Document:

Exhibit 10.11

COMMON STOCK PURCHASE
WARRANT

Right to Purchase
Shares of Common Stock of

Puroflow Incorporated

THIS WARRANT AND ANY SHARES ACQUIRED
UPON THE EXERCISE OF THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "ACT"), AND MAY NOT BE SOLD, TRANSFERRED, PLEDGED,
HYPOTHECATED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF (i) AN EFFECTIVE
REGISTRATION STATEMENT FOR SUCH SECURITIES UNDER THE ACT OR (ii) AN OPINION OF
COMPANY COUNSEL THAT SUCH REGISTRATION IS NOT REQUIRED.

Puroflow Incorporated

Common Stock Purchase
Warrant

Puroflow
Incorporated, a Delaware corporation (together with any corporation which shall
succeed to or assume the obligations of Puroflow Incorporated (the "Company")
hereunder, hereby certifies that, for value received, _________________ or his
assigns is entitled, subject to the terms set forth below, to purchase from the
Company fully-paid and non-assessable shares of the Company's common stock, par
value $.15 per share (the "Common Stock") at a purchase price per share
of Seven and 75/100 Dollars ($7.75) (such price per share as adjusted from time
to time as provided herein is referred to herein as the "Exercise Price"). 
The number of shares of Common Stock for which this Warrant is exercisable and
the Exercise Price are subject to computation and adjustment as provided
herein.

ARTICLE I

DEFINITIONS

Certain terms
are used in this Warrant as specifically defined in Article IX hereof.

 

ARTICLE II

EXERCISE OF WARRANT

Section 2.1       Exercise.  This Warrant may be exercised, in whole at any time or
in part from time to time (such partial exercises to be in amounts of not less
than 1,000 shares of Common Stock (or the equivalent)) prior to 5:00 P.M. on
December 31, 2012, by the Holder (the "Holder") by the surrender of this
Warrant (with the subscription form at the end hereof duly executed) at the
principal office of the Company at One Church Street, Suite 302, Rockville, MD
20850, together with proper payment of the aggregate Exercise Price applicable
on such date, or the proportionate part thereof if this Warrant is exercised in
part.  Payment for such shares shall be made by check or checks, payable to the
order of the Company.  If this Warrant is exercised in part, the Holder shall
be entitled to receive a new Warrant covering the number of shares of Common
Stock in respect of which this Warrant has not been exercised and setting forth
the proportionate part of the aggregate Exercise Price applicable to such
shares. 

Section 2.2       Exercisable Shares.  The Holder shall have the right pursuant to
this Warrant to purchase _________________ shares of Common Stock at a purchase
price of Seven and 75/100 Dollars ($7.75) per share.

Section 2.3       Warrant Agent.  In the event that a bank or trust company shall have
been appointed as trustee for the Holder, such bank or trust company shall have
all the powers and duties of a warrant agent appointed pursuant to Article X
hereof and shall accept, in its own name for the account of the Company or such
successor entity as may be entitled thereto, all amounts otherwise payable to
the Company or such successor, as the case may be, on the exercise of this
Warrant pursuant to this Article II.

ARTICLE III

DELIVERY
OF STOCK CERTIFICATES ON EXERCISE

Section 3.1       Delivery.  As soon as practicable after the exercise of this
Warrant, and in any event within ten (10) days thereafter, the Company, at its
expense (including the payment by it of any applicable issue taxes), will cause
to be issued in the name of and delivered to the Holder, or as the Holder (upon
payment by the Holder of any applicable transfer taxes) may direct, a
certificate or certificates for the number of fully-paid and non-assessable
shares of Common Stock (or Other Securities, as defined herein) to which the
Holder shall be entitled on such exercise, together with any other stock or
other securities and property (including cash, where applicable) to which the
Holder is entitled upon such exercise.

Section 3.2       Fractional Shares.  In the event that the exercise of this Warrant,
in full or in part, would result in the issuance of any fractional share of Common
Stock, then such event the Holder shall be entitled to cash equal to the fair
market value of such fractional share as determined in good faith by the
Company's Board of Director. 

 

 

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ARTICLE IV

ADJUSTMENT FOR REORGANIZATION

CONSOLIDATION, MERGER, ETC.

Section 4.1       Certain Adjustments.  In case at any time or from time to time the
Company shall (i) effect a capital reorganization, reclassification or recapitalization,
(ii) consolidate with or merge into any other entity, or (iii) transfer all or
substantially all of its properties or assets to any other person or entity
under any plan or arrangement contemplating the dissolution of the Company,
then in each such case, the Holder, on the exercise hereof as provided in
Article II hereof at any time after the consummation of such reorganization,
recapitalization, consolidation or merger or the effective date of such
dissolution, as the case may be, shall receive, in lieu of the Common Stock (or
Other Securities) issuable on such exercise prior to such consummation or
effective date, the stock and other securities and property (including cash) to
which the Holder would have been entitled upon such consummation or in
connection with such dissolution, as the case may be, if the Holder had so
exercised this Warrant immediately prior thereto, all subject to further
adjustment thereafter as provided in Article V hereof.

Section 4.2       Continuation of Terms.  Upon any reorganization, consolidation,
merger or transfer (and any dissolution following any transfer) referred to in
this Article IV, this Warrant shall continue in full force and effect and the
terms hereof shall be applicable to the shares of stock and other securities
and property receivable on the exercise of this Warrant after the consummation
of such reorganization, consolidation or merger or the effective date of
dissolution following any such transfer, as the case may be, and shall be
binding upon the issuer of any such stock or other securities, including, in
the case of any such transfer, the person or entity acquiring all or
substantially all of the properties or assets of the Company, whether or not
such person or entity shall have expressly assumed the terms of this Warrant as
provided in Article VI hereof.

ARTICLE V

AMOUNT OF OUTSTANDING COMMON STOCK

In case any
Other Securities shall have been issued, or then shall be subject to issue upon
the conversion or exchange of any stock (or Other Securities) of the Company
(or any other issuer of Other Securities or any other entity referred to in
Article IV hereof) or to subscription, purchase or other acquisition pursuant
to any rights or options granted by the Company (or such other issuer or
entity), the Holder shall be entitled to receive upon exercise hereof such
amount of Other Securities (in lieu of or in addition to Common Stock) as is
determined in accordance with the terms hereof, treating all references to
Common Stock herein as references to Other Securities to the extent applicable,
and the computations, adjustments and readjustments provided for in this
Article V with respect to the number of shares of Common Stock issuable upon
exercise of this Warrant shall be made as early as possible in the manner so
provided and applied to determine the amount of Other Securities from time to
time receivable on the exercise of the Warrant, so as to provide the Holder
with the benefits intended by this Article V and the other provisions of this
Warrant.

 

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ARTICLE VI

NO DILUTION OR IMPAIRMENT

The Company,
by amendment of its Charter or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, will not avoid or seek to avoid the observance or performance
of any of the terms of this Warrant, but will at all times in good faith assist
in the carrying out of all such terms and in the taking of all such action as
may be necessary or appropriate to protect the rights of the Holder against
dilution.  Without limiting the generality of the foregoing, the Company (i)
will not increase the par value of any shares of stock receivable on the
exercise of the Warrant above the amount payable therefor on such exercise,
(ii) will take all such action as may be necessary or appropriate so that the
Company may validly and legally issue fully-paid and non-assessable shares of
stock on the exercise of the Warrant from time to time outstanding, and (iii)
will not transfer all or substantially all of its properties and assets to any
other entity (corporate or otherwise), or consolidate with or merge into any
other entity or permit any such entity to consolidate with or merge into the
Company (if the Company is not the surviving entity), unless such other entity
shall expressly assume in writing and will be bound by all the terms of this
Warrant.

ARTICLE VII

NOTICES OF RECORD DATE

In the event of:

(a)        any taking by the Company of a record of the holder of any class of securities
for the purpose of determining the holders thereof who are entitled to receive
any dividend or other distribution, or any right to subscribe for, purchase or
otherwise acquire any shares of stock of any class or any other securities or
property, or to receive any other right; or

(b)        any capital reorganization of the Company, any reclassification or
recapitalization of the capital stock of the Company or any transfer of all or
substantially all the assets of the Company to or any consolidation or merger
of the Company with or into any other entity; or

(c)        any voluntary or involuntary dissolution, liquidation or winding up of the
Company; or

(d)        any proposed issue or grant by the Company of any shares of stock of any class or
any other securities, or any right or option to subscribe for, purchase or
otherwise acquire any shares of stock of any class or any other securities
(other than the issue of Common Stock on the exercise of this Warrant);

4

 

then, and in
such event, the Company will mail or cause to be mailed to the holders of the
Warrants a notice specifying (i) the date on which any such record is to be
taken for the purpose of such dividend, distribution or right, and stating the
amount and character of such dividend, distribution or right, (ii) the date on
which any such reorganization, reclassification, recapitalization, transfer,
consolidation, merger, dissolution, liquidation or winding-up is anticipated to
take place, and the time, if any is to be fixed, as of which the holders of
record of Common Stock (or Other Securities) shall be entitled to exchange
their shares of Common Stock (or Other Securities) for securities or other
property deliverable on such reorganization, reclassification,
recapitalization, transfer, consolidation, merger, dissolution, liquidation or
winding-up and (iii) the amount and character of any stock or other securities,
or rights or options with respect thereto, proposed to be issued or granted,
the date of such proposed issue or grant and the persons or class of persons to
whom such proposed issue or grant is to be offered or made.  Such notice shall
be mailed at least ten (10) days prior to the date specified in such notice on
which any such action is to be taken.

ARTICLE VIII

RESERVATION OF STOCK ISSUABLE

ON EXERCISE OF WARRANT

The Company
will at all time reserve and keep available, solely for issuance and delivery
on the exercise of this Warrant, a number of shares of Common Stock equal to
the total number of shares of Common Stock from time to time issuable upon
exercise of this Warrant, and, from time to time, will take all steps necessary
to amend its Charter to provide sufficient reserves of shares of Common Stock
issuable upon exercise of this Warrant.

ARTICLE IX

DEFINITIONS

As used
herein, the following term, unless the context otherwise requires, has the
following meaning:

The term Other
Securities refers to any stock (other than Common Stock) and other securities
of the Company or any other entity (corporate or otherwise) (i) which the
Holder at any time shall be entitled to receive, or shall have received, on the
exercise of this Warrant, in lieu of or in addition to Common Stock, or (ii)
which at any time shall be issuable or shall have been issued in exchange for
or in replacement of Common Stock or Other Securities, in each case pursuant to
Article IV or V hereof.

 

 

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ARTICLE X

WARRANT AGENT

The Company
may, by written notice of the Holder, appoint any agent having an office in New
York, New York for the purpose of issuing Common Stock on the exercise of this
Warrant pursuant to Article II hereof, and thereafter any such issuance, exchange
or replacement, as the case may be, shall be made at such office by such
agent.  The Company hereby appoints as warrant agent Continental Stock Transfer
& Trust Company, 17 Battery Place, New York, New York 10004.

ARTICLE XI

REMEDIES

The Company
stipulates that the remedies at law of the Holder in the event of any default
or threatened default by the Company in the performance of or compliance with
any of the terms of this Warrant are not and will not be adequate, and that
such terms may be specifically enforced by a decree for the specific
performance of any agreement contained herein or buy an injunction against a
violation of any of the terms hereof or otherwise.

ARTICLE XII

NOTICES

No notice or other communication under this
Warrant shall be effective unless, but any notice or other communication shall
be effective and shall be deemed to have been given if, the same is in writing
and is mailed by first-class mail, postage prepaid, addressed to:

1           the Company at One Church Street, Suite 302, Rockville, MD  20850, Attn:  H. Haywood Miller, or such other address
as the Company has designated in writing to the Holder, or

2.         the Holder at One Church Street, Suite 302, Rockville, MD  20850, or such other address as the Holder has
designated in writing to the Company.

 

 

 

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ARTICLE XIII

WARRANT HOLDER
NOT SHAREHOLDER

Except as otherwise provided herein, this Warrant
does not confer upon the Holder any right to vote or to consent or to receive
notice as a shareholder of the Company, as such, in respect of any matters
whatsoever, or any other rights or liabilities as a shareholder, prior to the
exercise hereof.

ARTICLE XIV

ASSIGNMENT

Notwithstanding anything herein to the contrary,
the Warrant may not be assigned without the prior written consent of the
Company.

ARTICLE XV

MISCELLANEOUS

In case any
provision of this Warrant shall be invalid, illegal or unenforceable, or
partially invalid, illegal or unenforceable, the provision shall be enforced to
the extent, if any, that it may legally be enforced and the validity, legality
and enforceability of the remaining provisions shall not in any way be affected
or impaired thereby.  This Warrant and any term hereof may be changed, waived,
discharged or terminated only by a statement in writing signed by the party
against which enforcement of such change, waiver, discharge or termination is sought. 
This Warrant shall be governed by and construed in accordance with the domestic
substantive laws (and not the conflict of law rules) of the State of Delaware. 
The heading in this Warrant are for purposes of reference only, and shall not
limit or otherwise affect any of the terms hereof.  This Warrant shall take
effect as an instrument under seal. 

 

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IN WITNESS
WHEREOF, the Company has caused this Warrant to be executed by its duly
authorized officer and its corporate seal to be impressed hereon and attested
by its Secretary.

Dated as of April 29, 2003

PUROFLOW INCORPORATED

By:                                                                  

         Name:   

        
Title:

Attest:

                                                            

Name:

Title:

 

 

 

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FORM OF ASSIGNMENT

(To be signed only on
transfer of Warrant)

For value received, the undersigned
hereby sells, assigns, and transfers unto _________ ______________________ the
right represented by the within Warrant to purchase _________ shares of the
Common Stock of PUROFLOW INCORPORATED (the "Company"), a Delaware
corporation, to which the within Warrant relates, and appoints
_______________________ as its attorney to transfer such right on the books of
the Company, with full power of substitution in the premises.

Dated as of ___________________, ________

                                                                       

 

 

By:                                                                  

      Name:

      Title:

 

 

 

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SUBSCRIPTION

            The undersigned,                                           pursuant
to the provisions of the Warrant, dated April 29, 2003, granted by Puroflow
Incorporated for One Thousand (1,000) Common Shares hereby elects to purchase                            (             
) Common Shares of Puroflow Incorporated covered by that Warrant.

Dated:                      

                                                                         

 

 

Signature                                 

 

 

 

 

 

 

10EXHIBIT 10.20
                                  INTEREST ONLY
                           NONRECOURSE PROMISSORY NOTE
                             AND SECURITY AGREEMENT

$400,000.00                                                      2/23/03  [Date]
                                                                 -------
                                                           Portsmouth,  Virginia

     FOR VALUE RECEIVED, H.E.R.C. Products Incorporated, a Delaware corporation,
("Maker" or "Debtor") promises to pay to R. John Armstrong ("Holder" or "Secured
Party"),  or  order,  the  principal  sum  of  Four  Hundred  Thousand  Dollars
($400,000.00) with interest from the date of this Note on unpaid principal owing
from  time  to  time  at  the rate of eight percent (8.0%) per annum until fully
paid.   Maker  shall  make interest only payments on the first day of each month
from  the  date  of  this Note until the date one (1) year from the date of this
Note  ("Maturity  Date"). Principal plus all accrued and unpaid interest on such
principal  shall  be  due  and  payable  on  the  Maturity  Date.

     Maker  shall  make  all  payments  in  lawful money of the United States of
America  and  in  immediately available funds. Computations of interest shall be
based  on  a  year  of 360 days but shall be calculated for the actual number of
days  in  the  period  for  which  interest  is  charged.

     This  Note  may  be  prepaid  in  whole or in part, without penalty, at the
option of Maker and without the consent of Holder. All payments shall be applied
first  to  accrued  and  unpaid  interest  and  then  to  the  principal balance
outstanding.  All  payments  under  this Note shall be paid to Holder at Seaward
Marine  Services,  Inc.,  Attention:  R.  John Armstrong, 3975 University Drive,
Suite  400,  Fairfax,  Virginia  22030 marked "PERSONAL and CONFIDENTIAL", or at
such  other  address  as  Holder  shall  direct  Maker  in  writing.

     This  Note  is  nonrecourse as to Maker, except as to those assets of Maker
described  in  the  Security  Agreement  between  Maker  as Debtor and Holder as
Secured Party ("Security Agreement") and a UCC-1 Financing Statement, both dated
the  same  date  as this Note ("Collateral"). In the event Holder is entitled to
proceed  against  Maker,  Holder's sole recourse shall be to proceed against the
Collateral  pursuant  to  the  terms set forth in the Security Agreement. Holder
shall have no other recourse against Maker or any assets of Maker other than the
Collateral.  This provision is not intended to constitute a discharge or release
of  any  obligation  contained  in  this  Note  or  security  that  secures such
obligations,  but  is  a  covenant  by Holder not to sue Maker for a deficiency.

     In  the  event  of  any failure to pay when due any installment of interest
under this note, and the continuance of that failure to pay for a period of (10)
days  after written notice, by certified or registered mail or by hand delivery,
of  this  failure, this promissory note shall be considered to be in default and
the  entire  unpaid  principal sum, together with accrued interest, shall at the
option  of  the  holder  become  immediately  due  and  payable  in  full.

     The  laws  of  the  State  of Virginia excluding its conflict of laws rules
shall govern this Note. The exclusive jurisdiction and venue of any legal action
instituted  by  any  party  to  this  Note  shall  be  Fairfax,  Virginia.

     Maker  waives presentment, protest and demand, notice of protest, notice of
demand  and  dishonor,  and  notice  of nonpayment of this Note. Maker expressly
agrees that Holder may extend this Note or any payment under this Note from time
to  time  without  in  any  way  affecting  the  liability  of  Maker.

      Maker  shall pay all costs and expenses, including attorney fees, incurred
(i) in collecting payment on this Note, (ii) in connection with any dispute that
arises  as to its enforcement, validity, or interpretation, whether or not legal
action  is  instituted  or  prosecuted  to  judgment,  or (iii) in enforcing any
judgment  obtained  in  any  related  legal  proceeding.

     If  any  provision  or  any word, term, clause, or part of any provision of
this  Note  shall  be invalid for any reason, the same shall be ineffective, but
the  remainder of this Note and of the provision shall not be affected and shall
remain  in  full  force  and  effect.

<PAGE>

     Any  of  the terms and conditions of this Note may be waived by Holder, but
no  such  waiver  shall  affect  or  impair  the  rights  of  Holder  to require
observance, performance, or satisfaction, either of that term or condition as it
applies on a subsequent occasion or of any other term or condition of this Note.

     This  Note  shall be secured by Collateral in the Security Agreement made a
part  hereof  as  follows:

                                   SECTION ONE

                          CREATION OF SECURITY INTEREST

Debtor grants, and secured party retains a security interest in all of company's
present  and future inventory, accounts, account and contract rights, contracts,
drafts,  acceptances,  documents,  instruments, chattel paper, deposit accounts,
general intangibles and all products and proceeds therefrom, all of which are in
this  instrument  referred  to as "collateral," subject to prior encumbrance and
security  interest  under  that  certain agreement by and between debtor and KBK
Financial,  Inc.  dated September 22, 1997, as amended, to secure payment of the
following:

    A.  The  debt  evidenced  by  this  instrument.

    B. All costs and expenses incurred by secured party in the collection of the
debt.

    C.  All  future  advances made by secured party for taxes, levies, insurance
and  repairs  to  or  maintenance  of  collateral.

    D.  All  other  future advances that may, at the option of secured party, be
made  or  given  by  secured  party  to  or  for  the  account  of  debtor.

    E.  All  other  past,  present,  future, direct or contingent liabilities of
debtor  to  secured  party.

                                   SECTION TWO

                                 PURPOSE OF LOAN

Secured  party  has  loaned  the above sum to debtor to enable debtor to provide
operational  working  capital  and  other  general  corporate  purposes.

                                  SECTION THREE

                         PERFECTION OF SECURITY INTEREST

Debtor  shall  pay all filing fees with respect to the security interest created
by  this  agreement,  and  secured  party  is  by  this  agreement appointed the
attorney-in-fact  of  debtor  to  perform  all  acts that secured party may deem
necessary  to  perfect  and  continue  perfecting  such  security  interest.

<PAGE>

                                  SECTION FOUR

                         LOCATION OF BUSINESS OF DEBTOR

The place of business of debtor for the purpose of sale of collateral is at 1420
Columbus  Avenue,  Portsmouth,  Virginia  23704.  Debtor  has  no other place of
business  in Virginia. Debtor shall promptly notify secured party in writing of:

    A.  Any  change  in  location  of  any  place  of  business.

    B.  Establishment  of  any  new  place  of  business.

    C.  Discontinuance  of  any  established  place  of  business.

                                  SECTION FIVE

                            PROTECTION OF COLLATERAL

Debtor  shall maintain collateral in good condition and repair and shall pay and
discharge  all taxes, levies and other impositions levied on collateral, as well
as  the  cost  of repairs to or maintenance of collateral. If debtor fails to do
so,  secured  party  may  pay  the  cost of such maintenance or repairs and such
taxes,  levies  and  impositions for the account of debtor, adding the amount of
the  same  to  the  debt  secured by this agreement. Debtor shall permit secured
party  to  inspect  collateral and the books and records of debtor pertaining to
the  collateral at any reasonable time. Debtor shall not lease, mortgage, pledge
or  encumber  collateral, permit its identity to be lost, permit it to be levied
on  or  attached under any legal process, or create any security interest in the
collateral  other  than the security interest created by this agreement, subject
to  prior  encumbrance  and  security interest referenced in Section One hereof.

                                   SECTION SIX

                                  RISK OF LOSS

Risk  of  loss,  damage  to  or  destruction  of  collateral  is  on  debtor.

                                  SECTION SEVEN

                        RIGHTS AND REMEDIES UNDER STATUTE

In  addition  to  all  rights given to secured party by this promissory note and
security  agreement,  secured  party shall have all the rights and remedies of a
secured party under VA ST T. 8.9A and otherwise accorded by the law in Virginia.

<PAGE>

                                  SECTION EIGHT

                             CONFESSION OF JUDGMENT

Debtor  empowers any attorney of any court of record within the United States to
appear  for  debtor  and, with or without one or more complaints or declarations
filed,  confess a judgment or judgments against debtor in favor of the holder of
this  note  and  agreement,  as  of  any  term,  for  the above sum plus accrued
interest,  together  with costs of suit and attorney fees of 1.0%. Debtor waives
all  errors  and stays of execution. The exemption of all property from levy and
sale  on  any  execution  is  also  waived, and no benefit of exemption shall be
claimed  under  or by virtue of any exemption law now in force or that may later
be  enacted.

                                  SECTION NINE

                                  SEVERABILITY

If  any  provision  of  this  instrument shall for any reason be held invalid or
unenforceable,  such  invalidity  or unenforceability shall not affect any other
provision  of  this  instrument, but this promissory note and security agreement
shall  be construed as if such invalid or unenforceable provision had never been
contained  in  this  instrument.

                                   SECTION TEN

                              EFFECT OF INSTRUMENT

The  rights and privileges of secured party under this instrument shall inure to
the  benefit  of the successors and assigns of secured party, and the duties and
obligations  of  debtor  under  this  instrument  shall bind the heirs, personal
representatives,  successors  and  assigns  of debtor. If there is more than one
debtor,  the  warranties,  covenants  and agreements of debtor contained in this
instrument,  including  the foregoing confession of judgment, shall be joint and
several.

Executed  at  Portsmouth,  Virginia  the  day  and  year  first  above  written.

MAKER/DEBTOR

H.E.R.C.  Products  Incorporated,
a  Delaware  corporation

By:    S.  Steven  Carl,  CEO
     ------------------------

[Signature]

  /s/   S.  Steven  Carl
------------------------

<PAGE>

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