Exhibit 10.1
Execution Copy
$135,000,000
HEADWATERS
INCORPORATED
2.50% CONVERTIBLE SENIOR
SUBORDINATED NOTES DUE 2014
PURCHASE AGREEMENT
January 16, 2007
January 16, 2007
J.P. Morgan Securities Inc.
Deutsche Bank Securities Inc.
Morgan Stanley & Co. Incorporated
Canaccord Adams Inc.
Stephens Inc.
Wedbush Morgan Securities Inc.
c/o J.P. Morgan Securities Inc.
277 Park Avenue
9 th Floor
New York, New York 10172
c/o Deutsche Bank Securities
Inc.
60 Wall Street
New York, New York 10005
c/o Morgan Stanley & Co.
Incorporated
1585 Broadway
New York, New York 10036
Dear Sirs and Mesdames:
Headwaters Incorporated, a Delaware
corporation (the “ Company ”), proposes to issue
and sell to the several purchasers named in Schedule I hereto (the
“ Initial Purchasers ”) $135,000,000 principal
amount of its 2.50% Convertible Senior Subordinated Notes due 2014
(the “ Firm Securities ”) to be issued pursuant
to the provisions of an Indenture to be dated as of 22, 2007 (the
“ Indenture ”) between the Company and Wells
Fargo Bank, National Association, as Trustee (the “
Trustee ”). The Company also proposes to issue
and sell to the several Initial Purchasers not more than an
additional $25.0 million principal amount of its 2.50% Convertible
Senior Subordinated Notes due 2014 (the “ Additional
Securities ”) if and to the extent that the
Representatives (as defined below) shall have determined to
exercise, on behalf of the Initial Purchasers, the right to
purchase such Additional Securities (or any portion thereof)
granted in Section 2 hereof. The Firm Securities and the
Additional Securities are hereinafter collectively referred to as
the “ Securities .” The Securities will be
convertible into cash and shares of common stock of the Company,
par value $0.001 per share (the “ Common Stock
”). The shares into which the Securities are
convertible are hereinafter collectively referred to as the “
Underlying Securities .” J.P. Morgan Securities
Inc., Deutsche Bank Securities Inc. and Morgan Stanley & Co.
Incorporated shall act as representatives (collectively, the
“ Representatives ”) of the several Initial
Purchasers.
The Securities will be offered
without being registered under the Securities Act of 1933, as
amended (the “ Securities Act ”), to qualified
institutional buyers in compliance with the exemption from
registration provided by Rule 144A under the Securities
Act.
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Holders (including subsequent
transferees) of the Securities will have benefit of the
registration rights set forth in the registration rights agreement
(the “ Registration Rights Agreement ”), for so
long as such Securities constitute Transfer Restricted Securities
(as defined in the Registration Rights Agreement). This
Agreement, the Securities, the Indenture and the Registration
Rights Agreement are hereinafter referred to collectively as the
“ Operative Documents .” This is to
confirm the agreements concerning the purchase of the Securities
from the Company by the Initial Purchasers.
In connection with the sale of the
Securities, the Company has prepared a preliminary offering
memorandum dated January 16, 2007, (the “ Preliminary
Offering Memorandum ”) and a Pricing Supplement dated
January 16, 2007, describing the terms of the Securities and set
forth on Schedule II hereto (the “ Pricing Supplement
”), and will prepare a final offering memorandum (the “
Final Offering Memorandum ” and, together with the
Preliminary Offering Memorandum, the “ Offering
Documents ”) including or incorporating by reference a
description of the terms of the Securities, the terms of the
offering and a description of the Company. As used herein,
the term “ Offering Documents ” shall include in
each case the documents incorporated by reference therein.
The terms “ supplement ,” “
amendment ” and “ amend ” as used
herein with respect to an Offering Document shall include all
documents deemed to be incorporated by reference in the Preliminary
Offering Memorandum or Final Offering Memorandum that are filed
subsequent to the date of such Offering Document with the
Securities and Exchange Commission (the “ Commission
”) pursuant to the Securities Exchange Act of 1934, as
amended (the “ Exchange Act ”). “
Time of Sale Memorandum ” means the Preliminary
Offering Memorandum and the Pricing Supplement together with the
information in the form set forth on Schedule II hereto that has
been prepared and delivered by the Company to the Initial
Purchasers in connection with the offering and sale of the
Securities. “ Applicable Time ” means 5:00
p.m. Eastern Standard Time on January 16, 2007.
1.
Representations and Warranties of
the Company. The
Company represents and warrants to and agrees with each of the
Initial Purchasers as of the date hereof, as of the Applicable
Time, and as of the Closing Date, that:
(a)
(i) Each
document, if any, filed or to be filed pursuant to the Exchange Act
and incorporated by reference in the Offering Documents complied or
will comply when so filed in all material respects with the
Exchange Act and the applicable rules and regulations of the
Commission thereunder and (ii) The Time of Sale Memorandum, at the
Applicable Time, did not contain any untrue statement of a material
fact or omit to state a material fact necessary to make the
statements therein, in the light of the circumstances under which
they were made, not misleading and (iii) the Final Offering
Memorandum as of its date and as of the Closing Date will not
contain any untrue statement of a material fact or omit to state a
material fact necessary to make the statements therein, in the
light of the circumstances under which they were made, not
misleading, except that the representations and warranties set
forth in this paragraph do not apply to statements or omissions in
the Time of Sale Memorandum or the Final Offering Memorandum based
upon information furnished to the Company in writing by or on
behalf of the Initial Purchasers expressly for use therein.
No order preventing the use of the Time of Sale Memorandum or the
Final Offering Memorandum, or any amendment or supplement thereto,
or any order asserting that any of the transactions
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contemplated by
this Agreement are subject to the registration requirements of the
Securities Act or any state securities or blue sky laws has been
issued.
(b)
The Company has
been duly incorporated, is validly existing as a corporation in
good standing under the laws of the state of Delaware, has the
corporate power and authority to own its property and to conduct
its business as described in the Time of Sale Memorandum and Final
Offering Memorandum and is duly qualified to transact business and
is in good standing in each jurisdiction in which the conduct of
its business or its ownership or leasing of property requires such
qualification, except to the extent that the failure to be so
qualified or be in good standing would not have a material adverse
effect on the Company and its subsidiaries, taken as a
whole.
(c)
Each subsidiary
of the Company has been duly incorporated, is validly existing as a
corporation in good standing under the laws of the jurisdiction of
its incorporation, has the corporate power and authority to own its
property and to conduct its business as described in the Time of
Sale Memorandum and Final Offering Memorandum and is duly qualified
to transact business and is in good standing in each jurisdiction
in which the conduct of its business or its ownership or leasing of
property requires such qualification, except to the extent that the
failure to be so qualified or be in good standing would not have a
material adverse effect on the Company and its subsidiaries, taken
as a whole; all of the issued shares of capital stock of each
subsidiary of the Company have been duly and validly authorized and
issued, are fully paid and nonassessable and are owned directly by
the Company (except for (a) FlexCrete Building Systems, L.C., in
which Headwaters Resources, Inc. owns a 90% limited company
interest, (b) Blue Flint Ethanol LLC, in which the Company owns a
51% limited liability company interest) and (c) Florida N-Viro
L.P., in which VFL Technologies, Inc. owns a 51.5% limited
partnership interest, (d) Florida N-Viro Management LLC, in which
VFL Technologies, Inc. owns a 52% limited liability company
interest, (e) Degussa Headwaters LLP, in which Headwaters
Incorporated owns a 50% membership interest and (f) Degussa
Headwaters Korea Co., Ltd., in which Headwaters Incorporated owns a
50% membership interest), free and clear of all liens,
encumbrances, equities or claims except for the security interests
granted under the senior secured credit agreement, dated September
8, 2004, as amended, between the Company and various lenders and
Morgan Stanley Senior Funding, Inc., as administrative
agent.
(d)
This Agreement
has been duly authorized, executed and delivered by the
Company.
(e)
The authorized
capital stock of the Company conforms as to legal matters to the
description thereof contained in each Offering
Document.
(f)
The shares of
common stock, par value $0.001 per share, of the Company (the
“ Common Stock
”)
outstanding prior to the issuance of the Securities have been duly
authorized and are validly issued, fully paid and
nonassessable.
(g)
The Underlying
Securities issuable upon conversion of the Securities have been
duly authorized and reserved and, when issued upon conversion
of
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the Securities in
accordance with the terms of the Securities, will be validly
issued, fully paid and non-assessable, and the issuance of the
Underlying Securities will not be subject to any preemptive or
similar rights.
(h)
The Securities
have been duly authorized and, at the Closing Date, will have been
duly executed by the Company and, when authenticated, issued and
delivered in accordance with the provisions of the Indenture and
delivered to and paid for by the Initial Purchasers in accordance
with the terms of this Agreement, will be valid and binding
obligations of the Company, enforceable in accordance with their
terms, subject to applicable bankruptcy, insolvency and similar
laws affecting creditors’ rights generally and equitable
principles of general applicability, and will be entitled to the
benefits of the Indenture pursuant to which such Securities are to
be issued and the Registration Rights Agreement.
(i)
Each of the
Indenture and the Registration Rights Agreement has been duly
authorized by the Company and, when duly executed and delivered by
the Company and the Trustee, will constitute a valid and binding
agreement of the Company, enforceable against the Company in
accordance with its terms, subject to applicable bankruptcy,
insolvency and similar laws affecting creditors’ rights
generally and equitable principles of general applicability and
except as rights to indemnification and contribution under the
Registration Rights Agreement may be limited under applicable
law.
(j)
The Securities
and the Indenture will conform in all material respects to the
respective statements relating thereto contained in the Time of
Sale Memorandum and the Final Offering Memorandum.
(k)
The execution and
delivery by the Company of, and the performance by the Company of
its obligations under, this Agreement, the Indenture, the
Registration Rights Agreement and the Securities will not
contravene any provision of applicable law or the certificate of
incorporation or bylaws of the Company or any agreement or other
instrument binding upon the Company or any of its subsidiaries that
is material to the Company and its subsidiaries, taken as a whole,
or any judgment, order or decree of any governmental body, agency
or court having jurisdiction over the Company or any subsidiary,
and no consent, approval, authorization or order of, or
qualification with, any governmental body or agency is required for
the performance by the Company of its obligations under this
Agreement, the Indenture, the Registration Rights Agreement or the
Securities except such as may be required by the securities or Blue
Sky laws of the various states in connection with the offer and
sale of the Securities and by Federal and state securities laws
with respect to the Company’s obligations under the
Registration Rights Agreement.
(l)
There has not
occurred any material adverse change, or any development involving
a prospective material adverse change, in the condition, financial
or otherwise, or in the earnings, business or operations of the
Company and its subsidiaries, taken as a whole, from that set forth
in the Offering Documents (exclusive
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of any subsequent
amendments or supplements thereto) and the Time of Sale
Memorandum.
(m)
There are no
legal or governmental proceedings pending or threatened to which
the Company or any of its subsidiaries is a party or to which any
of the properties of the Company or any of its subsidiaries is
subject other than proceedings accurately described in all material
respects in the Final Offering Memorandum and the Time of Sale
Memorandum and proceedings that would not have a material adverse
effect on the Company and its subsidiaries, taken as a whole, or on
the power or ability of the Company to perform its obligations
under this Agreement, the Indenture, the Registration Rights
Agreement or the Securities or to consummate the transactions
contemplated by the Offering Documents.
(n)
None of the
Company or its subsidiaries is in default in the performance or
observance of any obligation, agreement, covenant or condition
contained in any contract, indenture, loan agreement, note, lease
or other agreement or instrument that is described or referred to
in the Final Offering Memorandum and the Time of Sale Memorandum or
filed as an exhibit to the Company’s Annual Report on Form
10-K for the year-ended September 30, 2006, except for such
defaults that would not, singly or in the aggregate, have a
material adverse effect on the Company and its subsidiaries, taken
as a whole.
(o)
The Company and
its subsidiaries (i) are in compliance with any and all applicable
foreign, federal, state and local laws and regulations relating to
the protection of human health and safety, the environment or
hazardous or toxic substances or wastes, pollutants or contaminants
(“ Environmental
Laws ”), (ii) have received
all permits, licenses or other approvals required of them under
applicable Environmental Laws to conduct their respective
businesses and (iii) are in compliance with all terms and
conditions of any such permit, license or approval, except where
such noncompliance with Environmental Laws, failure to receive
required permits, licenses or other approvals or failure to comply
with the terms and conditions of such permits, licenses or
approvals would not, singly or in the aggregate, have a material
adverse effect on the Company and its subsidiaries, taken as a
whole.
(p)
There are no
costs or liabilities associated with Environmental Laws (including,
without limitation, any capital or operating expenditures required
for cleanup, closure of properties or compliance with Environmental
Laws or any permit, license or approval, any related constraints on
operating activities and any potential liabilities to third
parties) which would, singly or in the aggregate, have a material
adverse effect on the Company and its subsidiaries, taken as a
whole.
(q)
The financial
statements (including the related notes and supporting schedules)
included in or incorporated by reference in the Time of Sale
Memorandum and the Final Offering Memorandum present fairly in all
material respects the financial position and results of operations
of the entities purported to be shown thereby, at the dates and for
the periods indicated, and have been prepared in
conformity
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with U.S.
generally accepted accounting principles applied on a consistent
basis throughout the periods involved, except as otherwise stated
therein.
(r)
Subsequent to the
respective dates as of which information is given in the Time of
Sale Memorandum, (i) the Company and its subsidiaries have not
incurred any material liability or obligation, direct or
contingent, and have not entered into any material transaction not
in the ordinary course of business; (ii) the Company has not
purchased any of its outstanding capital stock, nor declared, paid
or otherwise made any dividend or distribution of any kind on its
capital stock other than ordinary and customary dividends; and
(iii) there has not been any material change in the capital stock,
short-term debt or long-term debt of the Company and its
consolidated subsidiaries, except in each case as described in the
Time of Sale Memorandum and the Final Offering
Memorandum.
(s)
To the knowledge
of the Company, no person or corporation which is a “holding
company” or a “subsidiary of a holding company”,
within the meaning of such terms as defined in the Public Utility
Holding Company Act of 1935, directly or indirectly owns, controls
or holds with power to vote 10% or more of the outstanding voting
securities of the Company; and the Company is not a “holding
company” or to its knowledge, a “subsidiary of a
holding company” as so defined.
(t)
The Company and
its subsidiaries possess all certificates, authorizations and
permits issued by the appropriate federal, state or foreign
regulatory authorities, including, without limitation, the Federal
Energy Regulatory Commission, necessary to conduct their respective
businesses as described in the Time of Sale Memorandum and the
Final Offering Memorandum, except when the failure to possess such
certificates, authorizations or permits would not have a material
adverse effect on the Company and its subsidiaries, taken as a
whole and neither the Company nor any such subsidiary has received
any notice of proceedings relating to the revocation or
modification of any such certificate, authorization or permit
which, singly or in the aggregate, if the subject of an unfavorable
decision, ruling or finding, would have a material adverse effect
on the Company and its subsidiaries, taken as a whole.
(u)
The Company and
its subsidiaries have good and marketable title in fee simple to
all real property and good and marketable title to all personal
property owned by them which is material to the business of the
Company and its subsidiaries, in each case free and clear of all
liens, encumbrances and defects except such as are described in the
Time of Sale Memorandum and the Final Offering Memorandum or such
as do not materially affect the value of such property and do not
interfere with the use made and proposed to be made of such
property by the Company and its subsidiaries; and any real property
and buildings held under lease by the Company and its subsidiaries
which are material to the business of the Company and its
subsidiaries are held by them under valid, subsisting and
enforceable leases with such exceptions as are not material and do
not interfere with the use made and proposed to be made of such
property and buildings by the Company and its subsidiaries, in each
case except as described in the Time of Sale Memorandum and the
Final Offering Memorandum.
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(v)
The Company and
its subsidiaries own or possess, or can acquire on reasonable
terms, all material patents, patent rights, licenses, inventions,
copyrights, know-how (including trade secrets and other unpatented
and/or unpatentable proprietary or confidential information,
systems or procedures), trademarks, service marks and trade names
currently employed by them in connection with the business now
operated by them, and neither the Company nor any of its
subsidiaries has received any notice of infringement of or conflict
with asserted rights of others with respect to any of the foregoing
which, singly or in the aggregate, if the subject of an unfavorable
decision, ruling or finding, would have a material adverse effect
on the Company and its subsidiaries, taken as a whole.
(w)
No material labor
dispute with the employees of the Company or any of its
subsidiaries exists, except as described in the Time of Sale
Memorandum and the Final Offering Memorandum, or, to the knowledge
of the Company, is imminent; and the Company is not aware of any
existing, threatened or imminent labor disturbance by the employees
of any of its principal suppliers, manufacturers or contractors
that could have a material adverse effect on the Company and its
subsidiaries, taken as a whole.
(x)
The Company and
its subsidiaries are insured by insurers of recognized financial
responsibility against such losses and risks and in such amounts as
are prudent and customary in the businesses in which they are
engaged; except as disclosed in the Time of Sale Memorandum and the
Final Offering Memorandum, neither the Company nor any of its
subsidiaries has been refused any insurance coverage sought or
applied for that is material to the business of the Company and the
subsidiaries; and neither the Company nor any of its subsidiaries
has any reason to believe that it will not be able to renew its
existing insurance coverage as and when such coverage expires or to
obtain similar coverage from similar insurers as may be necessary
to continue its business at a cost that would not have a material
adverse effect on the Company and its subsidiaries, taken as a
whole, except as described in the Time of Sale Memorandum and the
Final Offering Memorandum.
(y)
The Company and
each of its subsidiaries keep books and records accurate in all
material respects reflecting their assets and maintain a system of
internal accounting controls sufficient to provide reasonable
assurance that (i) transactions are executed in accordance with
management’s general or specific authorizations; (ii)
transactions are recorded as necessary to permit preparation of
financial statements in conformity with generally accepted
accounting principles and to maintain asset accountability; (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 the existing
assets at reasonable intervals and appropriate action is taken with
respect to any differences. Except as described in the Time
of Sale Memorandum and the Final Offering Memorandum, since the end
of the Company’s most recent audited fiscal year, there has
been (i) no material weakness in the Company’s internal
control over financial reporting (whether or not remediated) and
(ii) no change in the Company’s internal control over
financial reporting that has materially affected, or is reasonably
likely to materially affect, the Company’s internal control
over financial reporting.
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(z)
The Company is
not and, after giving effect to the offering and sale of the
Securities and the application of the proceeds thereof as described
in the Offering Documents, will not be, required to register as an
“investment company” as such term is defined in the
Investment Company Act of 1940, as amended.
(aa)
Neither the
Company nor any affiliate (as defined in Rule 501(b) of Regulation
D under the Securities Act, an “ Affiliate ”) of the Company has
directly, or through any agent, (i) sold, offered for sale,
solicited offers to buy or otherwise negotiated in respect of, any
security (as defined in the Securities Act) which is or will be
integrated with the sale of the Securities in a manner that would
require the registration under the Securities Act of the Securities
or (ii) offered, solicited offers to buy or sold the Securities by
any form of general solicitation or general advertising (as those
terms are used in Regulation D under the Securities Act) or in any
manner involving a public offering within the meaning of Section
4(2) of the Securities Act; provided , however, that no such
representation is made in respect to the Initial
Purchasers.
(bb)
It is not
necessary in connection with the offer, sale and delivery of the
Securities to the Initial Purchasers in the manner contemplated by
this Agreement to register the Securities under the Securities Act
or to qualify the Indenture under the Trust Indenture Act of 1939,
as amended.
(cc)
The Securities
satisfy the requirements set forth in Rule 144A(d)(3) under the
Securities Act.
2 .
Agreements to Sell and
Purchase. The
Company hereby agrees to sell to the several Initial Purchasers,
and each Initial Purchaser, upon the basis of the representations
and warranties herein contained, but subject to the conditions
hereinafter stated, agrees, severally and not jointly, to purchase
from the Company the respective principal amount of Securities set
forth in Schedule I hereto opposite its name at a purchase price of
97% of the principal amount thereof (the “ Purchase
Price ”).
On the basis of the representations
and warranties contained in this Agreement, and subject to its
terms and conditions, the Company agrees to issue and sell to the
Initial Purchasers the Additional Securities, and the Initial
Purchasers shall have the right to purchase, severally and not
jointly, up to $25.0 million principal amount of Additional
Securities at the purchase price set forth above plus accrued
interest, if any, to the date of payment and delivery. The
Initial Purchasers may exercise these rights in whole or from time
to time in part by giving written notice of each election to
exercise the foregoing option not later than 13 days after the date
of this Agreement. Any exercise notice shall specify the
principal amount of Additional Securities to be purchased by the
Initial Purchasers and the date on which such Additional Securities
are to be purchased. Each purchase date must be at least one
business day after the written notice is given and may not be
earlier than the Closing Date for the Firm Securities nor later
than ten business days after the date of such notice.
Additional Securities may be purchased as provided in Section 3
hereof solely for the purpose of covering over-allotments made in
connection with the offering of the Firm Securities. On each
day, if any, that Additional Securities are to be purchased (each
an “ Option Closing Date ”), each Initial
Purchaser agrees, severally and not jointly, to purchase the
principal amount of Additional Securities (subject to
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such adjustments to eliminate
fractional securities as you may determine) that bears the same
proportion to the total number of Additional Securities to be
purchased on such Option Closing Date as the principal amount of
Firm Securities set forth in Schedule I hereto opposite the name of
such Initial Purchaser bears to the total principal amount of Firm
Securities.
The Company hereby agrees that,
without the prior written consent of J.P. Morgan Securities Inc.,
Deutsche Bank Securities Inc. and Morgan Stanley & Co.
Incorporated on behalf of the Initial Purchasers, it will not,
during the period ending 90 days after the date of the Final
Offering Memorandum, (i) offer, pledge, sell, contract to sell,
sell any option or contract to purchase, purchase any option or
contract to sell, grant any option, right or warrant to purchase,
lend, or otherwise transfer or dispose of, directly or indirectly,
any shares of Common Stock or any securities convertible into or
exercisable or exchangeable for Common Stock, (ii) file any
registration statement with the Commission relating to the offering
of any shares of Common Stock, (iii) enter into any swap or other
arrangement that transfers to another, in whole or in part, any of
the economic consequences of ownership of the Common Stock, whether
any such transaction in clause (i), (ii) or (iii) above is to be
settled by delivery of Common Stock or such other securities, in
cash or otherwise, or (iv) publicly announce an intention to effect
any such transaction in clause (i), (ii) or (iii).
The foregoing paragraph shall not
apply to (i) the Securities to be sold hereunder or the Underlying
Securities, (ii) the issuance by the Company of shares of Common
Stock upon the exercise of an option, warrant or note or the
conversion of a security outstanding on the date hereof of which
the Initial Purchasers have been advised in writing, (iii) the
commencement of an exchange offer for the Company’s existing
2⅞% Convertible Senior Subordinated Notes due 2016 and the
issuance of the related convertible notes in connection with such
exchange offer, (iv) the filing of registration statements in
respect of the Securities and the Underlying Securities or in
connection with clause (iii) above or Forms S-8, (v) the issuance
of shares of Common Stock or rights to acquire shares of Common
Stock in respect of securities offered pursuant to the terms of the
Company’s existing employee benefits plans or agreements, or
(vi) transfers or sales of shares of Common Stock pursuant to the
convertible note hedge and warrant transactions executed by the
Company on the date hereof.
3.
Terms of Offering.
The Company is advised by you
that the Initial Purchasers will make an offering of the Securities
purchased by the Initial Purchasers hereunder on the terms set
forth in this Agreement and to be set forth in the Final Offering
Memorandum, as soon as practicable after this Agreement is entered
into as in your judgment is advisable.
4.
Payment and Delivery.
Payment for the Firm
Securities shall be made to the Company in Federal or other funds
immediately available in New York City against delivery of such
Firm Securities for the respective accounts of the several Initial
Purchasers at 9:00 a.m., New York City time, on January 22, 2007,
or at such other time on the same or such other date as shall be
designated in writing by you. The time and date of such
payment are hereinafter referred to as the “ Closing
Date .”
Payment for any Additional
Securities shall be made to the Company in Federal or other funds
immediately available in New York City against delivery of such
Additional Securities for the respective accounts of the several
Initial Purchasers at 9:00 a.m., New York
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City time, on the date
specified
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