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PUROFLOW
INCORPORATED 16559 Saticoy Street, Van Nuys, CA 91406
(818) 756-1388 FAX (818) 779-3902
June 4, 1999
YOUR BOARD HAS ADOPTED A SHAREHOLDER
RIGHTS PLAN TO PROTECT YOUR INTERESTS.
Dear Puroflow Shareholder:
On Friday, May 28, 1999 your Board of Directors announced the adoption of a
Shareholders Rights Plan, which is designed to protect the Company and its
shareholders from the abusive tactics often employed in hostile takeover
attempts by corporate raiders. More than 1,000 U.S. public companies have
adopted similar plans to protect their shareholders.
The Plan provides for a dividend distribution of Rights to shareholders of
record on June 7, 1999 to purchase shares of a new series of preferred stock
(or, in certain circumstances, common stock or other consideration) at a heavily
discounted rate, which Rights are exercisable upon the occurrence of certain
events.
The Rights become exercisable if, after May 28, 1999, a shareholder or
shareholder group becomes the beneficial owner of 17.5% or more of the
outstanding common shares of the Company, or ten days after the announcement of
a tender offer intended to achieve beneficial ownership totaling 17.5% or more
of the Company, provided certain other requirements are met. If the Rights do
not become exercisable or are not redeemed by your Board, they will expire on
May 28, 2001.
The Rights would be available to be exercised by all shareholders, except for
the directors of the Company and the shareholder or shareholder group
beneficially owning 17.5% or more of the Company's outstanding common stock.
You will find enclosed a summary description outlining the principal features of
the Plan, which we urge you to read carefully.
HOW THE PLAN PROTECTS YOUR INTERESTS AS A PUROFLOW OWNER.
We believe our Plan protects your interests as a Puroflow shareholder if the
Company is confronted with coercive or unfair takeover tactics by a corporate
raider. For example, the Plan contains provisions to protect you in the event
of an unsolicited offer to acquire the Company that does not treat all
shareholders equally, the acquisition in the open market of shares constituting
control without offering a fair price to all shareholders, and other hostile
takeover tactics that could hurt your Board's ability to represent your
interests fully.
The Plan will neither weaken the financial strength of the Company nor interfere
with its business plans. Additionally, the Rights, both before and after their
exercise, will have no
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dilutive effect on your shares and will not decrease earnings per share or
change how you can trade Puroflow common stock.
The Plan also permits the Board to maintain corporate stability in today's
volatile takeover environment, a critical aspect in retaining and recruiting
highly qualified executives to manage your Company.
THE PLAN WILL NOT STOP A FAIR OFFER TO ACQUIRE THE COMPANY.
The Plan is not intended to prevent an acquisition of the Company and will not
interfere with a merger or other transaction that your Board of Directors
approves as fair and as providing full value to shareholders.
If a qualified buyer makes an offer on terms that are favorable and fair to all
shareholders, the Board would be willing to commence negotiations and Plan will
have no effect. The Plan is designed to deal only with the very serious problem
of actions by hostile acquirors that attempt to deprive a company's shareholders
and its board of the directors of the ability to determine the destiny of the
company.
CORPORATE RAIDER STEEL PARTNERS HAS SUED YOUR COMPANY.
You should know that your Company has recently been sued by Steel Partners,
alleging securities laws violations. Steel Partners is a New York City hedge
fund run by Warren Lichtenstein, a stock speculator and former risk arbitrageur,
which has developed a track record as a dissident shareholder and corporate
raider. We believe Steel Partners' lawsuit is without merit and simply another
harassment tactic by a raider. On May 5, Steel Partners announced that it
intended to launch a proxy fight to replace your Company's Board of Directors
with its own hand-picked nominees at our next annual meeting.
We believe our Plan will give the Company an opportunity to explore strategic
alternatives to enhance share value and will give shareholders more time to
evaluate the Board's plans for the future.
Please refer to the enclosed summary of the Plan to answer any questions you may
have. If you have further questions, please call the Company's proxy solicitor,
MacKenzie Partners, Inc., toll free at (800) 322-2885. We invite your telephone
calls and appreciate your continued support of Puroflow.
On behalf of the Board of Directors,
Sincerely,
/s/ Michael H. Figoff
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Michael H. Figoff
President and Chief Executive Officer
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PARTICIPANT INFORMATION
In compliance with the rules and regulations promulgated by the Securities and
Exchange Commission, the following information is being furnished with respect
to Puroflow's nominees for election as directors at the 1999 annual meeting of
stockholders.
1. MICHAEL H. FIGOFF. Mr. Figoff serves as the President and Chief
Executive Officer of the Company, after joining the Company in November 1988.
Mr. Figoff has more than 30 years of experience in the marketing and
manufacture of aerospace and defense-related products. As of the date
hereof, Mr. Figoff beneficially owns 365,000 shares of Puroflow common stock
including the right to purchase 55,000 shares pursuant to stock options. Mr.
Figoff's 365,000 shares also includes 8,000 shares owned by Mr. Figoff's wife
with respect to which he disclaims beneficial ownership.
2. REUBEN M. SIWEK. Mr. Siwek serves as Chairman of the Board of Directors of
the Company and as its General Counsel. He has practiced law in the state of
New York for more than 48 years. Mr. Siwek beneficially owns 576,250 shares of
Puroflow common stock including options to purchase 50,000 shares. Mr. Siwek's
576,250 shares also includes 70,000 shares owned by Mr. Siwek's wife with
respect to which he disclaims beneficial ownership.
3. DR. TRACY KENT PUGMIRE. Dr. Pugmire serves as a member of the Board of
Directors of the Company and on the board's audit committee. He is an
independent aerospace consultant and representative. He is currently involved
with design and fabrication activities on the X-33 and X-34 rocket vehicles.
Dr. Pugmire beneficially owns 40,000 shares of Puroflow common stock including
the right to purchase 19,000 shares pursuant to stock options.
4. ROBERT A. SMITH. Mr. Smith currently serves as Vice Chairman of the Board
of Directors of the Company. He also serves as President of Microsource
Incorporated, a company engaged in the manufacturing of microwave signal
generation equipment to the defense, telecommunications and instrument/test
industries. Mr. Smith has extensive engineering, marketing and management
experience in the filter industry. Mr. Smith beneficially owns 250,000 shares
of Puroflow common stock including the right to purchase 40,000 shares pursuant
to stock options.
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SUMMARY OF RIGHTS TO PURCHASE PREFERRED SHARES
UNDER CERTAIN CIRCUMSTANCES SET FORTH IN THE RIGHTS AGREEMENT, RIGHTS
ISSUED TO, OR HELD BY, ANY PERSON WHO IS, WAS OR BECOMES AN ACQUIRING PERSON OR
AN AFFILIATE OR ASSOCIATE THEREOF (AS DEFINED IN THE RIGHTS AGREEMENT) AND
CERTAIN RELATED PERSONS, WHETHER CURRENTLY HELD BY OR ON BEHALF OF SUCH PERSON
OR BY ANY SUBSEQUENT HOLDER, SHALL BECOME NULL AND VOID.
On May 28, 1999, the Board of Directors of Puroflow Incorporated, a
Delaware corporation (the "CORPORATION"), declared a dividend distribution of
one preferred share purchase right (a "RIGHT") for each outstanding share of
Common Stock, par value $.01 per share (the "COMMON SHARES") of the Corporation.
The dividend is payable to the stockholders of record as of 5:00 P.M., Eastern
Standard Time, on June 7, 1999 (the "RECORD DATE"), and with respect to Common
Shares issued thereafter until the Distribution Date (as defined below) and, in
certain circumstances, with respect to Common Shares issued after the
Distribution Date. Except as set forth below, each Right, when it becomes
exercisable, entitles the registered holder to purchase from the Corporation one
one-thousandth of a share of Series A Junior Participating Preferred Stock, par
value $.10 per share (the "PREFERRED SHARES") at a price of $5.00 per one
one-thousandth of a Preferred Share (the "PURCHASE PRICE"), subject to
adjustment. The description and terms of the Rights are set forth in a Rights
Agreement, dated as of May 28, 1999 (the "RIGHTS AGREEMENT"), between the
Corporation and Continental Stock Transfer & Trust Company (the "RIGHTS AGENT").
Initially, the Rights will be attached to all certificates representing
Common Shares then outstanding, and no separate Right Certificates (as
hereinafter defined) will be distributed. The Rights will separate from the
Common Shares on the earliest to occur of (i) the first date of public
announcement that a person or "group" has acquired after May 28, 1999 beneficial
ownership of 17.5% or more of the outstanding Common Shares (except pursuant to
a Permitted Offer, as hereinafter defined); or (ii) 10 business days (or such
later date as the Board may determine) following the commencement of, or
announcement of an intention to commence, a tender offer or exchange offer the
consummation of which would result in a person or group becoming an Acquiring
Person (as hereinafter defined) (the earliest of such dates being called the
"DISTRIBUTION DATE"). A person or group whose acquisition of Common Shares
causes a Distribution Date pursuant to clause (i) above is an "ACQUIRING
PERSON." The first date of public announcement that a person or group has become
an Acquiring Person is the "SHARES ACQUISITION DATE." "DISINTERESTED DIRECTORS"
are directors who are not officers of the Corporation and who are not Acquiring
Persons or their affiliates, associates or representatives of any of them, or
any Person who directly or indirectly proposed or nominated as a director of the
Corporation by a Transaction Person (as defined below).
The Rights Agreement provides that, until the Distribution Date, the Rights
will be transferred with and only with the Common Shares. Until the Distribution
Date (or earlier redemption or expiration of the Rights) new Common Share
certificates issued after the Record Date upon transfer or new issuance of
Common Shares will contain a notation incorporating the
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Rights Agreement by reference. Until the Distribution Date (or earlier
redemption or expiration of the Rights), the surrender for transfer of any
certificates for Common Shares outstanding as of the Record Date, even without
such notation or a copy of this Summary of Rights being attached thereto, will
also constitute the transfer of the Rights associated with the Common Shares
represented by such certificate. As soon as practicable following the
Distribution Date, separate certificates evidencing the Rights ("RIGHT
CERTIFICATES") will be mailed to holders of record of the Common Shares as of
the close of business on the Distribution Date (and to each initial record
holder of certain Common Shares issued after the Distribution Date), and such
separate Right Certificates alone will evidence the Rights.
The Rights are not exercisable until the Distribution Date and will expire
at 5:00 P.M., New York City time, on May 28, 2001, unless earlier redeemed by
the Corporation as described below.
In the event that any person becomes an Acquiring Person (except pursuant
to a Permitted Offer as defined below), each holder of a Right will have
(subject to the terms of the Rights Agreement) the right (the "FLIP-IN RIGHT")
to receive upon exercise the number of Common Shares, or, in the discretion of
the Board of Directors, of one one-thousandths of a Preferred Share (or, in
certain circumstances, other securities of the Corporation) having a value
(immediately prior to such triggering event) equal to two times the exercise
price of the Right. Notwithstanding the foregoing, following the occurrence of
the event described above, all Rights that are, or (under certain circumstances
specified in the Rights Agreement) were, beneficially owned by any Acquiring
Person or any affiliate or associate thereof or by any Director of the
Corporation in office on the date of the Rights Agreement will be null and void.
A "PERMITTED OFFER" is a tender or exchange offer for all outstanding Common
Shares which is at a price and on terms determined, prior to the purchase of
shares under such tender or exchange offer, by a majority of Disinterested
Directors to be adequate (taking into account all factors that such
Disinterested Directors deem relevant) and otherwise in the best interests of
the Corporation, its stockholders and its other relevant constituencies (other
than the person or any affiliate or associate thereof on whose basis the offer
is being made) taking into account all factors that such directors may deem
relevant.
In the event that, at any time following the Shares Acquisition Date, (i)
the Corporation is acquired in a merger or other business combination
transaction in which the holders of all of the outstanding Common Shares
immediately prior to the consummation of the transaction are not the holders of
all of the surviving corporation's voting power, or (ii) more than 50% of the
Corporation's assets or earning power is sold or transferred, in either case
with or to an Acquiring Person or any affiliate or associate or any other person
in which such Acquiring Person, affiliate or associate has an interest or any
person acting on behalf of or in concert with such Acquiring Person, affiliate
or associate, or, if in such transaction all holders of Common Shares are not
treated alike, then each holder of a Right (except Rights which previously have
been voided as set forth above) shall thereafter have the right (the "FLIP-OVER
RIGHT") to receive, upon exercise, common shares of the acquiring company having
a value equal to two times the exercise price of the Right.
The Purchase Price payable, and the number of one-thousandths of a
Preferred Share or other securities issuable, upon exercise of the Rights are
subject to adjustment from time to time
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to prevent dilution (i) in the event of a stock dividend on, or a subdivision,
combination or reclassification of, the Preferred Shares, (ii) upon the grant to
holders of the Preferred Shares of certain rights or warrants to subscribe for
or purchase Preferred Shares at a price, or securities convertible into
Preferred Shares with a conversion price, less than the then current market
price of the Preferred Shares or (iii) upon the distribution to holders of the
Preferred Shares of evidences of indebtedness or assets (excluding regular
quarterly cash dividends) or of subscription rights or warrants (other than
those referred to above).
The Purchase Price is also subject to adjustment in the event of a stock
split of the Common Shares or a stock dividend on the Common Shares payable in
Common Shares or subdivisions, consolidations or combinations of the Common
Shares occurring, in any such case, prior to the Distribution Date.
With certain exceptions, no adjustment in the Purchase Price will be
required until cumulative adjustments require an adjustment of at least 1% in
such Purchase Price. No fractional one-thousandths of a Preferred Share will be
issued and in lieu thereof, an adjustment in cash will be made based on the
market price of the Preferred Shares on the last trading day price to the date
of exercise.
Preferred Shares purchasable upon exercise of the Rights will not be
redeemable. Each Preferred Share will be entitled to a minimum preferential
quarterly dividend payment of $ 1.00 per share but, if greater, will be entitled
to an aggregate dividend per share of 1000 times the dividend declared per
Common Share. In the event of liquidation, the holders of the Preferred Shares
will be entitled to a minimum preferential liquidation payment of $ 1.00 per
share; thereafter, and after the holders of the Common Shares receive a
liquidation payment of $0.001 per share, the holders of the Preferred Shares and
the holders of the Common Shares will share the remaining assets in the ratio of
one thousand to 1 (as adjusted) for each Preferred Share and Common Share so
held, respectively. Finally, in the event of any merger, consolidation or other
transaction in which Common Shares are exchanged, each Preferred Share will be
entitled to receive one thousand times the amount received per Common Share.
These rights are protected by customary antidilution provisions. In the event
that the amount of accrued and unpaid dividends on the Preferred Shares is
equivalent to at least six full quarterly dividends, the holders of the
Preferred Shares shall have the right, voting as a class, to elect two directors
in addition to the directors elected by the holders of the Common Shares until
all cumulative dividends on the Preferred Shares have been paid through the last
quarterly dividend payment date or until non-cumulative dividends have been paid
regularly for at least one year.
At any time prior to the earlier to occur of (i) a person becoming an
Acquiring Person or (ii) the expiration of the Rights, the Corporation may
redeem the rights in whole, but not in part, at a price of $.001 per Right (the
"REDEMPTION PRICE"), which redemption shall be effective upon the action of the
Board of Directors. Additionally, the Corporation may redeem the then
outstanding Rights in whole but not in part, at the Redemption Price after the
triggering of the Flip-in Right and before the expiration of any period during
which the Flip-in Right may be exercised in connection with a merger or other
business combination transaction or series of transactions involving the
Corporation in which all holders of Common Shares are treated alike but not
involving a Transaction Person (as defined below). Upon the effective date of
the
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redemption of the Rights, the right to exercise the Rights will terminate and
the only right of the holders of Rights will be to receive the Redemption Price.
Until a Right is exercised, the holder thereof, as such, will have no rights as
a stockholder of the Corporation, including, without limitation, the right to
vote or to receive dividends. While the distribution of the Rights will not be
taxable to stockholders of the Corporation, stockholders may, depending upon the
circumstances, recognize taxable income should the Rights become exercisable or
upon the occurrence of certain events thereafter.
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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))
/ / Definitive Proxy Statement
/ / Definitive Additional Materials
/X/ Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
PUROFLOW INCORPORATED
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
N/A
- --------------------------------------------------------------------------------
(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 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.:
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(3) Filing Party:
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(4) Date Filed:
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