-----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, HzG4VApb7DDXWo52rue0kO5+Lxt6QfQ5RelhvVVJE4QBZpEmXBRvJc+Sh0IG/A2o GAMOw+PU++Ajqstgu+HFFA== 0000899243-99-001156.txt : 19990524 0000899243-99-001156.hdr.sgml : 19990524 ACCESSION NUMBER: 0000899243-99-001156 CONFORMED SUBMISSION TYPE: SC 13D/A PUBLIC DOCUMENT COUNT: 4 FILED AS OF DATE: 19990521 GROUP MEMBERS: JOHN WOOD GROUP PLC GROUP MEMBERS: WOOD JOHN GROUP PLC SUBJECT COMPANY: 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: SC 13D/A SEC ACT: SEC FILE NUMBER: 005-39922 FILM NUMBER: 99632328 BUSINESS ADDRESS: STREET 1: 1441 PARK TEN BOULEVARD CITY: HOUSTON STATE: TX ZIP: 77084 BUSINESS PHONE: 2813988901 MAIL ADDRESS: STREET 1: 1441 PARK TEN BOULEVARD CITY: HOUSTON STATE: TX ZIP: 77084 FORMER COMPANY: FORMER CONFORMED NAME: ERC CORP /DE/ DATE OF NAME CHANGE: 19851103 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: WOOD JOHN GROUP PLC CENTRAL INDEX KEY: 0000904325 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] STATE OF INCORPORATION: TX FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D/A BUSINESS ADDRESS: STREET 1: JOHN WOOD HOUSE STREET 2: GREENWELL ROAD EAST TULLOS ABERLEEN CITY: SCOTLAND AB1 4AZ ZIP: 00000 MAIL ADDRESS: STREET 1: 16920 PARK ROW CITY: HOUSTON STATE: TX ZIP: 77084 SC 13D/A 1 AMENDMENT NO. 13 TO SCHEDULE 13D UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 SCHEDULE 13D Under the Securities Exchange Act of 1934 (Amendment No. 13)* ERC Industries, Inc. - -------------------------------------------------------------------------------- (Name of Issuer) Common Stock, par value $0.01 per share - -------------------------------------------------------------------------------- (Title of Class of Securities) 268912102 ------------------------------ (CUSIP Number) Arthur M. Nathan, Haynes and Boone, L.L.P. 1000 Louisiana Street, Suite 4300, Houston, Texas 77002 (713) 547-2000 - -------------------------------------------------------------------------------- (Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications) May 14, 1999 ------------------------------ (Date of Event which Requires Filing of this Statement) If the filing person has previously filed a statement on Schedule 13G to report the acquisition which is the subject of this Schedule 13D, and is filing this schedule because of Rule 13d-1(b)(3) or (4), check the following box [_]. Check the following box if a fee is being paid with the statement [_]. (A fee is not required only if the filing person: (1) has a previous statement on file reporting beneficial ownership of more than five percent of the class of securities described in Item 1; and (2) has filed no amendment subsequent thereto reporting beneficial ownership of five percent or less of such class.) (See Rule 13d-7.) Note: Six copies of this statement, including all exhibits, should be filed with the Commission. See Rule 13d-1(a) for other parties to whom copies are to be sent. *The remainder of this cover page shall be filled out for a reporting person's initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter disclosures provided in a prior cover page. The information required on the remainder of this cover page shall not be deemed to be "filed" for the purpose of Section 18 of the Securities Exchange Act of 1934 ("Act") or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes). SCHEDULE 13D - ----------------------- ----------------------- CUSIP NO. 268912102 Page 2 of 10 Pages - ----------------------- ----------------------- - ------------------------------------------------------------------------------ NAME OF REPORTING PERSON 1 S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON John Wood Group PLC, a company registered in Scotland and incorporated under the laws of the United Kingdom - ------------------------------------------------------------------------------ CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP 2 (a) [_] (b) [_] - ------------------------------------------------------------------------------ SEC USE ONLY 3 - ------------------------------------------------------------------------------ SOURCE OF FUNDS 4 AF - ------------------------------------------------------------------------------ CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) [_] 5 - ------------------------------------------------------------------------------ CITIZENSHIP OR PLACE OF ORGANIZATION 6 United Kingdom - ------------------------------------------------------------------------------ SOLE VOTING POWER 7 NUMBER OF 25,687,702 SHARES ----------------------------------------------------------- SHARED VOTING POWER BENEFICIALLY 8 0 OWNED BY ----------------------------------------------------------- EACH SOLE DISPOSITIVE POWER 9 REPORTING 25,687,702 PERSON ----------------------------------------------------------- SHARED DISPOSITIVE POWER WITH 10 0 - ------------------------------------------------------------------------------ AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 11 25,687,702 - ------------------------------------------------------------------------------ CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES 12 [_] - ------------------------------------------------------------------------------ PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 13 89% - ------------------------------------------------------------------------------ TYPE OF REPORTING PERSON 14 CO - ------------------------------------------------------------------------------ Page 2 of 10 Pages The Schedule 13D dated October 19, 1992, as amended by Amendment No. 1 thereto dated December 3, 1992, Amendment No. 2 thereto dated December 7, 1992, Amendment No. 3 thereto dated January 11, 1993, Amendment No. 4 thereto dated April 30, 1993, Amendment No. 5 thereto dated July 29, 1993, Amendment No. 6 thereto dated March 13, 1996, Amendment No. 7 thereto dated March 22, 1996, Amendment No. 8 thereto dated June 6, 1996, Amendment No. 9 thereto dated July 24, 1996, Amendment No.10 thereto dated August 2, 1996, Amendment 11 thereto dated September 26, 1996 and Amendment No. 12 thereto dated September 11, 1997 (the "Schedule 13D") of John Wood Group PLC (the "Reporting Person"), relating to the common stock, $0.01 par value per share (the "Common Stock"), and a series of preferred stock, $1.00 par value per share, of ERC Industries, Inc., a Delaware corporation (formerly known as ERC Subsidiary, Inc., successor by merger to ERC Industries, Inc. (the "Company")), is hereby amended and supplemented as set forth below. Defined terms used in this Amendment No. 13 and not defined herein shall have their respective meanings as set forth in the Schedule 13D. Item 3. Source and Amount of Funds or Other Consideration. Item 3 is hereby amended by adding the following paragraphs: "The Reporting Person acquired the securities reported by this Amendment No. 13 to Schedule 13D by selling all of the outstanding capital stock of a wholly-owned subsidiary to the Company." Item 4. Purposes of the Transaction. Item 4 is hereby amended by adding the following paragraphs: "On May 14, 1998, the Company and the Reporting Person entered into a Share Sale and Purchase Agreement (the "Purchase Agreement"), pursuant to which the Company completed its acquisition (the "Pressure Control Acquisition") from the Reporting Person of all of the outstanding capital stock of Wood Group Pressure Control Holdings Limited, a company incorporated in Scotland under the Companies Act of the United Kingdom ("WGPCHL"). Prior to the Pressure Control Acquisition, WGPCHL was a wholly-owned subsidiary of the Reporting Person, the owner of approximately 88.5% of the then issued and outstanding shares of the Company's Common Stock. The Purchase Agreement is attached hereto as Exhibit M. The sole assets of WGPCHL consist of all of the issued and outstanding capital stock of each of Wood Group Engineering Services (Peterhead) Limited and Wood Group Engineering (Middle East) Limited, which in turn beneficially owns Arabian Oil Equipment Services LLC (collectively, the "Group Companies"). The Group Companies market, manufacture and service products used in the drilling and production segment of the Oil and Gas Industry, primarily consisting of the repair and overhaul of valves and wellheads. The Group Companies operate out of one facility located in Scotland and one facility in the United Arab Emirates. The Company plans to continue to operate the Group Companies in substantially the same manner as they were operated prior to the acquisition. In connection with the transaction and in exchange for all of the shares of the capital stock of WGPCHL, the Company issued to the Reporting Person 1,350,000 shares of its Common Stock, Page 3 of 10 Pages representing approximately 0.5% of the currently issued and outstanding shares of Common Stock. In addition, the Company issued 1,850,000 shares of its Series A Cumulative Convertible Preferred Stock (the "Series A Preferred Stock"), which is only convertible following approval of the conversion by the Company's stockholders. The Certificate of Designations of the Series A Preferred Stock, dated May 14, 1998 (the "Certificate of Designations") sets forth the terms of the Series A Preferred Stock and is attached hereto as Exhibit N. The holders of Series A Preferred Stock are entitled to receive cumulative cash dividends of $0.01 per annum (1% of the liquidation preference) for each share of Series A Preferred Stock beginning on January 1, 2000 in the event that the Series A Preferred Stock is not then convertible into shares of Common Stock. The Series A Preferred Stock is entitled to a liquidation preference of $1.00 per share, plus all accrued but unpaid dividends. The Series A Preferred Stock is convertible at the holder's option into an equal number of shares of Common Stock at any time following the approval of the issuance of such shares of Common Stock by a majority of the holders of the issued and outstanding Common Stock at the next annual or special meeting of stockholders called for this purpose. The Series A Preferred Stock is not entitled to vote on any matters submitted to the stockholders of the Company, except as may otherwise be provided by law or matters which adversely affect the rights of the holders of the Series A Preferred Stock. The Company may redeem the Series A Preferred Stock at any time after December 31, 1999 for $1.00 per share. On May 13, 1999, the closing sales price per share of the Common Stock on the NASDAQ Small Cap Market was $1.00. In connection with the transaction, as part of the consideration for the acquisition, the Company granted certain registration rights to the Reporting Person pursuant to a Registration Rights Agreement, dated as of May 14, 1999 (the "Registration Rights Agreement"). Under the terms of the Registration Rights Agreement, the Company granted to the Reporting Person and its assignees the right to require the Company to register the offer and sale of the Common Stock issued in the transaction and the Common Stock issuable upon the conversion of the Series A Preferred Stock up to two times, subject to certain deferral and cutback provisions. In addition, the Company also granted to the Reporting Person and its assignees, certain incidental or "piggyback" registration rights, which allow the Reporting Person 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 the Reporting Person 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. The Registration Rights Agreement is attached hereto as Exhibit O. Prior to the consummation of the Pressure Control Acquisition, the Reporting Person owned approximately 88.5% of the outstanding shares of the Company's Common Stock. Prior to the Page 4 of 10 Pages negotiation and consummation of this transaction, the Company's Board of Directors appointed a special committee consisting of its two outside independent directors (the "Special Committee") to evaluate and negotiate the transaction. The Special Committee engaged Schroder & Co. Inc. ("Schroders"), as its financial advisor to assist it in evaluating and determining the fairness of the transaction to the Company's stockholders. On February 1, 1999, Schroders delivered an opinion stating that the consideration to be received by the Company in the transaction was fair to the Company's stockholders from a financial point of view. Because the terms, conditions and consideration for the transaction as consummated were the same as the terms, conditions and consideration analyzed by Schroders, and the valuation of the Group Companies increased since the date of the fairness opinion, the Special Committee determined that the transaction was fair to the Company's stockholders as of the date of the Pressure Control Acquisition. As a result of the Pressure Control Acquisition, the Reporting Person owns an aggregate of 25,687,702 shares of Common Stock (without giving effect to the conversion, subject to stockholder approval, of the Series A Preferred Stock), representing approximately 89% of the issued and outstanding shares of Common Stock. It is presently contemplated that the Reporting Person may, depending on its evaluation of the Company's business, prospects and financial condition, the market for the Common Stock, other opportunities available to the Reporting Person, general economic conditions, regulatory conditions, financial and stock market conditions and other future developments, make additional purchases of Common Stock either in the open market or in private transactions (or combinations thereof). The Reporting Person is continuing to evaluate its investment in the Company, including the feasibility of acquiring all of the capital stock of the Company. Any such acquisition would necessarily involve extraordinary corporate actions with respect to the Company which may involve certain of the actions or occurrences set forth in paragraphs (a) through (j) of Item 4 of Schedule 13D, including, without limitation, actions to eliminate minority interests in the Company, terminate registration status pursuant to Section 12(g)(4) of the 1934 Act and delist the Common Stock from the Nasdaq Stock Market. Depending upon the circumstances, the Reporting Person might also hold its shares of Common Stock for an extended period of time, or may decide to sell all or part of its investment in the Common Stock. While the Reporting Person is continuing to evaluate its investment in the Company, no detailed plans or arrangements have been made at this time." Item 5. Interest in Securities of the Issuer. The information set forth in Item 4 of this Amendment No. 13 is incorporated by reference in response to this Item 5. Item 6. Contracts, Arrangements, Understandings or Relationships with Respect to Securities of the Issuer. The information set forth in Item 4 of this Amendment No. 13 is incorporated by reference in response to this Item 6. Page 5 of 10 Pages Item 7. Material to be Filed as Exhibits. Item 7 is hereby amended and restated in its entirety by the following paragraphs: *A Form of proposed Certificate of Ownership and Merger merging ERC Industries, Inc. into ERC Subsidiary, Inc. *B Stock Purchase Agreement dated October 15, 1992 among the John Wood Group PLC, as Purchaser, Quantum Fund, N.V., Warren H. Haber, Lawrence M. Pohly and John L. Teager, as Sellers, and ERC Industries, Inc. *C Standstill and Voting Agreement dated October 15, 1992 among John Wood Group PLC, Quantum Fund, N.V. and ERC Industries, Inc. *D Irrevocable Proxy executed by Quantum Fund, N.V. to John Wood Group PLC and J. Derek P. Jones. *E Notice of Waiver of Conditions to Consummate Purchase Agreement dated November 30, 1992. *F Agreement dated December 4, 1992, between the Reporting Person and ERC Industries, Inc. *G Agreement dated December 4, 1992, among the Reporting Person, ERC Industries, Inc., and the Indemnitees. *H Letter Agreement dated March 5, 1996, between the Reporting Person and Quantum. *I Investment Agreement dated June 6, 1996, between the Reporting Person and the Company. *J Registration Rights Agreement dated June 6, 1996, between the Reporting Person and the Company. *K Investment Agreement dated September 8, 1997, between the Reporting Person and the Company. *L Registration Rights Agreement dated September 8, 1997, between the Reporting Person and the Company. **M Share Sale and Purchase Agreement between the Company and John Wood Group PLC dated May 14, 1998. **N Certificate of Designations of Series A Cumulative Convertible Preferred Stock dated May 14, 1998. Page 6 of 10 Pages **O Registration Rights Agreement between the Company and John Wood Group PLC dated May 14, 1998. - ------------------------- * Previously filed. ** Filed herewith. Page 7 of 10 Pages SIGNATURE After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this Amendment No. 13 to Schedule 13D is true, complete and correct. Date: May 14, 1999 JOHN WOOD GROUP PLC By: /s/ Wendell Brooks ---------------------------- Name: Wendell Brooks Title: Director Page 8 of 10 Pages EXHIBIT INDEX *A Form of proposed Certificate of Ownership and Merger merging ERC Industries, Inc. into ERC Subsidiary, Inc. *B Stock Purchase Agreement dated October 15, 1992 among the John Wood Group PLC, as Purchaser, Quantum Fund, N.V., Warren H. Haber, Lawrence M. Pohly and John L. Teager, as Sellers, and ERC Industries, Inc. *C Standstill and Voting Agreement dated October 15, 1992 among John Wood Group PLC, Quantum Fund, N.V. and ERC Industries, Inc. *D Irrevocable Proxy executed by Quantum Fund, N.V. to John Wood Group PLC and J. Derek P. Jones. *E Notice of Waiver of Conditions to Consummate Purchase Agreement dated November 30, 1992. *F Agreement dated December 4, 1992, between the Reporting Person and ERC Industries, Inc. *G Agreement dated December 4, 1992, among the Reporting Person, ERC Industries, Inc., and the Indemnitees. *H Letter Agreement dated March 5, 1996, between the Reporting Person and Quantum. *I Investment Agreement dated June 6, 1996, between the Reporting Person and the Company. *J Registration Rights Agreement dated June 6, 1996, between the Reporting Person and the Company. *K Investment Agreement dated September 8, 1997, between the Reporting Person and the Company. *L Registration Rights Agreement dated September 8, 1997, between the Reporting Person and the Company. **M Share Sale and Purchase Agreement between the Company and John Wood Group PLC dated May 14, 1998. **N Certificate of Designations of Series A Cumulative Convertible Preferred Stock dated May 14, 1998. Page 9 of 10 Pages **O Registration Rights Agreement between the Company and John Wood Group PLC dated May 14, 1998. - ---------------------------- * Previously filed. ** Filed herewith. Page 10 of 10 Pages EX-99.M 2 SHARE SALE AND PURCHASE AGREEMENT SHARE SALE AND PURCHASE AGREEMENT BETWEEN JOHN WOOD GROUP PLC AND ERC INDUSTRIES, INC - -------------------------------------------------------------------------------- IN RESPECT OF THE ENTIRE ISSUED SHARE CAPITAL OF WOOD GROUP PRESSURE CONTROL HOLDINGS LIMITED - -------------------------------------------------------------------------------- MAY 1999 WGPS LEGAL DEPARTMENT 16920 PARK ROW HOUSTON, TEXAS 77084 TEL (1) 281 398 0911 FAX (1) 281 398 9862 Page 1 SHARE SALE AGREEMENT Parties: JOHN WOOD GROUP PLC a company incorporated in Scotland under the Companies Acts of the United Kingdom (company number 36219) and having it's Registered Office at John Wood House, Greenwell Road, Aberdeen, Scotland AB12 3AX ("the Vendor"); and ERC INDUSTRIES, INC. a corporation incorporated under the Laws of Delaware and having a place of business at 1441 Park Ten Boulevard, Houston, Texas 77084 ("the Purchaser") Recitals WHEREAS:- (A) The Vendor is the owner of the entire issued share capital of Wood Group Pressure Control Holdings Limited a company incorporated in Scotland under the Companies Acts of the United Kingdom (company number 191311) and having it's Registered Office at John Wood House, Greenwell Road, Aberdeen, Scotland AB12 3AX ("the Company"); (B) The Purchaser wishes to buy and the Vendor has agreed to sell the entire issued share capital of the Company; (C) The parties wish to record the terms of their agreement in writing. NOW THEREFORE THE PARTIES HEREBY AGREE AS FOLLOWS: Operative provisions: 1. INTERPRETATION 1.1. In this agreement, including the Schedules the following terms have the following meanings, unless they are inconsistent with the context: TERM MEANING - ---- ------- `AGREED FORM' the form agreed between the parties on or prior to the date of this agreement and initialled for the purpose of identification by their respective solicitors `CA' Companies Act 1985 `COMPANIES ACTS' CA, the former Companies Acts (within the meaning of CA s 735(1)) and the Companies Act 1989 `COMPANY' Wood Group Pressure Control Holdings Limited Page 2 `COMPLETION' Completion of the purchase of the Shares in accordance with clause 4 `COMPLETION DATE' Friday May 14th, 1999 `CONSIDERATION SHARES' 1,350,000 ordinary shares of $0.01 each and 1,850,000 preferred shares of $1.00, credited as fully paid, of the Purchaser to be allotted to the Vendor pursuant to clause 3.1 `DEED OF INDEMNITY' The Deed of Indemnity referred to in Clause 4.2.5 `DISCLOSURE LETTER' The disclosure letter of the same date as this Agreement from the Vendor to the Purchaser `GROUP COMPANIES' the Company and its Subsidiaries for the time being `FRS' a financial reporting standard issued by The Accounting Standards Board Limited or an SSAP `INDUSTRIAL PROPERTY any patent, patent application, know-how, trade mark, RIGHTS' trade mark application, trade name, registered design, copyright or other similar industrial or commercial right `LAST ACCOUNTS DATE' December 31, 1998 (being the date to which the Principal Accounts have been prepared) `MANAGEMENT ACCOUNTS' the unaudited management accounts of the subsidiaries and the Company for the period to March 31, 1999 `PLANNING ACTS' as defined in the Town and Country Planning Act 1990, s 336 `PRINCIPAL ACCOUNTS' the audited balance sheet as at the Last Accounts Date and audited profit and loss account for the year ended on the Last Accounts Date of each Group Company `PROPERTIES' the properties of the Group Companies shortly described in Schedule Part Five `SHARES' the one thousand ordinary shares of one pound Sterling in the capital of the Company comprising the whole of its issued and allotted share capital `SSAP' is a reference to a statement of standard accounting practice adopted by The Accounting Standards Board Limited; `SUBSIDIARY' a subsidiary as defined in CA, s 736 `WARRANTIES' the warranties and undertakings of the Vendor contained in Clause 5 and Schedule Part Two Page 3 `WARRANTY CLAIM' Any claim made by the Purchaser for breach of any of the Warranties or any claim made by any Group Company under the Deed of Indemnity; 1.2. all references to a statutory provision shall be construed as including references to: 1.2.1. any statutory modification, consolidation or re-enactment for the time being in force; 1.2.2. all statutory instruments or orders made pursuant to a statutory provision; 1.2.3. any statutory provisions of which a statutory provision is a modification, consolidation, or re-enactment; 1.3. except where the context otherwise requires words denoting the singular include the plural and vice versa; 1.4. Clause headings in this agreement and in the Schedules are for ease of reference only and do not affect the construction of any provision. 2. AGREEMENT FOR SALE 2.1. Subject to the terms and conditions of this Agreement, the Vendor shall sell the Shares with full title guarantee free from all liens charges and encumbrances and the Purchaser shall purchase the Shares with all rights now or hereafter attaching to them and with effect from the date of this Agreement. 3. PURCHASE CONSIDERATION 3.1. The purchase consideration for the Shares shall be the allotment at Completion of the Consideration Shares. 3.2. The Consideration Shares shall be issued on terms that the Ordinary Shares will rank pari passu in all respects with the ordinary shares of the Purchaser in issue at the date of allotment save as regards any dividend declared or paid by reference to a record date which is prior to Completion and that the preferred stock will rank in accordance with the terms of the Certificate of stock designation relating to such stock. 3.3. The Parties agree that they will as soon as practicable after the closing of the transaction contemplated in this Agreement enter into a Registration Rights Agreement in relation to the Consideration Shares which will be in substantially the same terms as the last Registration Rights Agreement entered into in relation to the last stock of the Purchaser issued to the Vendor. 4. COMPLETION 4.1. Completion shall take place at the offices of the Company or the Purchaser on the Completion Date when all the transactions mentioned in the following sub-clauses shall take place. Page 4 4.2. The Vendor shall deliver to the Purchaser: 4.2.1. duly completed and signed transfers in favour of the Purchaser or as it may direct in respect of the Shares together with the relative share certificates; 4.2.2. A certified copy of the minutes of the meeting of the Board of the Vendor approving this transaction; 4.2.3. the statutory books of each Group Company complete and up-to-date and their certificates of incorporation; 4.2.4. written confirmation from the Vendor that there are no subsisting guarantees given by any Group Company in it's favour; 4.2.5. a validly executed Tax Deed of Indemnity of the form set out in Part Six of the Schedule. 4.3. A Board meeting of the Company shall be held at which: 4.3.1. such persons as the Purchaser may nominate shall be appointed additional directors; 4.3.2. the transfers referred to in clause 4.2.1 shall be approved (subject to stamping); and 4.4. Upon completion of the matters referred to in clauses 4.2 & 4.3 the Purchaser shall deliver to the Vendor definitive share certificates in respect of the Consideration Shares; 4.5. Following Completion, the Purchaser shall use its reasonable endeavours to procure the release of the Vendor from all liability arising after Completion under any guarantees given by it on behalf of the Group Companies. 5. WARRANTIES AND UNDERTAKINGS BY THE VENDOR 5.1. The Vendor warrants to the Purchaser that: 5.1.1. the Vendor has and will have full power and authority to enter into and perform this agreement which when executed will constitute a binding obligation on it in accordance with it's terms; 5.1.2. the Shares constitute the whole of the issued and allotted share capital of the Company; 5.1.3. there is and at Completion will be no pledge, lien or other encumbrance on, over or affecting the Shares and there is and at Completion will be no agreement or arrangement to give or create any such encumbrance and no claim has been or will be made by any person to be entitled to any of the foregoing; 5.1.4. the Vendor will be entitled to transfer the full legal and beneficial ownership of the Shares to the Purchaser on the terms of this Agreement without the consent of any third party; 5.1.5. the Subsidiaries listed in Schedule Part One are all the present Subsidiaries of the Company; Page 5 5.1.6. the information in the Disclosure Letter relating to the Group Companies is true and accurate in all material respects; 5.1.7. Other than as disclosed to the Purchaser in the Disclosure Letter, the Company or (where specified) a Subsidiary of the Company is the sole beneficial owner of the shares in the Subsidiaries of the Company listed in Schedule Part One free from any encumbrance; 5.1.8. the Warranties in Schedule Part Two are true and accurate in all material respects; 5.1.9. the contents of the Disclosure Letter, are true and accurate in all material respects and fully and fairly disclose the matters to which they relate. 5.2. the Vendor undertakes in relation to any Warranty which refers to the knowledge, information or belief of the Vendor, that it has made due enquiry into the subject matter of that Warranty. 5.3. Each of the Warranties is without prejudice to any other Warranty and, except where expressly stated otherwise, no clause of this agreement shall govern or limit the extent or application of any other clause. 5.4. The rights and remedies of the Purchaser in respect of any breach of the Warranties shall not be affected by Completion, or by it failing to exercise or delaying the exercise of any right or remedy (except a specific and duly authorised written waiver or release), and no single or partial exercise of any right or remedy shall preclude any further or other exercise. 5.5. The Purchaser acknowledges that it has not been induced to enter into this agreement by any representation or warranty other than the Warranties. 5.6. The Warranties are given subject to the matters fully and fairly disclosed in the Disclosure Letter. 5.7. Without restricting the rights of the Purchaser or the ability of the Purchaser to claim damages on any basis in the event that any of the Warranties proves to be untrue or misleading, the Vendor hereby covenants to pay to the Purchaser: 5.7.1. The amount necessary to put the Group Company into the position which would have existed if such Warranties had been true and not misleading; and 5.7.2. All proper and reasonable costs and expenses incurred by the Purchaser and the Group Company directly as a result of such breach. 6. PENSIONS 6.1. The provisions of Schedule Part Three shall apply. 7. VENDOR' PROTECTION 7.1. The provisions of Schedule Part Four shall apply. Page 6 8. GENERAL 8.1. This agreement shall be binding upon each party's successors and assigns and personal representatives (as the case may be) but, except as expressly provided, none of the rights of the parties under this agreement or the Warranties may be assigned or transferred. 8.2. all expenses incurred by or on behalf of the parties, including all fees of agents, representatives, solicitors, accountants and actuaries employed by any of them in connection with the negotiation, preparation or execution of this agreement, shall be borne solely by the party who incurred the liability and no Group Company shall have any liability in respect of them. 8.3. Any notice required to be given by any of the parties under this agreement may be sent by post to the address of the addressee as set out in this agreement or to such other address as the addressee may have notified for the purpose of this clause. Communications sent by post shall be deemed to have been received forty-eight hours after posting. In proving service by post it shall be necessary to prove only that the communication was contained in an envelope which was duly addressed and posted in accordance with this clause. 9. ARBITRATION. 9.1. In the event that there shall be any dispute arising out of or in any way relating to this Agreement, or the contemplated transactions, any document referred to or incorporated herein by reference or centrally related to the subject matter hereof, or the subject matter of any of the same, the Parties covenant and agree as follows: 9.1.1. The Parties shall first use their reasonable best efforts to resolve such dispute among themselves, with or without mediation. 9.1.2. If the Parties are unable to resolve such dispute among themselves, such dispute shall be submitted to binding arbitration in Aberdeen, Scotland, under the auspices of, and pursuant to the arbitration rules of the International Chamber of Commerce as then in effect, or such other procedures as the Parties may agree to at the time, before a tribunal of three arbitrators, one of which shall be selected by the Vendor, one of which shall be selected by Purchaser, and the third of which shall be selected by the two arbitrators so selected. Any award issued as a result of such arbitration shall be final and binding between the Parties, and shall be enforceable by any court having jurisdiction over the Party against whom enforcement is sought. A ruling by the arbitrators shall be non-appealable. The Parties agree to abide by and perform any award rendered by the arbitrators. If either Vendor or Purchaser seeks enforcement of the terms of this Agreement or seeks enforcement of any award rendered by the arbitrators, then the prevailing Party (designated by the arbitrators) to such proceeding(s) shall be entitled to recover its costs and expenses from the non- prevailing Party, in addition to any other relief to which it may be entitled. If a dispute arises and one Party fails or refuses to designate an arbitrator within 30 days after receipt of a written notice that an arbitration proceeding is to be held, then the dispute shall be Page 7 resolved solely by the arbitrator designated by the other Party and such arbitration award shall be as binding as if 3 arbitrators had participated in the arbitration proceeding. Either Vendor or Purchaser may cause an arbitration proceeding to commence by giving the other Party notice in writing of such arbitration. Vendor and Purchaser covenant and agree to act as expeditiously as practicable in order to resolve all disputes by arbitration. Notwithstanding anything in this section to the contrary, neither Vendor nor Purchaser shall be precluded from seeking court action in the event the action sought is either injunctive action, a restraining order or other equitable relief. 9.2. Except as expressly provided herein and except for injunctions and other equitable remedies that are required in order to enforce this Agreement, no action may be brought in any court of law and EACH OF THE PARTIES WAIVES ANY RIGHTS THAT IT MAY HAVE TO BRING A CAUSE OF ACTION IN ANY COURT OR IN ANY PROCEEDING INVOLVING A JURY TO THE MAXIMUM EXTENT PERMITTED BY LAW. 10. GOVERNING LAW 10.1. This Agreement shall be governed by the Law of Scotland. IN WITNESS WHEREOF this Agreement and the Schedule annexed are executed as follows:- At _____________________ on _________________1999 for and on behalf of the Vendor as follows:- By __________________ Director _____________________________ Signature In the presence of the following witness:- Witness Name______________________ _____________________________ Signature Address___________________________ And at _____________________ on _________________1999 for and on behalf of the Purchaser as follows:- By __________________ Director _____________________________ Signature In the presence of the following witness:- Witness Name______________________ _____________________________ Signature Address___________________________ Page 8 SCHEDULE PART ONE Details of group companies Part 1: The Company Company number: 191311 - -------------------------------------------------------------------------------- Date of incorporation: 19th November 1998 - -------------------------------------------------------------------------------- Share capital: Ordinary Shares of One Pound Sterling each - -------------------------------------------------------------------------------- Authorised 10,000 - -------------------------------------------------------------------------------- Issued 1,000 - -------------------------------------------------------------------------------- Registered office: John Wood House, Greenwell Road, Aberdeen, Scotland AB12 3AX - -------------------------------------------------------------------------------- Directors: Hugh Fraser, Kenneth Andrew Wade Taggart & Allister Langlands - -------------------------------------------------------------------------------- Secretary: Graham Good - -------------------------------------------------------------------------------- Part 2: The Subsidiaries of the Company Wood Group Engineering Services (Peterhead) Limited Wood Group Engineering (Middle East) Limited Arabian Oil Equipment Services LLC Page 9 SCHEDULE PART TWO Warranties 1. ACCOUNTS 1.1. The Principal Accounts 1.1.1. gave a true and fair view of the assets and liabilities of each Group Company at the Last Accounts Date and its profits for the financial period ended on that date; 1.1.2. comply with the requirements of the Companies Acts and other relevant statutes; 1.1.3. comply with all FRSs applicable to a United Kingdom company; 1.1.4. are not affected by any extraordinary, exceptional or non-recurring item; 1.2. Book debts 1.2.1. No part of the amounts included in the Principal Accounts, or subsequently recorded in the books of any Group Company, as owing by any debtors is overdue by more than twelve weeks, or has been released on terms that any debtor pays less than the full book value of his debt or has been written off or has proved to any extent to be irrecoverable or is now regarded by the relevant Group Company as irrecoverable in whole or in part. 1.2.2. To the best of the Vendors knowledge, the amounts due from debtors as at Completion (less the amount of any relevant provision or reserve,) will be recoverable in full in the ordinary course of business; and none of those debts is subject to any counter-claim or set off, except to the extent of any such provision or reserve. 1.3. Books and records 1.3.1. All the accounts, books, ledgers, financial and other records, of whatsoever kind, of each Group Company are in its possession or control; do not contain any material inaccuracies or discrepancies and fairly record its trading transactions. 1.4. Management Accounts 1.4.1. The Management Accounts of each Group Company disclose all material tangible assets of the Group Company and all material liabilities known to the Directors of that Group Company as at their date. 2. CORPORATE MATTERS 2.1. Subsidiaries, associations and branches 2.1.1. No Group Company is the holder or beneficial owner of or has agreed to acquire any share or loan capital of any company (whether incorporated in the United Kingdom or elsewhere) other than the Subsidiaries listed in Schedule Part One. Page 10 2.2. Options over group companies' capital 2.2.1. Except as required by this agreement, there are no agreements or arrangements in force which provide for the present or future issue, allotment or transfer of or grant to any person the right (whether conditional or otherwise) to call for the issue, allotment or transfer of any share or loan capital of any Group Company (including any option or right of pre-emption or conversion). 2.3. New issues of capital 2.3.1. No share or loan capital has been issued or allotted, or agreed to be issued or allotted, by any Group Company since the Last Accounts Date. 2.4. Commissions 2.4.1. No one is entitled to receive from any Group Company any finder's fee, brokerage or other commission in connection with the sale and purchase of the Shares under this agreement. 2.5. Memoranda and articles of association, statutory books and resolutions 2.5.1. The copy of the memorandum and articles of association of each Group Company attached to the Disclosure Letter is accurate and complete in all material respects 2.5.2. The register of members and other statutory books of each Group Company have been properly kept in all material respects and fairly record the matters with which they should deal. 2.5.3. No notice or allegation that any of the foregoing is incorrect or should be rectified has been received. 2.5.4. Since the Last Accounts Date no alteration has been made to the memorandum or articles of association of any Group Company and no resolution of any kind of the shareholders of any Group Company has been passed (other than resolutions relating to routine business at annual general meetings and in respect of the renewal of the Group Companies banking facilities). 2.6. Investigations 2.6.1. No investigations or enquiries by, or on behalf of, any governmental or other body in respect of the affairs of any Group Company are pending or taking place and to the best of the Vendors knowledge none are threatened. 3. FINANCE 3.1. Capital commitments 3.1.1. There are no outstanding commitments on capital account at the date of this agreement other than (1) those incurred in the ordinary course of the business of each Group Company and (2) those not exceeding $250,000. 3.2. Dividends and distributions Page 11 3.2.1. All dividends or distributions declared, made or paid by each Group Company have been declared, made or paid in accordance with its articles of association and the applicable provisions of the Companies Acts. No dividends have been declared which have not been paid in full. 3.3. Bank and other borrowings 3.3.1. No Group Company has outstanding, or has agreed to create or issue, any loan capital; nor has it factored any of its debts, or engaged in financing of a type which would not require to be shown or reflected in the Principal Accounts, or borrowed any money which it has not repaid, save for borrowings not exceeding the amounts shown in the Management Accounts. 3.4. Liabilities 3.4.1. There are no material liabilities of any Group Company which are outstanding other than those liabilities disclosed in the Principal Accounts and Management Accounts, or liabilities not exceeding $250,000 in aggregate incurred in the ordinary and proper course of trading since the date of the Management Accounts. 3.4.2. There has been no exercise, purported exercise or claim for any charge, lien, encumbrance or equity over any of the fixed assets of any Group Company; 3.4.3. No Group Company has been the tenant of, or a guarantor in respect of, any leasehold heritable property other than the Properties. 3.5. Government grants 3.5.1. Full details of all grants, subsidies or financial assistance applied for or received by the Group Companies from any governmental department or agency or any local or other authority are set out in the Disclosure Letter. 3.5.2. No Group Company has done or omitted to do any act or thing which could result in all or any part of any investment grant, employment subsidy or other similar payment made, or due to be made, to it becoming repayable or being forfeited or withheld in whole or in part. 4. TRADING 4.1. Since the date of the Management Accounts (1) the business of each Group Company has been continued in the ordinary and normal course (2) there has been no deterioration in the turnover or the financial or trading position of any Group Company and (3) no part of the business has been affected by any abnormal factor not affecting similar businesses to a like extent. 4.1.1. There is no outstanding indebtedness of the Vendor to a Group Company other than indebtedness not exceeding $250,000 in aggregate incurred in the ordinary course of business. 4.2. Effect of sale of shares 4.2.1. The Vendor has no knowledge or information that solely as a result of the proposed acquisition of the Company by the Purchaser: Page 12 4.2.1.1. any supplier of any Group Company will be entitled to cease supplying it or may substantially reduce its supplies to it; 4.2.1.2. any customer of any Group Company will be entitled to cease to deal with it or may substantially reduce its existing level of business with it; 4.2.2. Compliance with the terms of this agreement does not and will not: 4.2.2.1. conflict with, or result in the breach of, or constitute a default under any agreement or document to which any Group Company is a party, or any provision of the memorandum or articles of association of any Group Company or any encumbrance, lease, contract, order, judgment, award, injunction, regulation or other restriction or obligation of any kind by which or to which any asset of any Group Company is bound or subject; 4.2.2.2. relieve any person from any obligation to any Group Company (whether contractual or otherwise), or enable any person to determine any such obligation or any right or benefit enjoyed by any Group Company, or to exercise any right, whether under an agreement with or otherwise in respect of any Group Company; 4.2.2.3. result in the creation, imposition, crystallisation or enforcement of any encumbrance on any of the assets of any Group Company; 4.2.2.4. result in any present or future indebtedness of any Group Company becoming due and payable or capable of being declared due and payable prior to its stated maturity. to the extent that any such event will have a material adverse effect on any Group Company. 4.3. Conduct of businesses in accordance with memoranda and articles of association 4.3.1. Each Group Company has at all times carried on business and conducted its affairs in all material respects in accordance with its memorandum and articles of association for the time being in force and any other documents to which it is or has been a party. 4.3.2. Each Group Company is empowered and duly qualified to carry on business in all jurisdictions in which it carries on business to any material extent. 4.4. Joint ventures and partnership 4.4.1. No Group Company is or has agreed to become a member of any joint venture, consortium, partnership or other unincorporated association. 4.5. Agency agreements and agreements restricting business 4.5.1. No Group Company is a party to any agency, distributorship, marketing, purchasing, manufacturing or licensing agreement or arrangement, or any restrictive trading or other agreement or arrangement pursuant to which Page 13 any part of its business is carried on which in any way restricts its freedom to carry on the whole or any part of its business in the United Kingdom or elsewhere in such manner as it thinks fit to the extent that such restriction would have a material adverse effect on the financial or trading position of any Group Company. 4.5.2. No Group Company is bound by any undertaking or assurances given to any court or governmental agency. 4.5.3. No order has been made or petition presented or resolution passed for the winding up of any Group Company, no material diligence, execution or other process has been levied in respect of any Group Company which remains undischarged, and there are no unfulfilled or unsatisfied judgements or court orders outstanding against any Group Company. 4.6. Litigation, disputes and winding up 4.6.1. No Group Company is engaged in any litigation or arbitration proceedings as plaintiff or defendant; to the best of the Vendors knowledge information and belief there are no proceedings pending or threatened either by or against any Group Company; and to the best of the Vendors knowledge there are no circumstances which are likely to give rise to any litigation or arbitration. 4.6.2. There is no dispute with any revenue or other official, department in the United Kingdom or elsewhere, in relation to the affairs of any Group Company, and to the best of the Vendors knowledge there are no facts which may give rise to any dispute. 4.7. Compliance with statutes 4.7.1.1. No Group Company and none of its officers, agents or employees (during the course of their duties in relation to it) has committed or omitted to do any act or thing the commission or omission of which is or could be in contravention of any act, order, regulation or the like (whether of the United Kingdom or elsewhere) giving rise to any substantial fine, penalty, default proceedings or other liability on its part. 4.7.1.2. Each Group Company has conducted and is conducting its business in accordance with all applicable laws and regulations. 4.7.1.3. Any breach of 4.7.1.1 and 4.7.1.2 shall only be actionable to the extent that such breach has a material adverse effect on the financial or trading position of any Group Company. 4.8. Licences and consents 4.8.1. Each Group Company has obtained all necessary material licences and consents for the proper carrying on of its business and all the material licences and consents are valid and subsisting. 4.8.2. No Group Company is in breach of any of the terms or conditions of any of the material licences or consents; and there are no factors known to the Page 14 Vendor that might in any way material prejudice the continuation or renewal of any of them. 4.9. Subsisting contracts 4.9.1. No Group Company is a party to any contract which is of an unusual or abnormal nature or outside the ordinary and proper course of business. 4.10. Defaults by Group Company 4.10.1. No Group Company is in default under any contract to which it is a party to the extent that it would have a material adverse effect on any Group Company; 4.10.2. No written notice or claim of default under any contract has been made and is outstanding against any Group Company and to the best of the Vendors knowledge there are no circumstances which would give rise to a default; 4.11. Other party's defaults 4.11.1. To the best of the Vendors knowledge information and belief no party to any agreement or arrangement with or under an obligation to any Group Company is in default under it to the extent that it would have a material adverse effect on any Group Company's financial or trading position; 4.12. Defective products 4.12.1.1. To the best of the Vendors knowledge no Group Company has manufactured, sold or supplied products which are in any material respect faulty or defective or which do not comply in any material respect with any warranties or representations expressly or impliedly made by it. 4.13. Insurance 4.13.1. The Group Companies carry and at all material times have carried insurance cover in an amount and against such risks as are normal for similar companies in their respective industries and geographical locations. 5. EMPLOYMENT 5.1. Employees and terms of employment 5.1.1. Each Group Company employs it's employees on terms which are broadly similar in all material respects to industry practice in relation to the business of each Group Company and the country in which each Group Company trades 5.2. Industrial disputes and negotiations 5.2.1. None of the Group Companies or their respective employees is involved in any material industrial dispute, and to the knowledge of the Vendor there are no facts which might give rise to any material industrial dispute involving a Group Company. Page 15 6. ASSETS 6.1. Ownership of assets 6.1.1. The Group Companies owned at the Last Accounts Date all material assets included in the Principal Accounts and (except for current assets subsequently sold or realised in the ordinary course of business) still own all material assets included in the Principal Accounts (excluding the Properties) and all material tangible assets acquired since the Last Accounts Date. 6.1.2. Other than encumbrances arising as a mater of law there are no encumbrances over any material assets of the Group Companies. 6.2. Plant in working order 6.2.1. To the best of the Vendors knowledge all material plant, machinery, vehicles and other equipment used in connection with the business of each Group Company is in a reasonable state of repair and condition (fair wear and tear excepted) and is not in need of any repair or replacement which will cost in excess of $250,000 in the next six months. 6.3. Industrial property rights and trade secrets 6.3.1. To the best of the Vendors knowledge the Group Companies have valid rights to use all Industrial Property Rights required by any Group Company in connection with its business. 7. PROPERTIES 7.1. Title 7.1.1. The Properties comprise all the properties owned, occupied or otherwise used in connection with their businesses by the Group Companies. 7.1.2. Those of the Properties which are occupied or otherwise used by the Group Companies in connection with their businesses are occupied or used by right of ownership or under lease or licence, the terms of which permit the occupation or use. 7.1.3. The information contained in Schedule Part Five as to the tenure of each of the Properties, the principal terms of the leases or licences held by the Group Companies, and the principal terms of the tenancies and licences subject to and with the benefit of which the Properties are held is accurate in all material respects. 7.2. Encumbrances 7.2.1. The Properties are free from any mortgage, debenture, charge, rent- charge, lien or any other encumbrance securing the repayment of monies or other obligation or liability of any of the Group Companies or any other person. 7.2.2. The Properties are not subject to any unusual and unduly onerous outgoings. 7.3. Planning matters Page 16 7.3.1. To the best of the Vendors knowledge the use of each of the Properties is the permitted use for the purposes of the Planning Acts. 7.3.2. To the best of the Vendors knowledge planning permission has been obtained or is deemed to have been granted for the purposes of the Planning Acts with respect to the development of the Properties, no permission has been suspended or called in and no application for planning permission is awaiting decision. 7.3.3. To the best of the Vendors knowledge building regulation consents have been obtained with respect to all material development, alterations and improvements to the Properties. 7.4. Statutory obligations 7.4.1. To the best of the Vendors knowledge the Group Companies have complied and are complying in all material respects with all applicable statutory and by- law requirements with respect to the Properties. 7.5. Adverse orders 7.5.1. There are no compulsory purchase notices, orders or resolutions affecting any of the Properties and to the best of the Vendors knowledge there are no circumstances likely to lead to any being made. 7.5.2. There are no closing, demolition or clearance orders, enforcement notices or stop notices affecting the Properties and to the best of the Vendors knowledge there are no circumstances likely to lead to any being made. With regard to the maters covered in warranties 7.3.1, 7.3.2, 7.3.3, 7.4.1, 7.5.1 and 7.5.2 they shall only be deemed to be breached to the extent that the breach would result in a material adverse effect on the relevant Group Company. 7.6. Condition of the properties 7.6.1. The buildings and other structures on the Properties are in reasonable repair (fair wear and tear excepted) and fit for the purposes for which they are used. 7.6.2. There are no disputes with any neighbouring owner with respect to boundary walls and fences or with respect to any easement or right over or means of access to any of the Properties. 7.6.3. The principal means of access to each of the Properties is over roads which have been taken over by the local or other highway authority and which are maintainable at the public expense and no means of access to any of the Properties is shared with any other party nor subject to rights of determination by any other party. 7.6.4. Each of the Properties currently enjoys the main services of water, drainage, electricity and gas. 7.7. Leasehold properties Page 17 7.7.1. The relevant Group Companies have paid the rent in respect of the Properties and to the best of the Vendors knowledge no obligation necessary to comply with any notice given by the landlord under any leases of the Properties is outstanding and unobserved or unperformed. 7.7.2. To the best of the Vendors knowledge all licences, consents and approvals required from the landlords and any superior landlords under any leases of the Properties have been obtained and the covenants on the part of the tenant contained in the licences, consents and approvals have been duly performed and observed. 8. ENVIRONMENTAL 8.1. To the best of the Vendor's knowledge the Group Companies are complying in all material respects with all laws and regulations relating to the protection of the environment which apply to them. Page 18 SCHEDULE PART THREE Pension arrangements It is not anticipated that there will be any adverse impact on the entitlement of any of the employees of any of the Group Companies to continue their existing pension arrangements and it is not anticipated that there will be any increased pension cost to any of the Group Companies as a result of their purchase by the Purchaser. In the event that there are any increased costs, the Parties will negotiate in good faith in order to reach agreement on an alternative arrangement which minimises the impact of the cost increase. Page 19 SCHEDULE PART FOUR Vendor' protection provisions (1) The liability of the Vendor in relation to the Warranties shall cease on the 2nd anniversary of the date of this Agreement (and on the 6th anniversary of the date of this Agreement in relation to claims under the Tax Deed of Indemnity) save as regards any alleged specific breach of which notice in writing (containing details of the event or circumstance giving rise to the breach, the basis upon which the Purchaser is making a claim against the Vendor and the total amount of liability which results) has been given to the Vendor prior to that anniversary. (2) The Vendor shall not be liable for any Warranty Claim unless their aggregate liability (or what would be their liability apart from this paragraph) exceeds (Pounds)250,000. (3) The total liability of the Vendor under the Warranties and the Deed of Indemnity shall not in any event exceed (Pounds)2,500,000. (4) In the event of any Warranty Claim being established, the Vendor shall be entitled to set off against the amount of any depletion in or reduction in the value of the assets of the Group Companies giving rise to the Claim (1) the amount by which (after adjustment where appropriate for taxation in respect of revenue items) the position of the Group Companies (taken as a whole) in respect of any other matter is established to be better than as so warranted (after adjustments where appropriate for taxation) and (2) the amount which has been established by way of a provision in the books of account of the Group Companies to reflect the matters giving rise to such Warranty Claim. Page 20 SCHEDULE PART FIVE Workshop No1(0.866 acres rental (Pounds)4,600 per year excl VAT - terminates 15 March 2043) and Workshop No 2 (0.47 acres - rental (Pounds)2,690 per year excl. VAT - terminated 21 August 2042) at Blackhouse Industrial Estate, Peterhead, Aberdeenshire. Old Fleming Building (2.10 acres - rental (Pounds)9,500 per year excl. VAT - terminates 27 May 2040) at Blackhouse Industrial Estate, Peterhead Aberdeenshire. Leasehold workshop and office premises in Abu Dhabi on a short term leasehold extension while new leasehold premises are being purpose built for the Group Company Page 21 SCHEDULE PART SIX Deed of Indemnity Parties: JOHN WOOD GROUP PLC a company incorporated in Scotland under the Companies Acts of the United Kingdom (company number 36219) and having it's Registered Office at John Wood House, Greenwell Road, Aberdeen, Scotland AB12 3AX ("the Covenantors"); and WOOD GROUP PRESSURE CONTROL HOLDINGS LIMITED a company incorporated in Scotland under the Companies Acts of the United Kingdom (company number 191311) and having it's Registered Office at John Wood House, Greenwell Road, Aberdeen, Scotland AB12 3AX ("the Company") Recital: This deed is entered into pursuant to an agreement made between the Covenantors (1) and ERC INDUSTRIES, INC. a corporation incorporated under the Laws of Delaware and having a place of business at 1441 Park Ten Boulevard, Houston, Texas 77084 ("the Purchaser") (2) relating to the sale of all the ordinary share capital of the Company (`the Agreement'). Operative provisions: 1. DEFINITIONS In this deed: 1.1. Words and expressions defined in the Agreement shall, except where otherwise provided or expressly defined below, have the same meaning in this deed. 1.2. `TAXATION' means all forms of taxation, duties, imposts and levies whatsoever and whenever imposed and whether of the United Kingdom or elsewhere, and without prejudice to the generality of that expression includes: 1.2.1. income tax, corporation tax, capital gains tax, inheritance tax, stamp duty, stamp duty reserve tax, value added tax, customs and other import duties and national insurance contributions, any payment whatsoever which the Company may be or become bound to make to any person as a Page 22 result of any enactment relating to taxation and any other taxes, duties or levies supplementing or replacing any of the above; 1.2.2. all costs, charges, interest, fines, penalties and expenses incidental, or relating, to any Taxation. 1.3. Where the context admits, `COMPANY' includes each Group Company, so that this deed shall apply to each Group Company as if it were the Company, and the covenants given by the Covenantors are expressly given to each Group Company and may be enforced against the Covenantors by each and every Group Company acting jointly or severally. 1.4. `RELIEF' includes any relief, allowance, exemption, set-off or deduction in computing or against profits, income or gains of any description or from any source, or credit against Taxation. 1.5. `LIABILITY TO TAXATION' means any liability to make a payment in respect of Taxation but does not include: 1.5.1. the loss, counteracting or clawing back of any Relief which would otherwise have been available to the Company; 1.5.2. the nullifying, cancellation or set-off of a right to repayment of Taxation which would otherwise have been available to the Company; provided however that if such loss, counteracting or clawing back of any such Relief as is referred to in clause 1.5.1 or the nullifying, cancellation or set- off of that right to repayment as is referred to in clause 1.5.2 results in the Company thereby suffering a liability to make a payment in respect of Taxation, that liability shall itself be a `Liability to Taxation' for the purposes of this deed. 1.6. `CLAIM FOR TAXATION' includes any notice, demand, assessment, letter or other document issued, or action taken, by or on behalf of the Inland Revenue or Customs and Excise authorities or any other statutory or governmental authority or body whatsoever in any part of the world, whereby it appears that the Company is or may be subject to a liability to Taxation (whether or not it is primarily payable by the Company and whether or not the Company has or may have any right of reimbursement). 1.7. `FINAL DETERMINATION' means in relation to a Claim for Taxation where there is an appeal against that assessment: 1.7.1. an agreement under TMA s 54 or any legislative provision corresponding to that section; or 1.7.2. a decision of a court or tribunal from which either no appeal lies, or in respect of which no appeal is made within the prescribed time limit. 2. INDEMNITY 2.1. Subject as provided below, the Covenantors jointly and severally covenant with the Company (for itself and as trustee for each Group Company) that they will indemnify each Group Company against: Page 23 2.1.1. either any Liability to Taxation or any depletion in the value of the assets of the Company arising by reason of or in consequence of or in connection with any Liability to Taxation; 2.1.2. any settlement of a Claim for Taxation; and 2.1.3. the costs incurred by the Company in relation to any demands, actions, proceedings and claims in respect of Liabilities to Taxation or Claims for Taxation. 2.2. The indemnity in clause 2.1 shall apply only where the Liability to Taxation or the Claim for Taxation: 2.2.1. is made wholly or partly in respect of or in consequence of any acts, omissions or transactions of the Company or of the Covenantors occurring or entered into on or before the date of this deed; or 2.2.2. results from or is calculated by reference to any actual or deemed income, profits or gains earned, received or accrued, or deemed to have been earned, received or accrued, on or before that date; or 2.2.3. results from or is made by reference to any dividend or distribution paid or made, or deemed to have been paid or made, before that date. 2.3. In respect of any payment due from the Covenantors under clause 2.1, the Company may if it is satisfied that it will be or has been subject to a Liability to Taxation calculate and demand in writing from the Covenantors from time to time such amount as will ensure that the net receipt to the Company (after Taxation) in respect of the payment is the same as it would have been were the payment not subject to Taxation in the hands of the Company. 3. EXCLUSIONS 3.1. The indemnity in clause 2.1 shall not apply to any Liability to Taxation or Claim for Taxation: 3.1.1. to the extent that an appropriate provision or reserve was made in the Principal Accounts or was specifically referred to in the notes to those Accounts; 3.1.2. for which the Company is or may become liable wholly or primarily as a result of transactions in the ordinary course of its business after the Last Accounts Date; 3.1.3. to the extent that the Liability or Claim arises as a result only of the appropriate provision or reserve in the Principal Accounts being insufficient by reason of any increase in rates of Taxation made after the date of the Agreement; 3.1.4. which would not have arisen but for a voluntary act or transaction carried out by the Company after the date of this deed otherwise than in the ordinary course of business; 3.1.5. to the extent that liability is excluded or limited under the provisions of Schedule Part Four to the Agreement. Page 24 4. MITIGATION 4.1. Except as provided in clause 4.2, the Covenantors shall be liable under the indemnity in clause 2.1 notwithstanding any Reliefs, rights of repayment or other rights or claims of a similar nature, which may be available to any person entitled to the benefit of the indemnity to set against or otherwise mitigate any Liability to Taxation, so that the indemnity in clause 2.1 shall take effect as though no such Reliefs, rights of repayment or other rights or claims were available. 4.2. The provisions of clause 4.1 shall not apply if and to the extent that the Reliefs, rights of repayment, or other rights or claims mentioned in that clause arose: 4.2.1. wholly or mainly by reason of any act, omission or transaction of any other Group Company before the Last Accounts Date; 4.2.2. wholly or mainly by reason of any act, omission or transaction of the Covenantors which does not cause the Company to incur any liabilities, costs or expenses (unless the Company receives a satisfactory indemnity against them) and, without prejudice to the generality of this clause, the Company shall co- operate at the cost of the Covenantors in making a claim for group relief which falls within this clause. 4.3. Where and to the extent that clause 4.2 applies, credit shall be given to the Covenantors against any liability under this deed for any such Reliefs, rights of repayment or other rights or claims as are mentioned in clause 4.1. 4.4. When the Covenantors have satisfied an obligation under this deed to indemnify the Company against a Liability to Taxation and the Company has (whether by operation of law, contract or otherwise) a right of reimbursement (including by way of indemnity) against any other person in respect of the Liability to Taxation, the Company shall take all reasonable steps to enforce the right, giving credit to the Covenantors for any sum recovered by the Company by reason of the right, or shall at the request and expense of the Covenantors assign the right to the Covenantors, in such form as they shall reasonably require. 4.5. If: 4.5.1. any provision for Taxation contained in the Principal Accounts is or has been at the date that any payment is due to be made by the Covenantors under clause 2 certified by the Company's auditors at the Covenantors' request and expense to be an over-provision; or 4.5.2. the tax liability which has resulted in the payment by the Covenantors gives rise to a corresponding saving for any Group Company; the value (as certified by the Company's auditors) of the over-provision or corresponding provision shall be set off first against the payment then due from the Covenantors and secondly (to the extent there is any excess) against any further such payment(s) in chronological order until exhausted but if it is subsequently found that the over-provision or corresponding saving as certified Page 25 was not in fact an over-provision or corresponding saving or that the certified amount or value was excessive any amount which has been set off under this clause in respect of the purported over-provision or corresponding saving shall on demand be repaid forthwith by the Covenantors to the Purchaser or (as the case may be) to the appropriate Group Company, the obligations of the Covenantors to make the repayment being joint and several. 5. CONDUCT OF CLAIMS 5.1. The Company shall notify the Covenantors in writing of any Claim for Taxation which comes to its notice whereby it appears that the Covenantors are or may become liable to indemnify the Company under this deed. Where a time limit for appeal applies to the Claim, the notification shall be given as soon as reasonably possible after the date on which the Claim comes to the notice of the Company but, where no time limit applies or the period to which the limit relates has not commenced, the notification shall be given within fifty six days of that date. 5.2. The Company shall ensure that a Claim for Taxation to which this deed applies, is, so far as reasonably practicable, dealt with separately from claims to which it does not apply and is not paid prematurely; and for this purpose any payment made by the Company to avoid incurring interest or any penalty in respect of unpaid taxation shall be deemed not to be paid prematurely. 5.3. the Company shall ensure at the request in writing of the Covenantors that the Covenantors are placed in a position to dispute on behalf of the Company any Claim for Taxation to which this deed applies and shall render, or cause to be rendered, to the Covenantors at their expense all such assistance as the Covenantors, or a majority of them, may reasonably require in disputing any Claim for Taxation. 5.4. Subject to clause 5.5, the Covenantors shall be entitled on behalf of the Company to instruct such solicitors or other professional advisers as the Covenantors, or a majority of them, may nominate to act on behalf of the Covenantors or the Company, to the intent that the conduct, and costs and expenses, of the dispute shall be delegated entirely to and be borne solely by the Covenantors. The costs arising from obtaining the determination of counsel shall be borne as to one half by the Covenantors and as to the other half by the Company. 5.5. In connection with the conduct of any dispute relating to a Claim for Taxation to which this deed applies: 5.5.1. the Covenantors shall keep the Company fully informed of all relevant matters and the Covenantors shall promptly forward or procure to be forwarded to the secretary of the Company copies of all correspondence and other written communications pertaining thereto; 5.5.2. the appointment of solicitors or other professional advisers shall be subject to the approval of the Company, such approval not to be unreasonably withheld or delayed; Page 26 5.5.3. the Covenantors shall make no settlement or compromise of the dispute, nor agree any matter in the conduct of the dispute which is likely to affect the amount involved or the future Liability to Taxation of the Company without the prior approval of the Company, such approval not to be unreasonably withheld or delayed; 5.5.4. if any dispute arises between the Company and the Covenantors as to whether the Claim should at any time be settled in full or contested in whole or in part, the dispute shall be referred to the determination of a senior tax counsel of at least ten years standing appointed by agreement between the Company and the Covenantors, or (if they do not agree) upon the application by either party to the President for the time being of The Law Society of Scotland, whose determination shall be final. The counsel shall be asked to advise whether in his opinion an appeal against the Claim would on the balance of probabilities be likely to succeed and as to how the costs of such dispute should be allocated between the Covenantors and the Company. Only if his opinion is in the affirmative shall an appeal be made and that Claim not then settled. Any further dispute arising between the Covenantors and the Company as to whether any further appeal should be pursued following determination of an earlier appeal (whether or not in favour of the Company) shall be resolved in a similar manner. 5.6. The Company shall not be subject to any claim by or liability to, any of the Covenantors on the ground that it has not complied with the foregoing provisions, if it has bona fide acted in accordance with the instructions or approval of any one or more of the Covenantors. 6. DATES FOR AND QUANTUM OF PAYMENTS 6.1. This clause shall apply solely for determining the date on which any payments or repayments shall be made by or to the Covenantors pursuant to this deed and (where expressly provided) the amounts of the payments or repayments. 6.2. The Covenantors shall make payment to the Company to the extent that and on the date on which the Company discharges or is deemed to discharge a Liability to Taxation in respect of which the Company is entitled to be indemnified under this deed. 6.3. The Company shall make a repayment to the Covenantors to the extent that and on the date on which the Company receives any repayment of any amount paid in respect of any Liability to Taxation pursuant to clause 6.2. Any repayment to the Covenantors pursuant to this clause 6.3 shall not prejudice the right of the Company to recover from the Covenantors under this deed in the event that a further Liability to Taxation is imposed upon the Company, whether in respect of matters to which the repayment relates or otherwise. 6.4. For the purposes of clause 6.2, the Company shall be deemed to discharge a Liability to Taxation: 6.4.1. on the date on which the Company pays any amount of Taxation; Page 27 6.4.2. on the date on which any Liability to Taxation would have fallen due but for Reliefs, rights of repayment or other rights or claims of a similar nature to which clause 4.1] applies. 6.5. For the purpose of clause 6.3, the Company shall be deemed to receive a repayment: 6.5.1. on the date on which the Company receives a repayment of Taxation to which clause 6.2 applies; 6.5.2. if and when the Company would have received a repayment but for a Liability to Taxation in respect of which the Company is not entitled to be indemnified under this deed; 6.5.3. if and when the Company would have received a repayment had the Liability to Taxation been discharged by a payment of Taxation; or 6.5.4. if and when the Company is able to obtain the benefit of a reduction in its Liability to Taxation as a result of the right to repayment. 6.6. Upon Final Determination of a relevant Claim for Taxation the Covenantors shall promptly pay to the Company such amount or further amount in addition to any sums already paid under this deed as is required to cover the full liability of the Covenantors under this deed. 6.7. Any dispute in relation to the provisions of clauses 6.4, 6.5 or 6.6 may be referred, by the Company or the Covenantors, to the auditors for the time being of the Company, acting as experts and not as arbitrators, whose certificate shall be final and binding upon the parties in the absence of manifest error. 7. GENERAL 7.1. The Company shall procure that each other Group Company performs its obligations under this deed. 7.2. This deed shall be binding on the Covenantors and their respective successors and personal representatives. 7.3. The benefit of this deed may not be assigned in whole or in part by the Company. 7.4. The provisions of the Agreement relating to notices shall apply to any notice to be given under, or in connection with, this deed. Page 28 7.5 The construction, validity and performance of this deed shall be governed by the laws of Scotland. IN WITNESS WHEREOF this Agreement and the Schedule annexed are executed as follows:- At _____________________ on _________________1999 for and on behalf of the Covenantors as follows:- By __________________ Director _____________________________ Signature In the presence of the following witness:- Witness Name______________________ _____________________________ Signature Address___________________________ And at _____________________ on _________________1999 for and on behalf of the Company as follows:- By __________________ Director _____________________________ Signature In the presence of the following witness:- Witness Name______________________ _____________________________ Signature Address___________________________ Page 29 EX-99.N 3 CERTIFICATE OF DESIGNATIONS OF SERIES A ERC INDUSTRIES, INC. ___________________________________________________________________ CERTIFICATE OF DESIGNATIONS OF PREFERRED STOCK TO BE DESIGNATED SERIES A CUMULATIVE CONVERTIBLE PREFERRED STOCK ___________________________________________________________________ Pursuant to Section 151(g) of the General Company Law of the State of Delaware The undersigned DO HEREBY CERTIFY that the following resolution was duly adopted by the Board of Directors of ERC Industries, Inc., a Delaware corporation (the "Company"), in accordance with Section 141(f) of the General Corporation Law of the State of Delaware (the "DGCL"): "RESOLVED, that pursuant to the authority conferred on the Board of Directors of the Company by the Company's Certificate of Incorporation, the issuance of a series of preferred stock, par value $1.00 per share, of the Company (the "Preferred Stock") which shall consist of an aggregate of up to 1,850,000 shares of Preferred Stock be, and the same hereby is, authorized; and the Chairman and Chief Executive Officer and Secretary of the Company be, and they hereby are, authorized and directed to execute and file with the Secretary of State of the State of Delaware the Certificate of Designations of Series A Cumulative Convertible Preferred Stock of the Company fixing the designations, powers, preferences and rights of the shares of such Preferred Stock, and the qualifications, limitations or restrictions thereof (in addition to the designations, powers, preferences and rights, and the qualifications, limitations or restrictions thereof, set forth in the Certificate of Incorporation which may be applicable to the Company's Preferred Stock), as follows: 1. DESIGNATION The distinctive serial designation of the series of Preferred Stock authorized by this resolution shall be "Series A Cumulative Convertible Preferred Stock" (the "Series A-Convertible Preferred Stock"). The number of shares of Series A Convertible Preferred Stock shall initially be 1,850,000, which number may from time to time be increased or decreased (but not below the number then outstanding) by the Board of Directors. 2. RANK The Series A Convertible Preferred Stock shall, with respect to payment of dividends, redemption payments and rights upon liquidation, dissolution or winding up of the affairs of the Company, rank (a) senior and prior to (i) the Common Stock, par value $0.01 per share, of the Company (the "Common Stock"), and (ii) any preferred stock convertible into or exchangeable for other equity securities of the Company that may in the future be issued by the Company, and (b) pari passu with any additional preferred stock which may in the future be issued by the Company that is not convertible into or exchangeable for other equity securities of the Company (all shares identified in this clause (b) which are pari passu with the shares of the Series A Convertible Preferred Stock with respect to the payment of dividends are hereinafter referred to as "Parity Dividend Shares" and all shares identified in this clause (b) which are pari passu with the shares of the Series A Convertible Preferred Stock with respect to redemption, payment and rights upon liquidation, dissolution or winding up of the affairs of the Company are hereinafter referred to as "Parity Liquidation Shares"), but only to the extent any such non-convertible preferred stock is not stated to be junior to the Series A Convertible Preferred Stock in the related Certificate of Designations or amendment to the Company's Certificate of Incorporation (all shares identified in this clause (b) and in clause (a) above which are junior to the shares of the Series A Convertible Preferred Stock with respect to the payment of dividends are hereinafter referred to as "Junior Dividend Shares" and all shares identified in this clause (b) and in clause (a) above which are junior to the shares of the Series A Convertible Preferred Stock with respect to redemption, payment and rights upon liquidation, dissolution or winding up of the affairs of the Company are hereinafter referred to as "Junior Liquidation Shares"). The Company shall not, without the consent of the holders of at least two-thirds (2/3) of the outstanding shares of Series A Convertible Preferred Stock, create, authorize or issue, or reclassify any authorized Capital Stock of the Company into, or create, authorize or issue any obligation or security convertible or exchangeable into or evidencing a right to purchase, any shares of any class of Capital Stock of the Company ranking senior to the Series A Convertible Preferred Stock. The Company may issue additional series of Preferred Stock ranking on parity with or junior to the Series A Convertible Preferred Stock without the consent of the holders of the Series A Convertible Preferred Stock. 3. DIVIDENDS (a) The cash dividend rate on shares of the Series A Convertible Preferred Stock shall be 1% per annum ($0.01 per share) beginning on January 1, 2000 (the "Dividend Date") if the Series A Convertible Preferred Stock shall not be convertible into shares of Common Stock in accordance with Section 9 hereof. Dividends on shares of the Series A Convertible Preferred Stock shall be fully cumulative, accruing, without interest, from the Dividend Date and shall be payable quarterly in arrears, when, as and if declared by the Board of Directors out of funds legally available for the payment of cash dividends, on March 31, June 30, September 30 and December 31 of each year, except that if such date is not a business day then the dividend shall be payable on the first immediately succeeding business day (as used herein, the term "business day" shall mean any day except a Saturday, Sunday or day on which banking institutions are 2 legally authorized to close in New York, New York) (each such period being hereinafter referred to as a "Quarterly Dividend Period"). Each dividend shall be paid to the holders of record of shares of the Series A Convertible Preferred Stock as they appear on the stock register of the Company on the record date, which shall be not less than 10 nor more than 60 days preceding the payment date thereof, as shall be fixed by the Board of Directors of the Company. Dividends payable for each Quarterly Dividend Period shall be computed by dividing the annual dividend by four (rounded to the nearest cent). Dividends payable for any partial Quarterly Dividend Period shall be computed on the basis of a 360-day year of twelve 30-day months. Dividends on account of arrearages for any past Quarterly Dividend Period may be declared and paid at any time, without reference to any regular dividend payment date, to holders of record on such date, not exceeding 45 days preceding the payment date thereof, as may be fixed by the Board of Directors of the Company. No interest shall be payable with respect to any dividend payment that may be in arrears. Holders of shares of the Series A Convertible Preferred Stock called for redemption between the close of business on a dividend payment record date and the close of business on the corresponding dividend payment date shall, in lieu of receiving such dividend on the dividend payment date fixed therefor, receive such dividend payment on the date fixed for redemption together with all other accrued and unpaid dividends to the date fixed for redemption. The holders of shares of the Series A Convertible Preferred Stock shall not be entitled to any dividends other than the cash dividends provided for in this paragraph. (b) No dividends, except as described in the next succeeding sentence, shall be declared or paid or set apart for payment on any Parity Dividend Shares for any period unless full cumulative dividends have been or contemporaneously are declared and paid or declared and set apart for payment with respect to the Series A Convertible Preferred Stock through the most recent Quarterly Dividend Period ending on or prior to the date of payment (or the date of setting apart for payment) of such dividends on such Parity Dividend Shares. Unless dividends accrued and payable but unpaid on shares of the Series A Convertible Preferred Stock and any Parity Dividend Shares at the time outstanding have been paid in full, all dividends declared by the Company upon shares of the Series A Convertible Preferred Stock or Parity Dividend Shares shall be declared pro rata with respect to all such shares, so that the amounts of any dividends declared on shares of the Series A Convertible Preferred Stock and the Parity Dividend Shares shall in all cases bear to each other the same ratio that, at the time of the declaration, all accrued but unpaid dividends on shares of the Series A Convertible Preferred Stock and the other Parity Dividend Shares, respectively, bear to each other. (c) If at any time the Company has failed to pay or set apart for payment all accrued dividends on any shares of the Series A Convertible Preferred Stock through the then most recent Quarterly Dividend Period, the Company shall not: (i) declare or pay or set aside for payment any dividend or other distribution on or with respect to any Junior Dividend Shares, whether in cash, securities, obligations or otherwise (other than dividends or distributions paid in shares, options, warrants or rights to subscribe for or purchase shares of Capital Stock, which are both Junior Dividend Shares and Junior Liquidation Shares); or 3 (ii) redeem, purchase or otherwise acquire, or set apart money for a sinking or other analogous fund for the redemption, purchase or other acquisition of any Parity Dividend Shares, Junior Dividend Shares, Parity Liquidation Shares or Junior Liquidation Shares for any consideration (except by conversion into or exchange for shares which are both Junior Liquidation Shares and Junior Dividend Shares) unless, in each case, all dividends accrued on shares of the Series A Convertible Preferred Stock through the most recent Quarterly Dividend Period and on any Parity Dividend Shares have been or contemporaneously are declared and paid in full or are declared and a sum sufficient for the payment thereof is set aside for such payment. Notwithstanding anything to the contrary contained in this paragraph 3, the foregoing shall not affect in any respect the ability of the Company or holders of any stock options of the Company to surrender or have withheld any shares of Common Stock in payment of the exercise price of any such stock option(s) or any tax withholding obligations in connection therewith. (d) Any reference to "distribution" contained in this paragraph 3 shall not be deemed to include any distribution made in connection with any liquidation, dissolution or winding up of the Company, whether voluntary or involuntary. 4. LIQUIDATION (a) The liquidation value of shares of the Series A Convertible Preferred Stock, in case of the voluntary or involuntary liquidation, dissolution or winding up of the Company, shall be $1.00 per share, plus an amount equal to the dividends accrued and unpaid thereon, whether or not earned or declared, to the payment date (such aggregate total being hereinafter referred to as the "Aggregate Liquidation Preference"). (b) In the event of any voluntary liquidation, dissolution or winding up of the Company, the holders of such shares of the Series A Convertible Preferred Stock shall be entitled to receive the liquidation value of such shares held by them in preference to and in priority over distributions upon the Junior Liquidation Shares. Upon payment in full of the liquidation value to which the holders of shares of the Series A Convertible Preferred Stock are entitled, the holders of shares of the Series A Convertible Preferred Stock will not be entitled to any further participation in any distribution of assets by the Company. If the assets of the Company are not sufficient to pay in full the liquidation value payable to the holders of shares of the Series A Convertible Preferred Stock and the liquidation value payable to the holders of any Parity Liquidation Shares, the holders of all such shares shall share ratably in such distributions of assets in proportion to and in accordance with the amounts that would be payable on the distribution if the amounts to which the holders of shares of the Series A Convertible Preferred Stock and the holders of Parity Liquidation Shares are entitled were paid in full. (c) Neither a consolidation or merger of the Company with or into any other entity, nor a merger of any other entity with or into the Company, nor a share exchange involving the 4 Company, nor a sale or transfer of all or any part of the Company's assets for cash or securities or other property shall be considered a liquidation, dissolution or winding up of the Company within the meaning of this paragraph 4. (d) Written notice of any liquidation, dissolution or winding up of the Company, stating the payment date or dates when and the place or places where the amounts distributable in such circumstances shall be payable, shall be given by first-class mail, postage prepaid, not less than 30 days prior to any payment date stated therein, to the holders of record of shares of the Series A Convertible Preferred Stock at their respective addresses as the same shall appear on the books of the Company or the transfer agent for the Series A Convertible Preferred Stock. 5. OPTIONAL REDEMPTIONS (a) Subject to the restrictions in paragraph 3 above, shares of the Series A Convertible Preferred Stock will be redeemable at the option of the Company, in whole or in part, from and after December 31, 2000 at a redemption price per share of $1.00 (in each case, together with an amount equal to the dividends accrued and unpaid thereon, whether or not declared, to the redemption date). (b) Not less than 30 nor more than 60 days prior to the date fixed for any redemption of shares of the Series A Convertible Preferred Stock pursuant to this paragraph 5, a notice specifying the time and place of the redemption and the number of shares to be redeemed shall be given by first-class mail, postage prepaid, to the holders of record of the shares of the Series A Convertible Preferred Stock to be redeemed at their respective addresses as the same shall appear on the books of the Company or the transfer agent for the Series A Convertible Preferred Stock, calling upon each holder of record to surrender to the Company at such place as shall be designated in such notice on the redemption date such holder's certificate or certificates representing the number of shares specified in the notice of redemption. Neither failure to mail such notice, nor any defect therein or in the mailing thereof, to any particular holder shall affect the sufficiency of the notice or the validity of the proceedings for redemption with respect to any other holder. Any notice mailed in the manner herein provided shall be conclusively presumed to have been duly given whether or not the holder receives the notice. On or after the redemption date, each holder of shares of the Series A Convertible Preferred Stock to be redeemed shall present and surrender such holder's certificate or certificates for such shares to the Company at the place designated in the redemption notice and thereupon the redemption price of the shares shall be paid to or on the order of the Person whose name appears on such certificate or certificates as the owner thereof, and each surrendered certificate shall be canceled. In case less than all the shares represented by any such certificate are redeemed, a new certificate shall be issued to the holder representing the unredeemed shares of the Series A Convertible Preferred Stock. (c) If a notice of redemption has been given pursuant to this paragraph 5 and if, on or before the date fixed for redemption, the funds necessary for such redemption shall have been 5 set aside by the Company, separate and apart from its other funds, in trust for the pro rata benefit of the holders of the shares of the Series A Convertible Preferred Stock so called for redemption, then, notwithstanding that any certificates for such shares have not been surrendered for cancellation, on the redemption date dividends shall cease to accrue on the shares of the Series A Convertible Preferred Stock to be redeemed, and at the close of business on the redemption date the holders of such shares shall cease to be stockholders with respect to those shares, shall have no interest in or claims against the Company by virtue thereof and shall have no voting or other rights with respect thereto, except the right to receive the money payable upon such redemption, without interest thereon, upon surrender (and endorsement, if required by the Company) of their certificates, and the shares evidenced thereby shall no longer be outstanding. Subject to applicable escheat laws, any money so set aside by the Company and unclaimed at the end of two years from the redemption date shall revert to the general funds of the Company, after which reversion the holders of such shares so called for redemption shall look only to the general funds of the Company for the payment of the redemption price. Any interest accrued on funds so deposited shall be paid to the Company from time to time. (d) In every case of redemption of less than all of the outstanding shares of the Series A Convertible Preferred Stock pursuant to this paragraph 5, the shares to be redeemed shall be selected pro rata or by lot or in such other manner as the Board of Directors may equitably determine, as may be prescribed by resolution of the Board of Directors of the Company, provided that only whole shares shall be selected for redemption. Notwithstanding the foregoing, the Company shall not redeem any of the shares of the Series A Convertible Preferred Stock at any time outstanding until all dividends accrued and in arrears upon all shares of the Series A Convertible Preferred Stock then outstanding shall have been paid for all past dividend periods. 6. STATUS OF SHARES All shares of the Series A Convertible Preferred Stock that are at any time redeemed pursuant to paragraph 5 above, and all shares of the Series A Convertible Preferred Stock that are otherwise reacquired by the Company and subsequently canceled by the Board of Directors, shall have the status of authorized but unissued shares of Preferred Stock, without designation as to series, subject to reissuance by the Board of Directors as shares of any one or more other series. Notwithstanding the foregoing, shares of Series A Convertible Preferred Stock redeemed or otherwise reacquired by the Company may be put in Treasury by the Company and would be available for subsequent issuance upon a vote of the Board of Directors. 7. VOTING RIGHTS (a) General. Holders of the Series A Convertible Preferred Stock shall have no right to vote on any matter voted on by the stockholders of the Company, except as may otherwise be provided by law. 6 (b) So long as any shares of the Series A Convertible Preferred Stock remain outstanding, the consent of the holders of at least two-thirds (2/3) of the shares of the Series A Convertible Preferred Stock outstanding at the time, given in person or by proxy either in writing (as permitted by law and the Certificate of Incorporation and Bylaws of the Company) or at any special or annual meeting, shall be necessary to permit, effect or validate any one or more of the following: (i) the creation, authorization, issuance or reclassification of any authorized stock of the Company into (or the creation, authorization or issuance of any obligation or security convertible or exchangeable into or evidencing a right to purchase) any share of Capital Stock of the Company ranking senior to the Series A Convertible Preferred Stock as to dividends or the distribution of assets upon liquidation, dissolution or winding up; or (ii) the amendment, alteration or repeal, whether by merger, consolidation or otherwise, of any of the provisions of the Certificate of Incorporation (including this Certificate of Designations) or the Bylaws of the Company which would adversely affect the relative rights, preferences, qualifications, limitations or restrictions of the Series A Convertible Preferred Stock or of the holders thereof. 8. MANDATORY REDEMPTION The shares of the Series A Convertible Preferred Stock are not subject to mandatory redemption or sinking fund requirements. 9. CONVERSION The shares of the Series A Convertible Preferred Stock shall be convertible, in whole or in part, at the election of each of the preferred stockholders, into an equal number of shares of Common Stock at any time following the approval of the issuance of such shares of Common Stock by a majority of the holders of the issued and outstanding Common Stock at the next annual or special meeting of stockholders called for this purpose. 10. CERTAIN DEFINITIONS As used in this Certificate, the following terms shall have the following respective meanings: "Capital Stock" of any Person means the common stock or preferred stock of such Person. Unless otherwise stated herein or the context otherwise requires, "Capital Stock" means Capital Stock of the Company. 7 "Person" means any individual, corporation, partnership, association, trust or other entity or organization, including a government or political subdivision or any agency or instrumentality thereof. * * * * 8 IN WITNESS WHEREOF, the Company has caused this Certificate to be duly executed on its behalf by its undersigned President and Chief Executive Officer and attested to by its Secretary this 8th day of May, 1999. [Corporate Seal] ERC INDUSTRIES, INC. By: /s/ Wendell Brooks ------------------ Chief Executive Officer ATTEST: /s/ James Klima - --------------- Secretary 9 EX-99.O 4 REGISTRATION RIGHTS AGREEMENT REGISTRATION RIGHTS AGREEMENT THIS REGISTRATION RIGHTS AGREEMENT ("AGREEMENT") is made and entered into as of May 14, 1999, 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 a Share Sale and Purchase Agreement dated as of May 14, 1999 (the "INVESTMENT AGREEMENT"), pursuant to which the Investor has acquired 1,350,000 shares of the Company's $0.01 per share par value common stock (the "COMMON STOCK") and 1,850,000 shares of the Company's Series A Cumulative Convertible Preferred (the "PREFERRED STOCK") Stock (collectively with the Common Stock, the "SHARES"); 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 of Common Stock included in the Shares , and (ii) any Common Stock issued or issuable at any time or from time to time in respect of the Shares, including those shares of Common Stock issuable upon conversion of the Preferred Stock and shares issuable 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 2.2 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 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 3 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 4 promptly furnish to each underwriter and Investor notice of any stop- order or similar notice issued by the Commission or any state agency charged with the regulation of securities, and notice of any NASDAQ or securities exchange listing; and (c) Furnish prospectuses, including preliminary prospectuses and amendments and supplements thereto, to the Investor electing to sell any of its Registrable Securities pursuant to Section 2.2 hereof, all in accordance with applicable securities laws; and (d) Notify the Investor in the event that the Company becomes 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 5 incurred in connection with investigating, preparing or defending any such claim, loss, damage, liability or action, provided, however, that the indemnity contained herein shall not apply to amounts paid in settlement of any claim, loss, damage, liability or expense if settlement is effected without the consent of the Company (which consent shall not be unreasonably withheld); provided, further, that the Company will not be liable in any such case to the extent that any such claim, loss, damage, liability or expense arises out of or is based on any untrue statement or omission or alleged untrue statement or omission, made in reliance upon and in conformity with written information furnished to the Company expressly for inclusion in such registration by the Investor or such controlling person specifically for use therein. Notwithstanding the foregoing, insofar as the foregoing indemnity relates to any such untrue statement (or alleged untrue statement) or omission (or alleged omission) made in the preliminary prospectus but eliminated or remedied in the amended prospectus on file with the Commission at the time the registration statement becomes effective or in the final prospectus filed with the Commission pursuant to the applicable rules of the Commission or in any supplement or addendum thereto, the indemnity agreement herein shall not inure to the benefit of any underwriter or (if there is no underwriter) the Investor if a copy of the final prospectus filed pursuant to such rules, together with all supplements and addenda thereto, was not furnished to the person or entity asserting the loss, liability, claim or damage at or prior to the time such furnishing is required by the Securities Act. (b) To the extent permitted by law, the Investor will, if securities held by the Investor are included in the securities as to which such registration, qualification or compliance is being effected pursuant to the terms hereof, indemnify and hold harmless the Company, each of its directors and officers, each person who controls the Company within the meaning of Section 15 of the Securities Act, and each other person selling the Company's securities covered by such registration statement, each of such person's officers and directors and each person controlling such persons within the meaning of Section 15 of the Securities Act, against all claims, losses, damages and liabilities (or actions in respect thereof) to the extent to which such person or entity is subject, arising out of or based on any untrue statement (or alleged untrue statement) of a material fact contained in any such registration statement, prospectus, offering circular or other document, or arising out of or based on any omission (or alleged omission) to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, or any violation by the Investor of any rule or regulation promulgated under the Securities Act applicable to the Investor and relating to any action or inaction required of the Investor in connection with any such registration, qualification or compliance, and will reimburse the Company, such other persons, such directors, officers, persons or control persons for 6 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 7 an unconditional term thereof the giving by the claimant or plaintiff to such Indemnified Party of a release from all liability in respect to such claim or litigation. No Indemnified Party shall consent to entry of any judgment or enter into any settlement without the consent of each Indemnifying Party. (d) If the indemnification provided for in this Section 2.5 is unavailable to an Indemnified Party in respect of any losses, claims, damages or liabilities referred to therein, then each Indemnifying Party, in lieu of indemnifying such Indemnified Party, shall contribute to the amount paid or payable by such Indemnified Party as a result of such losses, claims, damages or liabilities (i) in such proportion as is appropriate to reflect the relative benefits received by the Company on the one hand and all stockholders offering securities in the offering (the "Selling Stockholders") on the other from the offering of the Company's securities, or (ii) if the allocation provided by clause (i) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the Company on the one hand and the Selling Stockholders on the other in connection with the statements or omissions which resulted in such losses, claims, damages or liabilities, as well as any other relevant equitable considerations. The relative benefits received by the Company on the one hand and the Selling Stockholders on the other shall be the net proceeds from the offering (before deducting expenses) received by the Company on the one hand and the Selling Stockholders on the other. The relative fault of the Company on the one hand and the Selling Stockholders on the other shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company or by the Selling Stockholders and the parties' relevant intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The Company and the Selling Stockholders agree that it would not be just and equitable if contribution pursuant to this Section 2.5(d) were based solely upon the number of entities from whom contribution was requested or by any other method of allocation which does not take account of the equitable considerations referred to above in this Section 2.5(d). The amount paid or payable by an Indemnified Party as a result of the losses, claims, damages and liabilities referred to above in this Section 2.5(d) shall be deemed to include any legal or other expenses reasonably incurred by such Indemnified Party in connection with investigating or defending any such action or claim, subject to the provisions of Section 2.5(c) hereof. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act). 8 2.6 CERTAIN INFORMATION. The Investor agrees, with respect to any Registrable Securities included in any registration, to furnish to the Company such information regarding the Investor, the Registrable Securities and the distribution proposed by the Investor as the Company may reasonably request in writing and as shall be required in connection with any registration, qualification or compliance referred to in Section 2.2. 2.7 RULE 144 REPORTING. With a view to making available the benefits of certain rules and regulations of the Commission which may at any time permit the sale of the Restricted Securities (used herein as defined in Rule 144 under the Securities Act) to the public without registration, the Company agrees to use its best lawful efforts to: (a) Make and keep public information available, as those terms are understood and defined in Rule 144 under the Securities Act, at all times during which the Company is subject to the reporting requirements of the Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT"); (b) File with the Commission in a timely manner all reports and other documents required of the Company under the Securities Act and the Exchange Act (at all times during which the Company is subject to such reporting requirements); and (c) So long as the Investor owns any Restricted Securities, to furnish to the Investor forthwith upon request a written statement by the Company as to its compliance with the reporting requirements of said Rule 144 and with regard to the Securities Act and the Exchange Act (at all times during which the Company is subject to such reporting requirements), a copy of the most recent annual or quarterly report of the Company, and such other non- confidential reports and documents of the Company and other non- confidential information in the possession of or reasonably obtainable by the Company as the Investor may reasonably request in availing itself of any rule or regulation of the Commission allowing it to sell any such securities without registration. 3. MISCELLANEOUS. 3.1 GOVERNING LAW. This Agreement shall be governed in all respects by the internal laws of the State of Texas. In the event any dispute arises between the parties, venue of any such dispute shall be proper only in Harris County, Texas. 3.2 TRANSFERABILITY; TERMINATION. The registration rights contemplated herein are transferable by the Investor to any person or entity, in whole or in part, which acquires all or part of the shares which the Investor 9 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. James Klima Fax: 713/398-8086 10 3.5 DELAYS OR OMISSIONS. Except as expressly provided herein, no delay or omission to exercise any right, power or remedy accruing to any party to this Agreement shall impair any such right, power or remedy of such party nor shall it be construed to be a waiver of any such breach or default, or an acquiescence therein, or of or in any similar breach or default thereafter occurring; nor shall any waiver of any single breach or default be deemed a waiver of any other breach or default theretofore or thereafter occurring. Any waiver, permit, consent or approval of any kind or character on the part of any party of any breach or default under this Agreement, or any waiver on the part of any party of any provisions or conditions of this agreement, must be in writing and shall be effective only to the extent specifically set forth in such writing. All remedies, either under this Agreement or by law or otherwise afforded to any party to this Agreement, shall be cumulative and not alter native. 3.6 COUNTERPARTS. This Agreement may be executed in any number of counterparts, each of which shall be enforceable against the parties actually executing such counterparts, and all of which together shall constitute one instrument. 3.7 SEVERABILITY. In the event that any provision of this Agreement becomes or is declared by a court of competent jurisdiction to be illegal, unenforceable or void, this Agreement shall continue in full force and effect without said provision. 3.8 TITLES AND SUBTITLES. The titles and subtitles used in this Agreement are used for convenience only and are not considered in construing or interpreting this Agreement. 11 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: ---------------------------- INVESTOR: JOHN WOOD GROUP PLC a U. K. company By: ---------------------------- Its: 12 -----END PRIVACY-ENHANCED MESSAGE-----