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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
______________________
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): SEPTEMBER 8, 1997
ERC INDUSTRIES, INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 0-14439 76-0382879
(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation or organization) File Number) Identification No.)
15835 PARK TEN PLACE, SUITE 115
HOUSTON, TEXAS 77084
(Address of Principal
Executive Offices)
(713) 398-8901
(Registrant's telephone number, including area code)
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With respect to each contract, agreement or other document referred to
herein and filed with the Securities and Exchange Commission as an exhibit to
this report, reference is made to the exhibit for a more complete description of
the matter involved, and each such statement shall be deemed qualified in its
entirety by such reference.
ITEM 5. OTHER EVENTS.
On September 8, 1997, ERC Industries, Inc., a Delaware corporation (the
"Company"), and John Wood Group PLC, a company incorporated under the laws of
the United Kingdom and registered in Scotland ("Wood Group"), entered into an
Investment Agreement (the "Investment Agreement") pursuant to which the Company
agreed to issue and sell, and Wood Group agreed to purchase, 6,250,000 shares
(the "Shares") of the Company's common stock, par value $0.01 per share ("Common
Stock"). The aggregate purchase price for the Shares was $10,000,000, or $1.60
per Share. Such transaction (the "Transaction") was also consummated on
September 8, 1997.
Prior to the consummation of the Transaction, Wood Group owned
approximately 85.1% of the outstanding shares of the Company's Common Stock.
Prior to the negotiation and consummation of the transaction, the Company's
Board of Directors formed a special committee of its outside independent
directors (the "Special Committee") to evaluate and negotiate the Transaction.
The Special Committee engaged Rauscher Pierce Refsnes, Inc. ("RPR"), as its
financial advisor to assist it in evaluating and determining the fairness of the
Transaction to the Company's stockholders. On September 5, 1997, RPR delivered
an opinion stating that the terms of the consideration to be received by the
Company in the Transaction were fair to the Company's stockholders from a
financial point of view.
In connection with the Investment Agreement, as part of the
consideration for the purchase of the Shares, the Company granted certain
registration rights to Wood Group 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 Company granted to Wood Group
and its assignees the right to require the Company to register the offer and
sale of the Shares up to two times, subject to certain deferral and cutback
provisions. In addition, the Company also granted to Wood Group and its
assignees, certain incidental or "piggyback" registration rights, which allow
Wood Group to participate in certain underwritten public offerings initiated by
the Company, subject to certain limitations and conditions set forth therein.
Under the terms of the Registration Rights Agreement, the ability of Wood Group
to exercise the rights granted thereunder may not be subordinated or subject to
registration rights of any other person or entity. The rights granted under the
Registration Rights Agreement terminate on the earlier of (i) the fifth
anniversary date of the Registration Rights Agreement, or (ii) such time as the
Shares may be immediately sold under Rule 144 under the Securities Act of 1933,
as amended, during any 90-day period.
As a result of the consummation of the Transaction, as of
September 8,1997, Wood Group owned an aggregate of 24,337,702 shares of Common
Stock, representing approximately 88.5% of the outstanding shares of Common
Stock.
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ITEM 7. FINANCIAL INFORMATION AND EXHIBITS.
10.1 Investment Agreement, dated as of September 8, 1997, by and between
the Company and Wood Group.
10.2 Registration Rights Agreement, dated as of September 8, 1997, by and
between the Company and Wood Group.
23.1 Consent of Rauscher Pierce Refsnes, Inc.
99.1 Press Release, dated September 9, 1997.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the Registrant has duly caused this report to be signed on its behalf
by the undersigned hereunto duly authorized.
ERC INDUSTRIES, INC.
("Registrant")
Date: September 17, 1997 /s/ WENDELL R. BROOKS
__________________________________
Wendell R. Brooks
President
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INDEX TO EXHIBITS
EXHIBIT
NUMBER
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10.1 Investment Agreement, dated as of September 8, 1997, by and between
the Company and Wood Group.
10.2 Registration Rights Agreement, dated as of September 8, 1997, by and
between the Company and Wood Group.
23.1 Consent of Rauscher Pierce Refsnes, Inc.
99.1 Press Release of the Company, dated September 9, 1997.
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EXHIBIT 10.1
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
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.
(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.
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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 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
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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 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.
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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 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.
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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 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.
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,
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(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 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.
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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.
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,
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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;
(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
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<PAGE>
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 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.
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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.
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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<PAGE>
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.
(g) "ERC Loss" has the meaning set forth in Section 6.2.
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<PAGE>
(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.
(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.
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<PAGE>
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 10.2
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.
"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.
<PAGE>
"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.
(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
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<PAGE>
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.
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
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<PAGE>
(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 registration statement, prospectus, offering circular
or other document, or 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 within the meaning of
Section 15 of the Securities Act, against all claims, losses, damages
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<PAGE>
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 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
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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).
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 Regis trable
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
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<PAGE>
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.
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
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<PAGE>
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 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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<PAGE>
EXHIBIT 23.1
The undersigned, Rauscher Pierce Refsnes, Inc., hereby consents to the
references to it in the Current Report on Form 8-K filed by ERC Industries, Inc.
on September 18, 1997. By giving such consent, we do not thereby admit that we
are experts with respect to any part of such Current Report on Form 8-K within
the meaning of the term "expert" as used in the Securities Act of 1933, as
amended, or the rules and regulations of the Securities and Exchange Commission
promulgated thereunder, or are within the class of persons whose consent is
required thereunder.
RAUSCHER PIERCE REFSNES, INC.
By: /s/ Richard L. Davis
__________________________________
Dallas, Texas
September 17, 1997
<PAGE>
EXHIBIT 99.1
FOR IMMEDIATE RELEASE Investor Contacts: Jim Klima
Wendell Brooks
(713) 398-8901 - Phone
(713) 398-8086 - Facsimile
ERC INDUSTRIES, INC.
ANNOUNCES INVESTMENT
HOUSTON, TEXAS, September 9, 1997 - ERC Industries, Inc. (Nasdaq:ERCI) (the
"Company"), announced today that John Wood Group PLC ("Wood Group") has invested
$10,000,000 in ERC Industries, Inc., through the purchase of 6,250,000 shares of
common stock at a price of $1.60 per share.
Wendell R. Brooks, President of ERC Industries, Inc., said, "Our Company has
significant market opportunities which we have been unable to pursue due to
capital constraints. This investment by the Wood Group will allow ERC to
strengthen its balance sheet, pursue growth opportunities, and establish a firm
foundation for long-term growth. We are very encouraged by the vote of
confidence this investment from the Wood Group demonstrates in the company, as
the Wood Group increases its ownership of the Company from approximately 85.1%
to 88.5%."
A Special Committee consisting of the outside Directors of the Board was formed
to review and negotiate the investment offer from the Wood Group. This Special
Committee retained the investment banking firm of Rauscher Pierce Refsnes, Inc.
to evaluate the proposal.
ERC Industries, Inc. is an oilfield service company engaged in the
remanufacture, manufacture and service of wellhead and valve equipment. The
Company conducts its business from 22 domestic locations, 4 international
locations, and 2 distributorships.
