-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, G/Tvg+qhkrNjCRbcaGutU1fa6p/0iZUJ4w02Elsgcf8W+pULLw+DQ/q99Lzfa9zu XcANO6Fo6i6EdSgMcjcLmQ== 0000899243-97-001835.txt : 19970922 0000899243-97-001835.hdr.sgml : 19970922 ACCESSION NUMBER: 0000899243-97-001835 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19970908 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 19970918 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: ERC INDUSTRIES INC /DE/ CENTRAL INDEX KEY: 0000775477 STANDARD INDUSTRIAL CLASSIFICATION: OIL & GAS FILED MACHINERY & EQUIPMENT [3533] IRS NUMBER: 760382879 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 000-14439 FILM NUMBER: 97682286 BUSINESS ADDRESS: STREET 1: 2906 HOLMES RD CITY: HOUSTON STATE: TX ZIP: 77051 BUSINESS PHONE: 7137339301 MAIL ADDRESS: STREET 2: 2906 HOLMES RD CITY: HOUSTON STATE: TX ZIP: 77051 FORMER COMPANY: FORMER CONFORMED NAME: ERC CORP /DE/ DATE OF NAME CHANGE: 19851103 8-K 1 FORM 8-K ================================================================================ 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) ================================================================================ 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. -2- 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. -3- 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 -4- INDEX TO EXHIBITS EXHIBIT NUMBER - ------ 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. -5- EX-10.1 2 EXHIBIT 10.1 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. 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 -2- 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. -3- 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. -4- 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, -5- (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. -6- 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, -7- 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 -8- 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. -9- 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 -10- 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. -11- (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. -12- 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 __________________________________ -13- EX-10.2 3 EXHIBIT 10.2 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. "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 -2- 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 -3- (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 -4- 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 -5- 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 -6- 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 -7- 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 __________________________________ -8- EX-23.1 4 EXHIBIT 23.1 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 EX-99.1 5 EXHIBIT 99.1 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. -----END PRIVACY-ENHANCED MESSAGE-----