEREAS, Amerson and Clark desire to separate any
and all business interests which they may own together;
and
WHEREAS, Clark and Flanders desire that
Clark’s employment with Flanders be terminated upon full
execution of this Agreement; and
WHEREAS, Flanders and Clark desire to settle any and
all outstanding claims which they may have against each other;
and
WHEREAS, Clark hereby submits his resignation as a
member of the Board of Directors of Flanders.
NOW, THEREFORE, for and in consideration of the
covenants hereinafter set forth and the sum of Ten Dollars ($10.00)
and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereby
agree as set forth below.
Settlement Agreement and Mutual Release
Page 2
1. Transfer of Interest in Wal-Pat .
Clark represents and warrants that he owns fifty percent (50%) of
the membership interest in Wal-Pat, LLC free and clear of all
claims and encumbrances. In consideration of the transfer of the
Mercury interests set forth in Section 2, Clark hereby transfers to
Amerson his fifty percent (50%) membership interest in Wal-Pat,
LLC, subject to any and all outstanding debts and obligations of
Wal-Pat, LLC. Clark shall execute and deliver to Amerson a bill of
sale or other document evidencing the transfer of said membership
interest in form and substance acceptable to Amerson. Amerson
agrees to assume any and all debts and obligations of Wal-Pat, LLC,
and to indemnify and hold Clark (and his heirs, personal
representatives, successors and assigns) harmless from any and all
actions, causes of action, claims, demands, damages, costs, and
expenses arising out of Clark’s ownership of a fifty percent
(50%) membership interest in Wal-Pat, LLC, or his personal
guarantee of any debts or obligations of Wal-Pat, LLC. Amerson
hereby covenants and agrees to use his best efforts to obtain a
complete release of any and all of Clark’s personal
guarantees for Wal-Pat obligations as soon as commercially
practicable. Clark hereby releases and abandons any right to
receive any additional distributions from Wal-Pat for the year
2007, including, without limitation, the right to receive any tax
distribution under the Wal-Pat Operating Agreement. Amerson
covenants and agrees that Wal-Pat shall not allocate to Clark any
more than Clark’s proportionate share of Wal-Pat income for
the year 2007 taking into account his ownership percentage and the
number of days Clark held his interest during the year.
2.
Transfer of Interest in Mercury
. Amerson represents and warrants that he owns fifty
percent (50%) of the membership interest in Mercury Diecutting, LLC
free and clear of all claims and encumbrances. In consideration of
the transfer of the Wal Pat interests set forth in Section 1,
Amerson hereby transfers to Clark his fifty percent (50%)
membership interest in Mercury Diecutting, LLC, subject to any and
all outstanding debts and obligations of Mercury Diecutting, LLC.
Amerson shall execute and deliver to Clark a bill of sale or other
document evidencing the transfer of said membership interest
in
Settlement Agreement and Mutual Release
Page 3
form and substance acceptable to Clark. Clark agrees
to assume any and all debts and obligations of Mercury Diecutting,
LLC, and to indemnify and hold Amerson (and his heirs, personal
representatives, successors and assigns) harmless from any and all
actions, causes of action, claims, demands, damages, costs, and
expenses arising out of Amerson’s ownership of a fifty
percent (50%) membership interest in Mercury Diecutting, LLC, or
his personal guarantee of any debts or obligations of Mercury
Diecutting, LLC. Clark hereby covenants and agrees to use his best
efforts to obtain a complete release of any and all of
Amerson’s personal guarantees for Mercury obligations as soon
as commercially practicable. Amerson hereby releases and abandons
any right to receive any additional distributions from Mercury for
the year 2007, including, without limitation, the right to receive
any tax distribution under the Mercury Operating Agreement. Clark
covenants and agrees that Mercury shall not to allocate to Amerson
any more than Amerson’s proportionate share of Mercury income
for the year 2007 taking into account his ownership percentage and
the number of days Amerson held his interest during the
year.
3.
Delivery of Books and Records
. Clark has this day delivered to the escrowee
referred to in Section 25 for delivery to Amerson a full, complete
and accurate copy of all financial reports and corporate books for
Mercury Diecutting, LLC. No information contained in such reports
contains any untrue statement of a material fact or omits a
material fact necessary to make the statements therein not
misleading. Amerson has this day delivered to the escrowee referred
to in Section 25 for delivery to Clark a full, complete and
accurate copy of all financial reports and corporate books for Wal
Pat, LLC. No information contained in such reports contains any
untrue statement of a material fact or omits a material fact
necessary to make the statements therein not misleading.
4.
Exercise of Flanders Stock Option by
Clark . Clark hereby exercises in full
his stock option granted by Flanders December 22, 1999, a copy of
which is attached hereto as Exhibit
D (the “Stock Option”), as
reflected on the notice of exercise which is hereby executed and
delivered by Clark and attached to this Agreement as
Exhibit C (the
“Notice of Exercise”) pursuant to which Clark is hereby
surrendering to Flanders as
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Page 4
payment of the exercise price of $2.50 per share a
total of five hundred forty-three thousand, four hundred
seventy-eight (543,478) shares of Common Stock of Flanders owned of
record by Clark since January 10, 2000. Clark shall deliver to
Flanders a duly executed stock power, based upon the terms and
conditions required by Flanders, for the transfer of such five
hundred forty-three thousand, four hundred seventy-eight (543,478)
shares to Flanders at a valuation price of four dollars sixty cents
($4.60) per share. Flanders hereby accepts the Notice of Exercise
and the exercise of the Stock Option in full and the surrender of
the five hundred forty-three thousand, four hundred seventy-eight
(543,478) shares provided for in this Section 4 constitutes full
payment by Clark of the exercise price of the Stock Option.
Flanders also hereby waives any requirement that Clark deliver an
Investment Representation Statement with his Notice of Exercise.
Flanders hereby represents and warrants that the exercise of the
Stock Option complies with the terms and conditions of the Stock
Option. Clark represents that the Stock Option was issued to him at
the date and upon the terms as set forth in the Stock Option and
that the issuance of the Stock Option was approved by the Flanders
board of directors at or prior to the Stock Option date.
5.
Transfer of Flanders Stock to Amerson
. Clark hereby transfers and surrenders to Amerson
Two Hundred Fifty Thousand (250,000) shares of common stock of
Flanders Corporation as full and complete repayment to Amerson for
Clark’s portion of the Tom Allen settlement. Clark shall
deliver to Flanders a duly executed stock power, based upon the
terms and conditions required by Flanders, for the transfer of Two
Hundred Fifty Thousand (250,000) shares to Amerson. Flanders will
thereupon issue new stock certificate(s) to Amerson representing
such stock.
6.
Transfer of Flanders Stock to Satisfy
Debt . Clark owes to Flanders, and/or its
subsidiaries and affiliates, the sum of Five Million Four Hundred
Forty-Five Thousand Eight Hundred Ten and 65/100 Dollars
($5,445,810.65) for loans made by Flanders to Clark (the
“Debt”). Clark hereby transfers and surrenders to
Flanders One Million One Hundred Eighty-Three Thousand Eight
Hundred Seventy-Two (1,183,872) shares of common stock of Flanders
Corporation as full and complete repayment to Flanders for the
Debt. Clark shall deliver to Flanders a duly executed stock power,
based upon the
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Page 5
terms and conditions required by Flanders, for the
transfer of said shares to Flanders. Flanders will thereafter
cancel any and all promissory notes made by Clark which evidence
the Debt.
7.
Purchase of Flanders Stock by Amerson and
Smith . Amerson and Smith shall purchase,
in equal shares, and Clark shall sell all of his remaining shares
of stock of Flanders Corporation to Amerson and Smith, in equal
shares, for the purchase price of Four and 60/100 Dollars ($4.60)
per share, consisting of: (a) at total of seven hundred fifty five
thousand, one hundred eighty three and one-half (755,183.5) shares
to be purchased by Amerson for an aggregate price payable by
Amerson of three million, four hundred seventy three thousand,
eight hundred forty four Dollars and ten Cents ($3,473,844.10); and
(b) a total of seven hundred fifty five thousand, one hundred
eighty three and one-half (755,183.5) shares to be purchased by
Smith for an aggregate price payable by Smith of three million,
five hundred ninety one thousand, fifteen Dollars and thirty four
hundred seventy three thousand, eight hundred forty four Dollars
and ten Cents ($3, 473,844.10). Amerson and Smith shall pay the
purchase price in cash or other immediately available funds upon
fulfillment of all escrow conditions as referenced in Section 25.
Clark shall deliver to Flanders a duly executed stock power, based
upon the terms and conditions required by Flanders, for the
transfer of said stock to Amerson and Smith. Flanders will
thereupon issue new stock certificate(s) to Amerson and Smith
representing such stock. Prior to the exercise of the Stock Option,
Clark’s total ownership in the shares of Flanders is set
forth in Exhibit F . Clark represents he owns no other common shares, of record,
in Flanders. Clark represents that his sole remaining interest in
Flanders is in three stock option grants that provide him with
options to purchase an aggregate of 2,000,000 shares of
Flanders’ common stock, all three of which options will
expire ninety (90) days after the termination of his employment
with Flanders.
8.
Representations and Warranties
.
(a)
Representations and Warranties by
Clark. Clark warrants and represents that
he is the sole owner of any stock in Flanders Corporation to be
surrendered or transferred pursuant to the terms of this Agreement,
that he has full power and authority,
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Page 6
without limitation, to endorse the certificate(s),
and that all such shares are lien free and are not pledged or
assigned as collateral for any debt and are not subject to the
claims of any creditor. All these representations shall be true at
the time of making this Agreement and shall survive the delivery of
all such shares transferred or sold hereunder.
(b)
Representations and Warranties by
Flanders . Flanders represents and
warrants that: (A) this Agreement, including (i) the exercise by
Clark of his stock option referred to
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