<PAGE>
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
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:
/ X / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/ / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Rule 14a-11(c) or Rule 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.:
------------------------------------------------------------------------
3) Filing Party:
------------------------------------------------------------------------
4) Date Filed:
------------------------------------------------------------------------
<PAGE>
PUROFLOW INCORPORATED
16559 SATICOY STREET
VAN NUYS, CALIFORNIA 91406
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
____________, 1999
To the Stockholders of PUROFLOW INCORPORATED:
NOTICE IS HEREBY GIVEN that the annual meeting of stockholders (the
"Annual Meeting") of Puroflow Incorporated, a Delaware corporation (the
"Company"), will be held at the offices of the Company, on ___________, 1999,
at 10:00 a.m., local time, or any adjournment or postponement thereof, for
the following purposes, all as more fully described in the attached Proxy
Statement:
1. To elect four directors to serve for a term of one year and until
their respective successors are duly elected and qualified.
2. To ratify the appointment by the Company's Board of Directors of
Rose, Snyder & Jacobs, certified public accountants, as independent auditors
of the Company for the fiscal year ending January 31, 2000, and to authorize
the Board of Directors to fix their remuneration.
3. To transact such other business as may properly come before the
Annual Meeting and any and all adjournments thereof.
Only stockholders of record at the close of business on ____________, 1999
shall be entitled to notice of and to vote at the Annual Meeting. A copy of
the Company's Annual Report for the fiscal year ended January 31, 1999 is
enclosed.
The Board of Directors appreciates and welcomes stockholder
participation in the Company's affairs. You are earnestly requested to
complete, sign, date and return the accompanying form of WHITE proxy card in
the enclosed envelope provided for that purpose (to which no postage need be
affixed if mailed in the United States), whether or not you expect to attend
the Annual Meeting in person. The WHITE proxy card is revocable by you at
any time prior to its exercise and will not affect your right to vote in
person in the event you attend the Annual Meeting. The prompt return of the
WHITE proxy card will be of assistance in preparing for the Annual Meeting
and your cooperation in this respect will be greatly appreciated.
By Order of the Board of Directors
Sandy Yoshisato
Corporate Secretary
Van Nuys, California
____________, 1999
- -------------------------------------------------------------------------------
YOUR VOTE IS IMPORTANT. TO VOTE YOUR SHARES,
PLEASE COMPLETE, SIGN AND DATE THE ENCLOSED
WHITE PROXY CARD AND MAIL IT PROMPTLY
IN THE ENCLOSED RETURN ENVELOPE.
- -------------------------------------------------------------------------------
<PAGE>
PUROFLOW INCORPORATED
16559 SATICOY STREET
VAN NUYS, CALIFORNIA 91406
________________________________
PROXY STATEMENT
FOR THE
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON ____________, 1999
________________________________
INTRODUCTION
This Proxy Statement and the accompanying WHITE proxy card are being
furnished to the stockholders of Puroflow Incorporated, a Delaware
corporation (the "Company"), in connection with the solicitation of proxies
by the Board of Directors of the Company for use in voting at the Annual
Meeting of Stockholders to be held at the offices of the Company, 16559
Saticoy Street, Van Nuys, California 91406, on ____________, 1999 at 10:00 a.m.,
local time (together with any and all adjournments or postponements thereof,
the "Annual Meeting"). This Notice of Annual Meeting and Proxy Statement,
together with the accompanying WHITE proxy card and Annual Report to
Stockholders of the Company for the fiscal year ended January 31, 1999
(including the financial statements contained therein), are first being
mailed or delivered to stockholders of the Company on or about ____________,
1999.
QUORUM AND VOTING
AGENDA FOR MEETING
At the Annual Meeting, the holders of outstanding shares of common
stock, par value $0.01 per share, of the Company (the "Common Stock") will be
asked to consider and vote upon: (i) the election of four directors to serve
for a term of one year and until their respective successors are duly elected
and qualified ("Proposal 1"); (ii) the appointment of Rose, Snyder & Jacobs,
certified public accountants, as independent auditors of the Company for the
fiscal year ending January 31, 2000 ("Proposal 2"); and (iii) such other
proposals as may properly be presented for the Annual Meeting.
RECORD DATE
The record date for the Annual Meeting is ____________, 1999. Only
stockholders of record as of the close of business on that date are entitled
to notice of and to vote at the Annual Meeting.
VOTING STOCK
The only class of stock entitled to be voted at the Annual Meeting is
the Company's Common Stock. At the close of business on the record date,
there were 8,100,321 shares of Common Stock outstanding and entitled to vote
at the Annual Meeting, and the holders of these shares will be entitled to
one vote per share.
QUORUM
The By-laws of the Company provide that holders of more than 50% of the
shares outstanding and entitled to vote must be represented at the Annual
Meeting either in person or by proxy.
<PAGE>
ADJOURNED MEETING
If a quorum is not present at the scheduled time of the meeting, the
stockholders who are represented may adjourn the meeting until a quorum is
present. The time and place of the adjourned meeting will be announced at
the time the adjournment is taken, and no other notice will be given. An
adjournment will have no effect on the business that may be conducted at the
meeting.
TABULATION OF VOTES
The votes will be tabulated and certified by an independent inspector of
election appointed by the Company or by the Company's transfer agent.
VOTING BY STREET NAME HOLDERS
If you are the beneficial owner of shares held in "street name" by a
broker, firm, bank, bank nominee or other institution (each a "Broker") on
the record date, the Broker, as the record holder of the shares, is required
to vote those shares in accordance with your instructions. If you do not
give instructions to the Broker, the Broker will nevertheless be entitled to
vote the shares with respect to "discretionary" items but will not be
permitted to vote the shares with respect to "non-discretionary" items, such
as in connection with the election of directors (in which case, the shares
will be treated as "broker non-votes"). Accordingly, please contact the
Broker responsible for your account and instruct that Broker as to how you
would like your shares to be voted and to execute on your behalf the WHITE
proxy card. The Company urges you to confirm your instructions in writing to
the Broker responsible for your account and to provide a copy of such
instructions to the Company, c/o MacKenzie Partners, Inc. who is assisting in
this solicitation, at the address and telephone numbers set forth below, so
that we may be aware of all instructions and can attempt to ensure that such
instructions are followed.
If you have any questions regarding your proxy, or need assistance in
voting your shares, please call:
MacKenzie Partners, Inc.
156 Fifth Avenue
New York, New York 10010
Call toll-free: (800) 332-2885 or (212) 929-5500
ABSTENTIONS AND BROKER NON-VOTES
If you ABSTAIN from voting on one or more proposals, your shares will
nevertheless be included in the number of shares represented for purposes of
determining whether a quorum is present. If you ABSTAIN from voting on
Proposal 2 (Ratification of Independent Auditors), your shares will also be
included in the number of shares voting on the proposal and, consequently,
your abstention will have the same practical effect as a vote AGAINST the
proposal. Because directors are elected by a plurality of the votes (see
"Proposal 1-Election of Directors" below), an abstention will have no effect
on the outcome of the vote on Proposal 1 and, thus, is not offered as a
voting option for that proposal.
If your shares are treated as broker non-votes on one or more proposals,
they will nevertheless be included in the number of shares represented for
purposes of determining whether a quorum is present. Otherwise, those shares
will be treated as shares not entitled to be voted on the proposal.
Consequently, a broker non-vote with respect to Proposal 1 (Election of
Directors) will have no effect on the outcome of the vote on that proposal.
Because the ratification of independent auditors requires the affirmative
vote of a majority of the shares outstanding (see "Proposal 2-Ratification of
Independent Auditors" below), a broker non-vote with respect to Proposal 2
will have the same practical effect as a vote AGAINST that proposal.
-2-
<PAGE>
RETURNING YOUR PROXY CARD
A proxy will not be valid unless the completed enclosed WHITE proxy card
is received by the Company, c/o MacKenzie Partners, Inc., 156 Fifth Avenue,
New York, New York 10010, prior to commencement of the Annual Meeting. If
the enclosed WHITE proxy card is properly executed and returned to the
Company, then your shares will be voted in accordance with the instructions
contained therein.
Any stockholder who executes and returns a proxy may revoke it at any
time before it is voted at the Annual Meeting by: (i) delivering written
notice of such revocation to the Company (attention: Corporate Secretary)
prior to the commencement of the Annual Meeting; (ii) submitting a duly
executed proxy bearing a later date which relates to the same shares; or
(iii) attending and voting such shares at the Annual Meeting. Mere
attendance at the Annual Meeting will not, in and of itself, revoke an
otherwise valid proxy.
Whether or not you attend the Annual Meeting, your vote is urgent.
Accordingly, you are urged to sign and return the accompanying WHITE proxy
card regardless of the number of shares you own. Shares can be voted at the
Annual Meeting only if the holder is present or represented by proxy.
DEFAULT VOTING
If you submit a WHITE proxy card but do not indicate any voting
instructions, your shares will be voted as follows:
-- Proposal 1 (Election of Directors) -- FOR all nominees
-- Proposal 2 (Ratification of Independent Auditors) -- FOR
If any other business properly comes before the stockholders for a vote at
the Annual Meeting, your shares will be voted in accordance with the
discretion of the holders of the proxy.
-3-
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information as of ___________, 1999
regarding the beneficial ownership of Common Stock by (A) each person known
by the Company to own beneficially more than five percent of the Common
Stock, (B) each director and director nominee of the Company, (C) each of the
"Named Executive Officers" (as defined in "Executive Compensation--Summary
Compensation Table"), and (D) all executive officers, directors and director
nominees of the Company as a group. Unless otherwise indicated, the address
of each person named in the table below is c/o Puroflow Incorporated, 16559
Saticoy Street, Van Nuys, California 91406.
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENTAGE
BENEFICIALLY BENEFICIALLY
NAME OWNED(1) OWNED
- ---- ---------------- ------------
<S> <C> <C>
Steel Partners II, L.P. 1,336,100(2) 16.5%
Reuben M. Siwek** 570,250(3) 7.0%
David S. Nagelberg 459,350(4) 5.7%
Michael H. Figoff** 355,000(5) 4.3%
George Solymar 334,650(6) 4.1%
Robert A. Smith** 238,000(7) 2.9%
Dale Livingston 211,800(8) 2.6%
Dr. Tracy Kent Pugmire** 40,000(9) *
Wayne Conner 32,000(10) *
All directors, director nominees and
executive as a group (six persons) 1,447,050 17.5%
- --------------
</TABLE>
* Less than 1%.
** Denotes nominee for election as director.
(1) As used in this table, a beneficial owner of a security includes any
person who, directly or indirectly, through contract, arrangement,
understanding, relationship or otherwise has or shares (i) the power to
vote, or direct the voting of, such security or (ii) investment power
which includes the power to dispose, or to direct the disposition of,
such security. In addition, a person is deemed to be the beneficial
owner of a security if that person has the right to acquire beneficial
ownership of such security within 60 days of the date shown above.
(2) Based upon a Schedule 13D filed with the Commission by Steel
Partners II, L.P., as amended. The business address of Steel Partners II,
L.P. is 750 Lexington Avenue, 27th Floor, New York, New York 10020.
(3) Includes (a) options to purchase 44,000 shares of Common Stock, all of
which are fully vested, and (b) 70,000 shares of Common Stock owned by Mr.
Siwek's spouse. Mr. Siwek disclaims beneficial ownership of the shares
owned by his spouse.
(4) Based upon a Schedule 13G filed with the Commission by Mr. Nagelberg.
Includes 99,250 shares owned by The Nagelberg Family Trust over which
Mr. Nagelberg and his spouse, as trustees, share voting and dispositive
power. The business address of Mr. Nagelberg is c/o M.H. Meyerson & Co.,
Inc., P.O. Box 2142, Rancho Santa Fe, California 92067-2142.
(5) Includes (a) options to purchase 44,000 shares of Common Stock, all of
which are fully vested, and (b) 8,000 shares of Common Stock owned by Mr.
Figoff's spouse. Mr. Figoff disclaims beneficial ownership of the shares
owned by his spouse.
(6) The business address of Mr. Solymar is 2203 Crescent Avenue, Montrose,
California 91020.
(7) Includes (a) options to purchase 28,000 shares of Common Stock, all of
which are fully vested, and (b) 10,000 shares of Common Stock owned
jointly by Mr. Smith and his spouse.
(8) Includes options to purchase 23,000 shares of Common Stock, all of which
are fully vested.
-4-
<PAGE>
(9) Includes options to purchase 19,000 shares of Common Stock, all of which
are fully vested.
(10) Includes options to purchase 12,000 shares of Common Stock, all of which
are fully vested.
PROPOSAL 1: ELECTION OF DIRECTORS
Directors of the Company are elected annually at the annual meeting of
stockholders. Their respective terms of office continue until their
successors have been duly elected and qualified in accordance with the
Company's By-laws. There are no family relationships among any of the
directors or executive officers of the Company. The Company's Board of
Directors currently consists of four directors. At the Annual Meeting, four
directors are to be elected to serve for a term of one year and until their
respective successors are duly elected and qualified.
The designated representatives named in the enclosed proxy intend to
vote for the election to the Board of Directors of each of the four nominees
named below to serve until the 2000 Annual Meeting of Stockholders and until
their successors shall be duly elected and qualified, unless the proxy is
marked to expressly indicate otherwise. Should any of such nominees be
unable or unwilling to accept such election (which the Board of Directors
does not anticipate), then the designated representatives named in the
enclosed proxy will vote for the election of such other persons as the Board
of Directors may recommend. Proxies cannot be voted for a greater number of
persons than the number of nominees named.
The following persons have been nominated as directors:
REUBEN M. SIWEK, 79, has served as Chairman of the Board of Director of
the Company since January 1992, and as a member of the Board of Directors
since January 1982. Mr. Siwek is a self-employed attorney and has practiced
law for more than 48 years. Mr. Siwek has also been certified public
accountant for more than 55 years.
MICHAEL H. FIGOFF, 56, has served as President and Chief Executive
Officer and Director of the Company since May 1995. Mr. Figoff joined the
Company in 1988 and has previously served as its Executive Vice President and
Director of Marketing. Prior to joining the Company, Mr. Figoff served in
various capacities with Lockheed Martin, Textron, Fairchild and Ferranti
International.
ROBERT A. SMITH, 59, has served as a Director of the Company since July
1994. Mr. Smith has been President of Microsource Inc., a subsidiary of
Giga-tronics, since October 1998. Previously, Mr. Smith served as President
of the Industrial Products Group of Haskel International Inc. from February
1995 to January 1998; President and Chief Executive Officer of Industrial
Tools Inc. from January 1994 to February 1995; President of Engineered
Filtration Company from October 1992 to January 1994; President of Puroflow
Corporation, a wholly-owned subsidiary of the Company, from February 1991 to
October 1992; and President of RTS Systems Incorporated from May 1988 to
February 1991, when the company was acquired by Telex Communications, Inc.
Mr. Smith served as President of Purolator Technologies Inc. from 1980 to
1988 and served as General Manager of the Filter Division of HR Textron Inc.
from 1964 to 1980.
DR. TRACY KENT PUGMIRE, 67, has served as a Director of the Company
since June 1991. Since April 1992, Dr. Pugmire has served as an independent
technical consultant. Dr. Pugmire currently provides consulting services to
Spincraft, a Division of Standex International, and is involved with the
design and fabrication of the X-33 and X-34 rocket vehicles. Previously, Dr.
Pugmire was Executive Vice President of ARDE Inc. and worked as a Program
Manager for several companies, including TRW Space Systems Division, Technion
Inc., AVCO Missile and Space Systems (now a division of Textron), General
Electric Space Sciences Laboratory, and Boeing Propulsion and Mechanical
Systems Department.
VOTE REQUIRED
Approval of Proposal 1 to elect four directors requires the affirmative
vote of a plurality of the shares of Common Stock represented in person or by
proxy at the Annual Meeting. The Board of Directors recommends that
stockholders vote FOR each of the four nominees listed above.
-5-
<PAGE>
RECENT BOARD ACTIONS--ADOPTION OF RIGHTS PLAN
On May 28, 1999, the Board of Directors of the Company adopted a
Stockholders Rights Plan (the "Rights Plan"), which is designed to protect
the Company and its stockholders from the abusive tactics often employed in
hostile takeover attempts by corporate raiders.
The Plan provides for a dividend distribution of one right (the
"Rights") to stockholders 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.
The Rights become exercisable if, after May 28, 1999, a stockholder or
stockholder group becomes the beneficial owner of 17.5% or more of the
outstanding shares of Common Stock 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 the
Board, they will expire on May 28, 2001.
The Rights are available to be exercised by all stockholders, except for
the directors of the Company and the stockholder or stockholder group
beneficially owning 17.5% or more of the Company's outstanding shares of
Common Stock.
The complete text of the Rights Plan was filed as an exhibit to the
Company's Report on Form 8-K filed with the Commission on June 2, 1999.
INFORMATION CONCERNING MEETINGS OF THE BOARD OF DIRECTORS AND COMMITTEES
AND DIRECTOR COMPENSATION
The business affairs of the Company are managed under the direction of
the Board of Directors. Members of the Board are informed about the
Company's affairs through presentations, reports and documents distributed to
them, through operating and financial reports routinely presented at meetings
of the Board of Directors and committee meetings, and through other means.
In addition, directors of the Company discharge their duties throughout the
year not only by attending meetings of the Board of Directors but also
through personal meetings and other communications, including telephone
contact with management and others regarding matters of interest and concern
to the Company.
During the fiscal year ended January 31, 1999, the Company's Board of
Directors held two meetings and acted by unanimous written consent six times.
Each director attended at least 75% of the Board meetings and committee
meetings held during the fiscal year ended January 31, 1999.
BOARD COMMITTEES
The Board of Directors has a standing Audit Committee, which met once
during the fiscal year ended January 31, 1999, and a Compensation Committee,
which met one time during the fiscal year ended January 31, 1999. The Audit
and Compensation Committees do not meet on a regular basis, but only as
circumstances require. The members of the Audit and Compensation Committees
are appointed by the Board of Directors. The Company does not currently have
a nominating committee. Nominations to the Board of Directors are made by
the entire Board.
AUDIT COMMITTEE. The Audit Committee recommends to the Board of
Directors the firm to be selected each year as independent auditors of the
Company's financial statements and to perform services related to such audit.
The Audit Committee also has responsibility for (i) reviewing the scope and
results of the audit with the independent auditors, (ii) reviewing the
Company's financial condition and results of operations with management,
(iii) considering the adequacy of the internal accounting, bookkeeping and
control procedures of the Company, and (iv) reviewing any non-audit services
and special engagements to be performed by the independent auditors and
considering the effect of such performance on the auditors' independence.
The current members of the Audit Committee are Messrs. Smith, Siwek and Dr.
Pugmire. A new Audit Committee will be elected by the Board of Directors
after the Annual Meeting.
-6-
<PAGE>
COMPENSATION COMMITTEE. The Compensation Committee recommends to the
Board of Directors compensation of the Company's executive officers and other
key personnel, reviews new or existing employee compensation programs and
periodically reviews management perquisites and other benefits. The current
members of the Compensation Committee are Messrs. Siwek and Smith. A new
Compensation Committee will be elected by the Board of Directors after the
Annual Meeting.
DIRECTOR COMPENSATION
Each outside director of the Company receives a $2,500 annual fee, plus
$300 for each formal meeting attended. Directors are also reimbursed for
reasonable expenses actually incurred in connection with attending each
formal meeting of the Board of Directors or any committee thereof. The
Company's outside directors are currently Messrs. Siwek, Smith and Dr.
Pugmire.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's directors and executive officers and
persons who beneficially own more than 10% of the Company's Common Stock
(collectively, the "Reporting Persons") to file with the Commission (and, if
such security is listed on a national securities exchange, with such
exchange), various reports as to ownership of such Common Stock. Such
Reporting Persons are required by Commission regulations to furnish the
Company with copies of all Section 16(a) reports they file. Based solely
upon a review of copies of Section 16(a) reports and representations received
by the Company from Reporting Persons, and without conducting any independent
investigation of its own, the Company believes that no Reporting Person
failed to timely file Forms 3, 4 and 5 with the Commission during the fiscal
year ended January 31, 1999.
INFORMATION CONCERNING EXECUTIVE OFFICERS
The following table sets forth information regarding the executive
officers of the Company as of ___________, 1999.
<TABLE>
<CAPTION>
NAME AGE POSITIONS WITH THE COMPANY
- ---- --- --------------------------
<S> <C> <C>
Michael H. Figoff 56 Director and President and Chief Executive Officer
Wayne Conner 51 Vice President of Engineering
Dale Livingston 60 Vice President of Manufacturing Operations
</TABLE>
The business experience of each of the persons listed above for at least
the last five years is as follows (for biographical data concerning Mr.
Figoff, see "Proposal 1--Election of Directors."):
WAYNE CONNER has over 30 years of filtration experience and has been the
Vice President of Engineering of the Company since July 1997. From 1990 to
1994, Mr. Conner served as Senior Project Engineer--New Product Development,
for the Hydraulic Filter Division of Parker Hannifin Corporation. Mr. Conner
has also served in various capacities with Purolator Technologies Inc.
DALE LIVINGSTON has been the Vice President of Manufacturing Operations
of the Company since February 1998. From August 1995 until February 1998,
Mr. Livingston served as Director of Operations of the Company, and from
October 1989 until August 1995, he served as Production Manager of the
Company. Mr. Livingston previously served in various capacities with Parker
Hannifin Corporation, Hydraulic Research/Textron, Talley Corporation, The
Marquardt Company and Teleflex Control Systems.
-7-
<PAGE>
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following summary compensation table sets forth the aggregate
compensation paid to or earned by the President and Chief Executive Officer
of the Company and the four most highly compensated executive officers of the
Company (other than the President and Chief Executive Officer) whose total
annual salaries and bonuses exceeded $100,000 for the year ended January 31,
1999 (the "Named Executive Officers").
<TABLE>
<CAPTION>
ANNUAL LONG-TERM
COMPENSATION COMPENSATION
----------------------------------- AWARDS
SECURITIES
FISCAL UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS ($) OPTIONS/SARs COMPENSATION $(1)
- --------------------------- ------ --------- --------- ------------ -----------------
<S> <C> <C> <C> <C> <C>
Michael H. Figoff 1999 160,875 -- -- 19,827
President and Chief 1998 158,125 -- -- 18,559
Executive Officer 1997 142,417 -- -- 15,975
Wayne Conner 1999 98,458 10,000 5,000 6,469
Vice President of 1998 91,245 10,000 10,000 5,880
Engineering 1997 86,000 -- -- --
Dale Livingston 1999 94,292 5,000 5,000 5,093
Vice President of 1998 89,083 16,000 10,000 3,000
Operations 1997 -- -- -- --
</TABLE>
- --------------
(1) Represents Company-reimbursed automobile expenses of such executive and
life and disability insurance premiums paid by the Company.
OPTION/SAR GRANTS IN FISCAL YEAR
The following table sets forth certain information concerning individual
option grants during the fiscal year ended January 31, 1999 to each of the
Named Executive Officers.
<TABLE>
<CAPTION>
NUMBER OF % OF TOTAL
SECURITIES OPTIONS/SARs
UNDERLYING GRANTED TO
OPTIONS/SARs EMPLOYEES IN EXERCISE PRICE EXPIRATION
NAME GRANTED FISCAL YEAR PER SHARE DATE
- ---- ------------ ------------ -------------- ----------
<S> <C> <C> <C> <C>
Michael H. Figoff 0 -- -- --
Wayne Conner 5,000 14.286 $0.81 7/9/03
Dale Livingston 5,000 14.286 $0.81 7/9/03
</TABLE>
-8-
<PAGE>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END
OPTION/SAR VALUES
The following table provides certain information regarding stock option
ownership and exercises by the Named Executive Officers, as well as the
number and assumed value of exercisable and unexercisable options held by
those persons at January 31, 1999.
<TABLE>
<CAPTION>
NUMBER OF
SHARES NUMBER OF SECURITIES UNDERLYING VALUE OF UNEXERCISED IN
ACQUIRED VALUE UNEXERCISED OPTIONS/SARs THE MONEY OPTIONS/SARs
NAME ON EXERCISE REALIZED($) AT 1/31/99 AT 1/31/99($)(1)
- ---- ----------- ----------- ------------------------------- ------------------------------
EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
-------------- --------------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Michael H. Figoff 100,000 25,000 44,000 11,000 $39,864 $9,966
Wayne Conner 0 -- 12,000 13,000 10,872 13,778
Dale Livingston 0 -- 9,800 13,200 8,879 11,959
</TABLE>
___________________________
(1) Value of unexercised "in-the-money" options is equal to the difference
between the closing bid price per share of the Common Stock on the OTC
Bulletin Board at January 31, 1999 ($0.906) and the option exercise price
per share multiplied by the number of shares subject to options.
EMPLOYMENT AGREEMENTS
On March 1, 1993, the Company entered into an employment agreement with
Michael H. Figoff pursuant to which Mr. Figoff agreed to serve as the
Executive Vice President of the Company for a term of five years at an annual
base salary of $95,000. Effective February 14, 1994, Mr. Figoff's annual
base salary was increased to $104,500. Mr. Figoff was appointed President of
the Company in February 1995, and was appointed President and Chief Executive
Officer in May 1995. In April 1997, Mr. Figoff's annual base salary was
increased to $165,000. On June 9, 1998, the Company extended Mr. Figoff's
employment agreement for a term of five years at an annual base salary of
$165,000.
1991 INCENTIVE STOCK OPTION PLAN
In 1991, the Board of Directors adopted and the stockholders approved
the 1991 Incentive Stock Option Plan (the "1991 Option Plan"). Under the
1991 Option Plan, the maximum number of shares of Common Stock that may be
subject to options may not exceed an aggregate of 500,000 shares. The
maximum number of shares may be adjusted in certain events, such as a stock
split, reorganization or recapitalization. Employees (including officers and
directors who are employees) of the Company or its subsidiaries are eligible
for the grant of incentive options under the 1991 Option Plan. Directors who
are not employees or officers are not eligible to receive incentive stock
options, but may receive non-qualified options. Options may also be granted
to other persons, provided that such options shall be non-qualified options.
In the event of incentive options, the aggregate fair market value of the
Common Stock with respect to which such options become first exercisable by
the holder during any calendar year cannot exceed $100,000. This limit does
not apply to non-qualified options. To the extent an option that otherwise
would be an incentive option exceeds this $100,000 threshold, it will be
treated as a non-qualified option.
The Company will receive no monetary consideration for the grant of
options under the 1991 Option Plan. In the case of an incentive option, the
exercise price cannot be less than the fair market value (as defined in the
1991 Option Plan) of the Common Stock on the date the option is granted and,
if an optionee is a stockholder who beneficially owns 10% or more of the
outstanding Common Stock, the exercise price of incentive options may not be
less than 110% of the fair market value of the Common Stock. The term of an
option cannot exceed ten years and, in the case of an optionee who owns 10%
or more of the outstanding Common Stock, cannot exceed five years
-9-
<PAGE>
The 1991 Option Plan will terminate automatically and no options may be
granted more than ten years after the date the 1991 Option Plan was approved
by the Board of Directors. The 1991 Option Plan may be terminated at any
prior time by the Board of Directors. Termination of the 1991 Option Plan
will not affect options that were granted prior to the termination date.
As of June 1, 1999, options to purchase an aggregate of 257,500 shares
of Common Stock were outstanding under the 1991 Option Plan. In addition, as
of June 1, 1999, non-plan options to purchase 119,000 shares of Common Stock
were also outstanding.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
TRANSACTIONS WITH DIRECTORS AND EXECUTIVE OFFICERS
On August 14, 1998, the Board of Directors adopted a stock purchase plan
pursuant to which directors, officers and employees of the Company were given
the opportunity to purchase up to an aggregate of 1,000,000 shares of Common
Stock at a purchase price of $0.75 per share (the "Stock Purchase Plan"). On
August 19, 1998, each of Messrs. Siwek, Smith, Figoff and Livingston (the
"Purchasers") purchased 200,000 shares of Common Stock pursuant to the Stock
Purchase Plan. The purchase price paid by each of the Purchasers was
$150,000. Of the total purchase price paid by each of the Purchasers,
$30,000 was paid in cash and $120,000 was paid by the execution and delivery
of a three-year full recourse promissory note bearing interest at the rate of
5% per annum, payable in quarterly installments. The shares of stock
purchased are pledged as collateral security for the full payment of the
promissory note portion of the purchase price.
Reuben M. Siwek, the Chairman of the Board of Directors of the Company,
renders legal services to the Company. The Company incurred expenses of
approximately $83,078, $66,250 and $62,033 during the fiscal years ended
January 31, 1999, 1998 and 1997, respectively, for legal services rendered by
Mr. Siwek.
PROPOSAL 2: RATIFICATION OF INDEPENDENT AUDITORS
Rose, Snyder & Jacobs has acted as the independent auditors of the
Company since November 1995, and has acted in such capacity in connection
with the preparation of the Company's audited consolidated financial
statements for the year ended January 31, 1999 and the report contained
therein, which is included in the Company's Annual Report to Stockholders
accompanying this Proxy Statement. As independent auditors for the Company,
Rose, Snyder & Jacobs is responsible for auditing the accounts of the Company
and providing other audit and accounting services to the Company in
connection with filings with the Commission.
In June 1999, the Board of Directors approved the appointment of Rose,
Snyder & Jacobs as the Company's independent auditors for the year ending
January 31, 2000. The stockholders are being asked to ratify the appointment
of Rose, Snyder & Jacobs as independent auditors for the year ending January
31, 2000, and to authorize the Board of Directors to fix their remuneration.
A representative of Rose, Snyder & Jacobs is expected to be present at the
Annual Meeting and available to respond to appropriate questions. Such
representative also will have the opportunity, if desired, to make a
statement to the stockholders.
REQUIRED AFFIRMATIVE VOTE
Ratification of the appointment of Rose, Snyder & Jacobs as independent
auditors of the Company for the year ending January 31, 1999 requires the
affirmative vote of holders of a majority of the shares of Common Stock
represented in person or by proxy at the Annual Meeting. The Board of
Directors unanimously recommends that the stockholders vote FOR Proposal 2.
LITIGATION
DELAWARE
On May 3, 1999, Steel Partners II, L.P. ("Steel Partners") commenced an
action in the Federal District Court for the District of Delaware against the
Company and each member of its Board of Directors, entitled: STEEL
-10-
<PAGE>
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.).
Steel Partners, which organized The Full Value Committee, alleges in
its complaint that it beneficially owns 16.6% of the Company's outstanding
shares of Common Stock and that it is the largest stockholder of the Company.
The complaint charges the defendants with using false and misleading proxy
materials to solicit votes for an annual meeting of the Company, which Steel
Partners alleges was to be held June 29, 1999. The complaint also alleges
that the individual defendants caused the Company to issue stock to them and
others at a price unfair to the Company. According to Paragraph 1 of the
complaint, the "sole purpose for the sale of these shares was to give the
individual defendants a large voting block at the annual meeting."
The Company and the individual defendants filed an answer to the
complaint on May 23, 1999. The defendants denied the material allegations of
the complaint and asserted several affirmative defenses, including the
defense that the proxy materials filed by the Company with the Securities and
Exchange Commission (the "Commission") were never distributed to the
Company's stockholders or otherwise used by the Company.
CALIFORNIA
On June 4, 1999, the Company commenced an action in the Superior Court
of the State of California for the County of Los Angeles against Steel
Partners and each member of The Full Value Committee, entitled: PUROFLOW
INCORPORATED V. WARREN G. LICHTENSTEIN, JAMES BENENSON, JR., STEVEN WOLOSKY,
THE FULL VALUE COMMITTEE, STEEL PARTNERS II, L.P. AND STEEL PARTNERS, L.L.C.,
Case No. LC049028.
In its complaint, the Company charges the defendants with interfering
with the Company's current and prospective relationships and the economic
benefits arising therefrom by making false statements. These statements
included a statement allegedly made by Mr. Lichtenstein to a competitor of
the Company that he was the owner of in excess of 55% of the Company's
outstanding Common Stock and that the Company was for sale. It is alleged
that these statements were intended to disrupt the Company's relationships
with its lenders, current and potential customers and suppliers. As of the
date of this Proxy Statement, the defendants had not filed an answer to the
Company's complaint.
STOCKHOLDER PROPOSALS
Proposals submitted for consideration at any future meeting of
stockholders must comply with Rule 14a-8 promulgated by the Commission
pursuant to the Exchange Act. Stockholder proposals requested to be included
in the Company's Proxy Statement for the 2000 Annual Meeting of Stockholders
must be received by the Company at its principal executive offices, 16559
Saticoy Street, Van Nuys, California 91406 (Attn: Corporate Secretary), no
later than January 13, 2000 to be included in the Company's Proxy Statement
for the 2000 Annual Meeting. Proposals submitted for consideration at any
future meeting of stockholders must comply with Rule 14a-8 promulgated by the
Commission pursuant to the Exchange Act.
On May 21, 1998, the Commission adopted an amendment to Rule 14a-4, as
promulgated under the Exchange Act. The amendment to Rule 14a-4(c)(1)
governs the Company's use of its discretionary proxy voting authority with
respect to a stockholder proposal that is not addressed in the Company's
proxy statement. The new amendment provides that if a proponent of a
proposal fails to notify the Company at least 45 days prior to the month and
day of mailing of the prior year's proxy statement (the "Notice Date"), then
the Company will be allowed to use its discretionary voting authority when
the proposal is raised at the meeting, without any discussion of the matter
in the proxy statement.
The Company had not received any notice of a stockholder proposal
through the Notice Date, March 28, 1999, for its 1999 Annual Meeting of
Stockholders. Accordingly, if any stockholder makes a proposal for
consideration and action by stockholders at the Annual Meeting, the Company
will be permitted and intends to exercise its discretionary voting power with
respect thereto as permitted by Rule 14a-4(c)(1).
OTHER MATTERS
As of the date of this Proxy Statement, the Company is aware that The
Full Value Committee has furnished or will furnish stockholders of the
Company with a proxy statement in connection with its solicitation of proxies
for the election of its own slate of nominees to the Board of Directors. THE
BOARD OPPOSES THE ELECTION OF THE NOMINEES PROPOSED BY THE FULL VALUE
COMMITTEE.
YOU ARE STRONGLY URGED NOT TO SIGN OR RETURN THE GOLD PROXY CARD SENT TO
YOU BY THE FULL VALUE COMMITTEE. EVEN IF YOU HAVE ALREADY RETURNED THE FULL
VALUE COMMITTEE'S GOLD PROXY CARD, YOUR BOARD URGES YOU TO SIGN, DATE
-11-
<PAGE>
AND PROMPTLY MAIL THE COMPANY'S ENCLOSED WHITE PROXY CARD, SINCE ONLY YOUR
LATEST DATED PROXY COUNTS.
Other than as set forth above, the Board of Directors does not know of
any other matters that are to be presented for consideration at the Annual
Meeting. Should any other matters properly come before the Annual Meeting,
the persons named in the accompanying proxy or their substitutes will vote
such proxy on behalf of the stockholders they represent in accordance with
their best judgment.
SOLICITATION OF PROXIES
Proxies are being solicited by and on behalf of the Board of Directors.
The Company will bear the costs of preparing and mailing the proxy materials
to its stockholders in connection with the Annual Meeting. The Company will
solicit proxies by mail and the directors and certain officers and employees
of the Company may solicit proxies personally or by telephone, facsimile or
telegraph. These persons will receive no additional compensation for such
services but will be reimbursed by the Company for reasonable out-of-pocket
expenses. The Company also will request brokers, dealers, banks and their
nominees to solicit proxies from their clients, where appropriate, and will
reimburse them for reasonable out-of-pocket expenses related thereto.
In addition, the Company has retained MacKenzie Partners, Inc.
("MacKenzie") as proxy solicitor to assist it in the solicitation of proxies
for a fee of $________ (plus reimbursement of reasonable out-of-pocket
expenses). It is anticipated that MacKenzie will use approximately 25
employees in its solicitation of proxies. The Company estimates that the
total expenditures relating to the solicitation of proxies by the Board of
Directors and its responses to The Full Value Committee will be approximately
$_________, of which approximately $__________ has been expended to date.
ADDITIONAL INFORMATION
The Company will make available to any stockholder, without charge, upon
a written request therefor, copies of the Company's Annual Report on Form
10-KSB for the year ended January 31, 1999. Any such request should be
directed to Puroflow Incorporated, 16559 Saticoy Street, Van Nuys, California
91406, Attention: Corporate Secretary.
Pursuant to the requirements of the Exchange Act and the rules and
regulations thereunder, the Company is required to disclose the following
summary of additional information with respect to the following directors and
nominees for election as directors of the Company (the "Participants").
1. NAMES AND BUSINESS ADDRESSES OF THE PARTICIPANTS.
Reuben M. Siwek Robert A. Smith
C/o Puroflow Incorporated c/o Puroflow Incorporated
16559 Saticoy Street 16559 Saticoy Street
Van Nuys, California 91406 Van Nuys, California 91406
Michael H. Figoff Dr. Tracy Kent Pugmire
C/o Puroflow Incorporated c/o Puroflow Incorporated
16559 Saticoy Street 16559 Saticoy Street
Van Nuys, California 91406 Van Nuys, California 91406
Except as disclosed in this Proxy Statement, none of the above named
persons or any associates of such person has any contract, arrangement or
understanding with any person with respect to: (i) any securities of the
Company (or any securities of any parent or subsidiary of the Company);
(ii) any future employment by the Company or its affiliates; or (iii) any
future transaction to which the Company or any of its affiliates will or may
be a party. Except as disclosed in this Proxy Statement, none of such
persons or any associate of such persons or any member of the immediate
family of any such associate has any direct or indirect material interest in
any transaction
-12-
<PAGE>
or series of transactions since January 31, 1997, or any currently proposed
transaction to which the Company or any of its subsidiaries is or will be a
party and which exceeds $60,000 in amount.
2. TRANSACTIONS IN THE COMPANY'S SECURITIES WITHIN THE PAST TWO YEARS.
The following table sets forth information with respect to the
Participants who made purchases or sales of shares of Common Stock of the
Company during the past two years. Except as indicated, no part of the
purchase price of any such shares is represented by borrowed funds.
<TABLE>
<CAPTION>
PARTICIPANT DATE TRANSACTION NO. OF SHARES
- ----------- ---- ----------- -------------
<S> <C> <C> <C>
Reuben M. Siwek 8/19/98 Purchase 200,000*
2/25/99 Purchase 10,000
2/3/99 Purchase 10,000
12/1/98 Purchase 12,500
8/19/98 Purchase 10,000
5/27/98 Purchase 10,000
4/24/98 Purchase 10,000
3/26/98 Purchase 10,000
3/3/98 Purchase 10,000
1/26/98 Purchase 10,000
Michael H. Figoff 1/7/99 Purchase 100,000
8/19/98 Purchase 200,000*
Robert A. Smith 8/19/98 Purchase 200,000*
7/31/98 Purchase 10,000
7/6/98 Sale 4,000
Dr. Tracy Kent Pugmire 4/30/99 Purchase 12,000
4/30/99 Purchase 9,000
5/19/99 Sale 5,500
5/19/99 Sale 4,755
5/11/99 Sale 5,000
</TABLE>
* For a description of these transactions, see "Certain Relationships and
Related Transactions--Transactions with Directors and Executive
Officers."
FOR THE BOARD OF DIRECTORS
SANDY YOSHISATO
CORPORATE SECRETARY
Van Nuys, California
___________, 1999
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<PAGE>
- --------------------------------------------------------------------------------
If you have any questions or need assistance in voting your shares or
changing your vote, please contact:
MACKENZIE
PARTNERS, INC.
156 Fifth Avenue
New York, New York 10010
(212)929-5500 (Call Collect)
or
CALL TOLL FREE (800) 322-2885
- --------------------------------------------------------------------------------
<PAGE>
PROXY
PUROFLOW INCORPORATED
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
ANNUAL MEETING OF STOCKHOLDERS
___________, 1999
The undersigned, revoking all other proxies previously given, hereby
appoints Michael H. Figoff and Reuben M. Siwek, and each of them individually
(with full power to act without the other and with power to appoint his
substitute), as the undersigned's proxies to represent and to vote all of the
shares of Common Stock of PUROFLOW INCORPORATED, a Delaware corporation (the
"Company"), held of record by the undersigned on __________, 1999 at the
Annual Meeting of Stockholders to be held on ___________, 1999 at 10:00 a.m.,
local time, at the offices of the Company, 16559 Saticoy Street, Van Nuys,
California 91406, and at any and all adjournments or postponements thereof.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY
WILL BE VOTED FOR PROPOSALS 1 AND 2. IF ANY OTHER MATTERS ARE PROPERLY
BROUGHT BEFORE THE ANNUAL MEETING, THE PROXIES WILL VOTE ON THESE MATTERS AS
THE PROXIES NAMED HEREIN MAY DETERMINE IN THEIR SOLE DISCRETION.
PROPOSAL 1. ELECTION
OF DIRECTORS
MANAGEMENT RECOMMENDS A VOTE FOR THE NOMINEES FOR DIRECTOR LISTED BELOW.
/ / FOR all nominees (The nominees are Reuben M.
Siwek, Michael H. Figoff, Robert A. Smith
and Dr. Tracy Kent Pugmire)
/ / WITHHOLD AUTHORITY to vote for all nominees
/ / FOR all nominees except as listed below
(INSTRUCTION: To withhold authority to vote for any individual nominee,
write that nominee's name on the line set forth below.)
- -------------------------------------------------------------------------------
PROPOSAL 2. Proposal to ratify the appointment of Rose, Snyder & Jacobs as
independent auditors of the Company for the year ending
January 31, 2000, and to authorize the Board of Directors to
fix their remuneration.
/ / FOR / / AGAINST / / ABSTAINING
- -------------------------------------------------------------------------------
If any amendments or variations to the matters referred to above or to
any other matters identified in the Notice of Annual Meeting are proposed
at the Annual Meeting or any adjournments thereof, or if any other
matters which are not now known to management should properly come before
the Annual Meeting or any adjournments thereof, this Proxy confers
discretionary authority on the person voting the proxy to vote on such
amendments or variations or such other matters in accordance with the
best judgment of such person.
The undersigned hereby acknowledges receipt of the Notice of Annual
Meeting of Stockholders dated _________, 1999, the Proxy Statement of the
Company, dated ___________, 1999, the accompanying form of Proxy and the
Company's Annual Report to Stockholders for the year ended January 31,
1999, each of which is enclosed herewith.
<PAGE>
The undersigned hereby revokes any proxy to vote shares of Common Stock
of the Company heretofore delivered by the undersigned in connection
with the Annual Meeting.
Dated
----------------------------------
---------------------------------------
Signature
---------------------------------------
Signature, if held jointly
---------------------------------------
Title (if applicable)
Please date, sign exactly as your name
appears on this Proxy and promptly
return in the enclosed envelope. In the
case of joint ownership, each joint
owner must sign. When signing as
guardian, executor, administrator,
attorney, trustee, custodian, or in any
other similar capacity, please give your
full title. In the case of a
corporation, sign in full corporate
name by president or other authorized
officer, giving title, and affix
corporate seal. If a partnership,
sign in partnership name by an
authorized person.
