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SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
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Section240.14a-12
PUROFLOW INCORPORATED
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PUROFLOW 16559 Saticoy Street, Van Nuys, CA 91406
INCORPORATED (818) 756-1388 FAX (818) 779-3902
August 6, 1999
YOUR BOARD HAS ADOPTED A SHAREHOLDER
RIGHTS PLAN TO PROTECT YOUR INTERESTS.
Dear Puroflow Stockholder:
DON'T BE FOOLED: THE SO-CALLED "FULL VALUE COMMITTEE"
IS REALLY STEEL PARTNERS AND WARREN LICHTENSTEIN.
You should be aware that an entity calling itself the "The Full Value
Committee", is about to launch a proxy fight to replace your Board of Directors
with its own candidates at Puroflow's 1999 annual meeting, which has been
scheduled for Wednesday, October 13, 1999.
DON'T BE FOOLED: THIS SO-CALLED "COMMITTEE" IS MERELY THE ALTER EGO OF STEEL
PARTNERS AND ITS PRINCIPAL, WARREN LICHTENSTEIN.
We first wrote to you about Warren Lichtenstein, a former risk arbitrageur,
in our June 3 letter explaining our new Shareholder Rights Plan. Let's again
review Mr. Lichtenstein's record regarding Puroflow and some of his other
investments. Warren Lichtenstein of both Steel Partners and The Full Value
Committee:
- has sought to gain control of small public companies he perceives as
defenseless, to take control of their Boards or to force a quick sale.
- was enjoined from voting certain shares he and his associates acquired in
connection with his proxy battle for control of Medical Imaging Centers of
America, Inc. in 1996 because he and his associates violated provisions of
the Securities Exchange Act of 1934.
- started a lawsuit against your Company and its Board of Directors in which
he makes allegations which in our view are solely for the purpose of
having something to write about in his proxy materials, since in our
opinion, his allegations are baseless and without merit.
- states, in his preliminary proxy statement, that the sale of Puroflow
would be in the best interests of the Company's stockholders; yet he also
tells you, in sharp contrast, that no assurance can be given that a sale
of the Company could be accomplished or that such a sale would produce
more favorable financial results or result in achieving full value for
stockholders. Mr. Lichtenstein also admits, in his preliminary proxy
statement, that he doesn't know what would be a fair price for the
Company.
- met with a Puroflow competitor and, we believe, advised that competitor
that he controlled in excess of 50% of your Company, and that if the
competitor did not buy Puroflow, he (Mr. Lichtenstein) would put it up for
auction, thereby hurting the competitor's business.
- expresses, in his preliminary proxy statement, disapproval of the way in
which the Company is run, but states that if he took control of the
Company, he would not want to replace any officers and does not
contemplate doing so.
- states, in his preliminary proxy statement, that The Full Value Committee
has not made or undertaken an analysis or report of the Company and DOES
NOT KNOW WHETHER STOCKHOLDER VALUE WILL BE MAXIMIZED AS A RESULT OF HIS
SOLICITATION.
- states, in his preliminary proxy statement, that notwithstanding his
announcement that he would sell the Company even it he took control, HE
COULD CHANGE HIS MIND AND DECIDE TO PURSUE "ANOTHER COURSE OF ACTION."
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PUT SIMPLY, MR. LICHTENSTEIN HAS NO IDEA OF WHAT WOULD HAPPEN IF THE COMPANY
WERE SOLD OR WHETHER THE RESULT WOULD BE IN YOUR BEST INTERESTS.
NOW THAT YOU KNOW WHO WARREN LICHTENSTEIN IS, AND THE TACTICS HE EMPLOYS, DO
YOU THINK THAT IT IS APPROPRIATE TO TRUST HIM AND HIS HAND-PICKED SLATE OF
NOMINEES TO ACHIEVE THE BEST RESULTS FOR YOUR INVESTMENT IN PUROFLOW? WE THINK
THE ANSWER IS NO!
WE TRIED TO NEGOTIATE A FAIR COMPROMISE.
You should know that, in hopes of avoiding the expense and disruption of a
proxy fight, your Board tried to negotiate a compromise with Mr. Lichtenstein on
terms that were, in our view, very reasonable and fair to both parties.
WE OFFERED MR. LICHTENSTEIN, AMONG OTHER THINGS, THREE REPRESENTATIVES ON AN
EXPANDED SEVEN MEMBER BOARD OF DIRECTORS--A BOARD SEAT PERCENTAGE OF 42%, WHICH
FAR EXCEEDS MR. LICHTENSTEIN'S 16.5% INTEREST IN PUROFLOW. UNFORTUNATELY, OUR
SETTLEMENT DISCUSSIONS BROKE DOWN WHEN MR. LICHTENSTEIN REFUSED TO AGREE NOT TO
WAGE ANOTHER PROXY FIGHT AT PUROFLOW'S 2000 ANNUAL MEETING.
Your Board felt it was very important to be able to ensure peace and pursue
ways to maximize Puroflow's share value without the threat of a proxy fight
looming over the Company until the 2001 annual meeting. MR. LICHTENSTEIN FLATLY
REFUSED.
Furthermore, Mr. Lichtenstein insisted upon--and was refused--the ability to
receive special treatment under the terms of our new Shareholder Rights Plan and
be permitted to increase his stake to as much as 22.5% of the Company. Your
Board firmly believes that further concentration of Puroflow shares is not in
the best interest of the Company.
However, in a continuing good faith effort to avoid this proxy contest, we
recently sent a letter to Mr. Lichtenstein stating our willingness to keep the
basic terms of our offer open until 5:00 p.m. Eastern time, Wednesday, August
11, 1999.
We hope this final offer will allow us to avoid a proxy fight with Steel
Partners. To date, Mr. Lichtenstein has not replied to our letter, and based on
his past actions, we are not hopeful that Mr. Lichtenstein will change his mind
and accept our offer.
THE FUTURE FOR PUROFLOW.
Puroflow's fiscal year ended January 31, 1999 was very productive. We
believe our accomplishments were significant. These accomplishments include:
- Our new International Programs Group, now one year old, has contributed
about $500,000 to our corporate backlog. Sales to date have come from the
Turkish government and military and we anticipate future orders from the
governments of Egypt and South Korea.
- The introduction of our new non-azide inflator technology, which we
believe will increase our side impact airbag business.
- We have resolved outstanding litigation with respect to all receivership
issues from 1996.
- In January 1999, we acquired Quality Control Cleaning, a major cleaner of
industrial precision parts, whose sales have increased by about 30% since
its acquisition by the Company.
IN LIGHT OF THESE ACHIEVEMENTS AND THE MOMENTUM WE ARE GENERATING AT
PUROFLOW, WE BELIEVE THIS IS NOT THE TIME TO RELINQUISH CONTROL OF YOUR BOARD TO
WARREN LICHTENSTEIN, WHO APPARENTLY HAS NOTICED PUROFLOW'S SUCCESSES AND MAY
WISH TO CAPITALIZE ON THEM FOR HIS OWN BENEFIT, NOT YOURS.
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WE WILL CONTINUE TO SEARCH FOR A STRATEGIC PARTNER.
Recently, we have held discussions with certain investment banks with a view
to retaining one to assist Puroflow in finding suitable merger candidates or
strategic partners. Regrettably, either the investment banks found the size of
the transactions contemplated to be too small or Puroflow found the fees to
retain one of these firms to be unjustifiable.
As a result, Puroflow will continue this search for suitable partners on its
own, relying on the industry and professional contacts our senior executives
have as well as their knowledge of companies which might be appropriate for a
partnership or business combination with Puroflow.
We will be mailing further information to you about Steel Partners as the
situation progresses. You will soon receive our proxy statement and a white
proxy card which we urge you to use it to vote in support of management's slate.
We appreciate your continued support of Puroflow.
On behalf of your Board of Directors.
Sincerely,
/s/ Michael H. Figoff
Michael H. Figoff
PRESIDENT AND CHIEF EXECUTIVE OFFICER
Certain statements made herein contain forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended. Such statements are
indicated by words or phrases such as "anticipate," "estimate," "project,"
"management believes," "the Company believes," and similar words or phrases.
Such statements are based on current expectations and are subject to risks,
uncertainties and assumptions. Should one or more of these risks or
uncertainties materialize, or should underlying assumptions prove incorrect,
actual results may vary materially from those anticipated, estimated or
projected.
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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 355,000 shares of Puroflow common stock including the right to
purchase 44,000 shares pursuant to stock options. Mr. Figoff's 355,000 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 570,250 shares of
Puroflow common stock including options to purchase 44,000 shares. Mr. Siwek's
570,250 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 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,
Inc., 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 238,000 shares of Puroflow common
stock including the right to purchase 28,000 shares pursuant to stock options.
The shares beneficially owned by Mr. Smith include 10,000 shares owned jointly
by he and his spouse.
