SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
--------------
SCHEDULE 13D
Under the Securities Exchange Act of 1934
(Amendment No. 8)1
Puroflow Incorporated
- --------------------------------------------------------------------------------
(Name of issuer)
COMMON STOCK, $.01 PAR VALUE
- --------------------------------------------------------------------------------
(Title of class of securities)
746 375 104
- --------------------------------------------------------------------------------
(CUSIP number)
STEVEN WOLOSKY, ESQ.
OLSHAN GRUNDMAN FROME ROSENZWEIG & WOLOSKY LLP
505 Park Avenue
New York, New York 10022
(212) 753-7200
- --------------------------------------------------------------------------------
(Name, address and telephone number of person
authorized to receive notices and communications)
September 16, 1999
- --------------------------------------------------------------------------------
(Date of event which requires filing of this statement)
If the filing person has previously filed a statement on Schedule 13G
to report the acquisition which is the subject of this Schedule 13D, and is
filing this schedule because of Rule 13d-1(b)(3) or (4), check the following box
o.
Note. six copies of this statement, including all exhibits, should be
filed with the Commission. See Rule 13d-1(a) for other parties to whom copies
are to be sent.
(Continued on following pages)
(Page 1 of 22 Pages)
Exhibit Index on Page 11
- --------
1 The remainder of this cover page shall be filled out for a
reporting person's initial filing on this form with respect to the subject class
of securities, and for any subsequent amendment containing information which
would alter disclosures provided in a prior cover page.
The information required on the remainder of this cover page
shall not be deemed to be "filed" for the purpose of Section 18 of the
Securities Exchange Act of 1934 or otherwise subject to the liabilities of that
section of the Act but shall be subject to all other provisions of the Act
(however, see the Notes).
<PAGE>
- ------------------------------- --------------------------
CUSIP No. 746 375 104 13D Page 2 of 22 Pages
- ------------------------------- --------------------------
================================================================================
1 NAME OF REPORTING PERSONS
S.S. OR I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS
STEEL PARTNERS II, L.P.
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) / /
(b) / /
- --------------------------------------------------------------------------------
3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
WC
- --------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEM 2(d) OR 2(e) / /
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OR ORGANIZATION
DELAWARE
- --------------------------------------------------------------------------------
NUMBER OF 7 SOLE VOTING POWER
SHARES
BENEFICIALLY 1,416,000
OWNED BY ---------------------------------------------------------------
EACH
REPORTING
PERSON WITH
8 SHARED VOTING POWER
-0-
---------------------------------------------------------------
9 SOLE DISPOSITIVE POWER
1,416,000
---------------------------------------------------------------
10 SHARED DISPOSITIVE POWER
-0-
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING
PERSON
1,416,000
- --------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES* / /
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
17.4%
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
PN
================================================================================
*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE>
- ------------------------------- --------------------------
CUSIP No. 746 375 104 13D Page 3 of 22 Pages
- ------------------------------- --------------------------
================================================================================
1 NAME OF REPORTING PERSONS
S.S. OR I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS
WARREN LICHTENSTEIN
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) / /
(b) / /
- --------------------------------------------------------------------------------
3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
00
- --------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEM 2(d) OR 2(e) / /
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OR ORGANIZATION
USA
- --------------------------------------------------------------------------------
NUMBER OF 7 SOLE VOTING POWER
SHARES
BENEFICIALLY 1,416,000
OWNED BY ---------------------------------------------------------------
EACH
REPORTING
PERSON WITH
8 SHARED VOTING POWER
-0-
---------------------------------------------------------------
9 SOLE DISPOSITIVE POWER
1,416,000
---------------------------------------------------------------
10 SHARED DISPOSITIVE POWER
-0-
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING
PERSON
1,416,000
- --------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES* / /
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
17.4%
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
IN
============================
*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE>
- ------------------------------- --------------------------
CUSIP No. 746 375 104 13D Page 4 of 22 Pages
- ------------------------------- --------------------------
================================================================================
1 NAME OF REPORTING PERSONS
S.S. OR I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS
ROBERT FRANKFURT
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) / /
(b) / /
- --------------------------------------------------------------------------------
3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
00
- --------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEM 2(d) OR 2(e) / /
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OR ORGANIZATION
USA
- --------------------------------------------------------------------------------
NUMBER OF 7 SOLE VOTING POWER
SHARES
BENEFICIALLY -0-
OWNED BY ---------------------------------------------------------------
EACH
REPORTING
PERSON WITH
8 SHARED VOTING POWER
-0-
---------------------------------------------------------------
9 SOLE DISPOSITIVE POWER
-0-
---------------------------------------------------------------
10 SHARED DISPOSITIVE POWER
-0-
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING
PERSON
-0-
- --------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES* / /
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
-0-
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
IN
================================================================================
*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE>
- ------------------------------- --------------------------
CUSIP No. 746 375 104 13D Page 5 of 22 Pages
- ------------------------------- --------------------------
================================================================================
1 NAME OF REPORTING PERSONS
S.S. OR I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS
STEVEN WOLOSKY
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) / /
(b) / /
- --------------------------------------------------------------------------------
3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
OO
- --------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEM 2(d) OR 2(e) / /
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OR ORGANIZATION
USA
- --------------------------------------------------------------------------------
NUMBER OF 7 SOLE VOTING POWER
SHARES
BENEFICIALLY -0-
OWNED BY -----------------------------------------------------------------
EACH
REPORTING
PERSON WITH
8 SHARED VOTING POWER
-0-
-----------------------------------------------------------------
9 SOLE DISPOSITIVE POWER
-0-
-----------------------------------------------------------------
10 SHARED DISPOSITIVE POWER
-0-
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING
PERSON
-0-
- --------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES* / /
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
-0-
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
IN
================================================================================
*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE>
- ------------------------------- --------------------------
CUSIP No. 746 375 104 13D Page 6 of 22 Pages
- ------------------------------- --------------------------
The following constitutes Amendment No. 8 ("Amendment No. "8") to the
Schedule 13D filed by the undersigned. This Amendment No. 8 amends the Schedule
13D as specifically set forth.
Item 2. Identity & Background.
In connection with the Settlement Agreement (as defined in
Item 4), the Reporting Persons have obtained the agreement of the Company to the
appointment of three members of the Full Value Committee, Warren G. Lichtenstein
Robert Frankfurt and Steven Wolosky, to the Board of Directors of the Issuer, to
serve until the 1999 annual meeting of stockholders, at which time Messrs.
Lichtenstein and Frankfurt shall be nominated to be elected to the Board.
Accordingly, on September 16, 1999, the Full Value Committee was disbanded, and
therefore the Full Value Committee and James Benenson, Jr. are no longer
Reporting Persons.
Item 3 is hereby amended and restated in its entirety as follows:
Item 3. Source and Amount of Funds.
The aggregate purchase price of the 1,416,000 Shares of Common Stock
owned by Steel Partners II is $1,199,500. The Shares of Common Stock owned by
Steel Partners II were acquired with partnership funds.
Item 4 is hereby amended to add the following:
Item 4. Purpose of Transaction.
On September 16, 1999, the Reporting Persons entered into a
Settlement Agreement and Release (the "Settlement Agreement") with the Issuer
and certain of its officers and directors, a copy of which is attached hereto as
Exhibit 7. Reference is made to Exhibit 7 for the complete terms of the
Settlement Agreement. Under the terms of the Settlement Agreement, the Issuer
has expanded the size of the Board to seven members and has granted Steel
Partners three seats on the Board, to be filled by Messrs. Lichtenstein,
Frankfurt and Wolosky. At the Issuer's 1999 Annual Meeting of Stockholders, to
be held on October 21, the Issuer will reduce the size of the Board to five
members, and will nominate Messrs. Lichtenstein and Frankfurt of Steel Partners
and Michael Figoff, Tracy Kent Pugmire and Robert A. Smith to the Board. Reuben
Siwek and Steven Wolosky shall not be nominated for re-election and Mr. Siwek
shall thereafter serve as Chairman-Emeritus of the Board. The Issuer and Steel
Partners have each agreed to vote their shares of Common Stock for the nominees
listed above until the termination of the Settlement Agreement, which shall be
the date following the Issuer's 2000 Annual Meeting of Stockholders, to be
called on or before July 31, 2000.
The Settlement Agreement also provides, among other things, for the
Reporting Persons to refrain from (i) soliciting proxies for the election of
directors to the Board of the Issuer or for any other matter; (ii) acquiring
shares of Common Stock or joining with any other person to form a "group," as
defined under Section 13(d) of the Securities Exchange Act of 1934 (and the
rules
<PAGE>
- ------------------------------- --------------------------
CUSIP No. 746 375 104 13D Page 7 of 22 Pages
- ------------------------------- --------------------------
promulgated thereunder) such that following such acquisition of shares of Common
Stock or formation of a group, the Reporting Persons would beneficially hold in
excess of 19.99% of the outstanding shares of Common Stock, or (iii) engaging or
participating in any tender offer for the shares of Common Stock, until the date
following the Issuer's 2000 Annual Meeting of Stockholders, which shall be
called on or before July 31, 2000. In addition, the Issuer has agreed to amend
the provisions of the Rights Agreement between Issuer and Continental Stock
Transfer and Trust Company, dated as of May 28, 1999, in order to increase the
ownership threshold from 17.5% to 20%.
On September 17, 1999, the Issuer and the Reporting Persons
issued a joint press release (the "Joint Press Release"), pursuant to the terms
of the Settlement Agreement, copy of which is attached hereto as Exhibit 8.
Reference is made to Exhibit 8 for the complete text of the Joint Press Release.
Item 5(a) is hereby amended to read as follows:
Item 5. Interest in Securities of the Issuer.
(a) The aggregate percentage of Shares of Common Stock
reported owned by each person named herein is based upon 8,123,721 Shares
outstanding, which is the total number of Shares of Common Stock outstanding as
reported in the Issuer's Quarterly Report on Form 10-QSB for the fiscal year
ended July 31, 1999.
As of the close of business on September 16, 1999, Steel
Partners II beneficially owns 1,416,000 Shares of Common Stock, constituting
approximately 17.4% of the Shares outstanding. Mr. Lichtenstein beneficially
owns 1,416,000 Shares, representing approximately 17.4% of the Shares
outstanding. Mr. Lichtenstein has sole voting and dispositive power with respect
to the 1,416,000 Shares owned by Steel Partners II by virtue of his authority to
vote and dispose of such Shares. All of such Shares were acquired in open market
transactions.
Item 5(c) is hereby amended to read as follows:
(c) Steel Partners II, L.P. engaged in the following
transactions in the Issuer's Common Stock in the last 60 days.
- --------------------------------------------------------------------------------
Number of Shares Purchase Price Per Share Date of Purchase
Purchased
- --------------------------------------------------------------------------------
10,000 .86375 8/20/99
- --------------------------------------------------------------------------------
Item 6 is amended to add the following:
Item 6. Contracts, Arrangements, Understandings or Relationships With Respect
to Securities of the Issuer.
<PAGE>
- ------------------------------- --------------------------
CUSIP No. 746 375 104 13D Page 8 of 22 Pages
- ------------------------------- --------------------------
On September 16, 1999, the Reporting Persons entered into the
Settlement Agreement, a copy of which is attached hereto as Exhibit 7. See Item
4 for a brief description of the Settlement Agreement.
Other than as described herein, there are no contracts,
arrangements or understandings among the Reporting Persons, or between the
Reporting Persons and any other Person, with respect to the securities of the
Issuer.
Item 7. Material to be Filed as Exhibits.
---------------------------------
1. Joint Filing Agreement between Steel Partners and Warren G.
Lichtenstein.
2. Joint Filing Agreement between Steel Partners, Warren
Lichtenstein, Robert Frankfurt, James Benenson, Jr. and Steven
Wolosky.
3. Preliminary Proxy Statement.
4. Letter to the Board of Directors of Puroflow,
Incorporated dated June 3, 1999.
5. Letter to the Board of Directors of Puroflow,
Incorporated dated August 9, 1999.
6. Letter from Puroflow Incorporated to Steel Partners
II, L.P. dated August 12, 1999.
**7. Settlement Agreement and Release dated September 16, 1999 by
and among Puroflow Incorporated, Reuben M. Siwek, Michael H.
Figoff, Robert A. Smith, Tracy Kent Pugmire, Steel Partners
II, L.P., Warren G. Lichtenstein, Steven Wolosky, James
Benenson, Jr., Robert Frankfurt, Steel Partners, L.L.C., and
the Full Value Committee.
**8. Joint Press Release dated September 17, 1999.
- --------
**Filed herewith.
<PAGE>
- ------------------------------- --------------------------
CUSIP No. 746 375 104 13D Page 9 of 22 Pages
- ------------------------------- --------------------------
SIGNATURES
----------
After reasonable inquiry and to the best of his knowledge and
belief, each of the undersigned certifies that the information set forth in this
statement is true, complete and correct.
Dated: September 17, 1999 STEEL PARTNERS II, L.P.
By: Steel Partners, L.L.C. General
Partner
By: /s/ Warren G. Lichtenstein
--------------------------------------
Warren G. Lichtenstein
Chief Executive Officer
/s/ Warren G. Lichtenstein
-----------------------------------------
WARREN G. LICHTENSTEIN
<PAGE>
- ------------------------------- --------------------------
CUSIP No. 746 375 104 13D Page 10 of 22 Pages
- ------------------------------- --------------------------
EXHIBIT INDEX
-------------
Exhibit Page
- ------- ----
1. Joint Filing Agreement between Steel Partners -
and Warren G. Lichtenstein
2. Joint Filing Agreement between Steel Partners, -
Warren Lichtenstein, Robert Frankfurt, James
Benenson, Jr. and Steven Wolosky.
3. Preliminary Proxy Statement -
4. Letter to the Board of Directors of Puroflow, -
Incorporated dated June 3, 1999.
5. Letter to the Board of Directors of Puroflow, _
Incorporated dated August 9, 1999.
6. Letter from Puroflow Incorporated to Steel
Partners II, L.P. dated
August 12, 1999.
7 Settlement Agreement and Release dated as of 11
September 16, 1999 by and among Puroflow
Incorporated, Reuben M. Siwek, Michael H.
Figoff, Robert A. Smith, Tracy Kent Pugmire,
Steel Partners II, L.P., Warren G.
Lichtenstein, Steven Wolosky, James Benenson,
Jr., Robert Frankfurt, Steel Partners, L.L.C.,
and the Full Value Committee.
8. Joint Press Release dated September 17, 1999 22
<PAGE>
- ------------------------------- --------------------------
CUSIP No. 746 375 104 13D Page 11 of 22 Pages
- ------------------------------- --------------------------
SETTLEMENT AGREEMENT AND RELEASE
SETTLEMENT AGREEMENT AND RELEASE, dated as of September 16,
1999, by and among Puroflow Incorporated, a Delaware corporation ("Puroflow"),
Reuben M. Siwek ("Siwek"), Michael H. Figoff ("Figoff"), Robert A. Smith
("Smith") and Tracy Kent Pugmire ("Pugmire") (collectively, Puroflow, Siwek,
Figoff, Smith and Pugmire, are referred to herein as the "Puroflow Parties"),
Steel Partners II, L.P., a Delaware limited partnership ("Steel"), Warren G.
Lichtenstein ("Lichtenstein"), Steven Wolosky ("Wolosky"), James Benenson, Jr.
("Benenson"), Robert Frankfurt ("Frankfurt"), Steel Partners, L.L.C., a Delaware
limited liability company ("Steel LLC"), and the Full Value Committee
(collectively, Steel, Lichtenstein, Wolosky, Benenson, Frankfurt, Steel LLC and
the Full Value Committee are referred to herein as the "Steel Parties").
WHEREAS, Steel owns an aggregate of 1,416,000 shares ("Steel
Shares") of common stock of Puroflow, $.01 par value ("Common Stock");
WHEREAS, the Full Value Committee has filed preliminary
materials with the Securities and Exchange Commission in order to solicit
proxies (the "Steel Solicitation") to vote at Puroflow's annual stockholders
meeting, scheduled to be held on October 13, 1999 (as such date is amended in
Section 4.1(ii), the "Annual Meeting"), in order to elect a slate of nominees
designated by the Full Value Committee to the Board of Directors of Puroflow
(the "Board");
WHEREAS, the Steel Parties have filed a lawsuit against the
Puroflow Parties in the United States District Court for the District of
Delaware, captioned Steel Partners II, L.P. v. Puroflow Incorporated, Michael H.
Figoff, Reuben M. Siwek, Tracy Kent Pugmire and Robert A. Smith, Civil Action
No. 99 271 (D. Del.), alleging violations of certain securities laws and other
allegations (the "Steel Litigation") and Puroflow has filed a lawsuit against
the Steel Parties in Superior Court of the State of California for the County of
Los Angeles entitled Puroflow Incorporated v. Warren G. Lichtenstein, Robert
Frankfurt, James Benenson, Jr., Steven Wolosky, The Full Value Committee, Steel
Partners II, L.P. and Steel Partners L.L.C., Case No. LC049028, in response
thereto and relating to other issues (the "Puroflow Litigation");
WHEREAS the parties hereto are desirous of entering into an
agreement with respect to the discontinuance of the Puroflow Litigation and the
Steel Litigation, resolving the election of directors and certain other matters.
NOW, THEREFORE, in consideration of the premises and mutual
agreements herein contained, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto,
intending to be legally bound, hereby agree as follows:
<PAGE>
- ------------------------------- --------------------------
CUSIP No. 746 375 104 13D Page 12 of 22 Pages
- ------------------------------- --------------------------
Section 7. Representations, Warranties and Covenants of the
Puroflow Parties. Each of the Puroflow Parties hereby represents, warrants and
agrees that each of the Puroflow Parties has full legal right, power and
authority to execute, deliver and perform this Agreement, and consummate the
transactions contemplated hereby; the execution and delivery of this Agreement,
and the consummation by Puroflow and the Board of the transactions contemplated
hereby have been duly authorized by all necessary corporate actions; and this
Agreement constitutes valid, legal and binding obligations of each of the
Puroflow Parties, enforceable against each such party in accordance with its
terms.
Section 8. Representations, Warranties and Covenants of the
Steel Parties. Each of the Steel Parties hereby represents, warrants and agrees
that each of the Steel Parties has full legal right, power and authority to
execute, deliver and perform this Agreement, and consummate the transactions
contemplated hereby; the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly authorized
by all necessary corporate actions; this Agreement constitutes valid, legal and
binding obligations of each of the Steel Parties, enforceable against each such
party in accordance with its terms.
Section 9. Term of Agreement.
9.1 Initial Term. The term of this agreement shall commence on
the date hereof and shall conclude on the date following Puroflow's 2000 Annual
Meeting of Stockholders, which the parties hereto agree shall be called on or
before July 31, 2000 (the "Term").
Section 10. Board of Directors.
10.1 Composition of Board. (i) Promptly following the date
hereof, the Board of Directors of Puroflow shall be expanded to seven directors.
The four members of the Board of Directors serving prior to the execution hereof
shall remain on the Board (the "Interim Puroflow Nominees"), and three persons
selected by the Steel Parties, who shall be Warren G. Lichtenstein, Robert
Frankfurt and Steven Wolosky, shall be appointed to the Board of Directors (the
"Interim Steel Nominees").
(ii) Following the constitution of the new seven
member Board of Directors, the Board shall set a new meeting date for the Annual
Meeting which date shall be October 21, 1999 and retain the record date of
August 30, 1999 set in connection with the Annual Meeting; and (b) nominate a
new slate of five directors for election by the stockholders to the Board of
Directors. Such slate shall consist of three persons nominated by the Puroflow
Parties who shall be Michael Figoff, Tracy Kent Pugmire and Robert A. Smith (the
"Permanent Puroflow Nominees) and two persons nominated by the Steel Parties who
shall be Warren G. Lichtenstein and Robert Frankfurt (the "Permanent Steel
Nominees"). The parties hereto agree that neither Siwek nor Wolosky shall stand
for election as a director at the Annual Meeting. Following the Annual Meeting,
Siwek shall hold the title of Chairman-Emeritus.
<PAGE>
- ------------------------------- --------------------------
CUSIP No. 746 375 104 13D Page 13 of 22 Pages
- ------------------------------- --------------------------
(iii) If any Permanent Puroflow Nominee or Permanent
Steel Nominee elects not to stand for election to the Board of Directors of
Puroflow at the Annual Meeting, then the party hereto that nominated such
permanent nominee shall have the right to nominate a new person to be that
party's permanent nominee. In addition, if during the Term of this Agreement an
Interim Puroflow Nominee, Interim Steel Nominee, Permanent Puroflow Nominee or
Permanent Steel Nominee ceases to serve as a member of the Board of Directors by
reason of death, resignation, removal, disqualification or for any other reason,
then such vacancy on the Board shall be filled by the party hereto that
originally nominated such interim or permanent nominee, as the case may be. A
director elected by either the Puroflow Parties or the Steel Parties to fill
such a vacancy shall hold office until such director's successor shall have been
duly elected and qualified.
(iv) During the Term of this Agreement, Puroflow
shall use its best efforts to: (a) maintain the number of directors on the Board
at seven until the Annual Meeting; (b) set and maintain the number of directors
on the Board for and following the Annual Meeting, at five; and (c) cause the
election to the Board, and the continued presence on the Board, of the Interim
Steel Nominees and the Interim Puroflow Nominees (prior to the Annual Meeting),
and the Permanent Steel Nominees and the Permanent Puroflow Nominees (following
the Annual Meeting). Thereafter, in connection with the 2000 Annual Meeting of
Stockholders, Puroflow shall take all necessary actions to nominate the
Permanent Steel Nominees and the Permanent Puroflow Nominees to the slate of
directors proposed for election by the Board of Directors at such meeting.
Puroflow and the Puroflow Parties shall take all other necessary actions to
comply with this Section 4.
(v) During the Term of this Agreement, each of the
Steel Parties and the Puroflow Parties shall vote its shares of Common Stock in
favor of the slate of nominees to the Board nominated by Puroflow in accordance
with this Agreement. If for any reason any of the Steel Parties shall fail to
vote its shares of Common Stock in favor of the slate of nominees to the Board
nominated by Puroflow pursuant to this Agreement, then such Steel Parties member
hereby appoints Michael H. Figoff and Robert A. Smith, and each of them
individually (with full power to act without the other and with power to appoint
his substitute), its true and lawful attorney and proxy to re-vote all shares of
Common Stock which such Steel Parties member is entitled to vote in favor of the
nominees to the Board nominated by Puroflow pursuant to this Agreement. If for
any reason any of the Puroflow Parties shall fail to vote its shares of Common
stock in favor of the slate of nominees to the Board nominated by Puroflow
pursuant to this Agreement, then such Puroflow Parties member hereby appoints
Warren Lichtenstein and Robert Frankfurt, and each of them individually (with
full power to act without the other and with power to appoint his substitute),
its true and lawful attorney and proxy to re-vote all shares of Common Stock
which such Puroflow Parties member is entitled to vote in favor of the nominees
to the Board nominated by Puroflow pursuant to this Agreement.
(vi) During the Term hereof, Siwek may be retained by
Puroflow to provide such services as shall be deemed necessary, in the
discretion of the President and Chief Executive Officer of Puroflow, from time
to time, including counsel on Securities and Exchange
<PAGE>
- ------------------------------- --------------------------
CUSIP No. 746 375 104 13D Page 14 of 22 Pages
- ------------------------------- --------------------------
Commission and general corporate matters. Such services shall be provided by
Siwek at reasonable and customary hourly rates for such services.
Section 11. Releases.
11.1 Release by Puroflow of Members of the Steel Parties. Each
of the Puroflow Parties, on behalf of each party and each of their successors
and assigns, releases and discharges each of the Steel Parties, each of their
heirs, executors, administrators, affiliates, successors and assigns (together,
the "Steel Releasees") from all actions, causes of action, suits, the Puroflow
Litigation, debts, dues, sums of money, accounts, reckonings, bonds, bills,
specialties, covenants, contracts, controversies, agreements, promises,
variances, trespasses, damages, judgments, executions, claims, and demands
whatsoever, in law or equity, which against Steel Releasees, each of the
Puroflow Parties and their affiliates, successors and assigns ever had, now have
or hereafter can, shall or may have, for, upon, or by reason of any matter,
cause or thing whatsoever from the beginning of the world to the date of this
Agreement. The foregoing release shall not extend to any actions, causes of
action, demands, etc. arising from the breach or the claimed breach of this
Agreement by any member of the Steel Parties.
11.2 Release by Members of the Steel Parties of Puroflow. Each
of the Steel Parties, on behalf of each party and each of their successors and
assigns, releases and discharges each of the Puroflow Parties, each of their
heirs, executors, administrators, affiliates, successors and assigns (together,
the "Puroflow Releasees") from all actions, causes of action, suits, the Steel
Litigation, debts, dues, sums of money, accounts, reckonings, bonds, bills,
specialties, covenants, contracts, controversies, agreements, promises,
variances, trespasses, damages, judgments, executions, claims, and demands
whatsoever, in law or equity, which against the Puroflow Releasees, each of the
Steel Parties and their affiliates, successors and assigns ever had, now have or
hereafter can, shall or may have, for, upon, or by reason of any matter, cause
or thing whatsoever from the beginning of the world to the date of this
Agreement. The foregoing release shall not extend to any actions, causes of
action, demands, etc. arising from the breach or the claimed breach of this
Agreement by Puroflow.
11.3 Dismissal of Litigation. The parties hereto hereby agree
to take all steps necessary in order to obtain a dismissal of the Puroflow
Litigation and the Steel Litigation, without prejudice.
Section 12. Reimbursement of Expenses. Simultaneously with the
execution of this Agreement, or as promptly thereafter as is practicable,
Puroflow shall transfer by wire transfer, in accordance with instructions
provided by Steel Partners to Puroflow, $50,000.00 in cash, as reimbursement for
actual out-of-pocket expenses incurred by the Steel Parties for outside
services, as set forth in the invoices previously provided, in connection with
or relating to the Steel Solicitation, including but not limited to fees and
expenses relating to the preparation of proxy material, the Puroflow Litigation,
the Steel Litigation, and the preparation of this Agreement.
<PAGE>
- ------------------------------- --------------------------
CUSIP No. 746 375 104 13D Page 15 of 22 Pages
- ------------------------------- --------------------------
Section 13. Standstill Agreement.
13.1 Terms of Standstill. Each of the Steel Parties covenants
and agrees that during the Term of this Agreement each party will not, directly
or indirectly: (i) solicit proxies for the election of directors to the Board or
for any other matter; (ii) acquire shares of Common Stock or join with any other
person to form a "group," as defined under Section 13(d) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act") (and the rules promulgated
thereunder) such that following such acquisition of shares of Common Stock or
formation of a group, the Steel Parties would beneficially hold in excess of
19.99% of the outstanding shares of Common Stock, or (iii) engage or participate
in any tender offer for the shares of Common Stock; provided, however, that
these obligations shall terminate in the event of a "Change in Control" (as
defined herein) of the ownership of Puroflow, in which Change of Control of the
Steel Parties or an affiliate had any involvement.
For purposes of this provision, a "Change in Control" shall be
deemed to have occurred if (i) any person (as that term is used in Sections
13(d) and 14(d) of the Exchange Act), who is not now a current affiliate or a 5%
or more holder, is or becomes the beneficial owner (as that term is used in
Section 13(d) of the Exchange Act, and the rules and regulations promulgated
thereunder) of more than 20% of the shares of capital stock of Puroflow
outstanding and entitled to vote; (ii) more than 66 2/3% of the members of the
Board of Directors of Puroflow shall not be Continuing Directors (which term, as
used herein, means the directors of Puroflow who were members of the Board of
Directors of Puroflow on August 1, 1999), except where such change in the
members of the Board of Directors is a result of the terms of this Agreement or
the resignation of any Interim Steel Nominee or Permanent Steel Nominee, as the
case may be, or (iii) Puroflow shall be merged or consolidated with, or, in any
transaction or series of transactions, substantially all of the business or
assets of Puroflow shall be sold or otherwise acquired by, another corporation
or entity and, as a result thereof, the stockholders of Puroflow immediately
prior thereto shall not have at least 50% or more of the combined voting power
of the surviving, resulting or transferee corporation or entity immediately
thereafter.
Section 14. Shareholder Rights Plan.
14.1 Amendment of the Rights Agreement. Puroflow will take all
necessary actions to amend the provisions of the Rights Agreement between
Puroflow and Continental Stock Transfer and Trust Company, dated as of May 28,
1999, (the "Rights Agreement") such that the percentage of Beneficial Ownership
stated within the definition of "Acquiring Person" therein shall be increased
from 17.5% to 20%.
Section 15. Miscellaneous
15.1 Severability. If any provision of this Agreement shall be
held invalid or unenforceable, such invalidity or unenforceability shall attach
only to such provision and shall not in any manner render invalid or
unenforceable any other provisions of this Agreement.
<PAGE>
- ------------------------------- --------------------------
CUSIP No. 746 375 104 13D Page 16 of 22 Pages
- ------------------------------- --------------------------
15.2 Consent to Jurisdiction. Each of the parties hereto
hereby irrevocably submits to the exclusive jurisdiction of the state and
federal courts of the State of Delaware for the purposes of any action or
proceeding (each a "Claim") arising out of or relating to this Agreement and
hereby waives, and agrees not to assert in any such action or proceeding that it
is not personally subject to the jurisdiction of such courts, that such Claim is
brought in an inconvenient forum or that the venue is proper. Each of the
parties hereto consents to process being served in any such Claim by mailing a
copy thereof to the address in effect for notices to it under this Agreement and
agrees that such service upon receipt shall constitute good and sufficient
service of process and notice thereof. Nothing in this paragraph shall affect or
limit any right to serve legal process in any other manner permitted by law.
15.3 Governing Law. This Agreement and the rights and duties
of the parties hereto shall be governed by and construed in accordance with the
internal laws of the State of Delaware, without regard to principles of
conflicts of law.
15.4 Entire Agreement. This Agreement and any and all other
documents delivered in connection therewith set forth the entire understanding
of the parties in respect to the transactions contemplated herein and supersedes
all prior agreements, arrangements and understandings, written or oral, relating
to the subject matter hereof.
15.5 Amendments and Waivers to be in Writing. This Agreement
may not be amended, modified or changed, and none of the terms, covenants,
representations, warranties or conditions hereof may be waived, except by a
written instrument signed by the party against whom enforcement of any change or
modification is sought, or in the case of a waiver, by the party waiving
compliance. The failure of any party at any time or times to require performance
of any provision hereof shall in no manner affect the right at a later time to
enforce same.
15.6 Notices. Any notice or other communication required or
permitted to be given hereunder shall be in writing and shall be effective (a)
when personally delivered or delivered by telecopy (with confirmation of
transmission) on a business day during normal business hours at the address or
number designated below or (b) on the business day following the date of mailing
by overnight courier, fully prepaid, addressed to such address, whichever shall
first occur. The addresses for such communications shall be:
If to Puroflow of any of the Puroflow Parties:
Puroflow Incorporated
16559 Saticoy Street
Van Nuys, California 91406
Attn: Michael H. Figoff
President and Chief Executive Officer
Telecopy: (818) 779-3902
<PAGE>
- ------------------------------- --------------------------
CUSIP No. 746 375 104 13D Page 17 of 22 Pages
- ------------------------------- --------------------------
with a copy to:
Baer Marks & Upham LLP
805 Third Avenue
New York, New York 10022
Attn: Donald J. Bezahler, Esq.
Telecopy: (212) 702-5941
If to The Steel Parties
Warren Lichtenstein
Steel Partners II, L.P.
150 East 52nd Street, 21st Floor
New York, New York 10022
Telecopy: (212) 813-2198
with a copy to:
Olshan Grundman Frome Rosenzweig & Wolosky LLP
505 Park Avenue
New York, New York 10022
Attention: Steven Wolosky
Telecopy: (212) 980-7177
Any party hereto may from time to time change its address for notices under this
Section 9.6 by giving at least 10 days' notice of such changed address to the
other parties hereto.
15.7 Headings. The headings herein are for convenience only,
do not constitute a part of this Agreement, and shall not be deemed to limit or
affect any of the provisions hereof.
15.8 Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors and assigns.
15.9 Further Assurances. The parties hereto shall execute and
deliver such further documents and do such further acts as any party hereto
shall reasonably require in order to assure and confirm to the parties hereto
the rights hereby created or to facilitate the full performance of the terms of
this Agreement.
15.10 Counterparts. This Agreement may be executed in as many
counterparts as may be deemed necessary or convenient, and by the different
parties hereto on separate counterparts,
<PAGE>
- ------------------------------- --------------------------
CUSIP No. 746 375 104 13D Page 18 of 22 Pages
- ------------------------------- --------------------------
each of which, when so executed, shall be deemed an original, but all of which
such counterparts shall constitute but one and the same agreement. A facsimile
signature shall be deemed an original.
15.11 Assignment. Neither this Agreement nor any rights
hereunder may be assigned by either party in whole or in part, without the prior
written consent of the other party.
15.12 Expenses. Except as otherwise agreed to by the parties
in writing and as provided in Section 6 of this Agreement, Puroflow shall pay
all of its own expenses incurred in connection with the implementation of this
Agreement, other than fees and expenses of counsel for Steel Parties which: (i)
are covered under Section 6; and (ii) may be incurred by the Steel Parties in
connection with any dispute arising hereunder. Each party hereto has retained
independent counsel and such counsel has advised each party with respect to the
subject matter of this Agreement.
<PAGE>
- ------------------------------- --------------------------
CUSIP No. 746 375 104 13D Page 19 of 22 Pages
- ------------------------------- --------------------------
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement or have caused this Agreement to be duly executed by their respective
authorized officers as of the date hereof.
THE PUROFLOW PARTIES
--------------------
PUROFLOW INCORPORATED
By: /s/ Michael H. Figoff
----------------------------------
Name: Michael H. Figoff
Title: President and CEO
REUBEN M. SIWEK
/s/ Reuben M. Siwek
-------------------------------------------
ROBERT A. SMITH
/s/ Robert A. Smith
-------------------------------------------
TRACY KENT PUGMIRE
/s/ Tracy Kent Pugmire
-------------------------------------------
MICHAEL H. FIGOFF
/s/ Michael H. Figoff
-------------------------------------------
<PAGE>
- ------------------------------- --------------------------
CUSIP No. 746 375 104 13D Page 20 of 22 Pages
- ------------------------------- --------------------------
THE STEEL PARTIES
STEEL PARTNERS II, L.P.
By: Steel Partners, L.L.C.,
General Partner
By: /s/ Warren G. Lichtenstein
----------------------------------
Name: Warren Lichtenstein
Title: Chairman
WARREN G. LICHTENSTEIN
/s/ Warren G. Lichtenstein
-------------------------------------------
STEVEN WOLOSKY
/s/ Steven Wolosky
-------------------------------------------
JAMES BENENSON, JR.
/s/ James Benenson, Jr.
-------------------------------------------
ROBERT FRANKFURT
/s/ Robert Frankfurt
-------------------------------------------
<PAGE>
- ------------------------------- --------------------------
CUSIP No. 746 375 104 13D Page 21 of 22 Pages
- ------------------------------- --------------------------
STEEL PARTNERS L.L.C.
By: /s/ Warren Lichtenstein
----------------------------------
Name: Warren Lichtenstein
Title: Chairman
THE FULL VALUE COMMITTEE
By: /s/ Warren Lichtenstein
----------------------------------
Name: Warren Lichtenstein
<PAGE>
- ------------------------------- --------------------------
CUSIP No. 746 375 104 13D Page 22 of 22 Pages
- ------------------------------- --------------------------
FOR IMMEDIATE RELEASE:
CONTACT:
Michael H. Figoff
President and CEO
Puroflow Incorporated
(818) 756-1388
PUROFLOW REACHES SETTLEMENT WITH STEEL PARTNERS,
------------------------------------------------
WHICH INCLUDES BOARD REPRESENTATION.
------------------------------------
ANNUAL MEETING POSTPONED TO OCTOBER 21.
---------------------------------------
VAN NUYS, CA, September 17, 1999 - Puroflow Incorporated (OTC Bulletin Board:
PURO) and Steel Partners II, L.P. jointly announced today that the Company and
its Board of Directors have entered into a settlement agreement with Steel
Partners and its affiliates under which Steel Partners has agreed to terminate
its pending proxy contest in exchange for Board representation.
At the same time, the Company's Board of Directors also announced the
postponement of the 1999 annual meeting of stockholders from Wednesday, October
13 to Thursday, October 21. The record date will remain Monday, August 30.
Pursuant to the settlement agreement, which will expire by its terms after the
2000 annual meeting of stockholders, and the Company's by-laws,the Company has
expanded its current Board to seven members and has appointed three
representatives from Steel Partners to the Board to fill the three vacancies. At
the annual meeting of stockholders to be held Thursday, October 21, the size of
the Board will be reduced to five, with the Company nominating three
representatives and Steel Partners nominating two representatives.
The Company and Steel Partners also agreed to vote its shares of Puroflow common
stock in favor of the new five- person slate of nominees to be presented at the
1999 annual meeting. The nominees will be named in the Company's amended
definitive proxy statement, which the Company expects to mail to stockholders on
or about September 24, 1999. The Company also agreed to promptly amend its
shareholders rights plan to increase the beneficial ownership threshold at which
the rights plan is triggered from 17.5% to 20%. Also as part of the settlement
agreement, both the Company and Steel Partners agreed to dismiss their
respective lawsuits in California and Delaware.
Michael H. Figoff, President and Chief Executive Officer of Puroflow, said, "The
settlement with Steel Partners will allow management to focus its attention on
enhancing stockholder value. We look forward to working with the representatives
from Steel Partners on the Board.
Warren G. Lichtenstein of Steel Partners commented, "We are pleased that the
agreement allows the Company and Steel Partners to avoid a proxy contest. We
look forward to working closely with the other Puroflow directors to achieve our
stated goal which is to enhance the value of Puroflow's shares for the benefit
of all stockholders."
Since 1961, Puroflow has designed and manufactured state-of-the-art, precision
filtration products for critical applications, including the automobile airbag
business. The Company is a leading supplier of aftermarket products used in jet
aircraft, turboshaft powered aircraft and helicopters and is a leading supplier
for U.S. Space Applications.
# # #
