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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 16 Page
Exhibit Index on Page 6
SEC 1746 (12-91)
<PAGE>
SCHEDULE 13D
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CUSIP No. 746375104 Page 2 of 16 Pages
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1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
David S. Nagelberg
###-##-####
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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
BENEFICIALLY 0 Shares
OWNED BY -------------------------------------------------
EACH 8 SHARED VOTING POWER
REPORTING
PERSON 376,876 Shares
WITH -------------------------------------------------
9 SOLE DISPOSITIVE POWER
0 Shares
-------------------------------------------------
10 SHARED DISPOSITIVE POWER
376,876 Shares
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11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
376,876 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)
5.3%
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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 16 Pages
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1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Bette Nagelberg
###-##-####
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) |_|
(b) |_|
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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
BENEFICIALLY 0 Shares
OWNED BY ---------------------------------------------------
EACH 8 SHARED VOTING POWER
REPORTING
PERSON 312,500 Shares
WITH ---------------------------------------------------
9 SOLE DISPOSITIVE POWER
0 Shares
---------------------------------------------------
10 SHARED DISPOSITIVE POWER
312,500 Shares
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11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
312,500 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)
4.4%
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14 TYPE OF REPORTING PERSON*
IN
- -------------------------------------------------------------------------------
*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 4 of 16 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 percentages of beneficial ownership reflected in this
Statement are 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
(i) David S. Nagelberg, an individual; and
(ii) Bette Nagelberg, an individual.
David S. Nagelberg and Bette Nagelberg are husband and wife.
(b) Business Address: David S. Nagelberg and Bette Nagelberg each has
a business address of c/o M.H. Meyerson & Co., Inc., 30 Montgomery Street,
Jersey City, New Jersey 07302.
(c) Principal Business: David S. Nagelberg 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. Bette Nagelberg is a private investor.
(d) During the last five years, neither David S. Nagelberg nor Bette
Nagelberg has been convicted in any criminal proceeding (excluding traffic
violations or similar misdemeanors).
(e) During the last five years, neither David S. Nagelberg nor Bette
Nagelberg has 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 or her enjoining him or her 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.
(f) Each of David S. Nagelberg and Bette Nagelberg is a citizen of the
United States.
<PAGE>
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CUSIP No. 746375104 Page 5 of 16 Pages
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Item 3. Source and Amounts of Funds or Other Consideration
Bette Nagelberg used personal funds to purchase 312,500 of the
shares of Common Stock described below in Item 5(c). Manhattan Group Funding
("Manhattan Group"), a partnership of which David S. Nagelberg and Ronald I.
Heller 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
David S. Nagelberg and Bette Nagelberg have 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. David S.
Nagelberg and Bette Nagelberg may acquire or dispose of additional shares of the
Issuer, but do not presently intend to do so, although this intention may change
depending upon market conditions. Neither David S. Nagelberg nor Bette Nagelberg
has any 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) Bette Nagelberg directly owns 312,500 shares of Common Stock.
Manhattan Group, of which David S. Nagelberg and Ronald I. Heller are the sole
partners, owns 64,376 shares of Common Stock.
(b) David S. Nagelberg may be deemed to share voting and
dispositive power over the 312,500 shares of Common Stock held by Bette
Nagelberg. David S. Nagelberg shares voting and dispositive power over the
64,376 shares of Common Stock held by Manhattan Group, as described in Item
5(a). David S. Nagelberg disclaims beneficial ownership of the 312,500 shares of
Common Stock held by Bette Nagelberg and the filing of this statement shall not
be construed as an admission that David S. Nagelberg is, for the purposes of
Section 13(d) or 13(g) of the Securities Exchange Act of 1934, the beneficial
owner of the 312,500 shares of Common Stock held by Bette Nagelberg.
<PAGE>
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CUSIP No. 746375104 Page 6 of 16 Pages
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(c) On July 24, 1996, Bette Nagelberg 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) David S. Nagelberg may be deemed to share the right to
receive and the power to direct the receipt of dividends from, or the proceeds
from the sale of, the 312,500 shares of Common Stock held by Bette Nagelberg.
David S. Nagelberg and Ronald I. Heller share 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 Bette Nagelberg and Manhattan Group in
the Private Placement. The purchasers in the Private Placement, including Bette
Nagelberg 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 7 of 16 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/ David S. Nagelberg
David S. Nagelberg
/s/ Bette Nagelberg
Bette Nagelberg
<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 "Registration 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 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 dealy 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 8 of 16 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:
Page 9 of 16 Pages
<PAGE>
(i) If, at any time after giving such written notice of the
Company's intention to register any of the Holders' Registrable 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 registration 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 10 of 16 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 shall not be obligated to take any actions
not specifically required elsewhere herein which in the aggregate would cost in
excess of $1,000.
Page 11 of 16 Pages
<PAGE>
3. Exclusion of Certain Securities in Registration Statement; No Other
Registration Statements. The Company hereby represents, 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 12 of 16 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 commencement 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 participate 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 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
Page 13 of 16 Pages
<PAGE>
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 14 of 16 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 confirmation 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 overnight 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 15 of 16 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 16 of 16 Pages
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