SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A)
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Check the appropriate box:
/ / Preliminary Proxy Statement
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/ / Definitive Proxy Statement
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/ / Soliciting Material Pursuant to Section 240.14a-11(c) or
Section 240.14a-12
PUROFLOW INCORPORATED
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(Name of Registrant as Specified In Its Charter)
THE FULL VALUE COMMITTEE
STEEL PARTNERS II, L.P.
WARREN G. LICHTENSTEIN
ROBERT FRANKFURT
JAMES BENENSON, JR.
STEVEN WOLOSKY
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(Name of Persons(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
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and 0-11.
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pursuant to
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Exchange Act Rule 0-11:
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STEEL PARTNERS II, L.P.
150 East 52nd Street, 21st Floor
New York, NY 10022
June 3, 1999
BY FACSIMILE AND FEDERAL EXPRESS
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Board of Directors
Puroflow Incorporated
16559 Saticoy Street
Van Nuys, California 91004
Dear Gentlemen:
Steel Partners II, L.P. ("Steel Partners" or "Steel") currently owns
1,336,100 shares of common stock or 16.7% of the primary shares outstanding of
Puroflow Incorporated ("Puroflow" or the "Company"). We are writing this letter
in response to the press release of the Company dated May 28, 1999.
Although we are encouraged by Puroflow's decision to consult with an
investment banking firm in order to assist the Board in evaluating strategic
alternatives, we were severely disappointed by the Company's adoption of a
poison pill and decision to delay the annual meeting. Although the Company
states in its press release that these moves were made in the best interests of
the Company's shareholders, we find them to be at the least self-serving and at
the most a blatant disregard of the Board's fiduciary duty towards its
shareholders.
We believe the Company's assertions that Steel Partner's is a
"corporate raider" and that we utilize "abusive tactics" in our business to be
completely without merit. Our primary goal in all of our investments is to
increase the value of the shares held by all shareholders. In that regard, we
consistently follow Federal securities regulations, including the filing of
Reports on Schedule 13D and Forms 3 and 4, in order to apprise the Company's in
which we invest, and the investing public in general, of our plans. Our aim is
simple and direct, as you well know. We believe that the best way to deal with
underperforming Company's is to acquire a large enough stake as to give Steel a
platform with which to best express its views and bring forth positive change.
Our recent track record, which has been well-documented, has shown this formula
to have met with great success. For example, Steel's involvement with Aydin
Corporation from October 5, 1998 until April 1999 concluded with a sale of the
Company at a price of $13.50 per share, which represented a premium
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of approximately 39% over the reported closing price of $9.69 per share the day
preceding the announced sale. In addition, Steel's involvement with Medical
Imaging Centers of America ultimately concluded in the sale of that company for
$11.75 per share, as contrasted with the price of $8.25 per share, representing
the closing price on the day prior to the initiation of Steel's proxy
solicitation. Steel Partners has never viewed, nor can it understand how a third
party such as the Company could view, its actions as involving a "creeping
tender". Steel Partners buys its shares primarily on the open market, at current
prices, and promptly discloses such purposes in accordance with Federal
securities laws. Any other characterization is false and misleading to
shareholders and investors. It would be a shame to waste the Company's time and
money in a futile effort to prove otherwise, when the Company should be focusing
all of its energies on maximizing the value of its shares.
On the other hand, it would seem that the Board's current tactics ARE
"abusive" to the Company's shareholders. A poison pill without onerous
provisions, if voted on and approved by the shareholders of the Company and
instituted for a valid purpose, can be an efficient procedure to assure
shareholders of a fair price in the event of an attempted takeover or other
hostile transaction. However, a poison pill put in place without the consent of
shareholders, and with a sole view towards entrenching the current management
and making it impossible for the Company to be sold, is nothing but detrimental
to shareholders. In this light, we hereby request that the Company put the issue
of a poison pill up for a vote of shareholders at the annual meeting, whenever
it may be held. Shareholders should be able to decide for themselves such an
important issue.
In that regard, we reiterate our disappointment with the Company's
postponement of the annual meeting. For most shareholders, the annual meeting is
their only opportunity to speak their mind and take a part in the governance of
the Company. A postponement of the annual meeting takes away the shareholders
right to exercise such actions. Since the Company has had a full year in which
to evaluate its alternatives and plans for the future, it makes us quite wary
that the Company would choose to postpone the annual meeting at such a late
date. We would hope that the Company is sincere in its assertion that the
postponement is for the good of shareholders and not a way for the Company to
issue more "cheap stock" to its officers and directors.
Once again, we would like to offer our assistance in helping the
Company to maximize its value on a friendly, negotiated basis. In that regard,
we would ask that you disclose the name of the investment banking firm with
which you have consulted and the terms, if any, of such consultation. In
addition, we invite the Board to meet with us face to face in order to discuss
our alternatives for the Company, and assist you in your stated goal to enhance
shareholder value.
Sincerely,
/s/ Warren G. Lichtenstein
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Warren G. Lichtenstein
Managing Partner