<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [_]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
ERC INDUSTRIES, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
-------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
-------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-------------------------------------------------------------------------
(5) Total fee paid:
-------------------------------------------------------------------------
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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Notes:
<PAGE>
ERC INDUSTRIES, INC.
15835 PARK TEN PLACE
SUITE 115
HOUSTON, TEXAS 77084
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD SEPTEMBER 19, 1997
To the Stockholders of
ERC INDUSTRIES, INC.
NOTICE IS HEREBY GIVEN that the 1997 Annual Meeting of Stockholders (the
"Annual Meeting") of ERC Industries, Inc., a Delaware corporation (the
"Company"), will be held at the Holiday Inn-Houston West, 14703 Park Row,
Houston, Texas 77079, on Friday, September 19, 1997 at 10:00 a.m., Houston time,
for the following purposes:
(1) To elect two Class I directors to serve until the Company's 2000 Annual
Meeting of Stockholders or until their successors are duly elected and
qualified;
(2) To ratify the appointment by the Board of Directors of Coopers &
Lybrand L.L.P. as the Company's independent public accountants for the
year ended December 31, 1997; and
(3) To transact any other proper business brought before the Annual Meeting
or any adjournments or postponements thereof.
The Board of Directors has fixed August 15, 1997, at the close of business,
as the record date for the determination of stockholders entitled to notice of,
and to vote at, the Annual Meeting and any adjournment or postponement thereof.
Only holders of record of the Company's common stock on that date are entitled
to vote on matters coming before the Annual Meeting and any adjournment or
postponement thereof. A complete list of stockholders entitled to vote at the
meeting will be maintained in the Company's offices at 15835 Park Ten Place,
Suite 115, Houston, Texas 77084, for ten days prior to the Annual Meeting.
Please advise the Company's transfer agent, American Stock Transfer & Trust
Company, 40 Wall Street, 46th Floor, New York, New York 10005 of any change in
your address.
YOUR VOTE IS IMPORTANT. WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL
MEETING, PLEASE SIGN AND DATE THE ENCLOSED PROXY AND RETURN IT IN THE ENVELOPE
PROVIDED, WHICH REQUIRES NO POSTAGE IF MAILED WITHIN THE UNITED STATES. IF YOU
RECEIVE MORE THAN ONE PROXY CARD BECAUSE YOUR SHARES ARE REGISTERED IN DIFFERENT
NAMES OR AT DIFFERENT ADDRESSES, EACH SUCH PROXY CARD SHOULD BE SIGNED AND
RETURNED TO ENSURE THAT ALL OF YOUR SHARES WILL BE VOTED. THE PROXY CARD SHOULD
BE SIGNED BY ALL REGISTERED HOLDERS EXACTLY AS THE SHARES ARE REGISTERED. ANY
PERSON GIVING A PROXY HAS THE POWER TO REVOKE IT AT ANY TIME PRIOR TO ITS
EXERCISE AND, IF PRESENT AT THE MEETING, MAY WITHDRAW IT AND VOTE IN PERSON.
By Order of the Board of Directors,
/s/ WENDELL R. BROOKS
Wendell R. Brooks
President
Houston, Texas
August 29, 1997
<PAGE>
ERC INDUSTRIES, INC.
15835 PARK TEN PLACE, SUITE 115
HOUSTON, TEXAS 77084
(281) 398-8901
------------------------
PROXY STATEMENT
------------------------
PROXY STATEMENT FOR ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD SEPTEMBER 19, 1997
SOLICITATION AND REVOCABILITY OF PROXIES
The accompanying proxy, mailed together with this Proxy Statement to
stockholders on or about August 29, 1997, is solicited by ERC Industries, Inc.
(the "Company") in connection with the Annual Meeting of Stockholders to be held
on September 19, 1997 (the "Annual Meeting").
As stated in the Notice to which this Proxy Statement is attached, matters
to be acted upon at the Annual Meeting include (1) election to the Board of
Directors of two persons to serve as Class I directors until the Company's 2000
Annual Meeting of Stockholders or until their successors are duly elected and
qualified; (2) to ratify the appointment by the Board of Directors of Coopers &
Lybrand L.L.P. as the Company's independent public accountants for the year
ended December 31, 1997; and (3) to transact any other proper business brought
before the Annual Meeting or any adjournments or postponements thereof.
All holders of record of shares of the Company's common stock, par value
$.01 per share (the "Common Stock"), at the close of business on August 15, 1997
(the "Record Date") are entitled to notice of and to vote at the Annual Meeting.
On the Record Date, the Company had outstanding 21,248,272 shares of Common
Stock. Each share of Common Stock is entitled to one vote. The presence, in
person or by proxy, of holders of a majority of the outstanding shares of Common
Stock entitled to vote as of the Record Date is necessary to constitute a quorum
at the Annual Meeting. A plurality of the votes of the shares present in person
or represented by proxy at the Annual Meeting, provided a quorum is constituted,
is required for the election of directors. The affirmative vote of holders of a
majority of the shares of Common Stock present in person or represented by proxy
at the Annual Meeting, provided a quorum is constituted, is required for
ratification of the independent auditors.
With regard to the election of directors, votes may be cast in favor or
withheld. Votes that are withheld will be excluded entirely from the vote and
will have no effect. Abstentions may be specified on all other proposals and
will be counted as present for purposes of the item on which the abstention is
noted. Abstentions on the proposal to ratify the appointment of the auditors
will have the effect of a negative vote because that proposal requires the
affirmative vote of holders of a majority of shares present in person or by
proxy and entitled to vote. A broker is entitled to vote on the election of
directors and the ratification of auditors if such broker holds shares in street
name for a customer who does not deliver voting instructions. Under applicable
Delaware law, a broker non-vote resulting from the failure to deliver voting
instructions to a broker will have no effect on the outcome of the election of
directors or the ratification of auditors.
Any stockholder has the unconditional right to revoke his proxy at any
time before it is voted. Any proxy given may be revoked either by a written
notice duly signed and delivered to the Secretary of the Company prior to the
exercise of the proxy, by execution of a subsequent proxy or by voting in person
at the Annual Meeting (although attending the Annual Meeting without executing a
ballot or executing a subsequent proxy will not constitute revocation of a
proxy). Where a stockholder's duly executed proxy specifies a choice with
respect to a voting matter, the shares will be voted accordingly. If no such
specification is made, the shares will be voted 1) FOR the nominees for director
identified below and (2) FOR the proposal to ratify the appointment of Coopers &
Lybrand L.L.P. as the Company's independent auditors.
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding beneficial
ownership of the Company's Common Stock as of August 10, 1997, by (i) each
director, nominee for director and the Chief Executive Officer of the Company,
(ii) all executive officers and directors of the Company as a group, and (iii)
all persons who are known by the Company to be beneficial owners of 5% or more
of the Company's outstanding Common Stock.
NAME AND ADDRESS OF BENEFICIAL OWNER SHARES OWNED /(1)/ PERCENT OF CLASS
- ------------------------------------ ------------------ ----------------
John Wood Group PLC/(1)/ 18,087,702/(1)/ 85.1%/(1)/
Allister G. Langlands/(2)/ 0 *
George W. Tilley 0 *
Wendell R. Brooks 0 *
John Derek Prichard-Jones/(2)/ 0 *
Anthony Howells 0 *
Directors and Executive Officers 0 *
as a group (5 persons)
_____________________
*Less than 1%
Except as otherwise indicated, the persons named in the table possess sole
voting and investment power with respect to all shares of Common Stock shown as
beneficially owned by them. Includes shares of Common Stock held by spouses and
minor children of such persons and corporations in which such persons hold a
controlling interest.
/(1)/ The address of John Wood Group PLC, a corporation registered in Scotland
and incorporated under the laws of the United Kingdom ("Wood Group"), is
John Wood House, Greenwell Road, East Tullos, Aberdeen, Scotland AB1 4AX.
/(2)/ The directors of Wood Group, which include Messrs. Prichard-Jones and
Langlands, and Sir Ian Wood C.B.E., L.L.D., Chairman and Managing
Director of Wood Group, may be deemed the beneficial owners of the
Company's Common Stock owned by Wood Group.
2
<PAGE>
DIRECTORS AND EXECUTIVE OFFICERS
ELECTION OF DIRECTORS
The Board of Directors of the Company presently consists of five directors.
These directors are divided into three classes: Class I (two directors), Class
II (two directors) and Class III (one director). The term of the Class I
directors expires at this Annual Meeting, the term of the Class II directors
expires at the Annual Meeting to be held in 1998, and the term of the Class III
director will expire at the Annual Meeting to be held in 1999. George W. Tilley
and Wendell R. Brooks will stand for election at this Annual Meeting for three-
year terms of office expiring at the 2000 Annual Meeting of Stockholders or
until their successors are duly elected and qualified.
The following table sets forth certain information as to the nominees for
director of the Company:
Director
Name and Age Positions and Offices With the Company Since
- ------------ -------------------------------------- --------
George W. Tilley, 60 Director 1993
Wendell R. Brooks, 47 President and Director 1995
GEORGE W. TILLEY joined the Company as a director in 1993. Mr. Tilley
served as President and Chief Executive Officer of Grant Geophysical, Inc., a
public company providing geophysical services to the oil industry until
November, 1996. Prior to his position with Grant, Mr. Tilley was the President
and Chief Executive Officer of Halliburton Geophysical Services, a division of
Halliburton Company, from 1990 to 1992. Prior to 1990, Mr. Tilley held other
positions with Halliburton.
WENDELL R. BROOKS was elected President and Director in August 1995.
Mr. Brooks has over 20 years of general management experience in the oil and gas
service industry. He has been involved in business development activities,
including acquisitions and mergers for the Drilling and Productions Services
Division of John Wood Group USA, Inc., a Houston-based, indirect wholly-owned
subsidiary of Wood Group performing administrative services for Wood Group's
U.S. operations. Prior to joining John Wood Group USA, Inc., Mr. Brooks served
for nine years as President and Chief Executive Officer of Del Norte Technology,
Inc., an international supplier of equipment and services to the offshore oil
and gas industry.
While it is not anticipated that the nominee will be unable to serve,
if such nominee should decline or become unable to serve as a director for any
reason, votes will be cast instead for a substitute nominee designated by the
Board of Directors or, if none is so designated, will be cast according to the
judgment of the person or persons voting the proxy.
3
<PAGE>
DIRECTORS CONTINUING IN OFFICE
The following table sets forth certain information as to the directors
continuing in office:
Positions and Offices Director
Name and Age With the Company Since
- ------------ ---------------------- --------
John Derek Prichard-Jones, 61 Chairman and Director 1993
Class II)
Anthony Howells, 60 Director 1996
(Class II)
Allister G. Langlands, 39 Director 1993
(Class III)
ALLISTER G. LANGLANDS is a Qualified Chartered Accountant. He has been Group
Financial Director of Wood Group since August 1991. From 1989 to August 1991,
Mr. Langlands was a partner in the international accounting firm of Coopers &
Lybrand Deloitte and its predecessor Deloitte Haskins & Sells.
JOHN DEREK PRICHARD-JONES was elected Chairman of the Company in February
1993. Since 1991, Mr. Jones has served as President of Wood Group USA, Inc.,
and serves in various other capacities for other subsidiaries and affiliates of
Wood Group. From 1990 to 1991, Mr. Jones served as Vice President -
Manufacturing of Western Atlas Inc., a well logging and seismic company
headquartered in Houston, Texas. Mr. Jones served as President of Computalog
USA, Inc., an oilfield services company having its principal executive offices
located in Houston, Texas, from 1989 to 1990. He has been a Director of Wood
Group since 1986.
ANTHONY HOWELLS was appointed to serve as a director of the Company in 1996.
He has extensive experience in the oil and gas service business, both
domestically and internationally. A graduate of Oxford University, Mr. Howells
began his career with Schlumberger Overseas, in Paris, France. From 1966 to
1991, Mr. Howells was employed by Dresser Atlas in various senior management
positions. Since 1992, Mr. Howells has served as a management consultant to
oil and gas service companies specializing in facilitating better business
practices and implementing programs to improve organizational effectiveness.
EXECUTIVE OFFICERS
See "Directors Continuing in Office" above for information concerning Wendell
R. Brooks, the Company's President and Director. See "Directors Continuing in
Office" above for information concerning John Derek Prichard-Jones, the
Company's Chairman.
There are no family relationships between any director, executive officer, or
person nominated or chosen by the Company to become a director or executive
officer.
COMMITTEES AND MEETINGS OF THE BOARD OF DIRECTORS
The Board of Directors has established an Audit Committee. The Company has no
committee to nominate persons for election to the Board of Directors.
The Audit Committee, currently composed of Messrs. Prichard-Jones and
Langlands, met one time during the fiscal year ended December 31, 1996. This
committee recommends to the Board of Directors the appointment of independent
auditors, reviews the plan and scope of audits, reviews the Company's
significant accounting policies and internal controls, and has general
responsibility for related matters.
4
<PAGE>
The Board of Directors held four meetings during the fiscal year ended
December 31, 1996. None of the directors attended fewer than 75% of the
meetings of the Board of Directors and its committees on which they served that
were held during their respective terms of service as director.
SECTION 16(A) REPORTING
Section 16(a) of the 1934 Act requires the Company's directors and
executive officers, and persons who own more than ten percent of a registered
class of the Company's equity securities to file with the Securities and
Exchange Commission initial reports of ownership and reports of changes in
ownership of Common Stock and other equity securities of the Company. Officers,
directors and greater than ten-percent stockholders are required by SEC
regulation to furnish the Company with copies of all Section 16(a) forms they
file.
Based solely upon a review of Forms 3, 4 and 5 and amendments thereto
provided to the Company pursuant to Rule 16a-3(e), the Company believes that all
reports required by Section 16(a) of the 1934 Act were filed on a timely basis
by the required persons during the fiscal year ended December 31, 1996.
5
<PAGE>
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth the total compensation paid or accrued by
the Company for services rendered during the years ended December 31, 1996,
December 31, 1995 and December 31, 1994 to the Company's Chief Executive Officer
and the other executive officers of the Company who received total annual salary
and bonus in excess of $100,000 for the fiscal years ended December 31, 1996,
December 31, 1995, and December 31, 1994.
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
-----------------------------------------------
OTHER ANNUAL OPTION ALL OTHER
NAME & PRINCIPAL POSITION YEAR/(1)/ SALARY BONUS COMPENSATION AWARDS/(3)/ COMPENSATION
- --------------------------- --------- ----------- ------ ------------ ----------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Wendell R. Brooks /(1)/ 1996 $138,966 28,592 -- -- --
President 1995 $ 75,000(2) -- -- -- --
1994 $ 0 -- -- -- --
Patrick Geiger (5) 1996 $103,210 9,000 -- -- 23,684(4)
1995 $ 88,365 -- 5,853
</TABLE>
- -----------------------
(1) Mr. Brooks joined the Company in August 1995.
(2) Mr. Brooks served as the Company's President from August 1995 to the
present. During 1995, Mr. Brooks served the Company as a consultant
pursuant to which he was paid $75,000 for his services. Effective January
1, 1996, Mr. Brooks became a salaried employee of the Company.
(3) The Company had no stock option, restricted stock, stock bonus or other
equity compensation plans in effect during the fiscal years covered by this
table.
(4) Amount paid for expenses relating to moving from Shawnee, Oklahoma to
Houston, Texas.
(5) Mr. Geiger joined the Company in January 1995.
The Company has a defined contribution 401(k) profit sharing plan. The plan
covers substantially all employees subject to certain length of service
requirements. Contributions are made at the discretion of the Board of
Directors. The Company paid $49,000 during 1994 for contributions accrued at
December 31, 1993. The Company paid $27,000 during 1995 for contributions
accrued at December 31, 1994. No contributions were paid or accrued for the
year ended December 31, 1995. In June 1996, the Company began matching
employee's contributions up to 6% of their eligible compensation at a rate
of 25% of employee contributions. The Company matching contributions totaled
approximately $53,000 in 1996.
LONG TERM INCENTIVE PROGRAM
In November 1994, the Company's Board of Directors approved a long term
incentive plan (the "1994 Plan") pursuant to which certain key employees of the
Company may receive cash incentives based upon the Company's earnings in given
years. Awards may be granted under the 1994 Plan up to an aggregate of
1,386,366 units (the "Units") (such number being subject to antidilution
adjustments under certain circumstances) at prices determined by the Board of
Directors. Plan participants, awards to participants, exercise prices and
performance measurement periods are determined by the Company's Board of
Directors.
Units granted under the Plan may be exercised and converted into cash at
such times and in such amounts as set forth in the applicable agreement entered
into in connection with the grant (but in no event earlier than three years
after the grant of the Units or later than seven years after the grant). Holders
of Units electing to exercise must irrevocably elect in writing to exercise the
Units between February 1 and March 31 of the year in which the holder desires to
exercise the Units (the "Window Period"). Such irrevocable election must be
delivered to and received by the Board of Directors during such Window Period.
6
<PAGE>
Upon exercise, holders shall be entitled to receive an amount of cash,
within 30 days of notice of exercise, equal to the excess of (A) the aggregate
Current Value (hereinafter defined) of the Units so exercised over (B) the
aggregate price for the Units (as set forth in the individual agreement with
holders) so exercised. The Company shall pay to the holder, within 30 days after
the exercise date, the cash amount payable to such holder. The Current Value of
a Unit shall be determined as of the end of the Company's fiscal year preceding
the exercise date (the "Valuation Date"). "Current Value" of a Unit shall mean
the average net consolidated pre-tax earnings of the Company for the two (2)
years ending prior to the Window Period in which the holder gives notice of his
or her election to exercise Units pursuant to the 1994 Plan and the applicable
agreement, multiplied by a factor of five (5) and this result shall be the
Current Value of the entire Company as of the Valuation Date, and such Current
Value shall be divided by the sum of (x) the number of issued and outstanding
shares of the Common Stock on the Valuation Date, plus (y) the number of Units
which are issued and outstanding on the Valuation Date. For purposes of
determining the Company's net consolidated pre-tax earnings, the earnings will
be determined after (1) subtracting all exceptional costs including (I) bonus
payments, (ii) contributions to qualified employee benefit plans, such as the
Company's 401(k) plans, pension plans or other retirement plans or trusts, and
(iii) management fees, and (2) setting aside any portion of the earnings which
are restricted or which are subject to a preference in favor of any preferred
stock or other senior securities issued by the Company.
The Company's Board of Directors shall administer the 1994 Plan and may,
from time to time, amend, suspend or discontinue the 1994 Plan, or amend any
Units granted hereunder; provided, that without the written consent of a holder,
no amendment or suspension of the 1994 Plan shall substantially impair any
Units.
During the year ended December 31, 1996, the Board granted 432,000 Units to
employees of the Company under the 1994 Plan.
DIRECTOR COMPENSATION
From 1990 to January 1993, the Company's policy was to provide each
director of the Company who was not an employee of the Company and who was not
compensated under any other agreement, $20,000 in cash as director's fees for
each full year of service, plus $500 per meeting attended. In January 1993, the
Company terminated this policy regarding directors' fees and meeting fees for
directors who are employed by either the Company or Wood Group. As a result, the
only directors who now receive fees for their services as directors are Messrs.
Tilley and Howells, who are not employed by either the Company or Wood Group.
Messrs. Howells and Tilley receive $10,000 for each full year of service as a
director.
BOARD OF DIRECTORS INTERLOCKS AND INSIDER PARTICIPATION
Compensation decisions with respect to the executive officers of the
Company are made by the Board of Directors, which includes John Derek Prichard-
Jones, Chairman of the Board, and Wendell R. Brooks, President. Mr. Jones does
not receive compensation from the Company for his service as Chairman. Mr.
Brooks did not participate in any deliberations or votes with respect to his
compensation during fiscal 1996.
7
<PAGE>
BOARD OF DIRECTORS' REPORT ON EXECUTIVE COMPENSATION
GENERAL
Decisions regarding executive compensation for fiscal 1996 and prior years
were made by the Board of Directors as discussed below. The Board of Directors
is committed to ensuring that the executive compensation policies and practices
of the Company support the Company's achievement of its business objectives.
BASE SALARY
The Company President's base salary is reviewed annually by the Chairman of
the Board of Directors. In determining (a) whether salary increases are merited
for executive officers who are not subject to an employment agreement or (b)
whether an employment agreement should be renewed and/or whether the base salary
thereunder should be increased, the Board of Directors considers a number of
factors. The primary factor considered is the Company's return on capital
employed compared to the Company's goals and compared to comparable companies in
the Company's marketplace. Other factors are the executive officer's
performance on the job; the executive officer's level of responsibility,
experience and expertise; internal compensation equity; and pay practices for
executives of comparable companies. Based upon these factors, Mr. Brooks'
salary was set at $138,966 for 1996. During 1995, Mr. Brooks served the Company
as a consultant pursuant to which he was paid $75,000 for his services.
BONUS
Bonuses are based on the Company's performance for each of the fiscal years
ended December 31, 1996, December 31, 1995, and December 31, 1994. All bonuses
are approved by the Board of Directors. Based upon its review of the Company's
performance, the Company awarded a bonus of $28,952 to Mr. Brooks and a bonus of
$9,000 to Mr. Geiger for the fiscal year ended December 31, 1996.
LONG TERM INCENTIVES
In an effort to provide a means by which the Company could grant long term
incentives to its key employees, the Board of Directors adopted the ERC
Industries Stock Appreciation Rights Plan (the "1994 Plan") in November 1994.
Pursuant to the 1994 Plan, the Board may grant units to key employees,
exercisable for cash payments based upon the Company's net earnings. See
"Executive Compensation - Long Term Incentive Program." During the year ended
December 31, 1996, the Board granted 432,000 Units under the 1994 Plan,
including 125,000 Units to Mr. Brooks and 30,000 Units to Mr. Geiger.
This report is submitted by the members of the Board of Directors:
John Derek Prichard-Jones Anthony Howells Allister G. Langlands
George W. Tilley Wendell R. Brooks
The Board of Directors' Report on Executive Compensation shall not be
deemed incorporated by reference by any general statement incorporating by
reference this proxy statement into any filing under the Securities Act of 1933
or the Securities Exchange Act of 1934, except to the extent that the Company
specifically incorporates such report by reference, and shall not otherwise be
deemed filed under such Acts.
COMPARISON OF TOTAL SHAREHOLDER RETURN
The following performance graph shall not be deemed incorporated by
reference by any general statement incorporating by reference this proxy
statement into any filing under the Securities Act of 1933, or the Securities
8
<PAGE>
Exchange Act of 1934 except to the extent that the Company specifically
incorporates this information by reference, and shall not otherwise be deemed
filed under such Acts.
The following performance graph compares the yearly percentage change in
the cumulative total stockholder return on the Common Stock (as measured by
dividing (i) the difference between the Common Stock share price at the end and
the beginning of the measurement period by (ii) the Common Stock share price at
the beginning of the measurement period) with the cumulative total return
assuming reinvestment of dividends of (1) the Media General Financial Services
Oil and Gas Field Services Industry Group Index (the "Industry Index") and (2)
the NASDAQ National Market Composite Index (the "Broad Market") over the period
beginning January 1, 1992 and ending December 31, 1996.
ERC Industries I Industry Index Broad Market
1992 100 100 100
1993 100 104.82 99.66
1993 180 119.95 118.3
1994 140 107.23 124.21
1995 140 158.49 161.11
1996 280 234.96 200.2
9
<PAGE>
BOARD OF DIRECTORS INTERLOCKS AND INSIDER PARTICIPATION
Compensation decisions with respect to the executive officers of the
Company are made by the Board of Directors, which includes John Derek Prichard-
Jones, Chairman of the Board, and Wendell R. Brooks, President. Mr. Jones does
not receive compensation from the Company for his service as Chairman. Mr.
Brooks did not participate in any deliberations or votes with respect to his
compensation during fiscal 1996.
CERTAIN TRANSACTIONS
On June 6, 1996, the Company and 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, 7,384,616 shares (the
"Shares") of Common Stock. The aggregate purchase price for the Shares was
$6,000,000.50, or $0.8125 ($13/16) per Share. Such transaction (the
"Transaction") was consummated on June 6, 1996.
Prior to the consummation of the Transaction, Wood Group owned
approximately 58% 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 Howard, Weil, Labouisse, Friedrichs Incorporated
("Howard Weil"), as its financial advisor to assist it in evaluating and
determining the fairness of the Transaction to the Company's stockholders. On
June 5, 1996, Howard Weil 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 June 6,
1996 (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) June 6, 2001, 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 June 6, 1996,
Wood Group owned an aggregate of 15,467,820 shares of Common Stock, representing
approximately 72.8% of the outstanding shares of Common Stock.
The Company and Wood Group have agreed to an annual provision for
administrative and financial services fees in amounts to be determined on an
annual basis. The Company paid or accrued $188,000 in such fees for the fiscal
year ended December 31, 1996.
10
<PAGE>
PROPOSAL TO RATIFY APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors, upon recommendation of the Audit Committee, has
appointed Coopers & Lybrand L.L.P. as the independent auditors of the Company
for the fiscal year ending December 31, 1997.
Representatives of Coopers & Lybrand L.L.P. are expected to be present at
the meeting with the opportunity to make a statement if they desire to do so and
to be available to respond to appropriate questions.
The Board of Directors recommends that you vote FOR the ratification of the
appointment of Coopers & Lybrand L.L.P. as the Company's independent
accountants for 1997.
STOCKHOLDER PROPOSALS
In order for stockholder proposals to receive consideration for inclusion
in the Company's Proxy Statement for its 1998 Annual Meeting of Stockholders,
such proposals must be received at the Company's offices at 15835 Park Ten
Place, Suite 115, Houston, Texas 77084, Attention: Secretary, by April 22,
1998.
The Company's By-Laws contain a provision which requires that a stockholder
may nominate a person for election as a director only if written notice of such
stockholder's intent to make such nomination has been given to the Secretary of
the Company not later than 45 nor more than 60 days prior to an annual meeting.
This provision also requires that the notice set forth, among other things, the
name and address of the stockholder giving the notice, as it appears on the
Company's books and records, and the class and number of shares of capital stock
of the Company held of record, held beneficially and represented by proxy by
such stockholder. Such notice must also contain such other information
regarding the nominee as would be required to be included in a proxy statement
filed pursuant to the proxy rules of the Securities and Exchange Commission had
the nominee been nominated by the Board. Such notice must also be accompanied
by the written consent of the person being nominated to serve as a director if
elected. The chairman of the annual meeting shall, if facts warrant, determine
and declare to the annual meeting that a nomination has not been made in
accordance with these procedures and if the chairman should so determine, he or
she shall so declare to the annual meeting, and the defective nomination shall
be disregarded. No stockholder has nominated a candidate for election to the
Board of Directors at the Annual Meeting.
11
<PAGE>
SOLICITATION OF PROXIES
The Company will pay the expenses of this proxy solicitation. In addition
to the solicitation by mail, some of the officers and regular employees of the
Company may solicit proxies personally or by telephone, if deemed necessary.
The Company will request brokers and other fiduciaries to forward proxy
soliciting material to the beneficial owners of shares which are held of record
by the brokers and fiduciaries, and the Company may reimburse them for
reasonable out-of-pocket expenses incurred by them in connection therewith.
OTHER MATTERS
The Annual Report to Stockholders for the fiscal year ended December 31,
1996, which includes financial statements, is enclosed herewith. The Annual
Report does not form a part of this Proxy Statement or the materials for the
solicitation of proxies to be voted at the annual meeting.
A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K WILL BE FURNISHED AT NO
CHARGE TO EACH PERSON TO WHOM A PROXY STATEMENT IS DELIVERED UPON RECEIPT OF A
WRITTEN REQUEST OF SUCH PERSON ADDRESSED TO ERC INDUSTRIES, INC., ATTN: WENDELL
R. BROOKS, 15835 PARK TEN PLACE, SUITE 115, HOUSTON, TEXAS 77084, TELEPHONE
(281) 398-8901. THE COMPANY WILL ALSO FURNISH SUCH ANNUAL REPORT ON FORM 10-K TO
ANY "BENEFICIAL OWNER" OF SUCH SECURITIES AT NO CHARGE UPON RECEIPT OF A WRITTEN
REQUEST, ADDRESSED TO MR. BROOKS CONTAINING A GOOD FAITH REPRESENTATION THAT, AT
THE RECORD DATE, SUCH PERSON WAS A BENEFICIAL OWNER OF SECURITIES OF THE COMPANY
ENTITLED TO VOTE AT THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD SEPTEMBER 19,
1997. COPIES OF ANY EXHIBIT TO THE FORM 10-K WILL BE FURNISHED UPON THE PAYMENT
OF A REASONABLE FEE.
The Board of Directors is not aware of any matter, other than the matters
described above, to be presented for action at the meeting. However, if any
other proper items of business should come before the meeting, it is the
intention of the person or persons acting under the enclosed form of proxy to
vote in accordance with their best judgment on such matters.
Certain information contained in the Proxy Statement relating to the
occupations and security holdings of directors and officers of the Company is
based upon information received from the individual directors and officers.
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD AT YOUR EARLIEST
CONVENIENCE IN THE ENCLOSED RETURN ENVELOPE. NO POSTAGE IS REQUIRED IF MAILED
IN THE UNITED STATES. A PROMPT RETURN OF YOUR PROXY CARD WILL BE APPRECIATED AS
IT WILL SAVE THE EXPENSE OF FURTHER MAILINGS.
By Order of the Board of Directors,
/s/ WENDELL R. BROOKS
Wendell R. Brooks
President
Houston, Texas
August 29, 1997
12
<PAGE>
PLEASE DATE, SIGN AND MAIL YOUR
PROXY CARD BACK AS SOON AS POSSIBLE!
ANNUAL MEETING OF SHAREHOLDERS
ERC INDUSTRIES, INC.
SEPTEMBER 19, 1997
Please Detach and Mail in the Envelope Provided
- --------------------------------------------------------------------------------
A [X] PLEASE MARK YOUR
VOTES AS IN THIS
EXAMPLE.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
FOR WITHHELD FOR AGAINST ABSTAIN
1. Election of [ ] [ ] NOMINEES: George W. Tilley 2. Ratification of Coopers & Lybrand [ ] [ ] [ ]
Directors Wendell R. Brooks L.L.P. Certified Public Accountants
of the Company for 1997;
For, except vote withheld from the following nominee(s) 3. Other Matters.
In their discretion, to vote with [ ] [ ]
_______________________________________________________ respect to any other matters that
may legally come before the meeting or any adjournment
thereof, including matters incident to its conduct.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER
DIRECTED HEREIN BY THE UNDERSIGNED SHAREHOLDER.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY IN THE
ENCLOSED ENVELOPE.
SIGNATURE DATED:
-------------------------------------- ----------- ---------------------------------- ----------------------
SIGNATURE IF JOINTLY OWNED PRINT NAME
</TABLE>
NOTE: THIS PROXY MUST BE SIGNED EXACTLY AS YOUR NAME APPEARS HEREON.
EXECUTORS, ADMINISTRATORS, TRUSTEES, ETC. SHOULD GIVE FULL TITLE AS SUCH.
IF THE SIGNER IS A CORPORATION, PLEASE SIGN FULL CORPORATE NAME BY DULY
AUTHORIZED OFFICER.
<PAGE>
8888
PROXY ERC INDUSTRIES, INC. PROXY
Proxy Solicited on Behalf of the Board of Directors
for the Annual Meeting of Shareholders of ERC Industries, Inc.
to be held at
the Holiday Inn-Houston West
14703 Park Row, Houston, Texas 77079
Friday, September 19, 1997 at 10:00 a.m. Central Time
The undersigned hereby appoints Wendell R. Brooks and James E. Klima, and each
or either of them, with full power of substitution, as proxies of the
undersigned to vote the Common Stock of the undersigned in ERC Industries, Inc.
at the above Annual Meeting and at any and all adjournments or postponements
thereof.
The shares represented by this Proxy will be voted as herein specified. If a
choice is not specified, such shares will be voted "FOR" the election of the
nominee for director named on the reverse side and "FOR" Proposal 2. This Proxy
hereby revokes all prior proxies given with respect to the shares of the
undersigned.
PLEASE SIGN ON THE REVERSE SIDE
