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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
(Amendment No. 8)*
ERC Industries, Inc.
- --------------------------------------------------------------------------------
(Name of Issuer)
Common Stock, par value $0.01 per share
- --------------------------------------------------------------------------------
(Title of Class of Securities)
268912102
-----------------------------------
(CUSIP Number)
Arthur M. Nathan, Haynes and Boone, L.L.P.
1000 Louisiana Street, Suite 4300, Houston, Texas 77002
(713) 547-2000
- --------------------------------------------------------------------------------
(Name, Address and Telephone Number of Person Authorized to Receive Notices
and Communications)
June 6, 1996
-----------------------------------
(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 / /. (A fee
is not required only if the filing 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 remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities, and
for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.
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).
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SCHEDULE 13D
CUSIP No. 268912102 Page 2 of 7 Pages
- --------------------------------------------------------------------------------
NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
1 John Wood Group PLC, a company registered in Scotland and incorporated
under the laws of the United Kingdom
- --------------------------------------------------------------------------------
CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) / /
2 (b) / /
- --------------------------------------------------------------------------------
SEC USE ONLY
3
- --------------------------------------------------------------------------------
SOURCE OF FUNDS
4
WC
- --------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS
2(d) OR 2(e) / /
- --------------------------------------------------------------------------------
CITIZENSHIP OR PLACE OF ORGANIZATION
6
United Kingdom
- --------------------------------------------------------------------------------
SOLE VOTING POWER
NUMBER OF 7
SHARES 15,467,820
BENEFICIALLY -----------------------------------------------------------------
OWNED BY SHARED VOTING POWER
EACH 8
REPORTING 0
PERSON -----------------------------------------------------------------
WITH SOLE DISPOSITIVE POWER
9
15,467,820
-----------------------------------------------------------------
SHARED DISPOSITIVE POWER
10
0
- --------------------------------------------------------------------------------
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
11
15,467,820
- --------------------------------------------------------------------------------
CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
12 SHARES / /
- --------------------------------------------------------------------------------
PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
13
72.8%
- --------------------------------------------------------------------------------
TYPE OF REPORTING PERSON*
14
CO
- --------------------------------------------------------------------------------
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The Schedule 13D dated October 19, 1992, as amended by Amendment No. 1 thereto
dated December 3, 1992, Amendment No. 2 thereto dated December 7, 1992,
Amendment No. 3 thereto dated January 11, 1993, Amendment No. 4 thereto dated
April 30, 1993, Amendment No. 5 thereto dated July 29, 1993, Amendment No. 6
thereto dated March 13, 1996 and Amendment No. 7 thereto dated March 22, 1996
(the "Schedule 13D") of John Wood Group PLC (the "Reporting Person"), relating
to the Common Stock, $.01 par value per share, of ERC Industries, Inc., a
Delaware corporation (formerly known as ERC Subsidiary, Inc., successor by
merger to ERC Industries, Inc.), is hereby amended and supplemented as set forth
below. Defined terms used in this Amendment No. 8 and not defined herein shall
have their respective meanings as set forth in the Schedule 13D.
Item 3. Source and Amount of Funds or Other Consideration.
Item 3 is hereby amended by adding the following paragraphs:
"The $6,000,000 used to make the purchases reported by this Amendment No.8 to
Schedule 13D came from the Reporting Person's working capital."
Item 4. Purposes of the Transaction.
Item 4 is hereby amended by adding the following paragraphs:
"On June 6, 1996, the Company and the Reporting Person entered into an
Investment Agreement (the "Investment Agreement") pursuant to which the
Reporting Person purchased and the Company sold an aggregate of 7,384,616 shares
(the "Shares") of Common Stock. The purchase price for such Shares was $0.8125
(13/16) per share (or an aggregate consideration of $6,000,000). The Company's
Board of Directors formed a special committee consisting entirely of outside
Directors (the "Special Committee") to negotiate the transaction. The Special
Committee retained the investment banking firm of Howard, Weil, Labouisse,
Friedrichs Incorporated to evaluate the transaction.
The Investment Agreement contains representations and warranties of the
Company and the Reporting Person which are typical of transaction of this kind.
The Investment Agreement is attached hereto as Exhibit I.
In connection with the Investment Agreement, the Company granted registration
rights to the Reporting Person pursuant to a Registration Rights Agreement dated
as of June 6, 1996 (the "Registration Rights Agreement"). Under the terms of
the Registration Rights Agreement, the Reporting Person has demand registration
rights, pursuant to which the Reporting Person may request, not more than two
times, registration by the Company of any or all of the Shares within 120 days
after notice to the Company. The Registration Rights Agreement also grants
piggyback registration rights, which allow the Reporting Person to participate
in underwritten public offerings initiated by the Company during the next two
years, subject to certain limitations and conditions set forth therein. Under
the terms of the Registration Rights Agreement, the ability of the Reporting
Person to exercise the rights granted thereunder may not be subordinated or
subject to registration rights granted to any other person or entity. The rights
granted under the Registration Rights Agreement terminate, and the registration
rights will not be exercisable by the Reporting Person, on the earlier of (i)
the fifth anniversary date of the Registration Rights Agreement, or (ii) at such
time as all of the Shares may immediately be sold under Rule 144 under the
Securities Act of 1933, as amended, during any 90-day period. The Registration
Rights Agreement is attached hereto as Exhibit J.
Page 3 of 7 Pages
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As a result of the purchase of the Shares, the Reporting Person currently owns
an aggregate of 15,467,820 shares representing approximately 72.8% of the
outstanding shares of Common Stock.
It is presently contemplated that the Reporting Person may, depending on its
evaluation of the Company's business, prospects and financial condition, the
market for the Common Stock, other opportunities available to the Reporting
Person, general economic conditions, regulatory conditions, financial and stock
market conditions and other future developments, make additional purchases of
Common Stock either in the open market or in private transactions (or
combinations thereof). The Reporting Person is continuing to evaluate its
investment in the Company, including the feasibility of acquiring all of the
capital stock of the Company. Any such acquisition would necessarily involve
extraordinary corporate actions with respect to the Company which may involve
certain of the actions or occurrences set forth in paragraphs (a) through (j) of
Item 4 of Schedule 13D, including, without limitation, actions to eliminate
minority interests in the Company, terminate registration status pursuant to
Section 12(g)(4) of the 1934 Act and delist the Common Stock from the Nasdaq
Stock Market. Depending upon the circumstances, the Reporting Person might also
hold its shares of Common Stock for an extended period of time, or may decide to
sell all or part of its investment in the Common Stock. While the Reporting
Person is continuing to evaluate its investment in the Company, no detailed
plans or arrangements have been made at this time."
Item 5. Interest in Securities of the Issuer.
The information set forth in Item 4 of this Amendment No. 8 is incorporated by
reference in response to this Item 5.
Item 6. Contracts, Arrangements, Understandings or Relationships with Respect
to Securities of the Issuer.
The information set forth in Item 4 of this Amendment No. 8 is incorporated by
reference in response to this Item 6.
Item 7. Material to be Filed as Exhibits.
Item 7 is hereby amended and restated in its entirety by the following
paragraphs:
*A Form of proposed Certificate of Ownership and Merger merging ERC Industries,
Inc. into ERC Subsidiary, Inc.
*B Stock Purchase Agreement dated October 15, 1992 among the John Wood Group
PLC, as Purchaser, Quantum Fund, N.V., Warren H. Haber, Lawrence M. Pohly
and John L. Teager, as Sellers, and ERC Industries, Inc.
*C Standstill and Voting Agreement dated October 15, 1992 among John Wood Group
PLC, Quantum Fund, N.V. and ERC Industries, Inc.
*D Irrevocable Proxy executed by Quantum Fund, N.V. to John Wood Group PLC and
J. Derek P. Jones.
Page 4 of 7 Pages
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*E Notice of Waiver of Conditions to Consummate Purchase Agreement dated
November 30, 1992.
*F Agreement dated December 4, 1992, between the Reporting Person and ERC
Industries, Inc.
*G Agreement dated December 4, 1992, among the Reporting Person, ERC
Industries, Inc., and the Indemnitees.
*H Letter Agreement dated March 5, 1996, between the Reporting Person and
Quantum.
**I Investment Agreement dated June 6, 1996, between the Reporting Person and
the Company.
**J Registration Rights Agreement dated June 6, 1996, between the Reporting
Person and the Company.
* Previously filed.
** Filed herewith.
Page 5 of 7 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 Amendment No. 8 to Schedule 13D is true,
complete and correct.
Date: June 12, 1996.
JOHN WOOD GROUP PLC
By: /s/ J. DEREK P. JONES
--------------------------------------
Name: J. Derek P. Jones
Title: Director
Page 6 of 7 Pages
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EXHIBIT INDEX
*A Form of proposed Certificate of Ownership and Merger merging ERC
Industries, Inc. into ERC Subsidiary, Inc.
*B Stock Purchase Agreement dated October 15, 1992 among the John Wood Group
PLC, as Purchaser, Quantum Fund, N.V., Warren H. Haber, Lawrence M. Pohly
and John L. Teager, as Sellers, and ERC Industries, Inc.
*C Standstill and Voting Agreement dated October 15, 1992 among John Wood
Group PLC, Quantum Fund, N.V. and ERC Industries, Inc.
*D Irrevocable Proxy executed by Quantum Fund, N.V. to John Wood Group PLC
and J. Derek P. Jones.
*E Notice of Waiver of Conditions to Consummate Purchase Agreement dated
November 30, 1992.
*F Agreement dated December 4, 1992, between the Reporting Person and ERC
Industries, Inc.
*G Agreement dated December 4, 1992, among the Reporting Person, ERC
Industries, Inc., and the Indemnitees.
*H Letter Agreement dated March 5, 1996, between the Reporting Person
and Quantum.
**I Investment Agreement dated June 6, 1996, between the Reporting
Person and the Company.
**J Registration Rights Agreement dated June 6, 1996, between the
Reporting Person and the Company.
* Previously filed.
**Filed herewith.
Page 7 of 7 Pages
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Exhibit I
INVESTMENT AGREEMENT
BETWEEN
ERC INDUSTRIES, INC.
AND
JOHN WOOD GROUP PLC
======================================
Dated as of June 6, 1996
<PAGE>
INVESTMENT AGREEMENT
THE SECURITIES TO BE ISSUED AND SOLD PURSUANT TO THIS INVESTMENT AGREEMENT
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE
SECURITIES LAWS OF ANY STATE OF THE UNITED STATES AND MAY NOT BE TRANSFERRED
IN VIOLATION OF SUCH ACT, THE RULES AND REGULATIONS PROMULGATED THEREUNDER,
ANY SUCH STATE SECURITIES LAWS OR THE PROVISIONS OF THIS AGREEMENT.
Investment Agreement
INVESTMENT AGREEMENT (the "Agreement") dated as of June 6, 1996, by
and between JOHN WOOD GROUP PLC, a company incorporated in the United Kingdom
and registered in Scotland ("Investor") and ERC INDUSTRIES, INC., a Delaware
corporation ("ERC").
WHEREAS, ERC needs an infusion of cash in order to pursue its
business interests; and
WHEREAS, Investor is willing to purchase shares of common stock, par
value $0.01 per share of ERC (the "ERC Common Stock") on the terms and
conditions described in this Agreement; and
WHEREAS, ERC desires to sell to Investor and Investor desires to
purchase from ERC, shares of ERC Common Stock subject to the terms and
conditions herein;
NOW, THEREFORE, in reliance upon the representations and warranties
made herein and in consideration of the premises and the mutual covenants and
conditions herein contained, the parties agree as follows:
ARTICLE 1
SALE AND PURCHASE OF THE SHARES; CLOSING
1.1 SALE OF SHARES.
At the Closing (as defined in Section 1.3 hereof), and subject to the terms
and conditions hereof, ERC will issue and sell to Investor and Investor will
purchase from ERC 7,384,616 shares of ERC Common Stock (the "ERC Shares").
1.2 DELIVERIES AT CLOSING.
(a) At the Closing, ERC shall deliver to Investor a certificate duly issued in
the name of Investor representing the ERC Shares purchased by Investor and
the documents contemplated by Section 2.1 below.
(b) At the Closing, Investor shall pay to ERC $6,000,000.50 (the
"ERC Stock Purchase Price"), by wire transfer of immediately available
funds, to such account as ERC may specify in writing prior to the Closing
Date.
(c) At the Closing, ERC shall execute and deliver the Registration Rights
Agreement in the form attached to this Agreement as Exhibit A.
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1.3 THE CLOSING.
(a) The closing of the purchase and sale of the ERC Shares hereunder (the
"Closing"), shall be held at the offices of Haynes and Boone, L.L.P., 1000
Louisiana, Suite 4300, Houston, Texas 77002-5012. The Closing shall occur
on the day and at the time (the "Closing Date") at which ERC notifies
Investor that all conditions to ERC's purchase of the ERC Shares shall
have been satisfied.
ARTICLE 2
CONDITIONS TO CLOSING
2.1 CONDITIONS TO CLOSING OF INVESTOR. The obligation of Investor to purchase
the ERC Shares on the Closing Date hereunder is subject to the satisfaction
of the following conditions:
(a) The representations and warranties of ERC contained in this Agreement
shall be true and correct in all material respects on and as of the
Closing Date as though made on and as of such date (except for those
made as of a specified date, which shall be true and correct as of such
date) and ERC shall have performed in all material respects its
obligations hereunder required to be performed on or before the Closing
Date and Investor shall have received from ERC an Officers' Certificate
signed by its Chief Executive Officer and its Chief Financial Officer
to the effect of the foregoing;
(b) There shall not have occurred (i) any general suspension of trading in
securities on NASDAQ; or (ii) a declaration of a banking moratorium or
any suspension of payments in respect of banks in the United States;
(c) There shall not be any temporary or permanent order, injunction or
decree entered or enforced, by or before any United States or U.K.
Government Entity, or any statute, rule or regulation enacted or
promulgated, that would prohibit the transactions contemplated
hereunder;
(d) Since the date of this Agreement, neither ERC and its Subsidiaries,
taken as a whole, nor ERC shall have undergone or suffered any long-
term material adverse change in its business, financial condition or
results of operations;
(e) ERC shall have obtained all consents and approvals which are legally
required to be obtained prior to consummation of the purchase of the
ERC Shares hereunder, which if not obtained would have a material
adverse effect on ERC and its Subsidiaries, taken as a whole;
(f) The Board of Directors of Investor shall have approved this Agreement
and the transactions contemplated hereunder and thereunder on or before
June 6, 1996;
(g) Howard Weil Labouisse Friedrichs Incorporated shall have issued and
delivered a fairness opinion to ERC and its Special Committee of the
Board of Directors in a form which is reasonably acceptable to the
Investor and which opines that the purchase price of the ERC Shares
being purchased pursuant to this Agreement is reasonable and fair to
both ERC and its stockholders from a financial point of view and such
opinion shall not have been withdrawn, revoked or modified in any
material respect; and
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(j) ERC shall have delivered a certified copy of the resolutions of its
Special Committee of the Board of Directors and its full Board of
Directors authorizing and approving (1) this Agreement and the
Registration Rights Agreement, (2) the transaction contemplated by this
Agreement and the Registration Rights Agreement, (3) such further
actions as such officers deem necessary or appropriate in order to
consummate the transaction contemplated by this Agreement and the
Registration Rights Agreement, and further directing ERC's proper
officers to execute and deliver this Agreement and the Registration
Rights Agreement and such other agreements, certificates and papers as
may be necessary or appropriate to consummate the transactions
contemplated by this Agreement and the Registration Rights Agreement.
The foregoing conditions are for the sole benefit of Investor and
may be asserted by Investor in its sole discretion or may be waived by
Investor in whole or in part at any time in the sole discretion of Investor.
2.2 CONDITIONS TO CLOSING OF ERC. The obligation of ERC to sell the ERC
Shares on the Closing Date hereunder is subject to the satisfaction of the
following conditions:
(a) The representations and warranties of Investor contained in this
Agreement shall be true and correct in all material respects on and as
of the Closing Date as though made on and as of such date (except for
those made as of a specified date, which shall be true and correct as
of such date) and Investor shall have performed in all material
respects its obligations hereunder required to be performed on or
before the Closing Date and ERC shall have received from Investor an
Officers' Certificate signed by one of its representative directors to
the effect of the foregoing;
(b) There shall not have occurred (i) any general suspension of trading in
securities on NASDAQ; or (ii) a declaration of a banking moratorium or
any suspension of payments in respect of banks in the United States;
(c) There shall not be any temporary or permanent order, injunction or
decree entered or enforced, by or before any United States or U.K.
Government Entity, or any statute, rule or regulation enacted or
promulgated, that would prohibit the transactions contemplated
hereunder;
(d) Each of ERC and Investor shall have obtained all consents and approvals
which are legally required to be obtained prior to the sale of the ERC
Shares hereunder, which if not obtained would have a material adverse
effect on ERC and its Subsidiaries, taken as a whole;
(e) The Board of Directors of Investor shall have approved this Agreement
and the transactions contemplated hereunder and thereunder on or before
June 6, 1996;
(f) Howard Weil Labouisse Friedrichs Incorporated shall have issued and
delivered a fairness opinion to ERC and its Special Committee of the
Board of Directors in a form which is reasonably acceptable to the
Investor and which opines that the purchase price of the ERC Shares
being purchased pursuant to this Agreement is reasonable and fair to
both ERC and its stockholders from a financial point of view and such
opinion shall not have been withdrawn, revoked or modified in any
material respect; and
(g) Investor shall have delivered a certified copy of the resolutions of
its Board of Directors authorizing and approving (1) this Agreement and
the Registration
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Rights Agreement, (2) the transaction contemplated by this Agreement
and the Registration Rights Agreement, (3) such further actions as its
officers deem necessary or appropriate in order to consummate the
transaction contemplated by this Agreement and the Registration Rights
Agreement, and further directing Investor's proper officers to execute
and deliver this Agreement and the Registration Rights Agreement and
such other agreements, certificates and papers as may be necessary or
appropriate to consummate the transactions contemplated by this
Agreement and the Registration Rights Agreement.
The foregoing conditions are for the sole benefit of ERC and may be
asserted by ERC in its sole discretion or may be waived by ERC in whole or in
part at any time in the sole discretion of ERC.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES AS TO ERC
ERC hereby represents and warrants to Investor as follows:
3.1 ORGANIZATION, ETC., OF ERC. ERC is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware and
has all requisite corporate power and authority to own and operate its
properties, to carry on its business as now conducted and proposed by ERC
to be conducted, to enter into this Agreement, and to carry out the
provisions of this Agreement, and to consummate the transactions
contemplated hereby and thereby. ERC is duly qualified and in good standing
in each jurisdiction in which the property owned, leased or operated by it
or the nature of the business conducted by it makes such qualification
necessary, except where the failure to be so qualified has or would be
reasonably expected (so far as can be foreseen at the time) to have a
material adverse effect on the business, results of operations or financial
condition of ERC and its Subsidiaries taken as a whole. Except as described
in the ERC SEC Reports filed prior to the date hereof or Schedule 3.1 of
the Disclosure Schedule, ERC is not subject to any order, complaint,
proceeding or investigation pending or, to the knowledge of the Responsible
Officers of ERC, threatened, which affects or would be reasonably expected
(so far as can be foreseen at the time) to affect the validity of any
approvals or licenses or impair the renewal thereof, except where the
invalidity of any approvals or licenses or the non-renewal thereof does not
have and would not be reasonably expected (so far as can be foreseen at the
time) to have a material adverse effect on the business, results of
operations or financial condition of ERC and its Subsidiaries taken as a
whole.
3.2 OPERATIONS OF SUBSIDIARIES. Each Subsidiary of ERC is:
(a) a corporation or other legal entity duly organized, validly existing
and (if applicable) in good standing under the laws of the
jurisdiction of its organization and has the requisite corporate or
other organizational power and authority to own its properties and
conduct its business and operations as currently conducted, except
where the failure to be duly organized, validly existing and in good
standing does not have, and would not be reasonably expected (so far
as can be foreseen at the time) to have, a material adverse effect on
the business, results of operations or financial condition of ERC and
its Subsidiaries taken as a whole,
(b) duly qualified and in good standing (if applicable) in each
jurisdiction in which the property owned, leased or operated by it or
the nature of the business
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conducted by it makes such qualification necessary, except where the
failure to be so qualified does not have and would not be reasonably
expected (so far as can be foreseen at the time) to have a material
adverse effect on the business, results of operations or financial
condition of ERC and its Subsidiaries taken as a whole, and
(c) is subject to no order, complaint, proceeding or investigation pending
or, to the knowledge of ERC's Responsible Officers, threatened, which
would be reasonably expected (so far as can be foreseen at the time)
to affect the validity of any approvals or licenses or impair the
renewal thereof, except where the invalidity of any approvals or
licenses or the non-renewal thereof does not have and would not be
reasonably expected (so far as can be foreseen at the time) to have a
material adverse effect on the business, results of operations or
financial condition of ERC and its Subsidiaries taken as a whole.
3.3 AUTHORIZATION. This Agreement and all other agreements which are to be
executed and delivered by ERC in connection with the transactions
contemplated by this Agreement, and the consummation of the transactions
contemplated hereby and thereby, have been unanimously approved by the
special committee of the Board of Directors of ERC and have been duly
authorized by all other necessary corporate action on the part of ERC. This
Agreement and all other agreements which are to be executed and delivered
in connection with the consummation of the transactions contemplated by
this Agreement, upon execution and delivery thereof will be, duly executed
and delivered by a duly authorized officer of ERC and this Agreement and
such other agreements constitute valid and binding agreements of ERC,
enforceable against ERC in accordance with their terms, except as may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium
and other similar laws of general application which may affect the
enforcement of creditors' rights generally and by general equitable
principles. ERC has delivered to Investor true and correct copies of
resolutions adopted by the Special Committee and entire Board of Directors
of ERC approving this Agreement.
3.4 CAPITAL STOCK.
(a) The authorized capital stock of ERC consists of (i) 30,000,000 shares
of common stock, par value $0.01 per share, of which 13,863,656 shares
are outstanding as of the date hereof, and (ii) 10,000,000 shares of
serial preferred stock, par value $1.00 per share, none of which are
issued or outstanding as of the date hereof. All outstanding shares of
ERC Common Stock are duly authorized, validly issued, fully paid and
non-assessable, and no class of capital stock of ERC is entitled to
preemptive rights.
(b) There are outstanding on the date hereof no options, warrants or other
rights to acquire or other securities convertible into or exchangeable
for capital stock of ERC. Except as disclosed in ERC SEC Reports filed
prior to the date hereof or Schedule 3.4 of the Disclosure Schedule,
all outstanding shares of capital stock of the Subsidiaries of ERC are
owned by ERC or a direct or indirect wholly-owned Subsidiary of ERC,
free and clear of all Liens (other than Liens described in Schedule 3.4
of the Disclosure Schedule).
(c) Immediately following the consummation of the transactions to be
completed at the Closing, Investor will hold shares representing
approximately 72.8% of the issued and outstanding shares of ERC Common
Stock and there will be no outstanding options, warrants and other
rights to acquire or other securities convertible into or exchangeable
for capital stock of ERC.
5
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3.5 LITIGATION. Except as disclosed in the ERC SEC Reports filed prior to the
date hereof or in Schedule 3.5 of the Disclosure Schedule and except for
any rulemaking proceeding in the ordinary course of business, there are no
actions, suits, investigations or proceedings pending or, to the knowledge
of the Responsible Officers of ERC, threatened against ERC or any of its
Subsidiaries, or any property of ERC or any such Subsidiary, in any court
or before any arbitrator or before or by any Government Entity, except
actions, suits, investigations or proceedings which, in the aggregate, do
not have and would not be reasonably expected (so far as can be foreseen at
the time) to have a material adverse effect on (i) the business, results of
operations or financial condition of ERC and its Subsidiaries taken as a
whole, or (ii) as of the date hereof, the ability of ERC to perform its
obligations under this Agreement.
3.6 COMPLIANCE WITH OTHER INSTRUMENTS, ETC. Except where the violation of such
an agreement or other document would not have a material adverse effect on
the business, results of operations or financial condition of ERC and its
Subsidiaries taken as a whole, neither ERC nor any Subsidiary of ERC is in
violation of any term of:
(a) its charter, by-laws or other organizational documents,
(b) any material agreement or instrument including any such related to
Indebtedness,
(c) any applicable law, ordinance, rule or regulation of any Government
Entity, or
(d) any applicable order, judgment or decree of any court, arbitrator or
Government Entity, the consequences of which violation, whether
individually or in the aggregate, have or would be reasonably expected
(so far as can be foreseen at the time) to have a material adverse
effect on (i) the business, results of operations or financial
condition of ERC and its Subsidiaries taken as a whole, or (ii) the
ability of ERC to perform its obligations under this Agreement. Except
as set forth on Schedule 3.6 of the Disclosure Schedule, the execution,
delivery and performance of this Agreement by ERC will not result in
any violation of or conflict with, constitute a default under, or
require any consent under any term of the charter, bylaws or other
organizational document of ERC (or any of its Subsidiaries) or any such
agreement, instrument, law, ordinance, rule, regulation, order,
judgment or decree or result in the creation of (or impose any
obligation on ERC or any of its Subsidiaries to create) any Lien upon
any of the properties or assets of ERC or any of its Subsidiaries
pursuant to any such term, except where such violation, conflict or
default, or the failure to obtain such consent, individually or in the
aggregate, does not have and would not be reasonably expected (so far
as can be foreseen at the time) to have a material adverse effect on
(i) the business, results of operations or financial condition of ERC
and its Subsidiaries taken as a whole, or (ii) the ability of ERC to
perform its obligations under this Agreement.
3.7 TAXES. ERC and its Subsidiaries have filed all federal, state, county,
local and material foreign tax returns required to be filed by them, and
have paid all taxes shown to be due thereon, other than taxes appropriate
reserves for which have been made in ERC's financial statements to the
extent required under generally accepted accounting principles in the
United States, except where the failure to file such tax returns or to have
paid such taxes would not, singly or in the aggregate have a material
adverse effect on the business, results of operations or financial
condition of ERC and its Subsidiaries, taken as a whole. There are no
assessments or adjustments that have
6
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been asserted in writing against ERC or its Subsidiaries for any period for
which ERC has not made appropriate reserves in ERC's financial statements
to the extent required by generally accepted accounting principles in the
United States.
3.8 INFORMATION SUPPLIED.
(a) ERC has filed all reports and schedules (including without limitation
proxy statements) required to be filed with the SEC since December 31,
1995 (collectively, the "ERC SEC Reports"). None of the ERC SEC
Reports, as of their respective dates (as amended through the date
hereof), contained any untrue statement of material fact or omitted to
state 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. All of the ERC SEC Reports, as of their
respective dates (as amended through the date hereof), complied in all
material respects with the requirements of the Securities Exchange Act
of 1934, as amended (the "Exchange Act") and the applicable rules and
regulations thereunder.
3.9 BROKERS AND FINDERS. Except for the fees and expenses payable to Howard
Weil Labouisse Friedrichs Incorporated, or except as shown on Schedule 3.9,
ERC has not employed any investment banker, broker, finder, consultant or
intermediary in connection with the transactions contemplated by this
Agreement which would be entitled to any investment banking, brokerage,
finder's or similar fee or commission in connection with this Agreement, or
the transactions contemplated hereby.
3.10 IMPROPER AND OTHER PAYMENTS. To the best knowledge of the Responsible
Officers of ERC,
(a) none of ERC, any wholly-owned Subsidiary of ERC or any director,
officer, employee, agent or representative of ERC or any such
Subsidiary of ERC or any person or entity acting on behalf of any of
them, has made, paid or received any bribes, kickbacks or other similar
payments to or from any person or entity, whether lawful or unlawful;
(b) no improper foreign payment (as defined in the Foreign Corrupt
Practices Act) has been made; and
(c) the internal accounting controls of ERC and its Subsidiaries are
adequate to detect any of the foregoing, except in each case as would
not have a material adverse effect on the business, results of
operations or financial condition of ERC and its Subsidiaries, taken as
a whole.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF INVESTOR
Investor represents and warrants to ERC and ERC as follows:
4.1 ORGANIZATION, ETC., OF INVESTOR. Investor is a corporation duly organized,
validly existing and in good standing under the laws of the United Kingdom
and has all requisite corporate power and authority to own and operate its
properties, to carry on its business as now conducted and proposed by
Investor to be conducted, to enter into this Agreement and to carry out the
provisions of this Agreement and to consummate the transactions
contemplated hereby.
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4.2 AUTHORIZATION. This Agreement and all other agreements which are to be
executed and delivered by Investor in connection with the transactions
contemplated by this Agreement, and the consummation of the transactions
contemplated hereby and thereby, have been approved by the Board of
Directors of Investor and have been duly authorized by all other necessary
corporate action on the part of Investor. This Agreement and all other
agreements which are to be executed and delivered in connection with the
consummation of the transactions contemplated by this Agreement, upon
execution and delivery thereof will be, duly executed and delivered by a
duly authorized officer of Investor and this Agreement and such other
agreements constitute valid and binding agreements of Investor, enforceable
against Investor in accordance with their terms, except as may be limited
by applicable bankruptcy, insolvency, reorganization, moratorium and other
similar laws of general application which may affect the enforcement of
creditors' rights generally and by general equitable principles. Investor
has delivered to ERC true and correct copies of resolutions adopted by the
Board of Directors of Investor approving this Agreement.
4.3 COMPLIANCE WITH OTHER INSTRUMENTS, ETC. The execution, delivery and
performance of this Agreement by Investor will not result in any violation
of or conflict with, constitute a default under, or require any consent
under any term of, the charter, by-laws or other organizational documents
of Investor or any of its Subsidiaries or any agreement to which Investor
is a party or by which it is bound or any applicable law, ordinance, rule,
regulation, order, judgment or decree, except where such violation,
conflict or default, or the failure to obtain such consent, individually or
in the aggregate, does not have and would not be reasonably expected (so
far as can be foreseen at the time) to have a material adverse effect on
the ability of Investor to perform its obligations under this Agreement.
4.4 INVESTMENT. Investor is acquiring the ERC Shares for investment for its own
account and not with the view to, or for resale in connection with, any
distribution thereof. Investor is an "accredited investor" as such term is
defined by Regulation D under the Securities Act. Investor understands that
(i) the ERC Shares have not been registered under the Securities Act of
1933, as amended (the "Securities Act") by reason of exemption from the
registration provisions of the Securities Act which depends upon, among
other things, the bona fide nature of its investment intent as expressed
herein, and (ii) the stock certificate or certificates representing the ERC
Shares will contain an appropriate Securities Act restrictive legend.
4.5 BROKERS AND FINDERS. Investor has not employed any investment banker,
broker, finder, consultant or intermediary in connection with the
transactions contemplated by this Agreement which would be entitled to any
investment banking, brokerage, finder's or similar fee or commission in
connection with this Agreement or the transactions contemplated hereby or
thereby.
4.6 FINANCING. Investor has sufficient funds to perform its obligations
hereunder.
ARTICLE 5
TERMINATION
5.1 TERMINATION. This Agreement may be terminated at any time on or before the
Closing Date:
(a) by mutual written consent of ERC and Investor;
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(b) by Investor, by written notice to ERC, if
(i) there shall have been any material breach of any representation or
warranty, or any material breach of any covenant or agreement, of
ERC hereunder, and such breach shall not have been remedied before
the Closing, or
(ii) the Special Committee of the Board of Directors of ERC shall
withdraw or modify in any manner materially adverse to Investor its
approval or recommendation of this Agreement, or resolve by Board
resolution to take such action;
(c) by ERC, by written notice to Investor, if there shall have been any
material breach of any representation or warranty, or any material
breach of any covenant or agreement, of Investor hereunder, and such
breach shall not have been remedied before the Closing;
(d) by Investor if the Board of Directors of Investor shall not have
approved this Agreement and the transactions contemplated hereunder on
or before the Closing Date; or
(e) by either ERC or Investor if the Special Committee of the Board of
Directors of ERC shall not have received, within five business days
prior to the Closing Date, the opinion of Howard Weil Labouisse
Friedrichs Incorporated to the effect that the consideration to be
received by ERC in exchange for the ERC Shares is fair to ERC and its
stockholders from a financial point of view.
5.2 EFFECT OF TERMINATION. In the event of termination of this Agreement in
compliance with Section 5.1, there shall be no liability on the part of any
party hereto or any of their respective officers or directors hereunder.
ARTICLE 6
INDEMNIFICATION
6.1 INDEMNIFICATION. ERC shall, until the expiration of the applicable statute
of limitations, indemnify Investor and its Affiliates and each director,
officer, employee, advisor and agent of investor and its Affiliates
(collectively, the "Investor Indemnified Parties") against, and hold
Investor Indemnified Parties harmless from, all losses, claims, damages,
liabilities, costs (including the costs of attorneys' fees) and expenses
relating to or in connection with any third party claim or suit and
including any and all attorneys' fees and expenses and costs of
investigation and litigation incurred in enforcing this Section 6.1
(collectively, "Investor Losses"), arising out of or related to (i) a
breach by ERC of any agreement, covenant, representation or warranty
contained in this Agreement, or (ii) any untrue or alleged untrue statement
of a material fact contained in any ERC SEC Filings, the Disclosure
Schedule or any other instruments, agreement, statement, schedule or
document, or the omission or the alleged omission to state therein a
material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading,
whether or not the transactions contemplated by this Agreement are
consummated, and whether or not an investigation or proceeding requires the
participation of, or is commenced or filed against, Investor because of
this Agreement or the transactions contemplated hereby or thereby,
provided, however, that ERC shall not be liable in any such case set forth
in clause (ii) to the extent but only to the extent that any Investor Loss
arises out
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of or is based upon any such untrue statement or alleged untrue statement
or omission or alleged omission made in reliance upon and in conformity
with investor information furnished by Investor expressly for use in such
ERC SEC Filings or any other instruments, agreements, statements, schedules
or documents, if any.
ERC agrees to reimburse Investor Indemnified Parties promptly for all
such Investor Losses as they are incurred by Investor Indemnified Parties,
including in connection with the investigation of, preparation for, or defense
of, any pending or threatened claim, whether or not such claim, action or
proceeding is initiated or brought by or on behalf of ERC. The obligations of
ERC under this Section 6.1 shall survive the repurchase or redemption of the
ERC Shares, any transfer of the ERC Shares by Investor and the termination of
this Agreement.
6.2 INDEMNIFICATION. Investor ("Stockholder Indemnitor") shall, until the
expiration of the applicable statute of limitations, indemnify ERC, and its
Subsidiaries and each director, officer, employee, advisor and agent of ERC
and its respective Subsidiaries (collectively, the "ERC Indemnified
Parties") against, and hold ERC Indemnified Parties harmless from, all
losses, claims, damages, liabilities, costs (including the costs of
attorneys' fees) and expenses relating to or in connection with any third
party claim or suit and including any and all attorneys' fees and expenses
and costs of investigation and litigation incurred in enforcing this
Section 6.2 (collectively, "ERC Losses"), arising out of or related to (i)
a breach by Investor of any agreement, covenant, representation or warranty
contained in this Agreement, or (ii) any untrue or alleged untrue statement
of a material fact contained in this Agreement, or any other instruments,
agreement, statement, schedule or document, or the omission or the alleged
omission to state therein a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, whether or not the transactions contemplated by this
Agreement are consummated, and whether or not an investigation or
proceeding requires the participation of, or is commenced or filed against,
ERC because of this Agreement, or the transactions contemplated hereby or
thereby, in each such case set forth in clause (ii) to the extent but only
to the extent that any ERC Loss arises out of or is based upon any such
untrue statement or alleged untrue statement or omission or alleged
omission made in reliance upon and in conformity with investor information
furnished by such Stockholder Indemnitor expressly for use in any
instrument, agreement, statement, schedule or document.
Stockholder Indemnitor agrees to reimburse ERC Indemnified Parties promptly
for all such ERC Losses as they are incurred by ERC Indemnified Parties,
including in connection with the investigation of, preparation for, or defense
of, any pending or threatened claim, whether or not such claim, action or
proceeding is initiated or brought by or on behalf of ERC. The obligations of
Stockholder Indemnitor under this Section 6.2 shall survive the repurchase or
redemption of the ERC Shares, any transfer of the ERC Shares by Investor and the
termination of this Agreement.
ARTICLE 7
MISCELLANEOUS
7.1 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Texas.
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7.2 SURVIVAL. None of the representations and warranties made herein shall
survive the earlier of the termination of this Agreement in accordance with
its terms and the Closing Date.
7.3 SUCCESSORS AND ASSIGNS. This Agreement shall inure to the benefit of, and
be binding upon, the parties hereto and their respective successors and
permitted assigns. No party hereto shall assign any of its rights,
interests or obligations hereunder without the prior written consent of the
other parties, except that Investor may assign its rights, interests and
obligations hereunder to a wholly-owned, direct or indirect, Subsidiary
provided that Investor remains primarily liable for all of the obligations
of Investor hereunder.
7.4 ENTIRE AGREEMENT; AMENDMENT. This Agreement, together with the Registration
Rights Agreement constitute the full and entire understanding and agreement
between the parties with regard to the subjects hereof. Neither this
Agreement nor any term hereof may be amended, waived, discharged or
terminated except by a written instrument signed by each party hereto.
7.5 NOTICES, ETC. All notices and other communications required or permitted
hereunder shall be in writing and shall be mailed by first class mail,
postage prepaid, or by express courier, or delivered either by hand or by
messenger or by telecopy (and confirmed by one of the foregoing methods),
addressed as follows:
To Investor, at:
John Wood Group PLC
John Wood House
Greenwell Road, East Tullos
Aberdeen AB1 4AX
Scotland
Telecopy No.: 011-44-1-224-871997
Attention: Hugh Fraser, Esq.
With a copy to:
Haynes and Boone, L.L.P.
1000 Louisiana, Suite 4300
Houston, Texas 77002-5012
Telecopy No.: (713) 547-2600
Attention: Arthur M. Nathan, Esq.
To ERC, at:
16920 Park Row
Houston, Texas 77084
Telecopy No.: (713) 398-8086
Attention: Mr. Wendell R. Brooks
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with a copy to:
Akin, Gump, Strauss, Hauer & Feld, L.L.P.
711 Louisiana, Suite 1900 South Tower
Houston, Texas 77002
Telecopy No.: (713) 236-0822
Attn: Rick L. Burdick, Esq.
or at such other address as any party shall have furnished to the other parties
in writing.
7.6 SEPARABILITY. In case any provision of the Agreement shall be invalid,
illegal or unenforceable, the validity, legality and enforceability of the
remaining provisions shall not in any way be affected or impaired thereby.
7.7 PUBLICITY. So long as this Agreement is in effect, except as may be
required by applicable law or requirements or applicable SEC or NASDAQ
requirements, neither of the parties shall, nor shall it permit any of its
respective Subsidiaries, employees, agents, or affiliates to, issue or
cause the publication of any press release or other public announcement
with respect to the transactions contemplated by this Agreement without the
consent of the other party, which consent shall not be unreasonably
withheld.
7.8 EXPENSES. ERC shall pay all of the expenses and legal fees incurred with
respect to this Agreement and the transactions contemplated hereby.
7.9 TITLES AND GENDER. The titles of the Sections and Subsections of this
Agreement are for convenience of reference only and are not to be
considered in construing this Agreement. Whenever used herein, the singular
member includes the plural, the plural includes the singular, and the use
of either gender shall include both genders.
7.10 COUNTERPARTS. This Agreement may be executed in counterparts, each of which
shall be an original, but all of which together shall constitute one
instrument.
7.11 DEFINITIONS. Capitalized terms used in this Agreement shall have the
following meanings:
(a) "Affiliate" means, with respect to any person, any other person
directly or indirectly Controlling, Controlled by, or under common
Control with such person. "Control" (including, with correlative
meanings, the terms "Controlled by" and "under common Control with") as
used with respect to any person, means possession, directly or
indirectly, of the power to direct or cause the direction of the
management and policies of such person, whether through ownership of
voting securities, by contract or otherwise.
(b) "Closing" has the meaning set forth in Section 1.3.
(c) "Closing Date" has the meaning set forth in Section 1.3.
(d) "Disclosure Schedule" means the Disclosure Schedule dated the date
hereof and delivered by ERC to Investor concurrently herewith.
(e) "ERC" means ERC Industries, Inc., a Delaware corporation.
(f) "ERC Common Stock" has the meaning set forth in the Preamble to this
Agreement.
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(g) "ERC Loss" has the meaning set forth in Section 6.2.
(h) "ERC SEC Reports" has the meaning set forth in Section 3.8.
(i) "ERC Shares" has the meaning set forth in Section 1.1(a).
(j) "ERC Stock Purchase Price" has the meaning set forth in Section 1.2(a).
(k) "Exchange Act" has the meaning set forth in Section 3.8.
(l) "Government Entity" means any court, administrative agency or
commission or government or governmental authority or instrumentality.
(m) "Investor" means John Wood Group PLC, a United Kingdom company
registered in Scotland.
(n) "Investor Indemnified Parties" has the meaning set forth in Section
6.1.
(o) "Investor Losses" has the meaning set forth in Section 6.1.
(p) "Lien" means any lien, mortgage, charge, encumbrance, security
interest, claim or option of any nature.
(q) "Responsible Officer" means any one of Wendell R. Brooks or James
Klima.
(r) "Stockholder Indemnitor" has the meaning set forth in Section 6.2.
(s) "Subsidiary" of any corporation means a business entity fifty percent
or more of whose voting securities or similar economic interests are
owned directly or indirectly by such corporation.
7.12 JURISDICTION; CONSENT TO SERVICE OF PROCESS; NO JURY TRIAL.
(a) Except as provided in the next paragraph, the parties hereto agree that
all disputes between them arising out of, connected with, related to,
or incidental to the relationship established between them pursuant to
this Agreement, and whether arising in contract, tort, equity, or
otherwise, shall be resolved only by state or federal courts located in
Houston, Texas, but the parties hereto acknowledge that any appeals
from those courts may have to be heard by a court located outside of
Houston, Texas. Each of the parties hereto waives in all disputes any
objection that it may have to the location of the court considering the
dispute including, without limitation, any objection to the laying of
venue or based on the grounds of forum non conveniens.
(b) Each of the parties hereto agrees that the other party to this
Agreement shall have the right, to the extent permitted by applicable
law, to proceed against it or its property in a court in any location
reasonably selected in good faith to enable such other parties to
realize on such property, or to enforce a judgment or other court order
entered in favor of any such other party. Each of the parties hereto
waives any objection that it may have to the location of the court in
which any other party to this Agreement has commenced a proceeding
described in this paragraph including, without limitation, any
objection to the laying of venue or based on the grounds of forum non
conveniens.
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(c) The parties hereto each waives any right to have a jury participate in
resolving any dispute, whether sounding in contract, tort, or otherwise
arising out of, connected with, related to or incidental to the
relationship established between them pursuant to this Agreement.
Instead, any disputes resolved in court will be resolved in a bench
trial without a jury.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed and delivered by their respective proper and duly authorized officers
as of the day and year first above written.
ERC INDUSTRIES, INC.
By: /s/ Wendell Brooks, President
-----------------------------
JOHN WOOD GROUP PLC
By: /s/ J Derek P. Jones, Director
------------------------------
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Exhibit J
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT ("AGREEMENT") is made and entered into
as of June 6, 1996, by and between ERC Industries, Inc., a Delaware
corporation (the "COMPANY") and John Wood Group PLC, a company incorporated in
the United Kingdom and registered in Scotland (the "INVESTOR").
RECITALS:
WHEREAS, the Company and the Investor have entered into an Investment
Agreement dated as of June 6, 1996 (the "INVESTMENT AGREEMENT"), pursuant to
which the Investor has acquired 7,384,616 shares (the "SHARES") of the
Company's $0.01 per share par value common stock (the "COMMON STOCK"); and
WHEREAS, the Investor is willing to enter into the Investment Agreement
and to consummate the transactions contemplated by the Investment Agreement
only if the Company grants the registration rights provided in this Agreement;
and
WHEREAS, the Company has agreed to grant the registration rights provided
in this Agreement;
NOW, THEREFORE, in consideration of the mutual promises and covenants set
forth herein, the parties hereby agree as follows:
1. CERTAIN DEFINITIONS. As used in this Agreement, the following terms
shall have the meanings set forth below:
"COMMISSION" shall mean the Securities and Exchange Commission or any
other federal agency at the time administering the Securities Act.
"INVESTOR" shall mean collectively, John Wood Group PLC, a company
incorporated in the United Kingdom and registered in Scotland and any
transferees of Registrable Securities from the Investor, provided such
transfer complies with Section 3.2 of this Agreement.
"REGISTRABLE SECURITIES" shall mean (i) the Shares, and (ii) any Common
Stock issued or issuable at any time or from time to time in respect of the
Shares upon a stock split, stock dividend, recapitalization or other similar
event involving the Company.
The terms "REGISTER," "REGISTERED", and "REGISTRATION" refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act, and the declaration or ordering by the
Commission of the effectiveness of such registration statement.
"REGISTRATION EXPENSES" shall mean all expenses, other than Selling
Expenses (as defined below), incurred by the Company in complying with
Sections 2.1 and 2.2 hereof, including, without limitation, all registration,
qualification
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and filing fees, exchange listing fees, printing expenses, escrow fees, fees
and disbursements of counsel for the Company, blue sky fees and expenses and
the expense of any special audits incident to or required by any such
registration (but excluding the compensation of regular employees of the
Company which shall be paid in any event by the Company).
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended, or
any similar federal statute and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
"SELLING EXPENSES" shall mean only the underwriting discounts, selling
commissions and stock transfer taxes applicable to the securities registered
by the Investor and all fees and disbursements of counsel for the Investor.
"UNDERWRITTEN PUBLIC OFFERING" shall mean a public offering in which the
Common Stock is offered and sold on a firm commitment or best efforts basis
through one or more underwriters, all pursuant to an underwriting agreement
between the Company and such underwriters.
2. REGISTRATION RIGHTS.
2.1 DEMAND REGISTRATION RIGHTS. If the Company shall receive from the
Investor at any time from and after the date of this Agreement a written
request that the Company effect any registration with respect to all or a part
of the Registrable Securities, the Company will use its best efforts to effect
such registration within 120 days thereafter (including, without limitation,
filing post-effective amendments, appropriate qualifications under applicable
blue sky or other state securities laws, and appropriate compliance with the
Securities Act) and as would permit or facilitate the sale and distribution of
all or such portion of such Registrable Securities as are specified in such
request. The Company shall not be required to effect more than two
registrations pursuant to this Section 2.1.
2.2 COMPANY REGISTRATION - "PIGGY-BACK REGISTRATION RIGHTS".
(a) Notice of Registration. Subject to the terms hereof, if at any time
or from time to time prior to the expiration of five (5) years from the date
of this Agreement (except as otherwise provided in Section 3.2), the Company
shall determine to register any of its Common Stock, for its own account
relating to an Underwritten Public Offering, the Company shall:
(i) promptly, but in any event at least 30 days before the Company
files a registration statement pursuant to an Underwritten Public Offering,
give to the Investor written notice thereof; and
(ii) include in such registration (and any related qualification
under blue sky laws or other compliance), and in the underwriting involved
therein, such Registrable Securities as the Investor may request in a writing
delivered to the Company within 20 days after the Investor's receipt of the
Company's written notice delivered pursuant to Section 2.2(a)(i) above.
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(b) Underwriting. The right of the Investor to registration
pursuant to Section 2.2 shall be conditioned upon the Investor's participation
in such underwriting, and the inclusion of Registrable Securities in the
underwriting shall be limited to the extent provided herein. The Investor and
all other stockholders proposing to distribute their securities through such
underwriting shall (together with the Company and the other holders
distributing their securities through such underwriting) enter into an
underwriting agreement in customary form with the managing underwriter
selected for such underwriting by the Company. Subject only to the provisions
of Section 2.2(c) below, if the managing underwriter determines that marketing
factors require a limitation on the number of shares to be underwritten, the
managing underwriter may limit some or all of the Registrable Securities that
may be included in the registration and underwriting as follows: the number of
Registrable Securities that may be included in the registration and
underwriting by the Investor shall be determined by multiplying the number of
shares of Registrable Securities of all selling stockholders of the Company
which the managing underwriter is willing to include in such registration and
underwriting, times a fraction, the numerator of which is the number of
Registrable Securities requested to be included in such registration and
underwriting by the Investor, and the denominator of which is the total number
of Registrable Securities which all selling stockholders of the Company have
requested to have included in such registration and underwriting (but taking
into account for this purpose, only those stockholders of the Company who have
been granted registration rights with respect to their shares of Common Stock.
To facilitate the allocation of shares in accordance with the above
provisions, the Company may round the number of shares allocable to any such
person to the nearest 100 shares. If the Investor disapproves of the terms of
any such underwriting, it may elect to withdraw therefrom by written notice to
the Company and the managing underwriter, delivered not less than seven days
before the effective date.
(c) Subordination of Registration Rights. The registration rights
granted pursuant to this Agreement shall not be subordinate to the
registration rights granted to any other person or entity.
(d) Right to Terminate Registration. The Company shall have the right to
terminate or withdraw any registration initiated by it under this Section 2.2
prior to the effectiveness of such registration whether or not the Investor
has elected to include its Registrable Securities in such registration,
provided, however, that in such event, the Company shall promptly pay all
reasonable out-of-pocket costs and expenses of the Investor (including,
without limitation, all reasonable fees and disbursements of one law firm
chosen to represent the Investor) incurred in connection with such terminated
registration.
(e) No Other Registration Rights. Except for rights granted pursuant to
this Agreement, the Company has not previously entered into or become a party
to, nor is it bound by any agreement with respect to its capital stock which
grants registration rights to any person or entity.
2.3 EXPENSES OF REGISTRATION. All Registration Expenses incurred in
connection with all registrations pursuant to Sections 2.1 and 2.2 shall be
borne by the Company. Unless otherwise stated herein, all Selling Expenses
relating to securities registered on behalf of the Investor shall be borne by
the Investor.
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2.4 COMPANY'S OBLIGATIONS IN REGISTRATION. In the case of each
registration, qualification or compliance effected by the Company pursuant to
this Agreement, the Company will keep the Investor advised in writing as to
the initiation of each registration, qualification and compliance and as to
the completion thereof. At its expense, the Company will:
(a) Prepare and file with the Commission a registration statement with
respect to such securities and use its commercially reasonable best
efforts to cause such registration statement to become and remain
effective with respect to a registration statement filed regarding an
Underwritten Public Offering, for the lesser of (i) 90 days or (ii) until
the distribution described in such registration statement has been
completed; and
(b) Furnish to each underwriter such number of copies of a prospectus,
including a preliminary prospectus, in conformity with the requirements
of the Securities Act, and such other documents as such underwriter may
reasonably request in order to facilitate the public sale of the shares
by such underwriter, and promptly furnish to each under writer and
Investor notice of any stop-order or similar notice issued by the
Commission or any state agency charged with the regulation of securities,
and notice of any NASDAQ or securities exchange listing; and
(c) Furnish prospectuses, including preliminary prospectuses and
amendments and supplements thereto, to the Investor electing to sell any
of its Registrable Securities pursuant to Section 2.2 hereof, all in
accordance with applicable securities laws; and
(d) Notify the Investor in the event that the Company becomes aware that
a prospectus relating to the Registrable Securities contains a materially
untrue statement or omits to state a material fact; and
(e) Apply to register or otherwise qualify the Registrable Securities
offered by the Investor under all applicable blue sky laws of any state.
2.5 INDEMNIFICATION.
(a) To the extent permitted by law, the Company will indemnify and hold
harmless the Investor, each of its officers and directors and stockholders,
and each person controlling the Investor within the meaning of Section 15 of
the Securities Act, with respect to which registration, qualification or
compliance has been effected pursuant to this Agreement, against all expenses,
claims, losses, damages or liabilities (or actions in respect thereof) to the
extent to which such person or entity is subject, including any of the
foregoing incurred in settlement of any litigation, commenced or threatened,
to the extent such expenses, claims, losses, damages or liabilities (or
proceedings in respect thereof) arise out of or are based on any untrue
statement (or alleged untrue statement) of a material fact contained in any
regis tration statement, prospectus, offering circular or other document, or
any amendment or supplement thereto, incident to any such registration,
qualification or compliance,
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or arise out of or are based on any omission (or alleged omission) to state
therein a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances in which they were made, not
misleading, or any violation by the Company of the Securities Act or any rule
or regulation promulgated under the Securities Act applicable to the Company
in connection with any such registration, qualification or compliance, and the
Company will reimburse the Investor, each of its officers and directors and
stockholders, and each person controlling the Investor for any legal and any
other expenses reasonably incurred in connection with investigating, preparing
or defending any such claim, loss, damage, liability or action, provided,
however, that the indemnity contained herein shall not apply to amounts paid
in settlement of any claim, loss, damage, liability or expense if settlement
is effected without the consent of the Company (which consent shall not be
unreasonably withheld); provided, further, that the Company will not be liable
in any such case to the extent that any such claim, loss, damage, liability or
expense arises out of or is based on any untrue statement or omission or
alleged untrue statement or omission, made in reliance upon and in conformity
with written information furnished to the Company expressly for inclusion in
such registration by the Investor or such controlling person specifically for
use therein. Notwithstanding the foregoing, insofar as the foregoing
indemnity relates to any such untrue statement (or alleged untrue statement)
or omission (or alleged omission) made in the preliminary prospectus but
eliminated or remedied in the amended prospectus on file with the Commission
at the time the registration statement becomes effective or in the final
prospectus filed with the Commission pursuant to the applicable rules of the
Commission or in any supplement or addendum thereto, the indemnity agreement
herein shall not inure to the benefit of any underwriter or (if there is no
underwriter) the Investor if a copy of the final prospectus filed pursuant to
such rules, together with all supplements and addenda thereto, was not
furnished to the person or entity asserting the loss, liability, claim or
damage at or prior to the time such furnishing is required by the Securities
Act.
(b) To the extent permitted by law, the Investor will, if securities held
by the Investor are included in the securities as to which such registration,
qualification or compliance is being effected pursuant to the terms hereof,
indemnify and hold harmless the Company, each of its directors and officers,
each person who controls the Company within the meaning of Section 15 of the
Securities Act, and each other person selling the Company's securities covered
by such registration statement, each of such person's officers and directors
and each person controlling such persons within the meaning of Section 15 of
the Securities Act, against all claims, losses, damages and liabilities (or
actions in respect thereof) to the extent to which such person or entity is
subject, arising out of or based on any untrue statement (or alleged untrue
statement) of a material fact contained in any such registration statement,
prospectus, offering circular or other document, or arising out of or based on
any omission (or alleged omission) to state therein a material fact required
to be stated therein or necessary to make the statements therein not
misleading, or any violation by the Investor of any rule or regulation
promulgated under the Securities Act applicable to the Investor and relating
to any action or inaction required of the Investor in connection with any such
registration, qualification or compliance, and will reimburse the Company,
such other persons, such directors, officers, persons or control persons for
any legal or other expenses reasonably incurred in connection with
investigating or defending any such claim, loss, damage, liability or action,
in each case to the extent, but only to the extent, that such untrue statement
(or alleged
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untrue statement) or omission (or alleged omission) is made in such
registration statement, prospectus, offering circular or other document in
reliance upon and in conformity with information furnished to the Company by
the Investor expressly for inclusion in such registration; provided, however,
that the indemnity contained herein shall not apply to amounts paid in
settlement of any claim, loss, damage, liability or expense if settlement is
effected without the consent of the Investor (which consent shall not be
unreasonably withheld). Notwithstanding the foregoing, insofar as the
foregoing indemnity relates to any such untrue statement (or alleged untrue
statement) or omission (or alleged omission) made in the preliminary
prospectus but eliminated or remedied in the amended prospectus on file with
the Commission at the time the registration statement becomes effective or in
the final prospectus filed pursuant to applicable rules of the Commission or
in any supplement or addendum thereto, the indemnity agreement herein shall
not inure to the benefit of the Company, any underwriter or any other person
if a copy of the final prospectus filed pursuant to such rules, together with
all supplements and addenda thereto, was not furnished to the person or entity
asserting the loss, liability, claim or damage at or prior to the time such
furnishing is required by the Securities Act.
(c) Each party entitled to indemnification under this Section 2.5 (the
"INDEMNIFIED PARTY") shall give notice to the party required to provide
indemnification (the "INDEMNIFYING PARTY") promptly after such Indemnified
Party has actual knowledge of any action or proceeding commenced against, or
written demand made on any such party in respect of which indemnity may be
sought, and shall permit the Indemnifying Party to assume the defense of any
such claim or any litigation resulting therefrom, provided that counsel for
the Indemnifying Party, who shall conduct the defense of such claim or
litigation, shall be approved by the Indemnified Party (whose approval shall
not be unreasonably withheld), and the Indemnified Party may participate in
such defense at such party's expense, and provided further that the failure of
any Indemnified Party to give notice as provided herein shall not relieve the
Indemnifying Party of its obligations under this Agreement unless the failure
to give such notice is materially prejudicial to an Indemnifying Party's
ability to defend such action and provided further, that the Indemnifying
Party shall not assume the defense for matters as to which there is a conflict
of interest or as to which the Indemnifying Party is asserting separate or
different defenses, which defenses are inconsistent with the defenses of the
Indemnified Party. No Indemnifying Party, in the defense of any such claim or
litigation, shall, except with the consent of each Indemnified Party, consent
to entry of any judgment or enter into any settlement which does not include
as an unconditional term thereof the giving by the claimant or plaintiff to
such Indem nified Party of a release from all liability in respect to such
claim or litigation. No Indemnified Party shall consent to entry of any
judgment or enter into any settlement without the consent of each Indemnifying
Party.
(d) If the indemnification provided for in this Section 2.5 is
unavailable to an Indemnified Party in respect of any losses, claims, damages
or liabilities referred to therein, then each Indemnifying Party, in lieu of
indemnifying such Indemnified Party, shall contribute to the amount paid or
payable by such Indemnified Party as a result of such losses, claims, damages
or liabilities (i) in such proportion as is appropriate to reflect the
relative benefits received by the Company on the one hand and all stockholders
offering securities in the offering (the "Selling Stockholders") on the other
from the offering of the Company's securities, or (ii) if the allocation
provided by clause (i) above is not permitted by applicable law, in such
proportion as
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is appropriate to reflect not only the relative benefits referred to in clause
(i) above but also the relative fault of the Company on the one hand and the
Selling Stockholders on the other in connection with the statements or
omissions which resulted in such losses, claims, damages or liabilities, as
well as any other relevant equitable considerations. The relative benefits
received by the Company on the one hand and the Selling Stockholders on the
other shall be the net proceeds from the offering (before deducting expenses)
received by the Company on the one hand and the Selling Stockholders on the
other. The relative fault of the Company on the one hand and the Selling
Stockholders on the other shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Company or by the Selling Stockholders and the parties'
relevant intent, knowledge, access to information and opportunity to correct
or prevent such statement or omission. The Company and the Selling
Stockholders agree that it would not be just and equitable if contribution
pursuant to this Section 2.5(d) were based solely upon the number of entities
from whom contribution was requested or by any other method of allocation
which does not take account of the equitable considerations referred to above
in this Section 2.5(d). The amount paid or payable by an Indemnified Party as
a result of the losses, claims, damages and liabilities referred to above in
this Section 2.5(d) shall be deemed to include any legal or other expenses
reasonably incurred by such Indemnified Party in connection with investigating
or defending any such action or claim, subject to the provisions of Section
2.5(c) hereof. No person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act).
2.6 CERTAIN INFORMATION. The Investor agrees, with respect to any
Registrable Securities included in any registration, to furnish to the Company
such information regarding the Investor, the Registrable Securities and the
distribution proposed by the Investor as the Company may reasonably request in
writing and as shall be required in connection with any registration,
qualification or compliance referred to in Section 2.2.
2.7 RULE 144 REPORTING. With a view to making available the benefits of
certain rules and regulations of the Commission which may at any time permit
the sale of the Restricted Securities (used herein as defined in Rule 144
under the Securities Act) to the public without registration, the Company
agrees to use its best lawful efforts to:
(a) Make and keep public information available, as those terms are
understood and defined in Rule 144 under the Securities Act, at all times
during which the Company is subject to the reporting requirements of the
Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT");
(b) File with the Commission in a timely manner all reports and other
documents required of the Company under the Securities Act and the Exchange
Act (at all times during which the Company is subject to such reporting
requirements); and
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(c) So long as the Investor owns any Restricted Securities, to
furnish to the Investor forthwith upon request a written statement by the
Company as to its compliance with the reporting requirements of said Rule 144
and with regard to the Securities Act and the Exchange Act (at all times
during which the Company is subject to such reporting requirements), a copy of
the most recent annual or quarterly report of the Company, and such other non-
confidential reports and documents of the Company and other non-confidential
information in the possession of or reasonably obtainable by the Company as
the Investor may reasonably request in availing itself of any rule or
regulation of the Commission allowing it to sell any such securities without
registration.
3. MISCELLANEOUS.
3.1 GOVERNING LAW. This Agreement shall be governed in all respects by
the internal laws of the State of Texas. In the event any dispute arises
between the parties, venue of any such dispute shall be proper only in Harris
County, Texas.
3.2 TRANSFERABILITY; TERMINATION. The registration rights contemplated
herein are transferable by the Investor to any person or entity, in whole or
in part, which acquires all or part of the shares which the Investor is
acquiring pursuant to the Investment Agreement. The registration rights
granted herein shall terminate, and the registration rights will not be
exercisable by the Investor (or the Investor's lawful transferees pursuant to
this Section 3.2) after said termination date, on the earlier of (i) the fifth
anniversary date of this Agreement, or (ii) at such time as all shares of
Registrable Securities held by the Investor may immediately be sold under Rule
144 (as amended from time to time) during any 90-day period.
3.3 ENTIRE AGREEMENT; AMENDMENT. This Agreement constitutes the full and
entire understanding and agreement between the parties with regard to the
subject hereof. This Agreement, or any provision hereof, may be amended,
waived, discharged or terminated only upon the written consent of the Company
and those Investors (assuming the original Investor has transferred part of
its Shares) who are the record holders of a majority of the Shares.
3.4 NOTICES. All notices or other communications which are required or
may be given under this Agreement shall be in writing and shall be deemed to
have been duly given when delivered in person, transmitted by telecopier or
mailed by registered or certified first class mail, postage prepaid, return
receipt requested to the parties hereto at the address set forth below (as the
same may be changed from time to time by notice similarly given) or the last
known business or residence address of such other person as may be designated
by either party hereto in writing.
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If to the Investor:
John Wood Group PLC
John Wood House
Greenwell Road
Aberdeen, AB1 4AX
Scotland
Attention: Group Financial Director
Fax: 011-44-1-224-871997
If to the Company:
ERC Industries, Inc.
16920 Park Row
Houston, Texas 77084
Attn.: Mr. Wendell R. Brooks, President
Fax: 713/398-8086
3.5 DELAYS OR OMISSIONS. Except as expressly provided herein, no delay
or omission to exercise any right, power or remedy accruing to any party to
this Agreement shall impair any such right, power or remedy of such party nor
shall it be construed to be a waiver of any such breach or default, or an
acquiescence therein, or of or in any similar breach or default thereafter
occurring; nor shall any waiver of any single breach or default be deemed a
waiver of any other breach or default theretofore or thereafter occurring. Any
waiver, permit, consent or approval of any kind or character on the part of
any party of any breach or default under this Agreement, or any waiver on the
part of any party of any provisions or conditions of this agreement, must be
in writing and shall be effective only to the extent specifically set forth in
such writing. All remedies, either under this Agreement or by law or
otherwise afforded to any party to this Agreement, shall be cumulative and not
alter native.
3.6 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be enforceable against the parties actually
executing such counterparts, and all of which together shall constitute one
instrument.
3.7 SEVERABILITY. In the event that any provision of this Agreement
becomes or is declared by a court of competent jurisdiction to be illegal,
unenforceable or void, this Agreement shall continue in full force and effect
without said provision.
3.8 TITLES AND SUBTITLES. The titles and subtitles used in this
Agreement are used for convenience only and are not considered in construing
or interpreting this Agreement.
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IN WITNESS WHEREOF, the undersigned or each of their respective duly
authorized officers or representatives have executed this agreement effective
upon the date first set forth above.
COMPANY:
ERC INDUSTRIES, INC.
a Delaware corporation
By: /S/Wendell R. Brooks, President
INVESTOR:
JOHN WOOD GROUP PLC
a U. K. company
By:/S/ J Derek P Jones, Director
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