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OMB NUMBER: 3235-0145
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Expires: October 31, 1997
Estimated average burden
hours per form 14.90
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
(Amendment No. 12)*
ERC Industries, Inc.
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(Name of Issuer)
Common Stock, par value $0.01 per share
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(Title of Class of Securities)
268912102
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(CUSIP Number)
Arthur M. Nathan, Haynes and Boone, L.L.P.
1000 Louisiana Street, Suite 4300, Houston, Texas 77002
(713) 547-2000
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(Name, Address and Telephone Number of Person Authorized
to Receive Notices and Communications)
September 8, 1997
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(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(b)(3) or (4), check the following box [_].
Check the following box if a fee is being paid with the statement [_]. (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
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CUSIP NO. 268912102 PAGE 2 OF 7 PAGES
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NAME OF REPORTING PERSON
1 S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
John Wood Group PLC, a company registered in Scotland and incorporated
under the laws of the United Kingdom
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CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
2 (a) [_]
(b) [_]
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SEC USE ONLY
3
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SOURCE OF FUNDS
4
WC
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CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
5 ITEMS 2(d) OR 2(e) [_]
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CITIZENSHIP OR PLACE OF ORGANIZATION
6
United Kingdom
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SOLE VOTING POWER
7
NUMBER OF 24,337,702
SHARES -----------------------------------------------------------
SHARED VOTING POWER
BENEFICIALLY 8
0
OWNED BY
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EACH SOLE DISPOSITIVE POWER
9
REPORTING 24,337,702
PERSON -----------------------------------------------------------
SHARED DISPOSITIVE POWER
WITH 10
0
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AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
11
24,337,702
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CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES
12 [_]
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PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
13
88.5%
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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, Amendment No. 7 thereto dated March 22, 1996,
Amendment No. 8 thereto dated June 6, 1996, Amendment No. 9 thereto dated July
24, 1996, Amendment No. 10 thereto dated August 2, 1996 and Amendment No. 11
thereto dated September 26, 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. 12 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 $10,000,000 used to make the purchases reported by this Amendment No.
12 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 September 8, 1997, 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 6,250,000 shares
(the "Shares") of Common Stock. The purchase price for such Shares was $1.60 per
share (or an aggregate consideration of $10,000,000). 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 Rauscher Pierce Refsnes, Inc. 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 K.
In connection with the Investment Agreement, the Company granted
registration rights to the Reporting Person pursuant to a Registration Rights
Agreement dated as of September 8, 1997 (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 five 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.
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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 L.
As a result of the purchase of the Shares, the Reporting Person currently
owns an aggregate of 24,337,702 shares representing approximately 88.5% 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. 12 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. 12 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.
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*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.
**K Investment Agreement dated September 8, 1997, between the Reporting
Person and the Company.
**L Registration Rights Agreement dated September 8, 1997, between the
Reporting Person and the Company.
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* Previously filed.
** Filed herewith.
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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. 12 to Schedule 13D
is true, complete and correct.
Date: September 10, 1997
JOHN WOOD GROUP PLC
By: /s/ J. Derek P. Jones
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Name: J. Derek P. Jones
Title: Director
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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.
**K Investment Agreement dated September 8, 1997, between the Reporting
Person and the Company.
**L Registration Rights Agreement dated September 8, 1997, between the
Reporting Person and the Company.
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* Previously filed.
** Filed herewith.
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EXHIBIT "K"
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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 September 8, 1997, 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
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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 6,250,000 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.
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(b) At the Closing, Investor shall pay to ERC $10,000,000.00 (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.
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
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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
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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 September 8, 1997;
(g) Rauscher Pierce Refsnes, Inc. 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
(h) 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
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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 September 8, 1997;
(f) Rauscher Pierce Refsnes, Inc. 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 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
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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
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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 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
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<PAGE>
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 21,248,272
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 88.5% 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.
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.
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<PAGE>
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 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
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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
Rauscher Pierce Refsnes, Inc., 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.
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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;
(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 Rauscher Pierce Refsnes,
Inc. 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
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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 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.
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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.
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.
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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
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.
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<PAGE>
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.
(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.
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(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.
(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
-----------------------------
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JOHN WOOD GROUP PLC
By: /s/ J. Derek P. Jones, Director
-------------------------------
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EXHIBIT "L"
-----------
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT ("AGREEMENT") is made and entered into as
of September 8, 1997, 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 September 8, 1997 (the "INVESTMENT AGREEMENT"), pursuant
to which the Investor has acquired 6,250,000 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.
<PAGE>
"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 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
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(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.
(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.
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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.
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
underwriter 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 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
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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 registration statement, prospectus,
offering circular or other document, any amendment or supplement
thereto, incident to any such registration, qualification or
compliance, 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
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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 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
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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 Indemnified 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 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).
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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
(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
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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.
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
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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 alternative.
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.
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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