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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
PUROFLOW INCORPORATED
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(Name of Issuer)
Common Stock, $.01 par value
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(Title Class of Securities)
746375104
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(CUSIP Number)
David Alan Miller, Esq.
Graubard Mollen & Miller
600 Third Avenue
New York, New York 10016-2097
Telephone: (212) 818-8800
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Name, Address and Telephone Number of Persons Authorized to
Receive Notices and Communications)
July 24, 1996
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(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 |_|.
Check the following box if a fee is being paid with the statement |X|.
(A fee is not required only if the Reporting Person: 1) has a previous statement
on file reporting beneficial ownership of more than five percent of the class of
securities described in Item 1; and (2) has filed no amendment subsequent
thereto reporting beneficial ownership of five percent or less of such class.)
(See Rule 13d-7.).
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.
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 ("Act") 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 1 of 15 Pages
Exhibit Index on Page 5
SEC 1746 (12-91
<PAGE>
SCHEDULE 13D
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CUSIP No. 746375104 Page 2 of 15 Pages
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1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Ronald I. Heller
###-##-####
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) |_|
(b) |X|
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3 SEC USE ONLY
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4 SOURCE OF FUNDS*
PF, OO - See Item 3
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5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) OR 2(e) |_|
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6 CITIZENSHIP OR PLACE OF ORGANIZATION
United States
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NUMBER OF 7 SOLE VOTING POWER
SHARES 367,590 Shares
BENEFICIALLY --------------------------------------------------
OWNED BY 8 SHARED VOTING POWER
EACH
REPORTING 101,141 Shares
PERSON --------------------------------------------------
WITH 9 SOLE DISPOSITIVE POWER
367,590 Shares
--------------------------------------------------
10 SHARED DISPOSITIVE POWER
101,141 Shares
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11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
468,731 Shares
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12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
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13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
6.6%
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14 TYPE OF REPORTING PERSON*
IN
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*SEE INSTRUCTIONS BEFORE FILLING OUT!
INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7
(INCLUDING EXHIBITS) OF THE SCHEDULE, AND THE SIGNATURE ATTESTATION.
<PAGE>
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CUSIP No. 746375104 Page 3 of 15 Pages
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Item 1. Security and Issuer
The class of equity securities to which this statement relates is the
common stock, $.01 par value, of Puroflow Incorporated (the "Issuer"), a
Delaware corporation, whose principal executive offices are located at 16559
Saticoy Street, Van Nuys, California 91406 (the "Common Stock").
The percentage of beneficial ownership reflected in this
Statement is based upon 7,108,521 shares of Common Stock outstanding on July 24,
1996, which number has been obtained directly from the Issuer.
Item 2. Identity and Background
(a) Name: This statement is filed on behalf of Ronald I. Heller
("Heller").
(b) Business Address: Heller has a business address of c/o M.H.
Meyerson & Co., Inc., 30 Montgomery Street, Jersey City, New Jersey 07302.
(c) Principal Business: Heller is principally engaged in the
investment banking business for M.H. Meyerson & Co., Inc. ("Meyerson"), an
investment banking firm with its offices at 30 Montgomery Street, Jersey City,
New Jersey 07302.
(d) During the last five years, Heller has not been convicted
in any criminal proceeding (excluding traffic violations or similar
misdemeanors).
(e) During the last five years, Heller has not been a party to any
civil proceeding of a judicial or administrative body of competent jurisdiction
resulting in any judgment, decree or final order against him enjoining him from
engaging in future violations of, or prohibiting or mandating activities subject
to, federal or state securities laws or finding any violation with respect to
such laws, except that Heller consented to certain findings by the Market
Surveillance Committee ("MSC") of the National Association of Securities Dealers
("NASD"). Specifically, effective January 17, 1994, Heller consented to findings
that R.H. Damon & Co., Inc. ("RHD"), an investment banking firm of which Heller
was a principal, distributed shares of Star Classic, Inc. in violation of
certain NASD rules at a time when RHD acted as one of that public company's
common stock's numerous market makers. While it was noted that such violations
occurred without scienter on Heller's part and that the transactions in question
were made in a negotiated, large block transaction accomplished through the
over-the-counter market at prices believed by RHD to be the then current market
prices, the MSC stated that RHD was negligent to make such transactions without
first withdrawing from market making activities for the requisite period of
time. It was also found that certain of RHD's compliance procedures were
inadequate and, although Heller had passed the Series 24 principals'
examination, for a period of time before passing such examination, he served as
the principal supervising RHD's trading. Heller consented to receiving a $20,000
fine, a two-week suspension from being associated with an NASD member firm in
any capacity and a two-month suspension from being associated with an NASD
member firm in a principal capacity, which latter suspension ended on March 17,
1994.
(f) Heller is a citizen of the United States.
<PAGE>
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CUSIP No. 746375104 Page 4 of 15 Pages
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Item 3. Source and Amounts of Funds or Other Consideration
Heller used personal funds to purchase 420,755 of the shares
of Common Stock described below in Item 5(c). Manhattan Group Funding
("Manhattan Group"), a partnership of which Heller and David S. Nagelberg are
the sole partners, used its working capital to purchase 64,376 of the shares of
Common Stock described below in Item 5(c).
Item 4. Purpose of Transactions
Heller has acquired the securities specified in Item 5(c) of
this Schedule 13D in order to obtain individual equity positions in the Issuer
for investment purposes. Heller may acquire or dispose of additional shares of
the Issuer, but does not presently intend to do so, although this intention may
change depending upon market conditions. Heller has no present plans which
relate to or would result in: an extraordinary corporate transaction, such as a
merger, reorganization or liquidation, involving the issuer or any of its
subsidiaries; a sale or transfer of a material amount of assets of the Issuer or
any of its subsidiaries; any change in the present board of directors or
management of the Issuer, including any plans or proposals to change the number
or term of directors or to fill any existing vacancies on the board; any
material change in the present capitalization or dividend policy of the Issuer;
any other material change in the Issuer's business or corporate structure;
changes in the Issuer's charter, bylaws or instruments corresponding thereto or
other actions which may impede the acquisition of control of the Issuer by any
person; causing a class of securities of the Issuer to be delisted from a
national securities exchange or to cease to be authorized to be quoted in an
inter-dealer quotation system of a registered national securities association;
causing a class of equity securities of the Issuer to become eligible for
termination of registration pursuant to Section 12(g)(4) of the Securities and
Exchange Act of 1934; or any action similar to the above.
Item 5. Interest in Securities of the Issuer
(a) Heller and his wife directly own 36,765 shares of Common
Stock and hold such shares in a joint account ("Joint Account"). The Ronald I.
Heller Individual Retirement Account ("IRA"), of which Heller is the grantor,
directly owns 367,590 shares of Common Stock. Manhattan Group, of which Heller
and David S. Nagelberg are the sole partners, owns 64,376 shares of Common
Stock.
(b) Heller has sole voting and dispositive power over the
367,590 shares of Common Stock held by the IRA and shared voting and dispositive
power over the aggregate 101,141 shares of Common Stock held in the Joint
Account and by Manhattan Group, as described in Item 5(a).
(c) On May 12, 1996, Heller and his wife, through the Joint
Account, purchased 42,565 shares in the open market for a purchase price of $.31
per share. On June 28, 1996, the Ronald I. Heller M/P/P/P Account ("M/P/P/P
Account") purchased 65,690 shares of Common Stock in the open market for a
purchase price of $1.50 per share. These 65,690 shares were subsequently
transferred to the IRA. On July 3, 1996 the IRA sold 10,600 shares in the open
market at a price of $2.00 per share. On July 22, 1996, the Joint Account sold
5,800 shares in the open market at a price of $1.74 per share. On July 24, 1996,
the IRA
<PAGE>
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CUSIP No. 746375104 Page 5 of 15 Pages
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purchased 312,500 shares of Common Stock, and Manhattan Group purchased 64,376
shares of Common Stock, from the Issuer in a private offering (the "Private
Placement") at a purchase price of $.80 per share.
(d) Heller's wife shares the right to receive and the power to
direct the receipt of dividends from, or the proceeds from the sale of, the
36,765 shares of Common Stock held in the Joint Account. David S. Nagelberg
shares the right to receive and the power to direct the receipt of dividends
from, or the proceeds from the sale of, the 64,376 shares of Common Stock held
by Manhattan Group.
(e) Not applicable.
Item 6. Contracts, Arrangements, Understandings or Relationships
with Respect to the Securities of the Issuer
Pursuant to the terms of the Registration Rights Agreement
between the Issuer and the purchasers in the Private Placement, no later than
six months after the closing of the Private Placement the Issuer must file a
registration statement on Form S-1 or Form SB-2 or other permitted form to
register the resale of the securities sold in the Private Placement, including
the shares of Common Stock purchased by the IRA and Manhattan Group in the
Private Placement. The purchasers in the Private Placement, including the IRA
and Manhattan Group, also have the right to "piggyback" upon any registration
statement filed by the Issuer at any time (other than any registration statement
filed in connection with a merger or on Form S-8 or other comparable form) to
the extent any shares sold in the Private Placement are not then registered for
resale.
Item 7. Material to be Filed as Exhibits
Exhibit 7.1: Form of Registration Rights Agreement, dated as of
June 3, 1996.
The balance of this page has been left blank intentionally.
<PAGE>
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CUSIP No. 746375104 Page 6 of 15 Pages
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SIGNATURE
After reasonable inquiry and to the best of my knowledge and
belief, I certify that the information set forth in this statement is true,
complete and correct.
Dated: August 5, 1996
/s/ Ronald I. Heller
onald I. Heller
<PAGE>
Exhibit 7.1
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT, dated as of June 3, 1996 by and
between PUROFLOW INCORPORATED, a Delaware corporation (the "Company"), and
person whose name appears on the signature page attached hereto (the "Holder").
WHEREAS, pursuant to a Private Placement Memorandum dated May 1, 1996
(the "Memorandum), the Company has offered (the "Offering"), through Toluca
Pacific Securities Corporation (the "Placement Agent"), for sale shares of its
common stock, $.01 par value (the "Common Stock"), on a "best efforts 2,500,000
share maximum - 1,200,000 share minimum" basis (collectively the "Shares");
WHEREAS, in order to induce the Holder to purchase the Shares, the
Company and the Holder have agreed to enter into this Agreement; and
WHEREAS, it is intended by the Company and the Holder that this
Agreement shall become effective immediately upon the acquisition by the Holder
of the Shares;
NOW, THEREFORE, in consideration of the premises, promises and the
mutual covenants contained herein and in the Subscription Agreement, the Company
hereby agrees as follows:
REGISTRATION RIGHTS.
1. Registration Rights.
(a) Grant of Required Registration Right. The Company agrees
to prepare and file a registration statement (the "Reg istration Statement"), on
Form S-1 (or Form SB-2, or other Form, if permitted) with the Securities and
Exchange Commission (the "SEC") no later than six (6) months from the date of
the last sale of the Shares in the Offering. The Registration Statement shall
include, among other things, all Shares sold in the Offering, a warrant (the "PA
Warrant"), granted by the Company to the Placement Agent and all the shares of
Common Stock issuable upon exercise thereof (the "PA Shares"). The Company
further agrees that it shall cause such Registration Statement to become
effective and remain effective for a period of twelve months (12) from the date
the date the SEC declares such Registration Statement effective. The Shares, the
PA Warrant and the PA Shares shall collectively be referred to herein as the
"Registrable Securities". Should this registration or the effectiveness thereof
be delayed by the Company, the exercisability of the Purchase Options shall be
extended for a period of time equal to the delay in registering the Registrable
Securities caused by the Company. Moreover, the Company agrees that from the net
proceeds raised in the Offering, it shall at the closing of the Offering deposit
$50,000.00 of such proceeds into a segregated account F/B/O PUROFLOW
INCORPORATED SHARE SUBSCRIBERS mutually acceptable to the Placement Agent and
the Company. The $50,000.00 shall be released automatically to TPSC F/B/O
Page 7 of 15 Pages
<PAGE>
Puroflow Inc., Share Subscribers (including the Holder), if the Company has not
filed the Registration Statement with the SEC by the target date, such funds
shall then be used solely in connection with the preparation and filing of a
registration statement covering the Shares, in the event such funds are released
from the special account to TPSC including the holder, the Company further
agrees that is shall take all necessary or advisable expeditiously to assist the
Holders in causing such registration statement to be filed and become and remain
effective, including, but not limited to, signing all documents (including the
registration statement) to effect such action.
(b) Terms. The Company shall bear all fees and expenses
attendant to registering the Registrable Securities, and the Holder(s) shall pay
any and all underwriting and broker-dealer discounts, commissions and
non-accountable expenses of any underwriter or broker-dealer selected by the
Holder(s) to sell the Registrable Securities. The Company agrees to use its
prompt best efforts to cause the filing required herein to become effective and
to qualify or register the Registrable Securities in such States as are
reasonably requested by the Holder(s) (but in no event more than ten (10)
states); provided, however, that in no event shall the Company be required to
register the Registrable Securities in a state in which such registration would
cause the Company to be obligated to qualify to do business in such State or
execute a general consent to service or process.
(c) "Piggyback Registration". If the Company at any time after
the date of this Agreement proposes to register any of its securities under the
Securities Act of 1933, as amended (the "1933 Act") (other than in connection
with a merger or pursuant to Form S-8 or other comparable form), and any shares
sold in the Offering to the Holders are at such time not registered for sale
under the Act, the Company shall include all such shares in such registration
statement if such registration statement does not related to any underwritten
public offering. If such registration statement relates to an underwritten
public offering, the Company shall request that the managing underwriter (if
any) of such underwritten offering include the Shares in the registration
statement for the underwritten offering in such registration. If such managing
underwriter agrees to include the Registrable Securities in the registration
statement relating to the underwritten offering, the Company shall at such time
give prompt written notice to all Holders of its intention to effect such
registration and of such Holders' right under such proposed registration, and
upon the request of any such Holder delivered to the Company within twenty (20)
days after giving such notice (which request shall specify the Registrable
Securities intended to be disposed of by such Holder), the Company shall include
such Registrable Securities held by such Holder requested to be included in such
registration; provided, however, that:
(i) If, at any time after giving such written
notice of the Company's intention to register any of the Holders' Registrable
Page 8 of 15 Pages
<PAGE>
Securities and prior to the effective date of the registration statement filed
in connection with such registration, the Company shall determine for any reason
not to file the reg istration statement wherein the Registrable Securities are
being registered or to delay the registration of such Registrable Securities, at
its sole election, the Company may give written notice of such determination to
each Holder and thereupon shall be relieved of its obligation to register any
Registrable Securities issued or issuable in connection with such registration
(but not from its obligation to pay registration expenses in connection
therewith or to register the Registrable Securities in a subsequent
registration); and in the case of a determination to delay a registration, the
Company shall thereupon be permitted to delay registering any Registrable
Securities for the same period as the delay in respect of securities being
registered for the Company's own account.
(ii) If the managing underwriter in such
underwritten offering shall advise the Company that it declines to include a
portion or all of the Registrable Securities requested by the Holders to be
included in the registration statement, then distribution of all or a specified
portion of the Registrable Securities shall be excluded from such registration
statement (in case of an exclusion as to a portion of the Registrable
Securities, such portion to be excluded shall be allocated among such holders
and any affiliates of the Company including securities to be registered in such
underwritten offering in proportion to the respective number of Registrable
Securities and other securities requested to be registered by each such Holder
and affiliate). In such event the Company shall give the applicable Holders
prompt notice of the number of Registrable Securities excluded from such
registration at the request of the managing underwriter. No such exclusion shall
reduce the securities being offered by the Company for its own account to be
included in such registration statement.
(d) Cooperation with Company. The Holder will cooperate with
the Company in all respects in connection with this Agreement, including, timely
supplying all information reasonably requested by the Company and executing and
returning all documents reasonably requested in connection with the registration
and sale of the Registrable Securities.
2. Registration Procedures. If and whenever the Company
is required by any of the provisions of this Agreement to use its
best efforts to effect the registration of any of the Registrable
Securities under the 1933 Act, the Company shall as expeditiously
as possible:
(a) prepare and file with the Securities and Exchange
Commission (the "Commission") a registration statement and shall use its best
efforts to cause such registration statement to become effective and remain
effective until all the Registrable Securities are sold or become capable of
being publicly sold without registration under the 1933 Act;
Page 9 of 15 Pages
<PAGE>
(b) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in connection
therewith as may be necessary to keep such registration statement effective and
to comply with the provisions of the 1933 Act with respect to the sale or other
disposition of all securities covered by such registration statement (including
prospectus supplements with respect to the sales of securities from time to time
in connection with a registration statement pursuant to Rule 415 of the
Commission);
(c) furnish to the Holders such numbers of copies of a summary
prospectus or other prospectus, including a preliminary prospectus or any
amendment or supplement to any prospectus, in conformity with the requirements
of the 1933 Act, and such other documents, as the Holders may reasonably request
in order to facilitate the public sale or other disposition of the securities
owned by the Holders;
(d) use its best efforts to register and qualify the
securities covered by such registration statement under such other securities or
blue sky laws of such jurisdictions as the Holders shall reasonably request, and
do any and all other acts and things which may be necessary or advisable to
enable such Holders to consummate the public sale or other disposition in such
jurisdictions of the securities owned by such Holders, except that the Company
shall not for any such purpose be required to qualify to do business as a
foreign corporation in any jurisdiction wherein it is not so qualified, to file
therein any general consent to service of process or to be subject to any escrow
or other similar conditions;
(e) use its best efforts to list such securities on any
securities exchange on which any securities of the Company is then listed, if
the listing of such securities is then permitted under the rules of such
exchange;
(f) enter into and perform its obligations under an
underwriting agreement, if the offering is an underwritten offering, in usual
and customary form, with the managing underwriter or underwriters of such
underwritten offering;
(g) notify the Holders of Registrable Securities covered by
such registration statement, at any time when a prospectus relating thereto
covered by such registration statement is required to be delivered under the
1933 Act, of the happening of any event of which it has knowledge as a result of
which the prospectus included in such registration statement, as then in effect,
includes an untrue statement of a material fact or omits to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading in the light of the circumstances then existing; and
(h) take such other actions as shall be reasonably requested
by any Holders to facilitate the registration and sale of the Registrable
Securities; provided, however, that the Company
Page 10 of 15 Pages
<PAGE>
shall not be obligated to take any actions not specifically required elsewhere
herein which in the aggregate would cost in excess of $1,000.
3. Exclusion of Certain Securities in Registration State ment; No Other
Registration Statements. The Company hereby rep resents, warrants and agrees
that (i) other than the Registrable Securities it shall not allow or permit any
other Securities of the Company to be included in the Registration Statement,
and (ii) for a period of twelve (12) months from the date the SEC declares the
Registration Statement effective, the Company shall not file any other
Registration Statement with the SEC without the prior permission from the
Placement Agent.
4. Expenses. All expenses incurred in any registration of the Holder's
Registrable Securities under this Agreement shall be paid by the Company,
including, without limitation, printing expenses, fees and disbursements of
counsel for the Company, expenses of any audits to which the Company shall agree
or which shall be necessary to comply with governmental requirements in
connection with any such registration, all registration and filing fees for the
Holders', limited to no more than ten (10) states, Registrable Securities under
federal and state securities laws, and expenses of complying with the securities
or blue sky laws of any jurisdictions pursuant to Section 2(d); provided,
however, the Company shall not be liable for (a) any discounts or commissions to
any underwriter; (b) any stock transfer taxes incurred with respect to
Registrable Securities sold in the Offering or (c) the fees and expenses of
counsel for any Holder, provided that the Company will pay the costs and
expenses of Company counsel when the Company's counsel is representing any or
all selling security holders.
5. Indemnification. In the event any Registrable
Securities are included in a registration statement pursuant to
this Agreement:
(a) Company Indemnity. Without limitation of any other
indemnity provided to any Holder, either in connection with the offering or
otherwise, to the extent permitted by law, the Company shall indemnify and hold
harmless each Holder, the affiliates, officers, directors and partners of each
Holder, any underwriter (as defined in the 1933 Act) for such Holder, and each
person, if any, who controls such Holder or underwriter (within the meaning of
the 1933 Act or the Securities Exchange Act of 1934 (the "Exchange Act"),
against any losses, claims, damages or liabilities (joint or several) to which
they may become subject under the 1933 Act, the Exchange Act or other federal or
state law, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon any of the following statements,
omissions or violations (collectively a "Violation"): (i) any untrue statement
or alleged untrue statement of a material fact contained in such registration
statement including any preliminary prospectus or final prospectus contained
therein or any amendments or supplements thereto, (ii) the omission or alleged
Page 11 of 15 Pages
<PAGE>
omission to state therein a material fact required to be stated therein, or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, (iii) any violation or alleged violation
by the Company of the 1933 Act, the Exchange Act, or any state securities law or
any rule or regulation promulgated under the 1933 Act, the Exchange Act or any
state securities law, and in each case, the Company shall reimburse the Holder,
affiliate, officer or director or partner, underwriter or controlling person for
any legal or other expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, damage, liability or action;
provided, however, that the Company shall not be liable to any Holder in any
such case for any such loss, claim, damage, liability or action to the extent
that it arises out of or is based upon a Violation which occurs in reliance upon
and in conformity with written information furnished expressly for use in
connection with such registration by the Holder or any other officer, director
or controlling person thereof.
(b) Holder Indemnity. The Holder shall indemnify and hold
harmless the Company, its affiliates, its counsel, officers, directors,
shareholders and representatives, any underwriter (as defined in the 1933 Act)
and each person, if any, who controls the Company or the underwriter (within the
meaning of the 1933 Act or the Exchange Act), against any losses, claims,
damages, or liabilities (joint or several) to which they may become subject
under the 1933 Act, the Exchange Act or any state securities law, and in each
case the Holder shall reimburse the Company, affiliate, officer or director or
shareholder, underwriter or controlling person for any legal or other expenses
reasonably incurred by them in connection with investigating or defending any
such loss, claim, damage, liability or action; insofar as such losses, claims,
damages or liabilities (or actions and respect thereof) arise out of or are
based upon a Violation which occurs in reliance upon and in conformity with
written information furnished expressly by such Holder or any other officer,
director or controlling person thereof to the Company in connection with the
registration of Registrable Securities. Notwithstanding the above, the Holder's
indemnification shall be limited to the dollar value of the securities being
registered for the account of the Holder.
(c) Notice; Right to Defend. Promptly after receipt by an
indemnified party under this Section 5 of notice of the com mencement of any
action (including any governmental action), such indemnified party shall, if a
claim in respect thereof is to be made against any indemnifying party under this
Section 5, deliver to the indemnifying party a written notice of the
commencement thereof and the indemnifying party shall have the right to par
ticipate in and if the indemnifying party agrees in writing that it will be
responsible for any costs, expenses, judgments, damages and losses incurred by
the indemnified party with respect to such claim, jointly with any other
indemnifying party similarly noticed, to assume the defense thereof with counsel
mutually satisfactory to the parties; provided, however, that an indemnified
Page 12 of 15 Pages
<PAGE>
party shall have the right to retain its own counsel in combination with other
parties who have entered into substantially identical agreements, with the fees
and expenses to be paid by the indemnifying party, if the indemnified party
based upon advice of counsel reasonably believes that representation of such
indemnified party by the counsel retained by the indemnifying party would be
inappropriate due to actual or potential differing interests between such
indemnified party and any other party represented by such counsel in such
proceeding. The failure to deliver written notice to the indemnifying party
within a reasonable time of the commencement of any such action shall relieve
such indemnifying party of any liability to the indemnified party under this
Agreement only if and to the extent that such failure is prejudicial to its
ability to defend such action, and the omission so to deliver written notice to
the indemnifying party will not relieve it of any liability that it may have to
any indemnified party otherwise than under this Agreement. There can be no
settlement without the indemnifying party's prior consent.
(d) Contribution. If the indemnification provided for in this
Agreement is held by a court of competent jurisdiction to be unavailable to an
indemnified party with respect to any loss, liability, claim, damage or expense
referred to therein, then the indemnifying party, in lieu of indemnifying such
indemnified party thereunder, shall contribute to the amount paid or payable by
such indemnified party as a result of such loss, liability, claim, damage or
expense in such proportion as is appropriate to reflect the relative fault of
the indemnifying party on the one hand and of the indemnified party on the other
hand in connection with the statements or omissions which resulted in such loss,
liability, claim, damage or expense as well as any other relevant equitable
considerations. The relevant fault of the indemnifying party and the indemnified
party shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission to state a
material fact relates to information supplied by the indemnifying party or by
the indemnified party and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
Notwithstanding the foregoing, the amount the Holder shall be obligated to
contribute pursuant to the Agreement shall be limited to an amount equal to the
proceeds to the Holder of the Registrable Securities sold pursuant to the
registration statement which gives rise to such obligation to contribute (less
the aggregate amount of any damages which the Holder has otherwise been required
to pay in respect of such loss, claim, damage, liability or action or any
substantially similar loss, claim, damage, liability or action arising from the
sale of such Registrable Securities).
(e) Survival of Indemnity. The indemnification provided by
this Agreement shall be a continuing right to indemnification and shall survive
the registration and sale of any Registrable Securities by any person entitled
to indemnification hereunder and the expiration or termination of this
Agreement.
Page 13 of 15 Pages
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6. Remedies.
(a) Time is of the Essence. The Company agrees that time is of
the essence of each of the covenants contained herein and that, in the event of
a dispute hereunder, this Agreement is to be interpreted and construed in a
manner that will enable the Holder to sell its Registrable Securities as quickly
as possible after such Holders have indicated to the Company that they desire
their Registrable Securities to be registered. Any delay on the part of the
Company not expressly permitted under this Agreement, shall be deemed a material
breach of this Agreement.
(b) Remedies Upon Default or Delay. The Company acknowledges
the breach of any part of this Agreement may cause irreparable harm to the
Holder and that monetary damages alone may be inadequate. The Company therefore
agrees that the Holder shall be entitled to injunctive relief or such other
applicable remedy as a court of competent jurisdiction may provide. Nothing
contained herein will be construed to limit a Holder's right to any remedies at
law, including recovery of damages for breach of any part of this Agreement.
7. Notices.
(a) All communications under this Agreement shall be in
writing and shall be mailed by certified mail return receipt requested, postage
prepaid, or telegraphed or telexed with con firmation of receipt or delivered by
hand or by overnight delivery service,
(i) If to the Company, at:
Puroflow Incorporated
16559 Saticoy Street
Van Nuys, California 91406
Attention: Michael H. Figoff
or at such other address as it may have furnished in writing to the Holder of
Registrable Securities at the time outstanding, or
(ii) if to the Holder of any Registrable
Securities, to the address of such Holder as it appears in the stock ledger of
the Company.
(b) Any notice so addressed, when mailed by certified mail
return receipt requested shall be deemed to be given three days after so mailed,
when telegraphed or telexed shall be deemed to be given when transmitted, or
when delivered by hand or over night delivery service shall be deemed to be
given when delivered.
8. Successors and Assigns. Except as otherwise expressly
provided herein, this Agreement shall inure to the benefit of and be binding
upon the successors and permitted assigns of the Company and the Holder.
Page 14 of 15 Pages
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9. Amendment, Waiver and Termination. This Agreement may be amended,
and the observance of any term of this Agreement may be waived, but only with
the written consent of the Company and the Holder. No delay on the part of any
party in the exercise of any right, power or remedy shall operate as a waiver
thereof, nor shall any single or partial exercise by any party of any right,
power or remedy preclude any other or further exercise thereof, or the exercise
of any other right, power or remedy. Upon the conversion of the Warrants offered
in the Offering into identical warrants as are included in any registration
statement pursuant to Paragraph l(a) hereof, this Agreement shall terminate and
be null and void. Thereafter, the Warrants shall be governed by the public
warrant agreement relating to such warrants.
10. Counterparts. One or more counterparts of this Agreement may
be signed by the parties, each of which shall be an original but all of which
together shall constitute one and the same instrument.
11. Governing Law. This Agreement shall be construed in
accordance with and governed by the internal laws of the State of California,
without giving effect to conflicts of law principles.
12. Invalidity of Provisions. If any provision of this Agreement
is or becomes invalid, illegal or unenforceable in any respect, the validity,
legality and enforceability of the remaining provisions contained herein shall
not be affected thereby.
13. Headings. The headings in this Agreement are for convenience
of reference only and shall not be deemed to alter or affect the meaning or
interpretation of any provisions hereof.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first set forth above.
PUROFLOW INCORPORATED
By:
Name: Signature of Holder
Position:
Print Name of Holder
Print address of Holder
Page 15 of 15 Pages
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