Investment Agreement

INVESTMENT AGREEMENT


BETWEEN


ERC INDUSTRIES, INC.


AND


JOHN WOOD GROUP PLC


======================================


Dated as of June 6, 1996


INVESTMENT AGREEMENT


THE SECURITIES TO BE ISSUED AND SOLD PURSUANT TO THIS INVESTMENT AGREEMENT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES AND MAY NOT BE TRANSFERRED IN VIOLATION OF SUCH ACT, THE RULES AND REGULATIONS PROMULGATED THEREUNDER, ANY SUCH STATE SECURITIES LAWS OR THE PROVISIONS OF THIS AGREEMENT.


Investment Agreement


INVESTMENT AGREEMENT (the "Agreement") dated as of June 6, 1996, by and between JOHN WOOD GROUP PLC, a company incorporated in the United Kingdom and registered in Scotland ("Investor") and ERC INDUSTRIES, INC., a Delaware corporation ("ERC").


WHEREAS, ERC needs an infusion of cash in order to pursue its business interests; and


WHEREAS, Investor is willing to purchase shares of common stock, par value $0.01 per share of ERC (the "ERC Common Stock") on the terms and conditions described in this Agreement; and


WHEREAS, ERC desires to sell to Investor and Investor desires to purchase from ERC, shares of ERC Common Stock subject to the terms and conditions herein;


NOW, THEREFORE, in reliance upon the representations and warranties made herein and in consideration of the premises and the mutual covenants and conditions herein contained, the parties agree as follows:


ARTICLE 1


SALE AND PURCHASE OF THE SHARES; CLOSING


1.1 SALE OF SHARES.


At the Closing (as defined in Section 1.3 hereof), and subject to the terms and conditions hereof, ERC will issue and sell to Investor and Investor will purchase from ERC 7,384,616 shares of ERC Common Stock (the "ERC Shares").


1.2 DELIVERIES AT CLOSING.


(a) At the Closing, ERC shall deliver to Investor a certificate duly issued in
the name of Investor representing the ERC Shares purchased by Investor and
the documents contemplated by Section 2.1 below.


(b) At the Closing, Investor shall pay to ERC $6,000,000.50 (the
"ERC Stock Purchase Price"), by wire transfer of immediately available
funds, to such account as ERC may specify in writing prior to the Closing
Date.


(c) At the Closing, ERC shall execute and deliver the Registration Rights
Agreement in the form attached to this Agreement as Exhibit A.


1.3 THE CLOSING.


(a) The closing of the purchase and sale of the ERC Shares hereunder (the
"Closing"), shall be held at the offices of Haynes and Boone, L.L.P., 1000
Louisiana, Suite 4300, Houston, Texas 77002-5012. The Closing shall occur
on the day and at the time (the "Closing Date") at which ERC notifies
Investor that all conditions to ERC's purchase of the ERC Shares shall
have been satisfied.


ARTICLE 2


CONDITIONS TO CLOSING


2.1 CONDITIONS TO CLOSING OF INVESTOR. The obligation of Investor to purchase
the ERC Shares on the Closing Date hereunder is subject to the satisfaction
of the following conditions:


(a) The representations and warranties of ERC contained in this Agreement
shall be true and correct in all material respects on and as of the
Closing Date as though made on and as of such date (except for those
made as of a specified date, which shall be true and correct as of such
date) and ERC shall have performed in all material respects its
obligations hereunder required to be performed on or before the Closing
Date and Investor shall have received from ERC an Officers' Certificate
signed by its Chief Executive Officer and its Chief Financial Officer
to the effect of the foregoing;


(b) There shall not have occurred (i) any general suspension of trading in
securities on NASDAQ; or (ii) a declaration of a banking moratorium or
any suspension of payments in respect of banks in the United States;


(c) There shall not be any temporary or permanent order, injunction or
decree entered or enforced, by or before any United States or U.K.
Government Entity, or any statute, rule or regulation enacted or
promulgated, that would prohibit the transactions contemplated
hereunder;


(d) Since the date of this Agreement, neither ERC and its Subsidiaries,
taken as a whole, nor ERC shall have undergone or suffered any long-
term material adverse change in its business, financial condition or
results of operations;


(e) ERC shall have obtained all consents and approvals which are legally
required to be obtained prior to consummation of the purchase of the
ERC Shares hereunder, which if not obtained would have a material
adverse effect on ERC and its Subsidiaries, taken as a whole;


(f) The Board of Directors of Investor shall have approved this Agreement
and the transactions contemplated hereunder and thereunder on or before
June 6, 1996;


(g) Howard Weil Labouisse Friedrichs Incorporated shall have issued and
delivered a fairness opinion to ERC and its Special Committee of the
Board of Directors in a form which is reasonably acceptable to the
Investor and which opines that the purchase price of the ERC Shares
being purchased pursuant to this Agreement is reasonable and fair to
both ERC and its stockholders from a financial point of view and such
opinion shall not have been withdrawn, revoked or modified in any
material respect; and


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(j) ERC shall have delivered a certified copy of the resolutions of its
Special Committee of the Board of Directors and its full Board of
Directors authorizing and approving (1) this Agreement and the
Registration Rights Agreement, (2) the transaction contemplated by this
Agreement and the Registration Rights Agreement, (3) such further
actions as such officers deem necessary or appropriate in order to
consummate the transaction contemplated by this Agreement and the
Registration Rights Agreement, and further directing ERC's proper
officers to execute and deliver this Agreement and the Registration
Rights Agreement and such other agreements, certificates and papers as
may be necessary or appropriate to consummate the transactions
contemplated by this Agreement and the Registration Rights Agreement.


The foregoing conditions are for the sole benefit of Investor and may be asserted by Investor in its sole discretion or may be waived by Investor in whole or in part at any time in the sole discretion of Investor.


2.2 CONDITIONS TO CLOSING OF ERC. The obligation of ERC to sell the ERC
Shares on the Closing Date hereunder is subject to the satisfaction of the
following conditions:


(a) The representations and warranties of Investor contained in this
Agreement shall be true and correct in all material respects on and as
of the Closing Date as though made on and as of such date (except for
those made as of a specified date, which shall be true and correct as
of such date) and Investor shall have performed in all material
respects its obligations hereunder required to be performed on or
before the Closing Date and ERC shall have received from Investor an
Officers' Certificate signed by one of its representative directors to
the effect of the foregoing;


(b) There shall not have occurred (i) any general suspension of trading in
securities on NASDAQ; or (ii) a declaration of a banking moratorium or
any suspension of payments in respect of banks in the United States;


(c) There shall not be any temporary or permanent order, injunction or
decree entered or enforced, by or before any United States or U.K.
Government Entity, or any statute, rule or regulation enacted or
promulgated, that would prohibit the transactions contemplated
hereunder;


(d) Each of ERC and Investor shall have obtained all consents and approvals
which are legally required to be obtained prior to the sale of the ERC
Shares hereunder, which if not obtained would have a material adverse
effect on ERC and its Subsidiaries, taken as a whole;


(e) The Board of Directors of Investor shall have approved this Agreement
and the transactions contemplated hereunder and thereunder on or before
June 6, 1996;


(f) Howard Weil Labouisse Friedrichs Incorporated shall have issued and
delivered a fairness opinion to ERC and its Special Committee of the
Board of Directors in a form which is reasonably acceptable to the
Investor and which opines that the purchase price of the ERC Shares
being purchased pursuant to this Agreement is reasonable and fair to
both ERC and its stockholders from a financial point of view and such
opinion shall not have been withdrawn, revoked or modified in any
material respect; and


(g) Investor shall have delivered a certified copy of the resolutions of
its Board of Directors authorizing and approving (1) this Agreement and
the Registration


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Rights Agreement, (2) the transaction contemplated by this Agreement
and the Registration Rights Agreement, (3) such further actions as its
officers deem necessary or appropriate in order to consummate the
transaction contemplated by this Agreement and the Registration Rights
Agreement, and further directing Investor's proper officers to execute
and deliver this Agreement and the Registration Rights Agreement and
such other agreements, certificates and papers as may be necessary or
appropriate to consummate the transactions contemplated by this
Agreement and the Registration Rights Agreement.


The foregoing conditions are for the sole benefit of ERC and may be asserted by ERC in its sole discretion or may be waived by ERC in whole or in part at any time in the sole discretion of ERC.


ARTICLE 3


REPRESENTATIONS AND WARRANTIES AS TO ERC


ERC hereby represents and warrants to Investor as follows:


3.1 ORGANIZATION, ETC., OF ERC. ERC is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware and
has all requisite corporate power and authority to own and operate its
properties, to carry on its business as now conducted and proposed by ERC
to be conducted, to enter into this Agreement, and to carry out the
provisions of this Agreement, and to consummate the transactions
contemplated hereby and thereby. ERC is duly qualified and in good standing
in each jurisdiction in which the property owned, leased or operated by it
or the nature of the business conducted by it makes such qualification
necessary, except where the failure to be so qualified has or would be
reasonably expected (so far as can be foreseen at the time) to have a
material adverse effect on the business, results of operations or financial
condition of ERC and its Subsidiaries taken as a whole. Except as described
in the ERC SEC Reports filed prior to the date hereof or Schedule 3.1 of
the Disclosure Schedule, ERC is not subject to any order, complaint,
proceeding or investigation pending or, to the knowledge of the Responsible
Officers of ERC, threatened, which affects or would be reasonably expected
(so far as can be foreseen at the time) to affect the validity of any
approvals or licenses or impair the renewal thereof, except where the
invalidity of any approvals or licenses or the non-renewal thereof does not
have and would not be reasonably expected (so far as can be foreseen at the
time) to have a material adverse effect on the business, results of
operations or financial condition of ERC and its Subsidiaries taken as a
whole.


3.2 OPERATIONS OF SUBSIDIARIES. Each Subsidiary of ERC is:


(a) a corporation or other legal entity duly organized, validly existing
and (if applicable) in good standing under the laws of the
jurisdiction of its organization and has the requisite corporate or
other organizational power and authority to own its properties and
conduct its business and operations as currently conducted, except
where the failure to be duly organized, validly existing and in good
standing does not have, and would not be reasonably expected (so far
as can be foreseen at the time) to have, a material adverse effect on
the business, results of operations or financial condition of ERC and
its Subsidiaries taken as a whole,


(b) duly qualified and in good standing (if applicable) in each
jurisdiction in which the property owned, leased or operated by it or
the nature of the business


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conducted by it makes such qualification necessary, except where the
failure to be so qualified does not have and would not be reasonably
expected (so far as can be foreseen at the time) to have a material
adverse effect on the business, results of operations or financial
condition of ERC and its Subsidiaries taken as a whole, and


(c) is subject to no order, complaint, proceeding or investigation pending
or, to the knowledge of ERC's Responsible Officers, threatened, which
would be reasonably expected (so far as can be foreseen at the time)
to affect the validity of any approvals or licenses or impair the
renewal thereof, except where the invalidity of any approvals or
licenses or the non-renewal thereof does not have and would not be
reasonably expected (so far as can be foreseen at the time) to have a
material adverse effect on the business, results of operations or
financial condition of ERC and its Subsidiaries taken as a whole.


3.3 AUTHORIZATION. This Agreement and all other agreements which are to be
executed and delivered by ERC in connection with the transactions
contemplated by this Agreement, and the consummation of the transactions
contemplated hereby and thereby, have been unanimously approved by the
special committee of the Board of Directors of ERC and have been duly ...