EXHIBIT 1
$105,000,000
CLIMACHEM, INC.
10 3/4% SENIOR NOTES DUE 2007
PURCHASE AGREEMENT
NOVEMBER 21, 1997
$105,000,000
10 3/4% SENIOR NOTES DUE 2007
PURCHASE AGREEMENT
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Xxxxxxxxxxx Xxxxxxx Securities, Inc.
00 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Dear Sirs:
ClimaChem, Inc., an Oklahoma corporation (the "Company"), proposes,
upon the terms and conditions set forth herein, to issue and sell to you, as the
initial purchaser (the "Initial Purchaser"), $105,000,000 aggregate principal
amount of its Senior Notes due 2007 (the "Notes"). The Notes are to be issued
pursuant to the provisions of an Indenture, to be dated as of November 26, 1997
(the "Indenture"), between the Company and Bank One, NA, as Trustee (the
"Trustee"). The Notes are to be unconditionally guaranteed (the "Guarantees")
by the guarantors signatory hereto (the "Guarantors"). Unless the context
requires otherwise, all references herein to the Notes shall be deemed to
include the Guarantees.
The Company wishes to confirm as follows its agreement with the
Initial Purchaser in connection with the purchase and resale of the Notes.
1. Preliminary Offering Memorandum and Offering Memorandum. The
Notes will be offered and sold to the Initial Purchaser without registration
under the Securities Act of 1933, as amended (the "Act"), in reliance on an
exemption pursuant to Section 4(2) under the Act. The Company has prepared a
preliminary offering memorandum, dated October 30, 1997 (the "Preliminary
Offering Memorandum"), and an offering memorandum, dated November 21, 1997 (the
"Offering Memorandum"), setting forth information regarding the Company and the
Notes. Any references herein to the Preliminary Offering Memorandum shall be
deemed to include all amendments and supplements thereto. Any references herein
to the Offering Memorandum shall refer to the Offering Memorandum in the form
first furnished to the Initial Purchaser for use in connection with the offering
of the Notes. The Company hereby confirms that it has authorized the use of the
Preliminary Offering Memorandum and the Offering Memorandum in connection with
the offering and resale of the Notes by the Initial Purchaser.
The Initial Purchaser has advised the Company that it proposes to make
offers and sales (the "Exempt Resales") of the Notes purchased by it hereunder
only on the terms and in the manner set forth in the Offering Memorandum and
Section 2 hereof, as soon as it deems advisable after this Agreement has been
executed and delivered, (i) to persons in the United States whom the Initial
Purchaser reasonably believe to be qualified institutional buyers ("Qualified
Institutional Buyers") as defined in Rule 144A under the Act, as such rule may
be amended from time to time ("Rule 144A"), in transactions under Rule 144A,
(ii) to a limited number of other institutional "accredited investors" (as
defined in Rule 501 (a) (1), (2), (3) and (7) under Regulation D of the Act)
("Accredited Investors") in private sales exempt from registration under the Act
and (iii) to certain persons in offshore transactions in reliance on Regulation
S under the Act ("Regulation S") (such persons specified in clauses (i), (ii)
and (iii) being referred to herein as the "Eligible Purchasers").
It is understood and acknowledged that upon original issuance thereof,
and until such time as the same is no longer required under the applicable
requirements of the Act, the Notes shall bear a legend substantially to the
effect set forth below:
"THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY MAY NOT BE OFFERED
OR SOLD TO, OR FOR THE ACCOUNT OR BENEFIT OF, ANY PERSON EXCEPT AS SET
FORTH IN THE FOLLOWING SENTENCE. BY ITS ACQUISITION HEREOF, THE
HOLDER (1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER"
(AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT), (B) IT IS AN
"ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(a)(1), (2), (3) or (7)
UNDER THE SECURITIES ACT), WHO IS AN INSTITUTION (AN "INSTITUTIONAL
ACCREDITED INVESTOR"), OR (C) IT IS NOT A U.S. PERSON AND IS ACQUIRING
THIS NOTE OUTSIDE THE UNITED STATES IN COMPLIANCE WITH REGULATION S
UNDER THE SECURITIES ACT, (2) AGREES THAT IT WILL NOT PRIOR TO THE
DATE WHICH IS TWO YEARS AFTER THE LATER OF THE DATE OF ORIGINAL
ISSUANCE OF THIS NOTE AND THE LAST DATE ON WHICH THE ISSUER OR ANY
AFFILIATE OF THE ISSUER WAS THE OWNER OF THIS NOTE (THE "RESALE
RESTRICTION TERMINATION DATE") OFFER, SELL OR OTHERWISE TRANSFER THIS
NOTE, EXCEPT (A) TO THE ISSUER, (B) TO A PERSON WHOM THE SELLER
REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER PURCHASING FOR
ITS
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OWN ACCOUNT OR FOR THE ACCOUNT OF ANOTHER QUALIFIED INSTITUTIONAL
BUYER IN COMPLIANCE WITH THE RESALE PROVISIONS OF RULE 144A UNDER THE
SECURITIES ACT, (C) TO AN INSTITUTIONAL ACCREDITED INVESTOR THAT,
PRIOR TO SUCH TRANSFER, FURNISHES TO THE TRUSTEE A WRITTEN
CERTIFICATION CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS
RELATING TO THE RESTRICTIONS ON TRANSFER OF THIS NOTE (THE FORM OF
WHICH LETTER CAN BE OBTAINED FROM THE TRUSTEE), (D) PURSUANT TO THE
RESALE LIMITATIONS PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF
AVAILABLE), (E) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER
THE SECURITIES ACT, (F) OUTSIDE THE UNITED STATES TO A FOREIGN PERSON
IN A TRANSACTION MEETING THE REQUIREMENTS OF REGULATION S UNDER THE
SECURITIES ACT OR (G) PURSUANT TO ANY OTHER AVAILABLE EXEMPTION FROM
THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (BASED, IN THE
CASE OF CLAUSES (C), (D), (F) AND (G) ABOVE, UPON AN OPINION OF
COUNSEL REASONABLY ACCEPTABLE TO THE ISSUER IF THE ISSUER SO
REQUESTS), SUBJECT IN EACH OF THE FOREGOING CASES TO ANY REQUIREMENT
OF LAW THAT THE DISPOSITION OF ITS PROPERTY OR THE REQUIREMENT OF LAW
THAT THE DISPOSITION OF ITS PROPERTY OR THE PROPERTY OF SUCH ACCOUNT
BE AT ALL TIMES WITHIN ITS CONTROL AND TO COMPLIANCE WITH APPLICABLE
STATE SECURITIES LAWS AND (3) AGREES THAT IT WILL DELIVER TO EACH
PERSON TO WHOM THIS NOTE IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE
EFFECT OF THIS LEGEND. IF THE PROPOSED TRANSFEREE IS AN INSTITUTIONAL
ACCREDITED INVESTOR, THE HOLDER MUST, PRIOR TO SUCH TRANSFER, FURNISH
TO THE TRUSTEE AND THE ISSUER SUCH CERTIFICATIONS, LEGAL OPINIONS OR
OTHER INFORMATION AS EITHER OF THEM MAY REASONABLY REQUIRE TO CONFIRM
THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN
A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT. THE FOREGOING RESTRICTIONS ON RESALE WILL NOT APPLY
SUBSEQUENT TO THE RESALE RESTRICTION TERMINATION DATE."
It is also understood and acknowledged that holders (including
subsequent transferees) of the Notes will have the registration rights set forth
in the registration rights agreement (the "Registration Rights Agreement") in
substantially the form of Exhibit A hereto, to be dated as of the Closing Date
(as defined).
2. Agreements to Sell, Purchase and Resell. (a) The Company hereby
agrees, subject to all the terms and
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conditions set forth herein, to issue and sell to the Initial Purchaser and,
upon the basis of the representations, warranties and agreements of the Company
herein contained and subject to all the terms and conditions set forth herein,
the Initial Purchaser agrees to purchase from the Company, at a purchase price
of 97% of the principal amount thereof, the Notes.
(b) The Initial Purchaser has advised the Company that it proposes to
offer the Notes for sale upon the terms and conditions set forth in this
Agreement and in the Offering Memorandum. The Initial Purchaser hereby
represents and warrants to, and agrees with, the Company that it (i) is a
Qualified Institutional Buyer, with such knowledge and experience in financial
and business matters as are necessary in order to evaluate the merits and risks
in an investment in the Notes and is purchasing the Notes pursuant to a private
sale exempt from registration under the Act, (ii) has not and will not solicit
offers for, or offer or sell, the Notes by means of any form of general
solicitation or general advertising or in any manner involving a public offering
within the meaning of Section 4(2) of the Act provided, however, that such
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limitation shall not preclude the Initial Purchaser from placing any tombstone
announcement with respect to the resale by it of the Notes, (iii) will solicit
offers for the Notes only from, and will offer, sell or deliver the Notes as
part of its initial offering, only to (A) persons in the United States whom it
reasonably believes to be Qualified Institutional Buyers, or if any such person
is buying for one or more institutional accounts for which such person is acting
as fiduciary or agent, only when such person has represented to such Initial
Purchaser that each such account is a Qualified Institutional Buyer, to whom
notice has been given that such sale or delivery is being made in reliance on
Rule 144A, in each case, in transactions under Rule 144A or (B) to a limited
number of Accredited Investors that make the representations to and agreements
with the Company specified in Annex A to the Offering Memorandum, in private
sales exempt from registration under the Act or (C) to certain persons in
offshore transactions in reliance in Regulation S and (iv) will, during its
initial distribution of the Notes, unless prohibited by applicable law, furnish
to each person to whom it sells any Notes a copy of the Offering Memorandum.
The Initial Purchaser represents and agrees that it has offered and
sold Notes and will offer and sell Notes (i) as part of its distribution at any
time and (ii) otherwise until forty days after the later of the date upon which
the offering of the Securities commences and the Closing Date, only in
accordance with Rule 903 of Regulation S or in
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accordance with clauses (A) and (B) above. Accordingly, neither the Initial
Purchaser, its affiliates nor any persons acting on their behalf have engaged or
will engage in any directed selling efforts with respect to Notes, and the
Initial Purchaser, its affiliates and any person acting on their behalf have
complied and will comply with the offering restriction requirements of
Regulation S. The Initial Purchaser agrees that, at or prior to confirmation of
a sale of Notes (other than a sale of Notes pursuant to Rule 144A or to an
Accredited Investor), it will have sent to each distributor, dealer or person
receiving a selling concession, fee or other remuneration that purchases Notes
from it or through it during the restricted period a confirmation or notice to
substantially the following effect:
"The Notes covered hereby have not been registered under the
United States Securities Act of 1933 (the "Securities Act")
and may not be offered or sold within the United States or
to or for the account or benefit of U.S. persons (i) as part
of their distribution at any time and (ii) otherwise until
forty days after the later of the date upon which the
offering of the Notes commenced and the date of closing,
except in either case in accordance with Regulation S or
another available exemption from the registration
requirements of the Securities Act. Terms used above have
the meaning given to them by Regulation S."
Terms used in the above paragraph have the meanings given to them by Regulation
S.
The Initial Purchaser has advised the Company that it will offer the
Notes to Eligible Purchasers at a price and upon terms set forth in the Offering
Memorandum. Such price and terms may be changed by the Initial Purchaser at any
time thereafter without notice.
The Initial Purchaser understands that the Company and, for purposes
of the opinions to be delivered to the Initial Purchaser pursuant to Section 7
hereof, counsel to the Company and counsel to the Initial Purchaser, will rely
upon the accuracy and truth of the foregoing representations and agreements and
the Initial Purchaser hereby consents to such reliance.
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3. Delivery of the Notes and Payment Therefor. Delivery to the
Initial Purchaser of and payment for the Notes shall be made at the office of
Skadden, Arps, Slate, Xxxxxxx & Xxxx LLP, 000 Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx,
at 10:00 A.M., New York City time, on November 26 1997 (the "Closing Date").
The place of closing for the Notes and the Closing Date may be varied by
agreement between the Initial Purchaser and the Company.
The Notes which the Initial Purchaser may elect to purchase will be
delivered to the Initial Purchaser against payment of the purchase price
therefor in immediately available funds wired in accordance with the
instructions of the Company. The Notes will be evidence by a single global
security in definitive form (the "Global Debenture") and/or by additional
definitive securities, and will be registered, in the case of the Global
Debenture, in the name of Cede & Co. as nominee of The Depository Trust Company
("DTC"), and in the other cases, in such names and in such denominations as the
Initial Purchaser shall request prior to 9:30 A.M., New York City time, on the
third business day preceding the Closing Date. The Notes to be delivered to the
Initial Purchaser shall be made available to the Initial Purchaser in New York
City for inspection and packaging not later than 9:30 A.M., New York City time,
on the business day next preceding the Closing Date.
4. Agreements of the Company and the Guarantors. Each of the Company
and the Guarantors agrees with the Initial Purchaser as follows:
(a) The Company will advise the Initial Purchaser promptly and, if
requested by it, will confirm such advice in writing, within the period of time
referred to in the first sentence of subsection (e) below, of any material
change in the Company's condition (financial or other), business, prospects,
properties, net worth or results of operations, or of the happening of any event
which makes any material statement made in the Offering Memorandum (as then
amended or supplemented) untrue or which requires the making of any additions to
or changes in the Offering Memorandum (as then amended or supplemented) in order
to make the statements therein, in the light of the circumstances in which they
were made, not misleading, or of the necessity to amend or supplement the
Offering Memorandum (as then amended or supplemented) to comply with any law.
(b) The Company will furnish to the Initial Purchaser, without
charge, as of the date of the Offering Memorandum, such number of copies of the
Offering Memorandum
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as may then be amended or supplemented as it may reasonably request.
(c) The Company will not make any amendment or supplement to the
Preliminary Offering Memorandum or to the Offering Memorandum of which the
Initial Purchaser shall not previously have been advised or to which it shall
reasonably object after being so advised, and no such amendment or supplement
when it is made, shall contain an untrue statement of a material fact or will
omit to state a material fact required to be stated therein or necessary in
order to make the statements therein, in the light of the circumstances in which
they were made, not misleading.
(d) Prior to the execution and delivery of this Agreement, the
Company has delivered or will deliver to the Initial Purchaser, without charge,
in such quantities as it shall have requested or may hereafter reasonably
request, copies of the Preliminary Offering Memorandum. The Company consents to
the use, in accordance with the securities or Blue Sky laws of the jurisdictions
in which the Notes are offered by the Initial Purchaser and by dealers, prior to
the date of the Offering Memorandum, of each Preliminary Offering Memorandum so
furnished by the Company. The Company consents to the use of the Offering
Memorandum (and of any amendment or supplement thereto) in accordance with the
securities or Blue Sky laws of the jurisdictions in which the Notes are offered
by the Initial Purchaser in connection with the offering and sale of the Notes.
(e) If, at any time prior to completion of the distribution of the
Notes by the Initial Purchaser to Eligible Purchasers, any material event shall
occur that in the judgment of the Company or in the opinion of the Initial
Purchaser's counsel should be set forth in the Offering Memorandum (as then
amended or supplemented) in order to make the statements therein, in the light
of the circumstances under which they were made, not misleading, or if it is
necessary to supplement or amend the Offering Memorandum in order to comply with
any law, the Company will forthwith prepare an appropriate supplement or
amendment thereto, and will expeditiously furnish to the Initial Purchaser a
reasonable number of copies thereof.
(f) The Company will cooperate with the Initial Purchaser and with
its counsel in connection with the qualification of the Notes for offering and
sale by the Initial Purchaser and by dealers under the securities or Blue Sky
laws of such jurisdictions as the Initial Purchaser may designate and will file
such consents to service of process or
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other documents necessary or appropriate in order to effect such qualification;
provided that in no event shall the Company be obligated to qualify to do
business in any jurisdiction where it is not now so qualified or to take any
action which would subject it to service of process in suits, other than those
arising out of the offering or sale of the Notes, in any jurisdiction where it
is not now so subject.
(g) So long as any of the Notes are outstanding, the Company will
furnish to the Initial Purchaser (i) as soon as available, a copy of each report
of the Company mailed to stockholders or filed with the Securities and Exchange
Commission and (ii) from time to time such other information concerning the
Company as the Initial Purchaser may reasonably request.
(h) If this Agreement shall terminate or shall be terminated after
execution and delivery pursuant to any provisions hereof (otherwise than by
notice given by the Initial Purchaser terminating this Agreement pursuant to
Section 9 hereof) or if this Agreement shall be terminated by the Initial
Purchaser because of any failure or refusal on the part of the Company to comply
with the terms or fulfill any of the conditions of this Agreement, the Company
agrees to reimburse the Initial Purchaser for all out-of-pocket expenses
(including fees and expenses of its counsel) reasonably incurred by it in
connection herewith, but without further obligation on the part of the Company
for loss of profits or otherwise.
(i) The Company will apply the net proceeds from the sale of the
Notes to be sold by it hereunder substantially in accordance with the
description set forth in the Offering Memorandum under the caption "Use of
Proceeds".
(j) Without the prior consent of the Initial Purchaser, prior to the
expiration of 90 days after the date of the Offering Memorandum the Company will
not offer, sell, contract to sell or otherwise dispose of any note or debenture
similar to the Notes having a maturity of more than one year.
(k) Except as stated in this Agreement and in the Preliminary
Offering Memorandum and Offering Memorandum, neither the Company nor any of its
Subsidiaries (as defined below) has taken, nor will it take, directly or
indirectly, any action designed to or that might reasonably be expected to cause
or result in stabilization or manipulation of the price of the Notes to
facilitate the sale or resale of the Notes. Except as permitted by the Act,
neither the Company nor any of
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its Subsidiaries will distribute any offering material in connection with the
Exempt Resales.
(l) The Company will use its reasonable best efforts to cause the
Notes to be eligible for trading on the PORTAL Market.
(m) From and after the Closing Date, so long as any of the Notes are
outstanding and during any period in which the Company is not subject to or
filing reports under Section 13 or 15(d) of the Exchange Act, the Company will
make available to holders of the Notes and prospective purchasers of Notes
designated by such holders, upon request of such holders or such prospective
purchasers, the information required to be delivered pursuant to Rule 144A (d)
(4) under the Act to permit compliance with Rule 144A in connection with resale
of the Notes.
(n) Each of the Company and the Guarantors agrees that it will not
and will cause its affiliates not to sell, offer for sale or solicit offers to
buy or otherwise negotiate in respect of any security (as defined in the Act)
that would be integrated with the sale of the Notes in a manner that would
require the registration under the Act of the sale to the Initial Purchaser or
the Eligible Purchasers of the Notes.
(o) None of the Company and its affiliates will solicit any offer to
buy or offer or sell the Notes by means of any form of general solicitation or
general advertising.
(p) With respect to those Notes sold in reliance on Regulation S, (A)
none of the Company, its affiliates or any person acting on its or their behalf
(other than the Initial Purchaser, as to whom the Company makes no
representation) has engaged or will engage in any directed selling efforts
within the meaning of Regulation S and (B) each of the Company and its
affiliates and any person acting on its or their behalf (other than the Initial
Purchaser, as to whom the Company makes no representation) has complied and will
comply with the offering restrictions requirement of Regulation S.
(q) During the period from the Closing Date to two years after the
Closing Date, the Company and the Guarantors will not, and will not permit any
"affiliate" (as defined in Rule 144 under the Act) of the Company or the
Guarantors to, resell any of the Notes that have been reacquired by them, except
for Notes purchased by the Company,
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the Guarantors or any of their affiliates and resold in a transaction registered
under the Act.
(r) The Company agrees to comply with all the terms and conditions of
the Registration Rights Agreement and all agreements set forth in the
representation letter of the Company to DTC relating to the approval of the
Notes by DTC for "book entry" transfer.
(s) The Company agrees that in connection with the registration of
the Notes pursuant to the Registration Rights Agreement, or at such earlier time
as may be required, the Indenture shall be qualified under the Trust Indenture
Act of 1939, as amended (the "1939 Act") and any necessary supplemental
indentures will be entered into in connection therewith.
(t) Prior to the Closing Date, the Company will furnish to the
Initial Purchaser, as soon as they have been prepared, a copy of any unaudited
interim consolidated financial statements of the Company for any period
subsequent to the period covered by the most recent consolidated financial
statements of the Company appearing in the Offering Memorandum.
(u) The Company and the Guarantors will not claim the benefit of
any usury laws against any holders of the Notes.
5. Representations and Warranties of the Company and the Guarantors.
Each of the Company and the Guarantors represents and warrants to the Initial
Purchaser that:
(a) The Preliminary Offering Memorandum and Offering Memorandum with
respect to the Notes have been prepared by the Company for use by the Initial
Purchaser in connection with the Exempt Resales. No order or decree preventing
the use of the Preliminary Offering Memorandum or the Offering Memorandum or any
amendment or supplement thereto, or any order asserting that the transactions
contemplated by this Agreement are subject to the registration requirements of
the Act has been issued and no proceeding for that purpose has commenced or is
pending or, to the knowledge of the Company, is contemplated.
(b) The Preliminary Offering Memorandum and the Offering Memorandum
as of their respective dates do not, and the Offering Memorandum as of the
Closing Date will not, contain an untrue statement of a material fact or omit to
state a material fact required to be stated therein or
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necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading, except that this representation and
warranty does not apply to statements in or omissions from the Preliminary
Offering Memorandum and the Offering Memorandum made in reliance upon and in
conformity with information relating to the Initial Purchaser furnished to the
Company in writing by or on behalf of the Initial Purchaser expressly for use
therein.
(c) The Indenture has been duly and validly authorized by the Company
and, upon its execution and delivery by the Company and assuming due
authorization, execution, delivery and performance by the Trustee, will be a
valid and binding agreement of the Company, enforceable in accordance with its
terms, except as enforcement thereof may be limited by bankruptcy, insolvency or
other similar laws affecting creditors' right generally and limits imposed by
equitable principles, and conforms in all material respects to the description
thereof in the Offering Memorandum; no qualification of the Indenture under the
1939 Act is required in connection with the offer and sale of the Notes
contemplated hereby or in connection with the Exempt Resales.
(d) The Notes and Guarantees have been duly authorized by the Company
and the Guarantors, respectively, and when the Guarantees is executed by the
Guarantors and the Notes are executed by the Company and authenticated by the
Trustee in accordance with the Indenture and the Notes are delivered to the
Initial Purchaser against payment therefor in accordance with the terms hereof,
the Notes and Guarantees will have been validly issued and delivered, and will
constitute valid and binding obligations of the Company and the Guarantors,
respectively, entitled to the benefits of the Indenture and enforceable in
accordance with their terms, except as enforcement thereof may be limited by
bankruptcy, insolvency, fraudulent conveyance or other similar laws affecting
the enforcement of creditors' rights generally and limits imposed by equitable
principles, and the Notes will conform in all material respects to the
description thereof in the Offering Memorandum.
(e) All the outstanding shares of capital stock of the Company have
been duly authorized and validly issued and are fully paid and nonassessable.
(f) The Company is a corporation duly organized, validly existing and
in good standing under the laws of Oklahoma with full corporate power and
authority to own, lease and operate its properties and to conduct its business
as described in the Offering Memorandum, and is duly
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registered and qualified to conduct its business and is in good standing in each
jurisdiction or place where the nature of its properties or the conduct of its
business requires such registration or qualification, except where the failure
so to register or qualify does not have, individually or in the aggregate, a
material adverse effect on the condition (financial or other), business,
prospects, properties, net worth or results of operations of the Company and the
Subsidiary (as hereinafter defined) taken as a whole (a "Material Adverse
Effect").
(g) The Company's only subsidiaries (as defined in the Act) are The
Environmental Group, Inc., International Environmental Corporation, Climate
Master, Inc., CHP Corporation, KOAX Corp., APR Corporation, Climate Mate, Inc.
(the "Canadian Subsidiary"), The Environmental Group International Limited (the
"United Kingdom Subsidiary"), LSB Chemical Corp., El Dorado Chemical Company,
Slurry Explosive Corporation, Universal Tech Corporation, Total Energy Systems
Limited ("TES"), Total Energy Systems (NZ) Ltd. ("TES-NZ"), T.E.S. Mining
Services Pty. Ltd. ("TES Mining"), Northwest Financial Corporation, DSN
Corporation and El Dorado Nitrogen Company (each a "Subsidiary" and collectively
the "Subsidiaries"). TES, TES-NZ and TES Mining Inc. collectively referred to
as the "Australian - New Zealand Subsidiaries." Each Subsidiary is a corporation
duly organized, validly existing and in good standing under the laws of its
jurisdiction, with full corporate power and authority to own, lease and operate
its properties and to conduct its business and is duly registered and qualified
to conduct its business and is in good standing in each jurisdiction or place
where the nature of its properties or the conduct of its business requires such
registration or qualification. All the outstanding shares of capital stock or
other equity securities of each Subsidiary have been duly authorized and validly
issued, are fully paid and nonassessable, and are wholly owned by the Company,
directly or through one or more Subsidiaries, free and clear of any lien,
adverse claim, security interest, equity or other encumbrance, except for (i)
the lien and security interest held by the Bank of New Zealand in the shares of
the Australian - New Zealand Subsidiaries, (ii) the right of first refusal on
the El Dorado Nitrogen Company shares and (iii) any restrictions on transfer
under the registration requirements of any federal or state securities laws.
(h) There are no legal or governmental proceedings pending or, to the
knowledge of the Company, threatened against the Company or any Subsidiary or to
which the Company or any Subsidiary or any of their respective
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properties is subject, that are not disclosed in the Offering Memorandum and
which, if adversely decided, would cause a Material Adverse Effect or to
materially affect the issuance of the Notes or the consummation of the
transactions contemplated by this Agreement.
(i) Neither any Company nor any of the Subsidiaries is (A) in
violation of its certificate or articles of incorporation, or bylaws or other
organizational documents, or (B) in violation of any law, ordinance,
administrative or governmental rule or regulation applicable to the Company or
any Subsidiary or of any decree of any court or governmental agency or body
having jurisdiction over the Company or any Subsidiary, or (C) default in any
respect in the performance of any obligation, agreement or condition contained
in any bond, debenture, note or any other evidence of indebtedness or in any
material agreement, indenture, lease or other instrument to which the Company or
the Subsidiary a party or by which any of them or any of their respective
properties may be bound, except, in the case of (B) only, as disclosed in the
Offering Memorandum and, in the case of (B) and (C) only, where such violations
or defaults would not have, singly or in the aggregate, a Material Adverse
Effect.
(j) None of the issuance, offer, sale or delivery of the Notes, the
execution, delivery or performance of this Agreement, the Indenture or the
Registration Rights Agreement by the Company and the Guarantors or the
consummation by the Company and the Guarantors of the transactions contemplated
hereby or thereby (i) requires any consent, approval, authorization or other
order of, or registration or filing with, any court, regulatory body,
administrative agency or other governmental body, agency or official (except
such as may be required in connection with the registration under the Act of the
Notes and qualification of the Indenture under the 1939 Act in accordance with
the Registration Rights Agreement and compliance with the securities or Blue Sky
laws of various jurisdictions), or conflicts or will conflict with or
constitutes or will constitute a breach of, or a default under, the charter or
bylaws of the Company or the Subsidiary or (ii) conflicts or will conflict with
or constitutes or will constitute a breach of, or a default under, any material
agreement, indenture, lease or other instrument to which the Company or any
Subsidiary is a party or by which either of them or any of their respective
properties may be bound, or violates or will violate in any material respect any
statute, law, regulation or filing or judgment, injunction, order or decree
applicable to the Company or any Subsidiary or any of their respective
properties, or will result in the creation or imposition of
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any lien, charge or encumbrance upon any material property or assets of the
Company or any Subsidiary pursuant to the terms of any agreement or instrument
to which either of them is a party or by which either of them may be bound or to
which any of the property or assets of any of them is subject.
(k) The accountants, Ernst & Young LLP, who have certified or shall
certify the financial statements included as part of the Offering Memorandum (or
any amendment or supplement thereto), are independent certified public
accountants with respect to the Company and the Subsidiaries within the meaning
of Regulation S-X under the Act.
(l) The financial statements, together with related schedules and
notes included in the Offering Memorandum, present fairly in all material
respects the consolidated financial position, results of operations and changes
in stockholders' equity and cash flows of the Company and the Subsidiaries at
the respective dates or for the respective periods to which they apply; such
statements and related schedules and notes have been prepared in accordance with
generally accepted accounting principles consistently applied throughout the
periods involved, except as disclosed therein; and the other financial and
statistical information and data included in the Offering Memorandum is
accurately presented and, to the extent such information and data is derived
from the financial books and records of the Company, is prepared on a basis
consistent with such financial statements and the books and records of the
Company and the Subsidiaries.
(m) Each of the Company and the Guarantors have all requisite power
and authority to execute, deliver and perform its obligations under this
Agreement and the Registration Rights Agreement; the execution and delivery of,
and the performance by the Company and the Guarantors of their obligations
under, this Agreement and the Registration Rights Agreement have been duly and
validly authorized by the Company and the Guarantors, respectively, and this
Agreement and the Registration Rights Agreement have been duly executed and
delivered by the Company and the Guarantors and constitute the valid and legally
binding agreements of the Company and the Guarantors, respectively, enforceable
against the Company and the Guarantors, respectively, in accordance with their
terms, except as the enforcement hereof and thereof may be limited by
bankruptcy, insolvency or other similar laws affecting the enforcement or
creditors' rights generally and subject to the applicability of general
principles of equity, and except as rights to indemnity and contribution
hereunder and thereunder
14
may be limited by Federal or state securities laws or principles of public
policy.
(n) Except as disclosed in the Offering Memorandum, subsequent
to the date as of which such information is given in the Offering Memorandum,
neither the Company nor any Subsidiary has incurred any liability or obligation,
direct or contingent, or entered into any transaction, not in the ordinary
course of business, that is material to the Company and the Subsidiaries taken
as a whole, and there has not been any material change in the capital stock, or
material increase in the short-term or long-term debt, of the Company or of any
Subsidiary or any material adverse change, or any development involving or which
would involve a prospective material adverse change, in the condition (financial
or other), business, properties, net worth or results of operations of the
Company and the Subsidiaries taken as a whole.
(o) The Company and each of the Subsidiaries has good and
marketable title to all property (real and personal) described in the Offering
Memorandum as being owned by it, free and clear of all liens, claims, security
interests or other encumbrances except such as are described in the Offering
Memorandum and all the property described in the Offering Memorandum as being
held under lease by the Company and each of the Subsidiaries is held by it under
valid, subsisting and enforceable leases, with only such exceptions as in the
aggregate are not materially burdensome and do not interfere in any material
respect with the conduct of the business of the Company and the Subsidiaries
taken as a whole.
(p) The Company has not distributed and, prior to the later to
occur of the Closing Date and completion of the distribution of the Notes, will
not distribute any offering material in connection with the offering and sale of
the Notes other than the Preliminary Offering Memorandum and Offering
Memorandum.
(q) The Company and the Subsidiaries have such permits,
licenses, franchises, and other approvals or authorizations of governmental or
regulatory authorities ("Permits") as are necessary to own their respective
properties and to conduct their respective businesses in the manner described in
the Offering Memorandum, except such Permits the failure of which to possess
would not have, singly or in the aggregate, a Material Adverse Effect; the
Company and the Subsidiaries have fulfilled and performed all their respective
material obligations with respect to such Permits, except as described in the
Offering Memorandum, and no event
15
has occurred which allows, or after notice or lapse of time would allow,
revocation or termination thereof or results in any other material impairment of
the rights of the holder of any such Permit, subject in each case to such
qualification as may be set forth in the Offering Memorandum; and, except as
described in the Offering Memorandum, none of the Permits contains any
restriction that is materially burdensome to the Company and the Subsidiaries,
taken as a whole.
(r) The Company maintains a system of internal accounting
controls sufficient to provide reasonable assurances that (i) transactions are
executed in accordance with management's general or specific authorization; (ii)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting principles and to
maintain accountability for assets; (iii) access to assets is permitted only in
accordance with management's general or specific authorization; and (iv) the
recorded accountability for assets is compared with existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.
(s) Neither the Company nor any Subsidiary nor, to the Company's
knowledge, any employee or agent of the Company or any Subsidiary has made any
payment of funds of the Company or such Subsidiary or received or retained any
funds in violation of any law, rule or regulation, which violation would have a
Material Adverse Effect.
(t) The Company and each of the Subsidiaries have filed all tax
returns required to be filed, which returns are true and correct, and neither
the Company nor any Subsidiary is in default in the payment of any taxes which
were payable pursuant to said returns or any assessments with respect thereto.
(u) No holder of any security of the Company, other than the
Notes, has any right to request or demand registration of such security because
of the consummation of the transactions contemplated by this Agreement or the
Registration Rights Agreement.
(v) The Company and each of the Subsidiaries own or possess all
patents, trademarks, trademark registrations, service marks, service xxxx
registrations, trade names, copyrights, licenses, inventions, trade secrets and
rights described in the Offering Memorandum as being owned by any of them or
necessary for the conduct of their respective businesses, and the Company is not
aware of any claim to the contrary or any challenge by any other person to
16
the rights of the Company and any Subsidiary with respect to the foregoing.
(w) The Company is not and, upon sale of the Notes to be issued
and sold thereby in accordance herewith and the application of the net proceeds
to the Company of such sale as described in the Offering Memorandum under the
caption "Use of Proceeds," will not be an "investment company" within the
meaning of the Investment Company Act of 1940, as amended.
(x) When the Notes are issued and delivered pursuant to this
Agreement, such Notes will not be of the same class (within the meaning of Rule
144A (d) (3) under the Act) as any security of the Company that is listed on a
national securities exchange registered under Section 6 of the Exchange Act or
that is quoted in a United States automated interdealer quotation system.
(y) Neither the Company nor any affiliate (as defined in Rule
501 (b) of Regulation D ("Regulation D") under the Act) of the Company has
directly, or through any agent (provided that no representation is made as to
the Initial Purchaser or any person acting on its behalf), (i) sold, offered for
sale, solicited offers to buy or otherwise negotiated in respect of, any
security (as defined in the Act) which is or will be integrated with the
offering and sale of the Notes in a manner that would require the registration
of the Notes under the Act, (ii) engaged in any form of general solicitation or
general advertising (within the meaning of Regulation D) in connection with the
offering of the Notes or (iii) engaged in any direct selling efforts within the
meaning of Regulation S or failed to comply with the offering restrictions
requirement of Regulation S.
(z) The Company is not required to deliver the information
specified in Rule 144A (d) (4) in connection with the offering and resale of the
Notes by the Initial Purchaser.
(aa) Assuming (i) that the representations and warranties in
Section 2 hereof are true, (ii) the Initial Purchaser complies with the
covenants set forth in Section 2 hereof, and (iii) that each person to whom the
Initial Purchaser offers, sells or delivers the Notes is a Qualified
Institutional Buyer or an Accredited Investor or is a person to whom the Notes
may be validly offered in an offshore transaction meeting the requirements
Regulation S, the purchase and sale of the Notes pursuant hereto (including the
Initial Purchaser's proposed offering of the Notes on the terms and in the
manner set forth in the Offering Memorandum
17
and Section 2 hereof) is exempt from the registration requirements of the Act
and the Indenture is not required to be qualified under the 1939 Act.
(bb) The execution and delivery of this Agreement, the
Registration Rights Agreement and Indenture and the sale of the Notes to the
Initial Purchaser or by the Initial Purchaser to Eligible Purchasers will not
involve any prohibited transaction within the meaning of Section 406 of ERISA or
Section 4975 of the Code. The representation made by the Company in the
preceding sentence is made in reliance upon and subject to the accuracy of, and
compliance with, the representations and covenants made or deemed made by the
Eligible Purchasers as set forth in the Offering Memorandum under the section
entitled "Notice to Investors."
(cc) Except as would not have a Material Adverse Effect or
otherwise be required to be disclosed in a registration statement under the Act,
or as disclosed in the Offering Memorandum, (i) the Company is not in violation
of any federal, state or local laws and regulations relating to pollution or
protection of human health or the environment or the use, treatment, storage,
disposal, transport or handling, emission, discharge, release or threatened
release of toxic or hazardous substances, materials or wastes, or petroleum and
petroleum products ("Materials of Environmental Concern") (collectively,
"Environmental Laws"), including, without limitation, noncompliance with or lack
of any permits or other environmental authorizations, and (ii) (A) the Company
has not received any communication from any person or entity alleging any
violation of or noncompliance with any Environmental Laws, and there are no past
or present circumstances that may lead to any such violation in the future, (B)
there is no pending or threatened claim, action, investigation or notice by any
person or entity against the Company or against any person or entity for whose
acts or omissions the Company is liable, either contractually or by operation of
law, alleging liability for investigatory, cleanup, or governmental response
costs, or natural resources or property damages, or personal injuries,
attorney's fees or penalties relating to any Materi als of Environmental Concern
or any violation or potential violation, of any Environmental Law (collectively,
"Environ mental Claims"), and (C) there are no existing actions, activities,
circumstances, conditions, events or incidents that could form the basis of any
such Environmental Claim.
(dd) No labor dispute with the employees of the Company and any
of the Subsidiaries exists or is threatened or imminent that could result in a
material adverse change in the condition (financial or other), business,
18
prospects, net worth or results of operations of the Company and the
Subsidiaries taken as a whole.
(ee) The Company and LSB Industries, Inc. have completed the
reorganization and the Company's subsidiaries have entered into a revolving
credit facility with BankAmerica Business Credit, Inc. and the amendment with
respect to the secured facility with CIT Group/Equipment Financing, Inc., each
on or prior to the date of this Agreement, each on the terms disclosed in the
Offering Memorandum.
6. Indemnification and Contribution. (a) Subject to the provisions
of this Section 6, each of the Company and the Guarantors, jointly and
severally, agrees to indemnify and hold harmless the Initial Purchaser, its
affiliates and each person, if any, who controls the Initial Purchaser within
the meaning of Section 15 of the Act or Section 20 of the Exchange Act, and the
respective agents, employees, officers and directors of the Initial Purchaser,
its affiliates or such controlling persons (the "Initial Purchaser indemnified
parties"), from and against any and all losses, claims, damages, liabilities and
expenses (including reasonable costs of investigation) arising out of or based
upon any untrue statement or alleged untrue statement of a material fact
contained in the Preliminary Offering Memorandum or Offering Memorandum or in
any amendment or supplement thereto, or arising out of or based upon 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,
except insofar as such losses, claims, damages, liabilities or expenses arise
out of or are based upon any untrue statement or omission or alleged untrue
statement or omission which has been made therein or omitted therefrom in
reliance upon and in conformity with the information relating to the Initial
Purchaser indemnified parties furnished in writing to the Company by or on
behalf of the Initial Purchaser indemnified parties expressly for use in
connection therewith; provided, however, that the indemnification contained in
-------- -------
this paragraph (a) with respect to the Preliminary Offering Memorandum shall not
inure to the benefit of the Initial Purchaser indemnified parties on account of
any such loss, claim, damage, liability or expense arising from the sale of the
Notes by the Initial Purchaser to any person if the untrue statement or alleged
untrue statement or omission or alleged omission of a material fact contained in
the Preliminary Offering Memorandum was corrected in the Offering Memorandum and
the Initial Purchaser sold Notes to that person without sending or giving at or
prior to the written confirmation of such sale, a copy of the Offering
Memorandum (as then amended or supplemented) if the
19
Company has previously furnished sufficient copies thereof to the Initial
Purchaser on a timely basis to permit such sending or giving. The foregoing
indemnity agreement shall be in addition to any liability which the Company or
the Guarantors may otherwise have.
(b) If any action, suit or proceeding shall be brought against
an Initial Purchaser indemnified party in respect of which indemnity may be
sought against the Company or the Guarantors, the Initial Purchaser indemnified
party shall promptly notify the parties against whom indemnification is being
sought (the "indemnifying parties"), and such indemnifying parties shall assume
the defense thereof, including the employment of counsel and payment of all fees
and expenses. The Initial Purchaser indemnified party shall have the right to
employ separate counsel in any such action, suit or proceeding and to
participate in the defense thereof, but the fees and expenses of such counsel
shall be at the expense of the Initial Purchaser indemnified party unless (i)
the indemnifying parties have agreed in writing to pay such fees and expenses,
(ii) the indemnifying parties have failed to assume the defense and employ
counsel, or (iii) the named parties to any such action, suit or proceeding
(including any impleaded parties) include both the Initial Purchaser indemnified
party and the indemnifying parties and the Initial Purchaser indemnified party
shall have been advised by its counsel that representation of such indemnified
party and any indemnifying party by the same counsel would be inappropriate
under applicable standards of professional conduct (whether or not such
representation by the same counsel has been proposed) due to actual or potential
differing interests between them (in which case the indemnifying party shall not
have the right to assume the defense of such action, suit or proceeding on
behalf of the Initial Purchaser indemnified party). It is understood, however,
that the indemnifying parties shall, in connection with any one such action,
suit or proceeding or separate but substantially similar or related actions,
suits or proceedings in the same jurisdiction arising out of the same general
allegations or circumstances, be liable for the fees and expenses of only one
separate firm of attorneys (in addition to any local counsel) at any time for
all Initial Purchaser indemnified parties, which firm shall be designated in
writing by the Initial Purchaser, and that all such fees and expenses shall be
reimbursed on a monthly basis as provided in paragraph (a) hereof. The
indemnifying parties shall not be liable for any settlement of any such action,
suit or proceeding effected without their written consent, but if settled with
such written consent, or if there be a final judgment for the plaintiff in any
such action, suit or proceeding, the indemnifying parties agree to indemnify and
20
hold harmless the Initial Purchaser indemnified parties, to the extent provided
in paragraph (a), from and against any loss, claim, damage, liability or expense
by reason of such settlement or judgment.
(c) The Initial Purchaser agrees to indemnify and hold harmless
the Company and the Guarantors, their affiliates, any person who controls the
Company or the Guarantors within the meaning of Section 15 of the Act or Section
20 of the Exchange Act and any of their respective officers, directors,
employees or agents (the "Company indemnified parties") to the same extent as
the indemnity from the Company and the Guarantors to the Initial Purchaser
indemnified parties set forth in paragraph (a) hereof, but only with respect to
information relating to the Initial Purchaser furnished in writing by or on
behalf of the Initial Purchaser expressly for use in the Preliminary Offering
Memorandum or Offering Memorandum or any amendment or supplement thereto. If any
action, suit or proceeding shall be brought against the Company indemnified
parties based on the Preliminary Offering Memorandum or Offering Memorandum, or
any amendment or supplement thereto, and in respect of which indemnity may be
sought against the Initial Purchaser pursuant to this paragraph (c), the Initial
Purchaser shall have the rights and duties given to the Company and the
Guarantors by paragraph (b) above (except that if the Company and the Guarantors
shall have assumed the defense thereof such Initial Purchaser shall not be
required to do so, but may employ separate counsel therein and participate in
the defense thereof, but the fees and expenses of such counsel shall be at such
Initial Purchaser's expense), and the Company indemnified parties shall have the
rights and duties given to the Initial Purchaser indemnified parties by
paragraph (b) above. The foregoing indemnity agreement shall be in addition to
any liability which the Initial Purchaser may otherwise have.
(d) If the indemnification provided for in this Section 6 is
unavailable to an indemnified party under paragraphs (a) or (c) hereof in
respect of any losses, claims, damages, liabilities or expenses referred to
therein, then an 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, liabilities or expenses (i) in such
proportion as is appropriate to reflect the relative benefits received by the
Company and the Guarantors on the one hand and the Initial Purchaser on the
other hand from the offering of the Notes, 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
21
to in clause (i) above but also the relative fault of the Company and the
Guarantors on the one hand and the Initial Purchaser on the other in connection
with the statements or omissions that resulted in such losses, claims, damages,
liabilities or expenses, as well as any other relevant equitable considerations.
The relative benefits received by the Company and the Guarantors on the one hand
and the Initial Purchaser on the other shall be deemed to be in the same
proportion as the total net proceeds from the offering (before deducting
expenses) received by the Company bear to the total underwriting discounts and
commissions received by the Initial Purchaser, in each case as set forth in the
table on the cover page of the Offering Memorandum. The relative fault of the
Company and the Guarantors on the one hand and the Initial Purchaser on the
other hand shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission to state a
material fact relates to information supplied by the Company and the Guarantors
on the one hand or by the Initial Purchaser on the other hand and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission.
(e) The Company, the Guarantors and the Initial Purchaser agree
that it would not be just and equitable if contribution pursuant to this Section
6 were determined by a pro rata allocation or by any other method of allocation
that does not take account of the equitable considerations referred to in
paragraph (d) above. The amount paid or payable by an indemnified party as a
result of the losses, claims, damages, liabilities and expenses referred to in
paragraph (d) above shall be deemed to include, subject to the limitation set
forth in this Section 6, any legal or other expenses reasonably incurred by such
indemnified party in connection with investigating any claim or defending any
such action, suit or proceeding. Notwithstanding the provisions of this Section
6, the Initial Purchaser shall not be required to contribute any amount in
excess of the amount by which the total price of the Notes underwritten by it
and distributed to the public exceeds the amount of any damages which the
Initial Purchaser has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation.
(f) Any losses, claims, damages, liabilities or expenses for
which an indemnified party is entitled to indemnification or contribution under
this Section 6 shall be
22
paid by the indemnifying party to the indemnified party as such losses, claims,
damages, liabilities or expenses are incurred. The indemnity and contribution
agreements contained in this Section 6 and the representations and warranties of
the Company and the Guarantors set forth in this Agreement shall remain
operative and in full force and effect, regardless of (i) any investigation made
by or on behalf of the Initial Purchaser or any persons controlling the Initial
Purchaser, the Company and the Guarantors, their directors or officers or any
person controlling the Company or the Guarantors, (ii) acceptance of any Notes
and payment therefore hereunder, and (iii) any termination of this Agreement. A
successor to the Initial Purchaser indemnified parties or to the Company shall
be entitled to the benefits of the indemnity, contribution and reimbursement
agreements contained in this Section 6.
(g) No indemnifying party shall, without the prior written
consent of the indemnified party, effect any settlement of any pending or
threatened action, suit or proceeding in respect of which any indemnified party
is or could have been a party and indemnity could have been sought hereunder by
such indemnified party, unless such settlement includes an unconditional release
of such indemnified party from all liability on claims that are the subject
matter of such action, suit or proceeding.
7. Conditions of the Initial Purchaser's Obligations. The
obligations of the Initial Purchaser to purchase the Notes are subject to the
following conditions:
(a) At the time of execution of this Agreement and on the
Closing Date, no order or decree preventing the use of the Offering Memorandum
or any amendment or supplement thereto, or any order asserting that the
transactions contemplated by the Agreement are subject to the registration
requirements of the Act shall have been issued and no proceedings for that
purpose shall have been commenced or shall be pending or, to the knowledge of
the Company, be contemplated. No stop order suspending the sale of the Notes in
any jurisdiction designated by any of the Initial Purchaser shall have been
issued and no proceedings for that purpose shall have been commenced or shall be
pending or, to the knowledge of the Company, shall be contemplated.
(b) Subsequent to the effective date of this Agreement, there
shall not have occurred (i) any change, or any development involving a
prospective change, in or affecting the condition (financial or other),
business, properties, net worth, or results of operations of the Company
23
or the Subsidiary not contemplated by the Offering Memorandum, which in the
opinion of the Initial Purchaser, would materially adversely affect the market
for the Notes, or (ii) any event or development relating to or involving the
Company or any officer or director of the Company which makes any material
statement made in the Offering Memorandum untrue or which, in the opinion of the
Company and its counsel or the Initial Purchaser and its counsel, requires the
making of any addition to or change in the Offering Memorandum in order to state
a material fact required by any law to be stated therein or necessary in order
to make the statements therein, in light of the circumstances under which they
were made, not misleading, if amending or supplementing the Offering Memorandum
to reflect such event or development would, in the opinion of the Initial
Purchaser, materially adversely affect the market for the Notes.
(c) The Initial Purchaser shall have received on the Closing
Date an opinion of Xxxxxx & Xxxxxxx, counsel for the Company dated the Closing
Date and addressed to the Initial Purchaser, to the effect that:
(i) Each of the Company and Subsidiaries is a
corporation duly incorporated and validly existing in good
standing under the laws of its respective jurisdiction of
incorporation with full corporate power and authority to own,
lease and operate its respective properties and to conduct its
respective business as described in the Offering Memorandum (and
any amendment or supplement thereto), notwithstanding anything
herein to the contrary, whenever the terms "Subsidiary,"
"Subsidiaries," "Guarantor" and "Guarantors" are used in this
Section 7(c), such shall exclude for all purposes the United
Kingdom Subsidiary, the Australian -New Zealand Subsidiaries and
the Canadian Subsidiary except where indicated;
(ii) Each of the Company and the Guarantors have
the corporate power and authority to enter into this Agreement
and the Registration Rights Agreement and, in the case of the
Company, to issue, sell and deliver the Notes to be sold by it to
the Initial Purchaser as provided herein, and this Agreement and
the Registration Rights Agreement have been duly authorized,
executed and delivered by the Company and the Guarantors and are
the valid, legal and binding agreements of the Company and the
Guarantors (including TES),
24
enforceable against the Company and the Guarantors in accordance
with their terms, except (A) as enforcement of rights to
indemnity and contribution hereunder and thereunder may be
limited by Federal or state securities laws or principles of
public policy and (B) subject to the qualification that the
enforceability of the Company's and the Guarantors's obligations
hereunder and thereunder may be limited by bankruptcy, fraudulent
conveyance, insolvency, reorganization, moratorium, and other
similar laws affecting creditors' rights generally and by general
equitable principles;
(iii) The Indenture has been duly and validly
authorized, executed and delivered by the Company and the
Guarantors and, assuming due authorization, execution and
delivery by the Trustee, is a valid and binding agreement of the
Company and the Guarantors (including TES), enforceable in
accordance with its terms, subject to the qualification that the
enforceability of the Company's and the Guarantors's obligations
thereunder may be limited by bankruptcy, fraudulent conveyance,
insolvency, reorganization, moratorium, and other similar laws
affecting creditors' rights generally and by general equitable
principles; no qualification of the Indenture under the 1939 Act
is required in connection with the offer and sale of the Notes
contemplated hereby or in connection with the Exempt Resales;
(iv) The Notes have been duly and validly authorized
by the Company and when executed by the Company in accordance
with the Indenture and, assuming due authentication of the Notes
by the Trustee, upon delivery to the Initial Purchaser against
payment therefor in accordance with the terms hereof, will have
been validly issued and delivered, and will constitute valid and
binding obligations of the Company enforceable in accordance with
their terms and entitled to the benefits of the Indenture,
subject to the qualification that the enforceability of the
Company's obligations thereunder may be limited by bankruptcy,
fraudulent conveyance, insolvency, reorganization, moratorium,
and other laws relating to or affecting creditors' rights
generally and by general equitable principles;
25
(v) Neither the offer, sale or delivery of the
Notes, the execution, delivery or performance by the Company and
the Guarantors of this Agreement, the Registration Rights
Agreement or the Indenture, compliance by the Company and the
Guarantors with the provisions hereof or thereof nor consummation
by the Company and the Guarantors of the transactions
contemplated hereby or thereby conflicts or will conflict with or
constitutes or will constitute a breach of, or a default under,
the charter or by laws of the Company or the Subsidiary or any
material agreement, indenture, lease or other instrument to which
any of the Company or the Subsidiaries is a party or by which
either of them or any of their properties is bound or results or
will result in the creation or imposition of any lien, charge or
encumbrance upon any property or assets of any of the Company or
the Subsidiaries, nor will any such action result in any
violation in any material respect of any existing law, of any
regulation, ruling (assuming compliance with all applicable state
securities and Blue Sky laws), judgment, injunction, order or
decree known to such counsel, applicable to the Company, the
Subsidiaries or any of their respective properties, provided that
such counsel need express no opinion with respect to laws
involving fraudulent conveyances;
(vi) The Guarantees have been duly and validly
authorized by the Guarantors and when executed by the Guarantors
in accordance with the Indenture and, assuming due authentication
of the Notes by the Trustee, upon delivery to the Initial
Purchaser against payment therefor in accordance with the terms
hereof, will have been validly issued and delivered, and will
constitute valid and binding obligations of the Guarantors
(including TES) enforceable in accordance with their terms and
entitled to the benefits of the Indenture, subject to the
qualification that the enforceability of the Guarantors'
obligations thereunder may be limited by bankruptcy, fraudulent
conveyance, insolvency, reorganization, moratorium, and other
laws relating to or affecting creditors' rights generally and by
general equitable principles;
(vii) No consent, approval, authorization or other
order of, or registration or filing with, any court, regulatory
body,
26
administrative agency or other governmental body, agency or
official is required on the part of the Company for the valid
issuance and sale of the Notes to the Initial Purchaser as
contemplated by this Agreement and the Indenture (except such as
may be required under securities or Blue Sky laws of various
jurisdictions);
(viii) To the knowledge of such counsel after
reasonable inquiry, other than as described in the Offering
Memorandum (or any amendment or supplement thereto), there are no
legal or governmental proceedings pending or threatened against
the Company or the Subsidiaries or to which the Company or the
Subsidiaries or any of their properties are subject, which, if
adversely decided, are reasonably likely to cause a Material
Adverse Effect or materially affect the issuance of the Notes or
the consummation of the transactions contemplated by this
Agreement;
(ix) The statements contained in the Offering
Memorandum, insofar as they are descriptions of contracts,
agreements or other legal documents, or refer to statements of
law or legal conclusions, are, to the knowledge of such counsel
after making reasonable inquiry, accurate in all material
respects and present fairly the information required to be shown;
(x) Such counsel does not know of any person who
has the right, contractual or otherwise, to cause the Company to
sell or otherwise issue to them, or to permit them to underwrite
the sale of, any of the Notes or the right, as a result of the
consummation of the transactions contemplated by this Agreement
and the Registration Rights Agreement, to require registration
under the Act of any shares of Common Stock or other securities
of the Company, other than the holders of the Notes;
(xi) When the Notes are issued and delivered
pursuant to this Agreement, such Notes will not be of the same
class (within the meaning of Rule 144A(d) (3) under the Act) as
any security of the Company that is listed on a national
securities exchange registered under Section 6 of the Exchange
Act or that is quoted in a United State automated interdealer
quotation system;
27
(xii) No registration of the Notes under the Act or
qualification of the Indenture under the 1939 Act is required for
the sale of the Notes to the Initial Purchaser or for the Exempt
Resales in the manner contemplated by the Purchase Agreement and
the Offering Memorandum;
(xiii) The Company is not required to obtain
stockholder consent for the issuance of offering of the Notes;
(xiv) To the knowledge of such counsel after making
reasonable inquiry, the Company is duly registered and qualified
to conduct its business and is in good standing as a foreign
corporation in each jurisdiction or place where the nature of its
properties or the conduct of its business requires such
registration or qualification, except where the failure so to
register or qualify or to be in good standing does not have,
individually or in the aggregate, a Material Adverse Effect;
(xv) All the outstanding shares of capital stock or
other equity securities of each of the Subsidiaries have been
duly authorized and validly issued, are fully paid and
nonassessable, and the shares of each of the Subsidiaries
(including the United Kingdom Subsidiary, the Australian -New
Zealand Subsidiaries and the Canadian Subsidiaries) are owned by
the Company, directly or through one or more Subsidiaries, and,
to the knowledge of such counsel after making reasonable inquiry,
with respect to such shares other than those of the United
Kingdom Subsidiary, the Australian - New Zealand Subsidiary and
the Canadian Subsidiary, are free and clear of any security
interest, lien, adverse claim, equity or other encumbrance,
except for (i) the lien and security interest held by the Bank of
New Zealand in the shares of the Australian - New Zealand
Subsidiaries, (ii) the right of first refusal on the El Dorado
Nitrogen Company shares and (iii) any restrictions on transfer
under the registration requirements of any federal or state
securities laws;
(xvi) To the knowledge of such counsel after making
reasonable inquiry, each of the Subsidiaries is duly registered
and qualified
28
to conduct its business and is in good standing as a foreign
corporation in each jurisdiction or place where the nature of its
properties or the conduct of its business requires such
registration or qualification, except where the failure so to
register or qualify or to be in good standing does not have,
individually or in the aggregate, a Material Adverse Effect;
(xvii) To the knowledge of such counsel after making
reasonable inquiry, neither the Company nor any of the
Subsidiaries is in violation of its respective charter or bylaws,
or is in default in the performance of any material obligation,
agreement or condition contained in any bond, debenture, note or
other evidence of indebtedness or in any material agreement,
indenture, lease or other instrument to which the Company or any
of the Subsidiaries is a party or by which any of them or any of
their respective properties may be bound, except for violations
or defaults which would not have, singly or in the aggregate, a
Material Adverse Effect or except as described in the Offering
Memorandum (or any amendment or supplement thereto);
(xviii) To the knowledge of such counsel after making
reasonable inquiry, neither the Company nor any of the
Subsidiaries is in violation in any material respects of any
decree of any court or governmental agency or body having
jurisdiction over the Company or any of the Subsidiaries, except
for violations which would not, singly or in the aggregate, have
a Material Adverse Effect and except as disclosed or referenced
in the Offering Memorandum (or any amendment or supplement
thereto);
(xix) All the shares of capital stock of the Company
outstanding prior to the issuance of the Notes have been duly
authorized and validly issued and are fully paid and
nonassessable; and
(xx) Although such counsel has not undertaken,
except as otherwise indicated in their opinion, to determine
independently, and does not assume any responsibility for, the
accuracy, completeness or fairness of the statements contained in
the Offering Memorandum, such counsel has participated in the
preparation of the Offering
29
Memorandum, including review and discussion of the contents
thereof, and nothing has come to the attention of such counsel
that has caused them to believe that the Offering Memorandum, as
of its date and as of the Closing Date, contained an untrue
statement of material fact or omitted to state a material fact
required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were
made, not misleading or that any amendment or supplement to the
Offering Memorandum, as of its respective date and as of the
Closing Date, contained any untrue statement of a material fact
or omitted to state a material fact required to be stated therein
or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading (it
being understood that such counsel need express no opinion with
respect to the financial statements and the notes thereto and the
schedules and other financial and statistical data included in
the Offering Memorandum).
Such opinion may state (A) as to the enforceability of the Indenture, the
Registration Rights Agreement and this Agreement, that such counsel assumes that
the laws of the State of New York which affect enforceability are not different
from the laws of the State of Oklahoma, (B) as to matters of Australian law, it
is relying on the opinion of Corrs Xxxxxxxx Westgarth and (C) it is assuming
that the transactions contemplated by the Indenture, the Registration Rights
Agreement and this Agreement do not conflict with or constitute a default under
(i) any Australian law, rule, or regulation to which the Company, the Guarantors
or any of their properties is subject, (ii) any judicial or regulatory order or
decree of any Australian governmental authority, (iii) any consent, approval,
license, authorization or validation of, or filing, recording or registration
with any Australian governmental authority, and (iv) there is nothing to
preclude this Agreement, the Registration Rights Agreement and Indenture from
being a valid and binding agreement under Australian law.
(d) The Initial Purchaser shall have received on the Closing Date an
opinion of Corrs Xxxxxxxx Westgarth, counsel for TES dated the Closing Date and
addressed to the Initial Purchaser, to the effect that:
(i) TES is a corporation duly incorporated and
validly existing in good standing
30
under the laws of its jurisdiction of incorporation;
(ii) TES has the corporate power and authority to
enter into this Agreement, the Registration Rights Agreement and
the Indenture, and this Agreement, the Registration Rights
Agreement and the Indenture have been duly autho rized, executed
and delivered by TES, subject to TES receiving valid benefits
under the Guarantee; and
(iii) The Guarantee has been duly and validly
authorized by TES, subject to TES receiving valid benefits under
the Guarantee.
(e) The Initial Purchaser shall have received on the Closing Date an
opinion of Skadden, Arps, Slate, Xxxxxxx & Xxxx LLP, special counsel for the
Initial Purchaser, dated the Closing Date, and addressed to the Initial
Purchaser, with respect to such matters as the Initial Purchaser may request.
(f) The Initial Purchaser shall have received letters addressed to it
and dated the Closing Date from Ernst & Young, independent certified public
accountants, substantially in the forms heretofore approved by the Initial
Purchaser, and the Initial Purchaser shall have received an executed audit
report addressed to the board of directors and stockholders of the Company in
exactly the form contained in the Offering Memorandum.
(g) (i) There shall not have been any change in the capital stock of
the Company nor any material increase in the short-term or long-term debt of the
Company (other than in the ordinary course of business) from that set forth in
the Offering Memorandum; (ii) there shall not have been, since the respective
dates as of which information is given in the Offering Memorandum, except as may
otherwise be stated therein, any material adverse change in the condition
(financial or other), business, prospects, properties, net worth or results of
operations of the Company and the Subsidiaries taken as a whole; (iii) the
Company and the Subsidiaries shall not have any liabilities or obligations,
direct or contingent (whether or not in the ordinary course of business), that
are material to the Company and the Subsidiaries, taken as a whole, other than
those reflected in the Offering Memorandum; and (iv) all the representations and
warranties of the Company and the Guarantors contained in this Agreement shall
be true and correct in all material respects
31
on and as of the date hereof and on and as of the Closing Date as if made on and
as of the Closing Date, and the Initial Purchaser shall have received a
certificate, dated the Closing Date and signed by the chief executive officer
and the chief financial officer of the Company and the Guarantors (or such other
officers as are acceptable to the Initial Purchaser), to the effect set forth in
this Section 7(g) and in Section 7(h) hereof.
(h) The Company and the Guarantors shall not have failed at or prior
to the Closing Date to have performed or complied with any of their agreements
herein contained and required to be performed or complied with by them hereunder
at or prior to the Closing Date.
(i) After the date hereto and at or prior to the Closing Date there
shall not have been any announcement by any "nationally recognized statistical
rating organization," as defined for purposes of Rule 436 (g) under the Act,
that (i) it is downgrading its rating assigned to any class of securities of the
Company, or (ii) it is reviewing its ratings assigned to any class of securities
of the Company with a view to possible downgrading, or with negative
implications, or direction not determined.
(j) The Notes shall have been approved for trading on PORTAL.
(k) The Company shall produce on the Closing Date evidence
satisfactory to the Initial Purchaser of the repayment and termination of the
term loan with the Xxxx Xxxxxxx Mutual Life Insurance Company.
(l) The Company shall have furnished or caused to be furnished to the
Initial Purchaser such further certificates and documents as the Initial
Purchaser shall have reasonably requested.
All such opinions, certificates, letters and other documents will be
in compliance with the provisions hereof only if they are satisfactory in form
and substance to the Initial Purchaser and counsel for the Initial Purchaser.
Any certificate or document signed by any officer of the Company or the
Guarantors and delivered to the Initial Purchaser, or to counsel for the Initial
Purchaser, shall be deemed a representation and warranty by the Company or such
Guarantors to the Initial Purchaser as to the statements made therein.
32
8. Expenses. (a) Whether or not the purchase and sale of the Notes
hereunder is consummated or this Agreement is terminated pursuant to Section 9,
the Company agrees to pay the following costs and expenses and all other costs
and expenses incident to the performance by it of its obligations hereunder: (i)
the preparation, printing, or reproduction of the Preliminary Offering
Memorandum, Offering Memorandum (including financial statements thereto), and
each amendment or supplement to any of them; (ii) the delivery (including
postage, air freight charges and charges for counting and packaging) of such
copies of the Offering Memorandum, the Preliminary Offering Memorandum, and all
amendments or supplements to any of them as may be reasonably requested for use
in connection with the offering and sale of the Notes; (iii) the preparation,
printing, authentication, issuance and delivery of certificates for the Notes,
including any stamp taxes in connection with the original issuance and sale of
the Notes; (iv) the printing (or reproduction) and delivery of this Agreement,
the preliminary and supplemental Blue Sky Memoranda and all other agreements or
documents printed (or reproduced) and delivered in connection with the offering
of the Notes; (v) the application for quotation of the Notes on the PORTAL
market; (vi) the qualification of the Notes for offer and sale under the
securities or Blue Sky laws of the several states as provided in Section 4 (f)
hereof (including the reasonable fees, expenses and disbursements of counsel for
the Initial Purchaser relating to the preparation, printing or reproduction, and
delivery of the preliminary and supplemental Blue Sky Memoranda and such
qualification); (vii) the performance by the Company of its obligations under
the Registration Rights Agreement; (viii) the fees and expenses of the Company's
accountants and the fees and expenses of counsel (including local and special
counsel) for the Company; and (ix) the fees and expenses of the Trustee,
including the fees and disbursements of counsel for the Trustee in connection
with the Indenture and the Notes.
(b) If the purchase and sale of the Notes hereunder is not
consummated because any condition to the obligations of the Initial Purchaser
set forth in Section 7 hereof is not satisfied, because this Agreement is
terminated pursuant to Section 9 hereof or because of any failure, refusal or
inability on the part of the Company to perform all obligations and satisfy all
conditions on its part to be performed or satisfied hereunder other than by
reason of a default by the Initial Purchaser in payment for the Notes on the
Closing Date, the Company shall reimburse the Initial Purchaser promptly upon
demand for all out-of-pocket expenses (including fees and disbursements of
counsel) that shall have been incurred by them in connection with the proposed
purchase
33
and sale of the Notes and the other transactions contemplated hereby.
9. Termination of Agreement. This Agreement shall be subject to
termination in the absolute discretion of the Initial Purchaser, without
liability on the part of the Initial Purchaser to the Company, by notice to the
Company, if prior to the Closing Date, (i) trading in securities generally on
the New York Stock Exchange, the American Stock Exchange or the NASDAQ National
Market shall have been suspended or materially limited, (ii) a general
moratorium on commercial banking activities in New York or Oklahoma City,
Oklahoma shall have been declared, or (iii) there shall have occurred any
outbreak or escalation of hostilities or other U.S. or international calamity,
crisis or change in political, financial or economic conditions, the effect of
which on the financial markets of the United States is such as to make it, in
the judgment of the Initial Purchaser, impracticable or inadvisable to commence
or continue the offering of the Notes on the terms set forth on the cover page
of the Offering Memorandum or to enforce contracts for the resale of the Notes
by the Initial Purchaser. Notice of such termination may be given to the
Company by telegram, telecopy or telephone and shall be subsequently confirmed
by letter.
10. Information Furnished by the Initial Purchaser. The statements
set forth in the stabilization legend on the inside front cover, the last
paragraph on the cover page and the statements in the first three paragraphs and
the last two paragraphs under the caption "Plan of Distribution" in the
Preliminary Offering Memorandum and Offering Memorandum, constitute the only
information furnished in writing by or on behalf of the Initial Purchaser as
such information is referred to in Sections 5 (b) and 6 hereof.
11. Miscellaneous. Except as otherwise provided in Sections 4 and 9
hereof, notice given pursuant to any provision of this Agreement shall be in
writing and shall be delivered (i) if to the Company, at ClimaChem, Inc., X.X.
Xxx 000, 00 Xxxxx Xxxxxxxxxxxx Xxxxxx, Xxxxxxxx Xxxx, Xxxxxxxx 00000, Attention:
Xxxx X. Xxxxxx, with a copy to Xxxxxx & Xxxxxxx, One Leadership Square, Suite
1700, 000 Xxxxx Xxxxxxxx, Xxxxxxxx Xxxx, Xxxxxxxx 00000, Attention: Xxxxx X.
Xxxxxxxxx, or (ii) if to the Initial Purchaser, at Xxxxxxxxxxx Xxxxxxx & Co.,
Inc., 00 Xxxx 00xx Xxxxxx, Xxx Xxxx, XX 00000, Attention: Xxxxxx Xxxxxxx, with a
copy to Skadden, Arps, Slate, Xxxxxxx & Xxxx LLP, 000 Xxxxx Xxxxxx, Xxx Xxxx, XX
00000, Attention: Xxxxxxx X. Xxxxxx.
34
This Agreement has been and is made solely for the benefit of the
Initial Purchaser, the Company and the Guarantors, their directors and officers
and the controlling persons referred to in Section 6 hereof and their respective
successors and assigns, to the extent provided herein, and no other person shall
acquire or have any right under or by virtue of this Agreement. Neither the
term "successor" nor the term "successors and assigns" as used in this Agreement
shall include a purchaser from the Initial Purchaser of any of the Notes in his
status as such purchaser.
12. Applicable Law; Governing Law; Consent to Jurisdiction; Waiver of
Immunity and of Right to Jury Trial; Counterparts. This Agreement shall be
governed by and construed in accordance with the laws of the State of New York
applicable to contracts made and to be performed within the State of New York
and without regard to the conflicts of law principles thereof. Each of the
Company and the Guarantors agrees that any action or proceeding based hereon, or
arising out of the transactions contemplated hereunder, shall be brought and
maintained in the courts of the State of New York located in the city and county
of New York or in the United States District Court for the Southern District of
New York. Each of the Company and the Guarantors hereby irrevocably submits to
the exclusive jurisdiction of the courts of the State of New York located in the
city and county of New York and the United States District Court for the
Southern District of New York for the purpose of any such action or proceeding
as set forth above and irrevocably agrees to be bound by any judgment rendered
thereby in connection with such action or proceeding. Each of the Company and
the Guarantors hereby irrevocably appoints CT Corporation as their authorized
agent upon which process may be served in any action arising out of based upon
this Agreement. Each of the Company and the Guarantors hereby expressly and
irrevocably waives to the fullest extent permitted by law any immunity from
jurisdiction of any such court and any objection, claim or defense in any such
action or proceeding which they may have, or hereafter may have, based on a
claim of improper venue, forum non conveniens or any similar basis to which the
Company or the Guarantors might otherwise be entitled in any such action or
proceeding.
This Agreement may be signed in various counterparts which together
constitute one and the same instrument. If signed in counterparts, this
Agreement shall not become effective unless at least one counterpart hereof
shall have been executed and delivered on behalf of each party hereto.
35
Please confirm that the foregoing correctly sets forth the agreement
between the Company, the Guarantors and the Initial Purchaser.
Very truly yours,
CLIMACHEM, INC.
By: /s/ Xxxx X. Xxxxxx
---------------------------
Name: Xxxx X. Xxxxxx
Title: Vice President
THE GUARANTORS:
International Environmental Corporation
Climate Master, Inc.
CHP Corporation
KOAX Corp.
APR Corporation
LSB Chemical Corp.
Slurry Explosive Corporation
Universal Tech Corporation
Total Energy Systems Limited
Northwest Financial Corporation
DSN Corporation
By: /s/ Xxxx X. Xxxxxx
---------------------------
Name: Xxxx X. Xxxxxx
Title: Vice President
Climate Mate, Inc.
The Environmental Group
International Limited
By: /s/ Xxxxx X. Xxxx
---------------------------
Name: Xxxxx X. Xxxx
36
Total Energy Systems (NZ) Ltd.
T.E.S. Mining Services Pty. Ltd.
El Dorado Chemical Company
By: /s/ Xxxxx X. Xxxxxx
--------------------------
Name: Xxxxx X. Xxxxxx
The Environmental Group, Inc.
By: /s/ Xxxxx X. Xxxxxx
--------------------------
Name: Xxxxx X. Xxxxxx
Confirmed as of the date first
above mentioned.
XXXXXXXXXXX XXXXXXX SECURITIES, INC.
By: /s/ Xxxxx X. Xxxxxxxxx
-----------------------------
Name: Xxxxx X. Xxxxxxxxx
Title: Chief Financial Officer
37
