EXHIBIT (h.8)
HEARTLAND GROUP, INC.
on behalf of the
Heartland Value Fund, Heartland Select Value Fund and Heartland Value Plus Fund
and
▇▇▇▇▇ BROTHERS ▇▇▇▇▇▇▇▇ & CO.
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US$25,000,000
CREDIT AGREEMENT
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Dated as of December 21, 2004
CREDIT AGREEMENT dated as of December 21, 2004 (this "Agreement") between
Heartland Group, Inc., a registered open-end management investment company with
offices at ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ (the
"Company"), on behalf of Heartland Value Fund, Heartland Select Value Fund and
Heartland Value Plus Fund (each "Sub-Fund" and collectively, the "Sub-Funds")
(Company acting on behalf of each Sub-Fund thereof, the "Borrower") and ▇▇▇▇▇
Brothers ▇▇▇▇▇▇▇▇ & Co., a New York limited partnership with an office at ▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ (the "Lender").
WITNESSETH:
WHEREAS, the Borrower has requested, and the Lender has agreed to make
Loans (as defined below) to the Borrower and to make available to it a credit
facility for the purposes and on the terms and conditions set forth herein; and
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, the parties to this Agreement agree as follows:
SECTION 1. DEFINITIONS
(1) Defined Terms. As used in this Agreement, the following terms shall
have the following meanings:
"Affiliate": as to any Person, any other Person (other than a
Subsidiary) which, directly or indirectly, is in control of, is controlled by,
or is under common control with, such Person. For purposes of this definition,
"control" of a Person means the power, directly or indirectly, either to (a)
vote 10% or more of the securities having ordinary voting power for the election
of directors of such Person or (b) direct or cause the direction of the
management and policies of such Person, whether by contract or otherwise.
"Agreement": this Credit Agreement, as amended, restated, supplemented
or otherwise modified from time to time.
"Arrangement Fee": as defined in Section 2.3.
"Assignee": as defined in Section 8.6(c).
"Available Commitment": an amount equal to (a) the amount of the
Lender's Commitment less (b) the aggregate principal amount of all Loans to the
Borrower made by the Lender then outstanding.
"Borrower": as defined in the Preamble hereto.
"Business Day": a day other than a Saturday, Sunday or other day on
which commercial banks in New York City are authorized or required by law to
close.
"Closing Date": the date on which the conditions precedent set forth
in Section 4.1 shall be satisfied and the Loan Documents are signed by the
parties hereto and delivered to the offices of ▇▇▇▇▇ Brothers ▇▇▇▇▇▇▇▇ & Co.,
▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇.
"Code": the Internal Revenue Code of 1986, as amended from time to
time.
"Collateral to Debt Ratio": The net asset value of the Borrower
(calculated in a manner consistent with the Borrower's pricing policies and
procedures as described in its Prospectus and/or Statement of Additional
Information) divided by the aggregate Loans outstanding under the Commitment.
"Commitment": the obligation of the Lender to make Loans to the
Borrower hereunder in an aggregate principal amount at any one time outstanding
not to US$25,000,000 (Twenty-five Million Dollars).
"Commitment Period": the period from and including the Closing Date,
but not including, the Termination Date.
"Contractual Obligation": as to any Person, any provision of any
security issued by such Person or of any agreement, instrument or other
undertaking to which such Person is a party or by which it or any of its
property is bound.
"Custody Agreement": as to the Borrower, the Custody Agreement in
effect between the Borrower and ▇▇▇▇▇ Brothers ▇▇▇▇▇▇▇▇ & Co. as custodian for
the Borrower.
"Default": any of the events specified in Section 7, whether or not
any requirement for the giving of notice, the lapse of time, or both, or any
other condition, has been satisfied.
"Documentation Fee": as defined in Section 2.3.
"Dollars" and "$": dollars in lawful currency of the United States of
America.
"Eligible Lender": an entity that is a "Bank" (as defined in the ▇▇▇▇
▇▇▇) and is not otherwise prohibited by Section 17 of the 1940 Act from lending
to the Borrower.
"Event of Default": any of the events specified in Section 7.1,
provided that any requirement for the giving of notice, the lapse of time, or
both, or any other condition, if any, has been satisfied.
"Federal Funds Rate": the fluctuating "offered rate", as determined by
the Lender, for overnight federal funds, which rate is determined day to day;
"Financing Lease": any lease of property, real or personal, the
obligations of the lessee in respect of which are required in accordance with
GAAP to be capitalized on a balance sheet of the lessee.
"Fundamental Investment Policy": those policies either from which the
Borrower may not deviate without obtaining shareholder consent or which involve
the Borrower's investment objectives.
"GAAP": generally accepted accounting principles in the Grand Duchy of
Luxembourg in effect from time to time.
"Governmental Authority": any nation or government, any state or other
political subdivision thereof and any entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to government.
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"Guarantee Obligation": as to any Person (the "Guaranteeing Person"),
any obligation of (a) the Guaranteeing Person or (b) another Person (including,
without limitation, any bank under any letter of credit) to induce the creation
of which the Guaranteeing Person has issued a reimbursement, counterindemnity or
similar obligation, in either case guaranteeing or in effect guaranteeing any
Indebtedness, leases, dividends or other obligations (the "Primary Obligations")
of any other third Person (the "Primary Obligor") in any manner, whether
directly or indirectly, including, without limitation, any obligation of the
guaranteeing person, whether or not contingent, (i) to purchase any such primary
obligation or any property constituting direct or indirect security therefor,
(ii) to advance or supply funds (A) for the purchase or payment of any such
primary obligation or (B) to maintain working capital or equity capital of the
primary obligor or otherwise to maintain the net worth or solvency of the
primary obligor, (iii) to purchase property, securities or services primarily
for the purpose of assuring the owner of any such primary obligation of the
ability of the primary obligor to make payment of such primary obligation or
(iv) otherwise to assure or hold harmless the owner of any such primary
obligation against loss in respect thereof; provided, however, that the term
Guarantee Obligation shall not include endorsements of instruments for deposit
or collection in the ordinary course of business. The amount of any Guarantee
Obligation of any guaranteeing person shall be deemed to be the lower of (a) an
amount equal to the stated or determinable amount of the primary obligation in
respect of which such Guarantee Obligation is made and (b) the maximum amount
for which such guaranteeing person may be liable pursuant to the terms of the
instrument embodying such Guarantee Obligation, unless such primary obligation
and the maximum amount for which such guaranteeing person may be liable are not
stated or determinable, in which case the amount of such Guarantee Obligation
shall be such guaranteeing person's maximum reasonably anticipated liability in
respect thereof as determined by such guaranteeing person in good faith.
"Indebtedness": of any Person at any date, (a) all indebtedness of
such Person for borrowed money or for the deferred purchase price of property or
services (other than current trade liabilities incurred in the ordinary course
of business and payable in accordance with customary practices), (b) any other
indebtedness of such Person which is evidenced by a note, bond, debenture or
similar debt instrument, (c) all obligations of such Person under Financing
Leases or Interest Rate Agreements, calculated daily on a marked-to-market basis
in accordance with GAAP, (d) all obligations of such Person in respect of
acceptances (as defined in Section 3-410 of the UCC) issued or created for the
account of such Person, (e) all reimbursement obligations of such person arising
out of any letters of credit, and (f) all liabilities secured by any Lien on any
property owned by such Person even though such Person has not assumed or
otherwise become liable for the payment thereof.
"Interest Rate Agreement": any interest rate protection agreement,
interest rate future, interest rate option, interest rate swap, interest rate
cap or other interest rate hedge or arrangement under which a Fund, on its own
behalf or if applicable on behalf of an investment portfolio thereof that is a
Borrower, is a party or a beneficiary.
"Investment Policies": as to each Borrower, the policies and
objectives for, and limits and restrictions on, investing by such Borrower set
forth in the Prospectus relating to such Borrower.
"Lender": as defined in the Preamble hereto.
"Lien": any mortgage, pledge, hypothecation, assignment, deposit
arrangement, encumbrance, lien (statutory or other), charge or other security
interest or any preference, priority or other security agreement or preferential
arrangement of any kind or nature whatsoever (including, without limitation, any
conditional sale or other title retention agreement
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and any Financing Lease having substantially the same economic effect as any of
the foregoing).
"Loan Documents": this Agreement, the Note, a Pledge Agreement and
such other papers, agreements, instruments, certificates and documents as the
Lender shall reasonably require at any time during the term of the Commitment.
"Loans": all loans made pursuant to this Agreement; individually, a
"Loan".
"Material Adverse Effect": a material adverse effect on (a) the
business, financial condition (other than changes in net assets of the Borrower
in the ordinary course of its activities) or ability to timely perform any of
its material obligations under the Loan Documents of the Borrower or (b) the
legality, validity, binding nature or enforceability of the Loan Documents or
the rights or remedies of the Lender hereunder or thereunder.
"Maturity Date": as to each Loan, the date which is the earliest of
(a) 60 days after the Borrowing Date for such Loan, (b) the Termination Date and
(c) the payment in full of such Loan.
"1940 Act": the Investment Company Act of 1940, as amended, together
with all rules and regulations promulgated from time to time thereunder.
"Non-Excluded Taxes": as defined in Section 2.12.
"Note": the Revolving Credit Note as amended, extended, superseded or
replaced.
"Participant": as defined in Section 8.6(b).
"Person": an individual, partnership, corporation, limited liability
company, business trust, joint stock company, trust, unincorporated association,
joint venture, Governmental Authority or other entity of whatever nature.
"Pledge Agreement": as to the Borrower, the pledge agreement
substantially in the form attached hereto as Exhibit 2.12, as amended or
modified from time to time, to be entered into by the Borrower for the benefit
of the Lender.
"Prospectus": at a particular time, shall mean the currently effective
prospectus of the Borrower.
"Regulation T": Regulation T of the Board of Governors of the Federal
Reserve System as in effect from time to time.
"Regulation U": Regulation U of the Board of Governors of the Federal
Reserve System as in effect from time to time.
"Regulation X": Regulation X of the Board of Governors of the Federal
Reserve System as in effect from time to time.
"Requirement of Law": as to any Person, the certificate of
incorporation, by-laws, partnership agreement, or other organizational or
governing documents of such Person, and any law, treaty, rule or regulation or
determination of an arbitrator or a court or other Governmental Authority, in
each case applicable to or binding upon such Person or any of its property or to
which such Person or any of its property is subject.
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"Responsible Officer": the chairman, vice chairman, president,
treasurer, secretary, assistant treasurer or assistant secretary of the
Borrower, or, with respect to financial matters, the treasurer of the Borrower.
"Revolving Credit Note": as defined in Section 2.5(d).
"Senior Securities": any bond, debenture, note or similar obligation
or instrument constituting a security and evidencing indebtedness (including
without limitation all Loans under this Agreement), and any share of beneficial
interest or common stock, as the case may be, of the Borrower having priority
over any other class of shares of such Fund as to distribution of assets or
payment of dividends.
"Subsidiary": as to any Person, a corporation, partnership or other
entity of which shares of stock or other ownership interests having ordinary
voting power (other than stock or such other ownership interests having such
power only by reason of the happening of a contingency) to elect a majority of
the board of directors or other managers of such corporation, partnership or
other entity are at the time owned, or the management of which is otherwise
controlled, directly or indirectly through one or more intermediaries, or both,
by such Person.
"Swap Obligation": as to any Person, any obligation of such Person
arising out of (i) any "swap agreement" (as defined in Section 101(53B) of the
Bankruptcy Code), (ii) any equity swap, floor, collar, cap or option
transaction, (iii) any option to enter into any of the foregoing or (iv) any
combination of the foregoing.
"Termination Date": the date which is 364 days following the Closing
Date or such earlier date on which the Commitment shall terminate as provided
herein.
"Transferee": as defined in Section 8.6(d).
"UCC": the Uniform Commercial Code as from time to time in effect in
the State of New York.
1.2 Other Definitional Provisions. (a) Unless otherwise specified therein,
all terms defined in this Agreement shall have such defined meanings when used
in any Note or any certificate or other document made or delivered pursuant
hereto.
(b) As used herein and in any Note and any certificate or other document
made or delivered pursuant hereto, accounting terms relating to the Borrower not
defined in Section 1.1 and accounting terms partly defined in Section 1.1, to
the extent not defined, shall have the respective meanings given to them under
GAAP (as consistently applied).
(c) The words "hereof", "herein" and "hereunder" and words of similar
import when used in this Agreement shall refer to this Agreement as a whole and
not to any particular provision of this Agreement, and Section, subsection,
Schedule and Exhibit references are to this Agreement unless otherwise
specified.
(d) The meanings given to terms defined herein shall be equally applicable
to both the singular and plural forms of such terms.
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SECTION 2. AMOUNT AND TERMS OF COMMITMENTS
2.1 Commitment. Subject to the terms and conditions hereof, the Lender
agrees to make revolving credit Loans to the Borrower on behalf of the
Sub-Funds, from time to time during the Commitment Period, in an aggregate
principal amount at any one time outstanding not to exceed the amount of
Twenty-Five Million Dollars and no/100 (US$25,000,000). During the Commitment
Period, the Borrower may use Commitment by borrowing, repaying Loans in whole or
in part, and re-borrowing, all in accordance with the terms and conditions
hereof and with such procedures as may be agreed to by the Borrower from time to
time; provided that at no time may the aggregate principal amount outstanding of
Loans to the Borrower exceed the Commitment.
2.2 Procedure for Borrowing. The Borrower may borrow under the Commitment
during the Commitment Period on any Business Day, provided that the Borrower
shall give the Lender irrevocable notice substantially in the form of Exhibit
2.2 not later than 2:00 PM (New York City time) on or before the Borrowing Date.
2.3 Fees. The Borrower agrees to pay to the Lender for the account of the
Lender a documentation fee ("Documentation Fee") in the amount of $2,500.00
payable on the Closing Date and an arrangement fee ("Arrangement Fee") equal to
0.10% per annum of the Commitment on the unused portion of the Commitment
payable quarterly in arrears.
2.4 Termination and Reduction of Commitments. (a) The Borrower shall have
the right, upon not less than three (3) Business Days' notice to the Lender, to
terminate the Commitment. Any termination of a Commitment to the Borrower shall
be effective as of the last day of the calendar quarter in which such notice is
given, and shall be accompanied by prepayment in full of the Loans to the
Borrower then outstanding, and payment of any other accrued fees, expenses or
indemnified liabilities payable by the Borrower to the Lender hereunder.
(b) Interest accrued, but unpaid, on the amount of any prepayment relating
to such termination and any unpaid Arrangement Fee accrued hereunder shall be
paid on the date of such termination.
2.5 Repayment of Loans; Evidence of Debt. (a) The Borrower, on behalf of
each Sub-Fund, hereby unconditionally promises to pay to the Lender the then
unpaid principal amount of each Loan of the Lender to the Borrower, on behalf of
each Sub-Fund, on the Maturity Date for such Loan (or such earlier date on which
the Loans become due and payable pursuant to Sections 2.6 or 7). The Borrower
hereby further agrees to pay to the Lender accrued, but unpaid, interest on the
unpaid principal amount of the Loans to the Borrower from time to time
outstanding from the date hereof until payment in full thereof at the rates per
annum, and on the dates, set forth in Sections 2.7 and 2.9. The Lender agrees
that each Loan shall be made to the Borrower with respect to a particular
Sub-Fund and the Lender shall only look to the Borrower with respect to that
Sub-Fund and that Sub-Fund's assets for repayment of such Loan, and shall not
enforce its rights under such Loan against any other Sub-Funds or their
respective assets.
(b) The Lender shall maintain in accordance with its usual practice an
account or accounts evidencing indebtedness of the Borrower to such Lender
resulting from each Loan of the Lender from time to time, including the amounts
of principal and interest payable and paid to the Lender from time to time under
this Agreement.
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(c) The entries made in the accounts of the Lender maintained pursuant to
Section 2.5(b) shall, to the extent permitted by applicable law, be prima facie
evidence of the existence and amounts of the obligations of the Borrower therein
recorded, provided, however, that the failure of the Lender to maintain the
register or any such account, or any error therein, shall not in any manner
affect the obligation of the Borrower to repay (with applicable interest) the
Loans made to such Borrower by the Lender in accordance with the terms of this
Agreement.
(d) The Borrower has executed and delivered to the Lender a promissory note
evidencing the Loans of the Borrower in the form of Exhibit 2.5(d) (the
"Revolving Credit Note").
2.6 Optional and Mandatory Prepayments. Any notice from Borrower of
prepayment under this Agreement will oblige the Borrower to prepay in accordance
with that notice. Loans may be prepaid in whole or in part without a penalty.
If, at any time and from time to time, the aggregate amount of all borrowings of
Borrower (including without limitation the Loans made pursuant to this
Agreement) then outstanding exceeds the borrowing limits provided in such
Borrower's Prospectus and/or applicable law and regulations, then in each case
within three (3) Business Days thereafter the Borrower shall repay Loans made to
the Borrower to the extent necessary to ensure that the aggregate amount of all
Loans made to the Borrower then outstanding does not after such payments exceed
such limits.
2.7 Interest Rates and Payment Dates. (a) Each Loan or any portion of the
principal outstanding hereunder, shall bear interest at a per annum rate equal
to the Federal Funds Rate in effect from time to time and adjusted daily plus
150 basis points. Interest on each Loan shall be payable on the first day of
each month and on the Maturity Date.
(b) Upon (i) the occurrence and continuance of any Default or Event of
Default specified in Section 7(e) with respect the Borrower, or (ii) notice
given by the Lender to the Borrower of any other Default or Event of Default
which is existing and continuing, then all Loans outstanding shall bear interest
at a rate per annum equal to the Federal Funds Rate adjusted daily plus 300
basis points. If all or a portion of (i) the principal amount of any Loan to the
Borrower, (ii) any interest payable thereon or (iii) any Arrangement Fee or
other amount payable hereunder shall not be paid when due (whether at the stated
maturity, by acceleration or otherwise), all of the Loans outstanding to the
Borrower shall bear interest at a rate per annum equal to the Federal Funds Rate
adjusted daily plus 300 basis points until such payments have been made.
2.8 Computation of Interest. (a) Interest shall be calculated on the basis
of a 360-day year for the actual days elapsed.
(b) Each determination of an interest rate by the Lender pursuant any
provision of this Agreement shall be conclusive and binding on the Borrower in
the absence of manifest error. The Lender shall, at the request of the Borrower,
deliver to the Borrower a statement showing the quotations used by the Lender in
determining any interest rate pursuant to Sections 2.7.
2.9 Payments. All payments (including prepayments) to be made by the
Borrower hereunder, whether on account of principal, interest, fees or
otherwise, shall be made no later than 12:00 Noon New York City time, on the due
date thereof to the Lender, at the Lender's office specified in Section 8.2
hereof, in Dollars and in immediately available funds. If any payment hereunder
becomes due and payable on a day other than a Business Day, such payment shall
be extended to the next succeeding Business Day, and, with respect to payments
of principal, interest thereon shall be payable at the then applicable rate
during such extension.
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2.10 Requirements of Law. (a) If the Lender shall have determined that the
adoption of or any change in any Requirement of Law (in each case after the date
hereof) of any Governmental Authority regarding capital adequacy or in the
interpretation or application thereof or compliance by the Lender or any
corporation controlling such Lender with any request or directive regarding
capital adequacy (whether or not having the force of law) from any Governmental
Authority made subsequent to the date hereof shall have the effect of reducing
the rate of return on the Lender's or such corporation's capital as a
consequence of its obligations hereunder to a level below that which the Lender
or such corporation could have achieved but for such adoption, change or
compliance (taking into consideration the Lender's or such corporation's
policies with respect to capital adequacy) by an amount determined by the
Lender, in its reasonable discretion, to be material, then from time to time,
each Borrower shall promptly pay to the Lender such additional amount or amounts
as will compensate the Lender for such reduction.
(b) If the Lender becomes entitled to claim any additional amounts pursuant
to this Section, it shall promptly notify the Borrower of the event by reason of
which it has become so entitled by providing a certificate setting forth in
reasonable detail the basis for the claim for additional amounts and the amounts
required to be paid by the Borrower to the Lender; provided that the Lender
shall not be required to disclose any confidential information. Such certificate
as to any additional amounts payable pursuant to this Section submitted by the
Lender to the Borrower shall be conclusive in the absence of manifest error. The
agreements in this Section shall survive the termination of this Agreement and
the payment of the Loans and all other amounts payable hereunder. No Borrower
shall be responsible to compensate the Lender for additional amounts
attributable to another Borrower's Loans. Any amounts due hereunder which are
not attributable to particular Loans shall be subject to pro rata allocation.
(c) Failure or delay on the part of the Lender to demand compensation
pursuant to this Section shall not constitute a waiver of the Lender's right to
demand such compensation; provided that the Borrower shall not be required to
compensate the Lender pursuant to this Section for any increased costs or
reductions of the rate of return incurred more than 180 days prior to the date
that the Lender notifies the Borrower of the change in the Requirement of Law
giving rise to such increased costs or reductions of the rate of return and of
the Lender's intention to claim compensation therefor; provided further that, if
the change in the Requirement of Law giving rise to such increased costs or
reductions of the rate of return is retroactive, then the 180-day period
referred to above shall be extended to include the period of retroactive effect
thereof.
2.11 Taxes. All payments made by the Borrower under this Agreement and the
Note shall be made free and clear of, and without deduction or withholding for
or on account of, any present or future income, stamp or other taxes, levies,
imposts, duties, charges, fees, deductions or withholdings, now or hereafter
imposed, levied, collected, withheld or assessed by any Governmental Authority,
excluding all present and future income taxes and franchise taxes (imposed in
lieu of net income taxes) imposed on the Lender as a result of a present or
former connection between the Lender and the jurisdiction of the Governmental
Authority imposing such tax or any political subdivision or taxing authority
thereof or therein (other than any such connection arising solely from the
Lender having executed, delivered or performed its obligations or received a
payment under, or enforced, this Agreement or the Note). If any such
non-excluded taxes, levies, imposts, duties, charges, fees deductions or
withholdings ("Non-Excluded Taxes") are required to be withheld from any amounts
payable to the Lender hereunder or under the Note, the amounts so payable to the
Lender shall be increased to the extent necessary to yield to the Lender (after
payment of all Non-Excluded Taxes) interest or any such other amounts payable
hereunder at the rates or in the amounts specified in this Agreement. Whenever
any Non-Excluded Taxes are payable by the Borrower, as promptly as possible
thereafter the Borrower shall send to the Lender, a certified copy of an
original official
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receipt received by such Borrower showing payment thereof. If the Borrower fails
to pay any Non-Excluded Taxes when due to the appropriate taxing authority or
fails to remit to the Lender required receipts or other required documentary
evidence, the Borrower shall indemnify the Lender for any incremental taxes,
interest or penalties that may become payable by the Lender as a result of any
such failure. The agreements in this Section shall survive the termination of
this Agreement and the payment of the Loans and all other amounts payable
hereunder. The Lender will promptly notify the Borrower upon learning that any
payments hereunder may be subject to withholding.
2.12 Collateral. The Loans and obligations of each Sub-Fund under this
Agreement may be secured from time to time pursuant to a grant of a pledge by
such Sub-Fund of all of the cash and securities of such Sub-Fund to the Lender
to secure the payment when due of all Loans and obligations of the Borrower now
in existence or hereinafter arising under this Agreement. In accordance
therewith, the Borrower will execute a Pledge and Security Agreement and
Assignment of Account in the form of Exhibit 2.12 hereto in favor of the Lender.
SECTION 3. REPRESENTATIONS AND WARRANTIES
To induce the Lender to enter into this Agreement and to make the Loans,
the Borrower hereby represents and warrants to the Lender that:
3.1 Financial Condition. The statement of assets and liabilities as of the
Borrower's most recently ended fiscal year for which annual reports have been
prepared and the related statements of operations and of changes in net assets
for the fiscal year ended on such date, copies of which financial statements,
certified by the independent public accountants for the Borrower, have
heretofore been delivered to the Lender, fairly present, in all material
respects, the financial position of the Borrower as of such date and the results
of its operations for such period, in conformity with GAAP (as consistently
applied).
3.2 No Change. Since the date of the statement of assets and liabilities
for the most recently ended fiscal year for which annual reports have been
prepared for the Borrower, there has been no development or event which has had
or could reasonably be expected to have a Material Adverse Effect with respect
to the Borrower.
3.3 Existence, Compliance with Law. The Borrower (a) is duly organized and
validly existing under the laws of the jurisdiction of its organization, (b) has
the power and authority and the legal right to own its property and to conduct
the business in which it is currently engaged, (c) is duly registered with the
U.S. Securities and Exchange Commission as a management investment company under
the Investment Company Act of 1940, and (d) is in compliance with all
Requirements of Law, except to the extent that the failure to comply therewith,
and with clause (c) of this Section 3.3, could not, in the aggregate, reasonably
be expected to have a Material Adverse Effect. The shares of each Borrower have
been validly authorized.
3.4 Power, Authorization, Enforceable Obligations. The Borrower has the
power and authority and the legal right, to execute, deliver and perform the
Loan Documents to which it is a party and to borrow hereunder and thereunder on
behalf of the Sub-Funds, and has taken all necessary action to authorize the
borrowings on the terms and conditions of this Agreement and the Note and to
authorize the execution, delivery and performance of the Loan Documents to which
it is a party including, but not limited to, receiving the approval of the
majority of non-interested members of the board of directors of the Borrower as
to entering into the transactions contemplated hereby. No consent or
authorization of, filing with, notice to or other act by or in respect of, any
Governmental Authority or any other Person is required in connection with the
borrowings hereunder or with the execution, delivery, performance, validity or
enforceability of the Loan Documents to which Borrower is a party. This
Agreement has
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been, and each other Loan Document to which the Borrower is a party will be,
duly executed and delivered by the Borrower. This Agreement, the Note and each
other Loan Document to which the Borrower is a party when executed and delivered
will constitute, a legal, valid and binding obligation of the Borrower, and
enforceable against the Borrower in accordance with its terms, except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditors' rights generally and by general equitable principles (whether
enforcement is sought by proceedings in equity or at law).
3.5 No Legal Bar. The execution, delivery and performance of the Loan
Documents to which the Borrower, the borrowings hereunder and the use of the
proceeds thereof (a) will not violate any material Requirement of Law or
Contractual Obligation of the Borrower, and (b) will not result in, or require,
the creation or imposition of any material Lien on any of their respective
material properties or revenues pursuant to any such Requirement of Law or
Contractual Obligation.
3.6 No Material Litigation. No litigation, investigation or proceeding of
or before any arbitrator or Governmental Authority is pending or, to the
knowledge of the Borrower threatened by or against the Borrower or against its
properties or revenues (a) with respect to any of the Loan Documents or any of
the transactions contemplated hereby or thereby, or (b) which could reasonably
be expected to have a Material Adverse Effect, except as previously disclosed in
the Borrower's Prospectus (as supplemented).
3.7 No Default. The Borrower is not in default under or with respect to any
of its Contractual Obligations in any respect, which could reasonably be
expected to have a Material Adverse Effect. No Default or Event of Default has
occurred and is continuing.
3.8 Ownership of Property, Liens. The Borrower has good title to all its
property, and none of such property is subject to any Lien except as permitted
by Section 6.3.
3.9 No Burdensome Restrictions. No Requirement of Law or Contractual
Obligation of the Borrower could reasonably be expected to have a Material
Adverse Effect.
3.10 Taxes. The Borrower has filed all material tax returns which, to the
knowledge of the Borrower are required to be filed and has paid all taxes shown
to be due and payable on said returns or on any assessments made against it or
any of its property and all other taxes, fees or other charges imposed on it or
any of its property by any Governmental Authority (other than any the amount or
validity of which are currently being contested in good faith by appropriate
proceedings and with respect to which reserves in conformity with GAAP have been
provided on the books of the Borrower; no tax Lien has been filed, and, to the
knowledge of the Borrower with respect to any such tax, fee or other charge.
3.11 Federal Regulations. If requested by the Lender from time to time, the
Borrower will furnish to the Lender a statement and current list of the assets
of the Borrower in conformity with the requirements of FR Form U-I referred to
in said Regulation U. Other than the furnishing of such statement and such list,
no filing or other action is required under the provisions of Regulations T, U
or X in connection with the execution and delivery of the Agreement and the
making of the Loans hereunder. No part of the proceeds of any Loans made
hereunder will be used in a manner that violates Regulation U.
10
3.12 Certain Regulations. The Borrower is not subject to regulation under
any Federal or State statute or regulation (other than Regulations U and X of
the Board of Governors of the Federal Reserve System and the Investment Company
Act of 1940) or any law or regulation in the United States which limits its
ability to incur Indebtedness, and with respect to such Regulations and any law
or regulation in the United States, the Borrower has not failed to be in
compliance with such statutes and regulations.
3.13 Subsidiaries. The Borrower has no Subsidiaries and no equity
investment or interest in any other Person (other than portfolio securities
which have been acquired in the ordinary course of business).
3.14 Offering in Compliance with Securities Laws. The Borrower has complied
with all applicable securities laws with respect to the issue of its shares.
3.15 Investment Policies. The Borrower is in compliance in all material
respects with all of its Fundamental Investment Policies.
3.16 Permission to Borrow. The Borrower is permitted to borrow hereunder
pursuant to the limits and restrictions set forth in its Prospectus.
3.17 Accuracy of Information. All factual information heretofore or
contemporaneously furnished by the Borrower in writing to the Lender for
purposes of or in connection with this Agreement or any transaction contemplated
hereby (in each case, as amended, superseded, supplemented or otherwise modified
with the knowledge of the Lender) is, and all other such factual information
hereafter furnished by or on behalf of the Borrower to the Lender (in each case,
as amended, superseded, supplemented or otherwise modified with the knowledge of
the Lender will be), true and accurate in every material respect on the date as
of which such information is dated or certified, and to the extent such
information was furnished to the Lender heretofore or contemporaneously, as of
the date of execution and delivery of this Agreement by the Lender, and such
information is not, or shall not be, as the case may be, incomplete by omitting
to state any material fact necessary to make such information not misleading.
SECTION 4. CONDITIONS PRECEDENT
4.1 Conditions to Initial Loans. The agreement of the Lender to make the
initial Loan requested to be made by it is subject to the satisfaction, prior to
or concurrently with the making of such Loan, of the following conditions
precedent:
(a) Executed Agreement. The Lender shall have received this Agreement,
executed and delivered by a duly authorized officer of the Borrower.
(b) Note. The Lender shall have received the Note executed and delivered by
a duly authorized officer of the Borrower.
(c) Pledge Agreement. The Lender shall have received the Pledge Agreement
executed and delivered by a duly authorized officer of the Borrower.
(d) Related Agreements. The Lender shall have received, true and correct
copies, certified as to authenticity by a Responsible Officer of the Borrower,
of the most recent Prospectus for each Borrower, the Custody Agreement of the
Borrower, the most recent annual and semi-annual financial reports for the
Borrower and such other documents or instruments as may be reasonably requested
by the Lender including, without limitation, a copy of any debt instrument,
security agreement or other material contract to which the Borrower may be a
party.
11
(e) Proceedings of the Borrower. The Lender shall have received (i) a copy
of the resolutions, in form and substance satisfactory to the Lender, of the
board of directors of the Borrower authorizing (1) the execution, delivery and
performance of this Agreement and the other Loan Documents to which the Borrower
is a party, and (2) the borrowings contemplated hereunder, certified by a
Responsible Officer of the Borrower as of the Closing Date, which certificate
shall be in form and substance satisfactory to the Lender and shall state that
the resolutions thereby certified have not been amended, modified, revoked or
rescinded and are in full force and effect, (ii) a certificate of the Borrower
dated the Closing Date, as to the incumbency and signature of the officers of
the Borrower executing any Loan Document executed by a Responsible Officer of
the Borrower, satisfactory in form and substance to the Lender, and (iii) true
and complete copies of the Articles of Organization of the Borrower, certified
as of the Closing Date as complete and correct copies thereof by a Responsible
Officer of the Borrower.
(f) Financial Information. The Lender shall have received the most recent
publicly available financial information (which includes a list of portfolio
securities) for the Borrower.
(g) Termination of other Credit Facilities. All other credit facilities to
which the Borrower is a party shall have been terminated.
4.2 Conditions to Each Loan. The agreement of the Lender to make any Loan
requested by the Borrower to be made by it on any date (including, without
limitation, its initial Loan) is subject to the satisfaction of the following
conditions precedent:
(a) Representations and Warranties. Each of the representations and
warranties made by the Borrower, in or pursuant to the Loan Documents shall be
true and correct in all material respects on and as of such date as if made on
and as of such date.
(b) No Default. No Default or Event of Default shall have occurred with
respect to the Borrower be continuing on such date or after giving effect to the
Loans requested to be made on such date.
(c) Regulation U, Form U-1. The Lender shall be satisfied that the Loans
and the use of proceeds thereof comply in all respects with Regulation U. To the
extent required by Regulation U, the Lender shall have received a copy of either
(i) FR Form U- 1, duly executed and delivered by Borrower and completed for
delivery to the Lender or (ii) a current list of the assets of the Borrower
(including all "margin stock" (as defined in Regulation U) from the Borrower),
in form acceptable to the Lender and in compliance with Section 221.3(c)(2) of
Regulation U.
(d) Additional Matters. All proceedings, and all documents, instruments and
other legal matters in connection with the transactions contemplated by this
Agreement and the other Loan Documents shall be satisfactory in form and
substance to the Lender, and the Lender shall have received such other documents
and legal opinions in respect of any aspect or consequence of the transactions
contemplated hereby or thereby as it shall reasonably request.
Each borrowing by the Borrower shall constitute a representation and warranty by
such Borrower as of the date thereof that the conditions contained in this
Section have been satisfied with respect to the Borrower.
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SECTION 5. AFFIRMATIVE COVENANTS
The Borrower hereby agrees that, so long as (i) the Commitment remains in
effect with respect to it, or (ii) any amount is owing by it to the Lender
hereunder or under any other Loan Document, it shall:
5.1 Financial Statements. Furnish to the Lender:
(a) as soon as available and in any event within seventy-five (75) days
after the end of each fiscal year of the Borrower, a statement of assets and
liabilities of the Borrower as at the end of such fiscal year, a statement of
operations for such fiscal year, a statement of changes in net assets for such
fiscal year and the preceding fiscal year, a portfolio of investments as at the
end of such fiscal year and the per share and other data for such fiscal year
prepared in accordance with GAAP (as consistently applied) and all regulatory
requirements, and all presented in a manner acceptable to an independent
certified public accountants of recognized standing;
(b) as soon as available and in any event within sixty (60) days after the
close of the first six-month period of each fiscal year of the Borrower, a
statement of assets and liabilities as at the end of such six-month period, a
statement of operations for such six-month period, a statement of changes in net
assets for such six-month period and a portfolio of investments as at the end of
such six-month period, all prepared in accordance with regulatory requirements
and all certified (subject to normal year end adjustments) as to fairness of
presentation, GAAP (as consistently applied) and consistency by a Responsible
Officer; and
(c) as soon as available, but in any event not later than ten (10) days
after the end of each month of each fiscal year of the Borrower, the net asset
value sheet of the Borrower as at the end of such month, in the form and detail
similar to those customarily prepared by the Borrower's management for internal
use and reasonably satisfactory to the Lender, certified by a Responsible
Officer, as being fairly stated in all material respects; all such financial
statements shall be complete and correct in all material respects and shall be
prepared in reasonable detail and in accordance with GAAP applied consistently
throughout the periods reflected therein and with prior periods (except as
approved by such accountants or officer, as the case may be, and disclosed
therein).
5.2 Certificates; Other Information. Furnish to the Lender:
(a) concurrently with the delivery of the financial statements referred to
in Sections 5. 1 (a), (b), and (c) and the quarterly report in Section 5.2(c), a
certificate of a Responsible Officer substantially in the form of Exhibit 5.2
stating that (i) to the best of such Responsible Officer's knowledge, the
Borrower during such period has observed or performed all of its covenants and
other agreements, and satisfied every condition, contained in this Agreement and
the other Loan Documents to be observed, performed or satisfied by it, and (ii)
no Default or Event of Default has occurred and is continuing except as
specified in such certificate;
(b) within five (5) Business Days after they are sent, copies of all
financial statements and reports which the Borrower sends to its investors, and
within five (5) Business Days after they are filed, copies of all financial
statements and reports which each Borrower may make to, or file with, any
applicable Governmental Authority;
(c) as soon as available, but in any event not later than ten (10) days
after the end of each quarter, a certificate of a Responsible Officer
substantially in the form of Exhibit 5.2 stating that the list of the Borrower's
portfolio securities attached to such certificate is true and correct;
13
(d) within five (5) Business Days after they are filed with the Securities
and Exchange Commission, copies of all prospectuses, statements of additional
information and prospectus and statement of additional information supplements
for the Sub-Funds; and
(e) promptly, such additional financial and other information as any Lender
may from time to time reasonably request, including, but not limited to, copies
of all changes to the Borrower's Prospectus.
5.3 Payment of Obligations. Pay, discharge or otherwise satisfy at or
before maturity or before they become delinquent, as the case may be, all of the
obligations of whatever nature of the Borrower, except where (i) the amount or
validity thereof is currently being contested in good faith by appropriate
proceedings and reserves in conformity with GAAP with respect thereto have been
provided on the books of the Borrower, as the case may be, or (ii) the failure
to timely make payment thereof could not reasonably be expected to have a
Material Adverse Effect.
5.4 Conduct of Business and Maintenance of Existence. Except as otherwise
permitted herein, continue to engage in (i) the Borrower's investment business
in accordance with its Investment Policies and Prospectus and preserve, renew
and keep in full force and effect its existence, and (ii) take all reasonable
action to maintain all rights, privileges and franchises necessary or desirable
in the normal conduct of its business except to the extent that failure to take
such actions could not, in the aggregate, be reasonably expected to have a
Material Adverse Effect; comply with all Contractual Obligations and
Requirements of Law except to the extent that failure to comply therewith could
not, in the aggregate, be reasonably expected to have a Material Adverse Effect;
maintain at all times its status as a registered management investment company
authorized and existing under the laws of the United States of America; and
maintain at all times ▇▇▇▇▇ Brothers ▇▇▇▇▇▇▇▇ & Co. as its current primary
custodian.
5.5 Maintenance of Property; Insurance. Keep all property useful and
necessary in each Borrower's business, if any, in good working order and
condition; maintain with reputable insurance companies insurance on all its
property in at least such amounts and against at least such risks as are usually
insured against in the same general area by entities engaged in the same or
similar business or as may otherwise be required by any applicable Governmental
Authority, and any errors and omissions insurance; and furnish to each Lender,
upon written request, full information as to the insurance carried.
5.6 Inspection of Property; Books and Records; Discussions. Keep proper
books of records and account in which full, true and correct entries in
conformity with GAAP and all material Requirements of Law shall be made of all
dealings and transactions in relation to its business and activities; and permit
representatives of the Lender to visit and inspect any of the Borrower's
properties and examine and make abstracts from any of its books and records
during normal business hours and to discuss the business, operations, properties
and financial and other condition of the Borrower with officers and employees of
the Borrower and with its independent certified public accountants; provided
that, unless a Default or an Event of Default shall have occurred and be
continuing, the Lender shall provide the Borrower with five (5) Business Days'
prior notice of such visit and shall conduct such visit not more than once a
year.
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5.7 Notices. Promptly give notice to the Lender of:
(a) the occurrence of any Default or Event of Default with respect to the
Borrower;
(b) any (i) default or event of default under any Contractual Obligation of
the Borrower or (ii) litigation, investigation or proceeding which may exist at
any time between the Borrower and any Governmental Authority, which in either
case, if not cured or if adversely determined, as the case may be, could
reasonably be expected to have a Material Adverse Effect;
(c) any litigation or proceeding involving the Borrower in which the amount
reasonably determined to be at risk is more than 5% of the Borrower's net assets
and not covered by insurance or in which injunctive or similar relief is sought;
(d) any change in a Borrower's Prospectus involving Investment Policies
which could materially increase the risks to the shareholders of the Borrower or
which would increase the borrowing limits provided for in the Borrower's
Prospectus;
(e) its registration under the Investment Company Act of 1940 has been
suspended or revoked; and
(f) any development or event in the business activities of the Borrower
which could reasonably be expected to have a Material Adverse Effect on the
Borrower.
Each notice pursuant to this Section shall be accompanied by a statement of a
Responsible Officer reasonably setting forth details of the occurrence referred
to therein and if appropriate stating what action the Borrower proposes to take
with respect thereto.
5.8 Purpose of Loans. Use the proceeds of the Loans for temporary or
emergency purposes and any other purpose permitted under the Borrowers
Prospectus and the 1940 Act, including, without limitation, funding of
shareholder redemption's of one of more Sub-Fund. Without limiting the
foregoing, the Borrower will not, directly or indirectly, use any part of such
proceeds for any purpose which would violate any provision of its Registration
Statement or any applicable statute, regulation, order or restriction, including
but not limited to Regulation U; provided, however, that the Lender shall have
no responsibility as to the use of any of such proceeds.
5.9 Collateral to Debt Ratio. At all times cause each Sub-Fund to maintain
a minimum Collateral to Debt Ratio of 3:1.
SECTION 6. NEGATIVE COVENANTS
The Borrower hereby agrees that so long as (i) the Commitment remains in
effect with respect to it, or (ii) any amount is owing by it to the Lender
hereunder or under any other Loan Document, it shall not, without the prior
written consent of the Lender, directly or indirectly:
6.1 Financial Condition Covenant. Allow the aggregate borrowings and/or
Indebtedness of the Borrower to exceed the limits set forth in such Borrower's
Prospectus and/or the applicable law and regulations of the United States.
15
6.2 Limitation on Indebtedness, Derivatives. (a) Create, incur, assume or
suffer to exist any Indebtedness except Indebtedness of the Borrower incurred
(i) under this Agreement and the Note, (ii) in the ordinary course of business
of the Borrower (including liens arising from securities lending, margin
accounts, reverse repos and similar investment activities), or (iii) in the form
of reverse repurchase transactions, dollar rolls or other transactions entered
into primarily for investment purposes which have the effect of borrowing and,
in each case, which is not otherwise prohibited by law, is in the ordinary
course of business, is not in contravention of the Borrower's Prospectus or the
applicable law and regulations of the United States.
(b) Invest in, or incur Indebtedness or other liability to any Person with
respect to, any Swap Obligation or derivative instrument (including without
limitation any swap, collar, cap, puts, calls, equity derivative or
mortgage-backed or debt-backed derivative) unless each of the following is true:
(i) such Swap Obligation or derivative instrument, if marked-to-market on a net
daily basis (or marked to value in a manner reasonably acceptable to the
Lender), is appropriately reflected in the calculation of Collateral to Debt
Ratio, and (ii) the purpose of the investment in such Swap Obligation or
derivative instrument is to augment the capital appreciation or current income
of or by the Borrower, or to hedge or manage the risk of various current or
future exposures of the Borrower.
6.3 Limitation on Liens. Create, incur, assume or suffer to exist any Lien
upon any of the property, assets or revenues, whether now owned or hereafter
acquired by the Borrower, except for (i) Liens for taxes not yet due or which
are being contested in good faith by appropriate proceedings, and (ii) Liens in
favor of the Lender, provided that adequate reserves with respect thereto are
maintained on the books of the Borrower in conformity with GAAP.
6.4 Limitation on Guarantee Obligation. Create, incur, assume or suffer to
exist any material Guarantee Obligation except as may occur in the ordinary
course of the Borrower's business and which is not otherwise prohibited by any
Requirement of Law and/or the applicable law and regulations in the United
States.
6.5 Limitation on Fundamental Changes. (i) Enter into, any merger,
consolidation or amalgamation, or liquidate, wind up or dissolve itself (or
suffer any liquidation or dissolution), (ii) convey, sell, lease, assign,
transfer or otherwise dispose of all of the property, business or assets in a
single transaction or in related transactions, (iii) make any material change in
its present method of conducting business.
6.6 Limitation on Distributions. At any time, make any distribution to the
shareholders of the Borrower, whether now or hereafter existing, either directly
or indirectly, whether in cash or property or in obligations of the Borrower if
such distribution results in a Default or Event of Default. During the
occurrence and continuation of an Event of Default specified in paragraphs (a)
or (e) of Section 7.1 or an Event of Default arising in connection with the
Borrower's having failed to comply with Section 6.1, the Borrower shall not make
any distribution to the shareholders of the Borrower (except as necessary or
required to comply with Subchapter M of the Code and/or the Borrower's
Prospectus), whether now or hereafter existing, either directly or indirectly,
whether in cash or property or in obligations of the Borrower.
6.7 Limitation on Investments, Loans and Advances. Make any advance, loan,
extension of credit or capital contribution to, or purchase any stock, bonds,
notes, debentures or other securities of or any assets constituting a business
unit of or make any other investment in, any Person, except those not
inconsistent with such Borrower's Investment Policies.
6.8 Limitation on Transactions with Affiliates. Enter into any transaction,
including, without limitation, any purchase, sale, lease or exchange of property
or the rendering of any
16
service, with any Affiliate unless such transaction is (a) not otherwise
prohibited under this Agreement and/or the applicable laws and regulations of
the United States, (b) in the ordinary course of such Borrower's business, and
(c) upon terms which are fair and reasonable in light of comparable quality
services it would obtain in a comparable arm's length transaction with a Person
which is not an Affiliate.
6.9 Limitation on Negative Pledge Clauses. Enter into with any Person any
agreement, other than this Agreement or the other Loan Documents, which
prohibits or limits the ability of the Borrower to create, incur, assume or
suffer to exist any Lien upon any of its property, assets or revenues, whether
now owned or hereafter acquired, except such agreements entered into in the
ordinary course of the Borrower's business and which are not otherwise
prohibited by any Requirement of Law and/or the applicable laws and regulations
of the United States.
6.10 Limitation on Changes to Investment Policies. Except as may be
required by law, make any changes in the Fundamental Investment Policies of the
Borrower without the consent of the Lender, which consent shall not be
unreasonably withheld.
SECTION 7. EVENTS OF DEFAULT
7.1 Defaults and Events of Default. Subject to the final paragraph of this
Section 7.1, if any of the following events shall occur and be continuing with
respect the Borrower (each an "Event of Default"):
(a) the Borrower shall fall to pay any principal of any Loan when due in
accordance with the terms thereof or hereof, including without limitation any
failure to make a mandatory prepayment due pursuant to the provisions of Section
2.6; or the Borrower shall fail to pay any interest on any Loan, or any other
amount payable hereunder, within three (3) days after any such interest or other
amount becomes due in accordance with the terms thereof or hereof; or
(b) any representation or warranty made or deemed made by the Borrower, or
made or deemed made at the Borrower's request, herein or in any other Loan
Document or which is contained in any certificate, document or financial or
other statement furnished by it at any time under or in connection with this
Agreement or any such other Loan Document shall prove to have been incorrect in
any material respect on or as of the date made or deemed made; or
(c) permit a material adverse change to occur with respect to the net asset
value of the Sub-Fund. Such a "material adverse change" shall be deemed to have
occurred if at any time the net asset value of the Sub-Fund shall have declined
by more than 25% during any calendar quarter; and 40% during any calendar year;
or
(d) the Borrower shall default in the observance or performance of any
other agreement contained in this Agreement or any other Loan Document (other
than as provided in paragraphs (a) and (b) of this Section), and such default
shall continue unremedied for a period of thirty (30) days or, solely in the
case of such default arising under Sections 5.4, 5.7, 5.9 or 6.5 hereof, five
(5) Business Days; or
(e) the Borrower shall (i) default in any payment of principal of or
interest on any Indebtedness (other than the Loans), Interest Rate Agreement,
Swap Obligation or in the payment of any Guarantee Obligation, beyond the grace
period (not to exceed thirty (30) days), if any, provided in the instrument or
agreement under which such Indebtedness, Interest Rate Agreement, Swap
Obligation or Guarantee Obligation was created, if the aggregate amount of the
Indebtedness, Interest Rate Agreement, Swap Obligations and/or Guarantee
Obligations in respect of which such default or defaults shall have occurred is
equal to the lesser of (A)
17
$10,000,000 or (B) an amount equal to 5% of the Borrower's net assets; or (ii)
default in the observance or performance of any other agreement or condition
relating to any such Indebtedness, Interest Rate Agreement, Swap Obligation or
Guarantee Obligation or contained in any instrument or agreement evidencing,
securing or relating thereto, or any other event shall occur or condition exist,
the effect of which default or other event or condition is to cause, or to
permit the holder or holders of such Indebtedness or beneficiary or
beneficiaries of such Guarantee Obligation, Interest Rate Agreement, or Swap
Obligation (or a trustee or agent on behalf of such holder or holders or
beneficiary or beneficiaries) to cause, with the giving of notice if required,
such Indebtedness, Interest Rate Agreement or Swap Obligation to become due
prior to its stated maturity or such Guarantee Obligation to become payable if
the aggregate amount of the Indebtedness, Interest Rate Agreement, Swap
Obligations and/or Guarantee Obligations subject to becoming so due or so
payable is equal to the lesser of (A) $10,000,000 or (B) 5% of the Borrower's
net assets; or
(f) (i) the Borrower shall commence any case, proceeding or other action
with respect to itself (A) under any then applicable law of any jurisdiction,
domestic or foreign, relating to bankruptcy, insolvency, reorganization or
relief of debtors, seeking to have an order for relief entered with respect to
it, or seeking to adjudicate it a bankrupt or insolvent, or seeking
reorganization, arrangement, adjustment, winding-up, liquidation, dissolution,
composition or other relief with respect to it or its debts, or (B) seeking
appointment of a receiver, trustee, custodian, conservator or other similar
official for it or for all or any substantial part of its assets, or the
Borrower shall make a general assignment for the benefit of its creditors; or
(ii) there shall be commenced against the Borrower, any case, proceeding or
other action of a nature referred to in clause (i) above which results in the
entry of an order for relief or any such adjudication or appointment; or (iii)
there shall be commenced against the Borrower any case, proceeding or other
action seeking issuance of a writ of attachment, execution, or similar process
against all or any substantial part of its assets which results in the entry of
an order for any such relief or (iv) the Borrower shall take any action in
material furtherance of, or indicating its consent to, approval of, or
acquiescence in, any of the acts set forth in clause (i), (ii). or (iii) above;
or (v) the Borrower shall not, or shall be unable to, pay its debts as they
become due or shall admit in writing its inability to pay its debts as they
become due; or
(g) one or more judgments or decrees shall be entered against the Borrower
involving in the aggregate a liability (not fully covered by insurance or
otherwise paid or discharged) equal to the lesser of (A) $2,500,000 or (B) 5% or
more of the Borrower's net assets, and all such judgments or decrees shall not
have been vacated, discharged, stayed or bonded pending appeal within thirty
(30) days from the entry thereof; or
(h) any of the Loan Documents ceases to remain in full force and effect, or
the Borrower challenges the enforceability thereof; or
(i) the Borrower shall fail to materially comply with its Investment
Policies in a manner which the Lender, in its sole reasonable discretion,
determines could reasonably be expected to have a Material Adverse Effect and
such default (or the Material Adverse Effect arising therefrom if any) shall
continue unremedied for a period of three (3) days after notice from the Lender;
then, and in any such event, the Commitment available to the Borrower shall
automatically and immediately terminate and the Loans hereunder made to the
Borrower (with accrued interest thereon) and all other amounts owing under this
Agreement shall immediately become due and payable.
Presentment, demand, protest and all other notices of any kind are hereby
expressly waived by the Borrower.
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7.2 Remedies. Notwithstanding any other provision herein to the contrary
and at the election of the Lender, Defaults and Events of Default shall have the
following results:
(a) The Commitment established hereunder shall terminate as to the
Borrower;
(b) The unpaid principal amount of the Loans together with accrued interest
and all other amounts owed shall become immediately due and payable without
presentment, demand, protest or further notice of any kind, all of which are
hereby expressly waived by the Borrower; and
(c) The Lender may exercise any and all rights it has under this Agreement,
the Note and any other Loan Document execution in connection herewith, and
proceed to protect and enforce the Lender's rights by any action at law, in
equity or other appropriate proceeding.
Notwithstanding the foregoing provisions, the Lender may, in its sole
discretion elect to (i) waive or not to waive such a Default or an Event of
Default, and/or (ii) continue to make Loans available to the Borrower pursuant
to the Commitment and this Agreement. No such waiver of a Default or an Event of
Default by the Lender shall constitute a waiver of any other covenant,
condition, Default or Event of Default nor shall such waiver constitute a waiver
of the same Default or Event of Default occurring at any time thereafter.
SECTION 8. MISCELLANEOUS
8.1 Amendments and Waivers. Neither this Agreement nor any other Loan
Document, nor any terms hereof or thereof, may be amended, supplemented or
modified except in writing and signed by parties to this Agreement.
8.2 Notices. All notices, requests and demands to or upon the respective
parties hereto to be effective shall be in writing (which writing may be in the
form of a facsimile transmission), and, unless otherwise expressly provided
herein, shall be deemed to have been duly given or made when delivered, or five
(5) days after being deposited in the mail, postage prepaid, or, in the case of
facsimile notice, when received, addressed as follows in the case the Borrower
and the Lender, and as set forth in Schedule I in the case of the other parties
hereto, or to such other address as may be hereafter notified by the respective
parties hereto:
The Borrower: Heartland Group, Inc.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: General Counsel
The Lender: ▇▇▇▇▇ Brothers ▇▇▇▇▇▇▇▇ & Co.
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telex: 62923BBHUW
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
S.W.I.F.T.: ▇▇▇▇▇▇▇▇
Attention: Office of the General Counsel - Investor
Services
provided that any notice, request or demand to or upon the Lender pursuant to
Section 2.2, 2.4 or 2.7 shall not be effective until received.
8.3 No Waiver; Cumulative Remedies. No failure to exercise and no delay in
exercising, on the part of any party hereto, any right, remedy, power or
privilege hereunder or
19
under the Note or the other Loan Documents shall operate as a waiver thereof,
nor shall any single or partial exercise of any right, remedy, power or
privilege hereunder preclude any other or further exercise thereof or the
exercise of any other right, remedy, power or privilege. The rights, remedies,
powers and privileges herein provided are cumulative and not exclusive of any
rights, remedies, powers and privileges provided by law.
8.4 Survival of Representations and Warranties. All representations and
warranties made hereunder or under the Note or in the other Loan Documents and
in any document, certificate or statement delivered pursuant hereto or in
connection herewith shall survive the execution and delivery of this Agreement
and the making of the Loans hereunder.
8.5 Payment of Expenses and Taxes; Indemnification. The Borrower agrees (i)
to reimburse the Lender for its reasonable out-of-pocket costs and expenses (up
to a maximum of $5,000) incurred in connection with the development, preparation
and execution of, and any amendment, supplement or modification to, this
Agreement and the other Loan Documents and any other documents prepared in
connection herewith or therewith, and the consummation and administration of the
transactions contemplated hereby and thereby, including, without limitation, the
reasonable fees and disbursements of counsel to the Lender, (ii) to reimburse
the Lender for all its costs and expenses incurred in connection with the
enforcement or preservation of any rights under this Agreement with respect to
the Borrower, the other Loan Documents and any such other documents, including,
without limitation, the reasonable fees and disbursements of counsel to the
Lender, (iii) to indemnify and hold the Lender harmless from. any and all
recording and filing fees and any and all liabilities with respect to, or
resulting from any delay in paying, stamp, excise and other taxes, if any, which
may be payable or determined to be payable in connection with the execution and
delivery of, or consummation or administration of any of the transactions
contemplated by, or any amendment, supplement or modification of, or any waiver
or consent under or in respect of, this Agreement, the other Loan Documents and
any such other documents with respect to the Borrower, and (iv) to indemnify and
hold the Lender (and its respective affiliates, directors, partners, officers,
agents and employees (collectively the "Indemnified Parties") harmless from and
against any and all other liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, reasonable costs, reasonable out-of-pocket expenses
or disbursements of any kind or nature whatsoever arising from or in connection
with the execution, delivery, enforcement, performance and administration of
this Agreement, the Note and the other Loan Documents, the actual or proposed
use of proceeds, the other Loan Documents and any such other documents (all the
foregoing in this clause (iv), collectively, the "indemnified liabilities"),
provided, that the Borrower shall have no obligation hereunder to any
Indemnified Party with respect to indemnified liabilities arising from (A) with
respect to any Indemnified Party, the negligence or willful misconduct of such
Indemnified Party, (B) with respect to any such Indemnified Party, the failure
of such Indemnified Party (and its Affiliates) to comply with any Requirement of
Law. The agreements in this Section shall survive repayment of the Loans and all
other amounts payable hereunder.
8.6 Successors and Assigns; Participations and Assignments. (a) This
Agreement shall be binding upon and inure to the benefit of each of the Borrower
and the Lender and each of their respective successors and assigns.
(b) The Lender may, in the ordinary course of its commercial banking
business and in accordance with applicable laws, at any time sell to one or more
Eligible Lenders (each a "Participant" and collectively, the "Participants")
participating interests in any Loan owing to such Lender, any Commitment of such
Lender or any other interest of such Lender hereunder and under the other Loan
Documents.
(c) The Lender may, in the ordinary course of its commercial banking
business and in accordance with applicable law, at any time and from time to
time assign to an additional
20
Eligible Lender (an "Assignee") all or any part of its rights and obligations
under this Agreement and the other Loan Documents pursuant to an assignment and
acceptance. Upon such execution, delivery, acceptance and recording, from and
after the effective date of such assignment and acceptance, (x) the Assignee
thereunder shall be a party hereto and, to the extent provided in such
assignment and acceptance, have the rights and obligations of the Lender
hereunder with a Commitment as set forth therein, and (y) the Lender shall be
released from its obligations under this Agreement (and, in the case of an
assignment and acceptance covering all or the remaining portion of the Lender's
rights and obligations under this Agreement, the Lender shall cease to be a
party hereto and the Commitment of the Assignee shall be in an amount equal to
that of the Lender prior to the execution of such assignment and acceptance).
(d) The Borrower hereby authorizes the Lender to disclose to any Assignee
(a "Transferee") and any prospective Transferee any and all financial
information in the Lender's possession concerning the Borrower and its
Affiliates which has been delivered to the Lender by or on behalf the Borrower
pursuant to this Agreement or which has been delivered to such Lender by or on
behalf of the Borrower in connection with the Lender's credit evaluation of the
Borrower and its Affiliates prior to becoming a party to this Agreement.
(e) For avoidance of doubt, the parties to this Agreement acknowledge that
the provisions of this Section concerning assignments of the Loans and the Note
relate only to absolute assignments and that such provisions do not prohibit
assignments creating security interests, including, without limitation, any
pledge or assignment by the Lender of any Loan or Note to any Federal Reserve
Bank in accordance with applicable law.
8.7 Adjustments; Set-off. In addition to any rights and remedies of the
Lender provided by law, the Lender shall have the right, with prompt notice
subsequent to the exercise of such rights but without prior notice to the
Borrower, any such notice being expressly waived by the Borrower, to the extent
permitted by applicable law, upon any amount becoming due and payable by a
Borrower hereunder (whether at the stated maturity, by acceleration or
otherwise) to set-off and appropriate and apply against such amount any and all
deposits (general or special, time or demand, provisional or final), in any
currency, securities, and any other credits, indebtedness or claims, in any
currency, in each case whether direct or indirect, absolute or contingent,
matured or unmatured, at any time held or owing by such Lender or any branch or
agency thereof to or for the credit or the account of the Borrower. This right
shall be in addition to any rights to the Lender may have in its capacity as
custodian (whether by law, regulation, contract or otherwise).
8.8 Counterparts. This Agreement may be executed by one or more of the
parties hereto on any number of separate counterparts, and all of said
counterparts taken together shall be deemed to constitute one and the same
instrument. A set of the copies of this Agreement signed by all the parties
shall be lodged with the Borrower and the Lender.
8.9 Severability. Any provision of this Agreement which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
8.10 Waiver of Conflicts; Confidentiality. (a) The Borrower acknowledges
that the Lender and its respective affiliates (collectively, the "Bank Parties")
may be providing debt financing, equity capital or other services (including
financial advisory services) to other companies in respect of which the Borrower
may have conflicting interests regarding the transactions described herein and
otherwise. The Bank Parties will not use Confidential
21
Information obtained from the Borrower by virtue of the transactions
contemplated by this Agreement or their other relationships with the Borrower in
connection with the performance by each of the Bank Parties of services for
other companies, and each of the Bank Parties will not furnish any such
Confidential Information to other companies. The Borrower also acknowledges that
no Bank Party has any obligation to use in connection with the transactions
contemplated by this Agreement, or to furnish to the Borrower confidential
information obtained from other companies. The obligations of the Lender
hereunder shall survive the repayment of the Loans and termination of this
Agreement.
(b) For purposes of this Section. "Confidential Information" shall mean all
information received from the Borrower relating to its business, other than any
such information that is available to the Lender on a nonconfidential basis
other than as a result of a breach of this Agreement. The Lender agrees to
maintain the confidentiality of, and not to use the Confidential Information,
except that Confidential Information may be disclosed (i) to its and its
Affiliates' directors, officers, partners, employees and agents, including
without limitation accountants, legal counsel and other advisors for purposes
relating to the transactions contemplated by this Agreement or for conducting
legitimate audits (it being understood that the Persons to whom such disclosure
is made will be informed of the confidential nature of such Confidential
Information and will have agreed to keep such Confidential Information
confidential), (ii) to the extent requested by any legal or regulatory authority
having or claiming jurisdiction over such Person, (iii) to the extent required
by applicable laws or regulations or by any subpoena or similar legal process,
(iv) to any other party to this Agreement for purposes relating to the
transactions contemplated hereby, (v) in connection with the exercise of any
remedies hereunder or any suit, action or proceeding relating to this Agreement
or the enforcement of rights hereunder, (vi) subject to an agreement containing
provisions substantially the same as those of this subsection, to any Assignee
or Participant or any prospective Assignee or Participant which executes such
agreement, or (vii) with the consent of the Borrower. Any Person required to
maintain the confidentiality of Confidential Information as provided in this
Section shall be considered to have complied with its obligation to do so if
such Person has exercised the same degree of care to maintain the
confidentiality of such Information as such Person would accord to its own
confidential information.
8.11 GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE
PARTIES HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH, THE SUBSTANTIVE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD
FOR ITS CHOICE OF LAW RULES.
8.12 Submission To Jurisdiction; Waivers. The Borrower and the Lender
hereby irrevocably and unconditionally:
(a) submit for themselves and their respective property in any legal action
or proceeding relating to this Agreement and the other Loan Documents to which
they are a party, or for recognition and enforcement of any Judgment in respect
thereof, to the general jurisdiction of the Courts of the State of New York, the
courts of the United States of America for the Southern District of New York,
and appellate courts from any thereof;
(b) consents that any such action or proceeding may be brought in such
courts and waives any objection that it may now or hereafter have to the venue
of any such action or proceeding in any such court or that such action or
proceeding was brought in an inconvenient court and agrees not to plead or claim
the same;
(c) agrees that service of process in any such action or proceeding may be
effected by mailing a copy thereof by registered or certified mail (or any
substantially similar form of
22
mail), postage prepaid, to the Borrower at its address set forth in Section 8.2
or at such other address of which the Lender shall have been notified pursuant
thereto;
(d) agrees that nothing herein shall affect the right of any party hereto
to effect service of process in any other manner permitted by law or shall limit
the right of any party hereto to ▇▇▇ in any other jurisdiction; and
(e) waives, to the maximum extent not prohibited by law, any right it may
have to claim or recover in any legal action or proceeding referred to in this
Section any special, exemplary, indirect, punitive or consequential damages.
8.13 Acknowledgments. The Borrower hereby acknowledges that:
(a) it has been advised by counsel in the negotiation, execution and
delivery of this Agreement and the other Loan Documents;
(b) the Lender has no fiduciary relationship with or duty to the Borrower
arising out of or in connection with this Agreement or any of the other Loan
Documents and the relationship between the Lender, on the one hand, and the
Borrower on the other hand, in connection herewith or therewith is solely that
of creditor and debtor; the Lender does however serve as custodian for the
Borrower pursuant to a separate Custodian Agreement; and
(c) no joint venture is created hereby or by the other Loan Documents or
otherwise exists by virtue of the transactions contemplated hereby between the
Borrower and the Lender.
8.14 WAIVERS OF JURY TRIAL. THE BORROWER AND THE LENDER EACH HEREBY
IRREVOCABLY AND UNCONDITIONALLY WAIVE TRIAL BY JURY IN ANY LEGAL ACTION OR
PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AND FOR ANY
COUNTERCLAIM THEREIN. THE PROVISIONS OF THIS PARAGRAPH HAVE BEEN FULLY DISCUSSED
BY THE PARTIES HERETO, AND THE PROVISIONS HEREFOF SHALL BE SUBJECT TO NO
EXCEPTIONS. NO PARTY HERETO HAS IN ANY WAY AGREED WITH OR REPRESENTED TO ANY
OTHER PARTY THAT THE PROVISIONS OF THIS PARAGRAPH WILL NOT BE FULLY ENFORCED IN
ALL INSTANCES.
8.15 Integration. This Agreement, the Note and the other Loan Documents
represent the agreement of the Borrower and the Lender with respect to the
subject matter hereof, and there are no promises, undertakings, representations
or warranties by the Lender relative to the subject matter hereof not expressly
set forth or referred to herein or in the other Loan Documents.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered by their proper and duly authorized officers as of
the day and year first written above.
[THIS SPACE INTENTIONALLY LEFT BLANK]
23
▇▇▇▇▇ BROTHERS ▇▇▇▇▇▇▇▇ & CO.
as Lender
By:
---------------------------------------
Name:
Title:
HEARTLAND GROUP, INC.
on behalf of the aforementioned Sub-Funds
By:
---------------------------------------
Name:
Title:
24
Heartland Group, Inc.
REVOLVING CREDIT NOTE
US$25,000,000 As of December 21, ▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇
FOR VALUE RECEIVED, Heartland Group, Inc. on behalf of Heartland Value Fund,
Heartland Select Value Fund and Heartland Value Plus Fund hereby promises to pay
to ▇▇▇▇▇ Brothers ▇▇▇▇▇▇▇▇ & Co. (the "Bank") or order, at the office of the
Bank at ▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, on Maturity Date the principal
amount Twenty Five Million Dollars and no/100 (U.S. $25,000,000), or such lesser
amount as shall not have been prepaid, in immediately available funds, together
with all unpaid Arrangement Fees, Documentation Fees and interest on the unpaid
principal balance hereof. Capitalized terms used herein and not otherwise
defined shall have the meanings assigned to such terms in the Agreement (as
defined below). Interest shall be payable monthly in arrears on the first day of
each month beginning on January 1, 2005 at the rate per annum as described in
the Agreement. Interest shall be computed on the basis of a 360-day year for the
actual number of days elapsed, including holidays or other days on which the
Bank is not open for the conduct of banking business.
All Loans hereunder and all payments on account of principal and interest
hereof shall be recorded by the Bank and prior to any transfer hereof, endorsed
on Schedule I attached hereto and incorporated by reference herein. The entries
on the records of the Bank (including any appearing on this Note) shall be shall
be prima facie evidence of amounts outstanding hereunder.
Overdue payments of principal (whether at stated maturity by acceleration
or otherwise), and, to the extent permitted by law, overdue interest, shall bear
interest, compounded monthly and payable on demand in immediately available
funds, at a rate per annum equal to the Federal Funds Rate in effect from time
to time and adjusted daily plus 300 basis points.
This Note is issued pursuant to, and entitled to the benefits of, and is
subject to, the provisions of a Credit Agreement dated as of the date hereof by
and between the Borrower and the Bank (herein, as the same may from time to time
be amended, extended, superseded or replaced, the "Agreement"). But, neither
this reference to the Agreement nor any provision thereof shall affect or impair
the absolute and unconditional obligation of the undersigned maker of this Note
to pay the principal of and interest on this Note as herein provided.
This Note may, from time to time, be secured by certain personal property
of the Borrower.
In the case of a Default or an Event of Default by the Borrower with
respect to a Sub-Fund shall occur, the aggregate unpaid principal and accrued
interest on this Note by the Borrower with respect to such Sub-Fund shall become
or may be declared to be due and payable in the manner and with the effect
provided in the Agreement.
The Borrower may prepay all or any part of the principal of this Note
before the Maturity Date upon the terms provided in the Agreement.
In addition to any rights and remedies of the Bank provided by law, the
Bank shall have the right, with prompt notice subsequent to the exercise of such
rights but without prior notice to the Borrower, any such notice being expressly
waived by the Borrower to the extent permitted by applicable law, upon any
amount becoming due and payable by a Borrower hereunder (whether at the stated
maturity, by acceleration or otherwise) to set-off and appropriate and apply
against such amount any and all deposits (general or special, time or demand,
provisional or final), in any currency, securities, and any other credits,
indebtedness or claims, in any currency, in each case whether direct or
indirect, absolute or contingent, matured or unmatured, at any time held or
owing by such Bank or any branch or agency thereof to or for the credit or the
account of the Borrower. This right shall be in addition to any rights to the
Bank may have in its capacity as custodian (whether by law, regulation, contract
or otherwise).
The Borrower, makers and every endorser and guarantor hereof hereby waives
presentment, demand, notice, protect and all other demands and notices in
connection with the delivery, acceptance, performance, default or enforcement
hereof and consents that this Note may be extended from time to time and that no
such extension of other indulgence, and no substitution, release or surrender of
collateral and no discharge or release of any other party primarily or
secondarily liable hereon, shall discharge or otherwise affect the liability of
the undersigned, or any endorser or guarantor. No delay or omission on the part
of the Bank in exercising any right hereunder shall operate as a waiver of such
right or of any other right hereunder, and a waiver of any such right on any one
occasion shall not be construed as a bar to or waiver of any such right on any
future occasion.
This instrument shall have the effect of an instrument executed under seal
and shall be governed by and construed in accordance with the laws of the State
of New York (without giving effect to any conflicts of laws provisions contained
therein).
Heartland Group, Inc. on behalf
Heartland Value Fund, Heartland Select
Value Fund and Heartland Value Plus
Fund, each a Sub-Fund thereof
By:
------------------------------------
Name:
Title:
26
SCHEDULE I
TO REVOLVING CREDIT NOTE DATED DECEMBER 21, 2004
HEARTLAND GROUP, INC., TO THE BANK
Name Amount Amount of Outstanding Notation Amount
of Sub-Fund Date of Loan Principal Principal Made By Paid Balance
------------------------------------------------------------------------------------
PLEDGE AND SECURITY AGREEMENT
AND ASSIGNMENT OF ACCOUNT
The undersigned, Heartland Group, Inc., an open-end management investment
company (the "Company"), duly registered with the U.S. Securities and Exchange
Commission ("SEC"), acting on behalf of each of the Heartland Value Fund,
Heartland Select Value Fund and Heartland Value Plus Fund, each a subfund
thereof (each a "Sub-Fund" and collectively, the "Sub-Funds") (the Company on
behalf of each Sub-Fund, the "Borrower") which is executing this agreement (this
"Agreement"), hereby pledges and grants to ▇▇▇▇▇ Brothers ▇▇▇▇▇▇▇▇ & Co. (the
"Bank") a continuing security interest in, and collaterally assigns to the Bank
its interest in and to the following described property belonging to such
Sub-Fund in the accounts maintained with the Bank described below:
All securities, stock, bonds, United States Treasury instruments
and other investment property and financial assets reflect as
maintained with the Borrower's custodian, ▇▇▇▇▇ Brothers ▇▇▇▇▇▇▇▇
& Co. (the "Custodian") in the accounts set forth in Schedule I
hereto and in the name of the Borrower as the same are reflected
as pledged to the Bank as collateral on the books and records of
the Custodian, together with any and all proceeds, replacements
or substitutions therefor and other property constituting
"Collateral" as defined below.
1. COLLATERAL. The Borrower agrees that the above-listed property, whether in
certificated or uncertificated form, now or hereafter owned by the Borrower and
which now is or hereafter may be in the possession of the Custodian or its
designee and all additions, substitutions and replacements to or of such
property, shall be collateral subject to this Agreement without further
agreement or identification of such property of any kind, including all cash
payments or other property received by the Custodian as dividends, interest,
proceeds of any kinds or accretions to such property, and any deposits or other
sums at any time credited by or due from the Custodian to the Borrower (all of
the foregoing, the "Collateral").
2. OBLIGATIONS. The Borrower hereby agrees that the Collateral belonging to each
Sub-Fund which is in the name of the Borrower will be held by the Custodian
together with the proceeds thereof, as security for any and all obligations and
liabilities of such Borrower to the Bank now existing or hereinafter arising
under of in connection with loans made by the Bank to such Borrower on behalf of
such Sub-Fund pursuant to a Committed Credit Agreement dated as of December 21,
2004 by and between the Bank and the Borrower, as such Committed Credit
Agreement may be amended, extended, or restated from time to time (the "Credit
Agreement"), together with all interest, fee and other amounts payable in
connection therewith (the "Obligations"). The Bank agrees that the Collateral
belonging to a particular Sub-Fund shall secure the Obligations of the Borrower
with respect to such Sub-Fund only, and that, upon the occurrence of an event of
default (as defined herein) by the Borrower on behalf of a particular Sub-Fund,
the Bank may enforce its rights and remedies with respect to the Collateral of
such Sub-Fund but shall not extend its rights and remedies to the Collateral of
any other Sub-Fund.
3. RIGHTS AND DUTIES AS TO COLLATERAL. The Bank may at any time collect and
receive, and at its option apply to the Obligations, any distributions in cash
or otherwise payable with respect to the Collateral and, at any time, may
demand, ▇▇▇ for, receive and collect or make any compromise or settlement with
reference to any Collateral. The Bank may pay for insurance for the Collateral
and any charges, taxes, assessments, liens and other expense it deems reasonably
desirable to protect, maintain, preserve or collect the Collateral and all
expenses incurred will be chargeable to the Collateral. The Bank, at any time,
may notify the
obligor(s) on any Collateral to make payments due, or to become due, directly to
the Bank. In order to perfect its security interest in the Collateral, the Bank
may register the pledge of any such Collateral with its issuer by sending them a
copy of this Agreement. Beyond the exercise of reasonable care to assure the
safe custody of Collateral, the Bank shall be under no duty or liability to
collect the Collateral or the income thereon or to protect or preserve rights
pertaining thereto, and shall be relieved of all responsibility for the
Collateral upon surrendering it to the Borrower. Upon the occurrence of an event
of default (defined below), the Bank shall be entitled to exercise its right to
vote any securities comprising the Collateral with notice to the Borrower. The
Borrower agrees to indemnify and hold the Bank harmless against any loss or
damage (including indirect, special, consequential and punitive damages) the
Bank may suffer and any expense it may incur or claim asserted against it as a
result of dealing with the Collateral or any other action it may take in
reliance upon any provision of this Agreement.
4. REPRESENTATIONS, WARRANTIES, AND COVENANTS. The Borrower hereby represents,
warrants, and covenants as follows:
(a) The undersigned Borrower (i) is the legal and equitable owner of the
Collateral and holds the Collateral free and clear of all liens, charges,
encumbrances and security interests of every kind and nature whatsoever except
for the security interest granted hereunder to the Bank, (ii) has good right and
legal authority to assign, deliver and/or create a security interest in the
Collateral and shall defend its title to the Collateral against all claims of
all other persons or entities, (iii) agrees to pay when due, all taxes,
assessments, liens, premiums and other charges with respect to or against the
Collateral, and (iv) agrees that it will not assign this Agreement or any
interest of the Borrower in the Collateral or any part thereof, or otherwise
pledge, encumber, or grant any option with respect to the Collateral or any part
thereof, except in favor of the Bank.
(b) The undersigned Borrower agrees to deliver to the Bank or otherwise
place under its control any and all stock dividends, warrants, options, rights,
substituted shares or other securities distributed on account of the Collateral
or received on account of the exercise by the Borrower of any option, warrant or
right appertaining to any security constituting part of the Collateral. In case
such a distribution is made directly to the Custodian, the Borrower will execute
such assignments and other documents as the Bank may require in order to
adequately make such distribution part of the Collateral hereunder.
(c) The market value of the Collateral, as determined by the Bank in its
sole and absolute discretion, shall at all times shall be in an amount such that
the aggregate percentage of the market value of the Collateral equals or exceeds
300% of the amount of the outstanding Obligations.
The Bank may adjust the foregoing percentage to reflect changes in
applicable law or Bank policy, and the Bank will notify the Borrower as to the
effective date of such changes. At any time that the market value of the
Collateral shall fall below such level, the Borrower, upon demand, shall deliver
to the Bank or otherwise place under its control additional Collateral
acceptable to the Bank acting in its sole discretion, sufficient to correct such
shortfall.
(d) Upon any maturity date, the Borrower will direct the Custodian to
reinvest the funds then due in any other obligation of a substantially similar
type and maturity.
(e) The Borrower will at all times do, make, execute, and deliver all such
additional and further acts and instruments as the Bank may at any time
reasonably request in connection with the administration and enforcement of this
Agreement or relative to the Collateral.
5. ATTORNEY-IN-FACT. The Bank is hereby irrevocably appointed by the Borrower as
attorney-in-fact for the purposes of carrying out the provisions of this
Agreement and taking any action and executing any instrument, such as stock
powers, which the Bank may reasonably deem necessary or advisable to accomplish
the purposes hereof.
6. RECORDS OF COLLATERAL. The Borrower hereby authorizes the Bank to keep the
official record of all instruments, securities, accounts or other property which
may, as a result of reinvestment, substitution, or sale upon or prior to
maturity or otherwise, from time to time constitute Collateral. Such records
shall be presumed to be true and correct absent manifest error.
7. EVENTS OF DEFAULT. An event of default ("event of default") shall exist
hereunder if the Borrower:
(a) fails to pay or perform when due any of the Obligations;
(b) breaches any of the material covenants contained in this Agreement or
in the Credit Agreement;
(c) does or attempts to encumber, sell, transfer or otherwise dispose of
all or any part of the Collateral, other than in the ordinary course of the
Borrower's business, without the prior written consent of the Bank;
(d) causes or permits any of the Collateral is attached or levied upon or
seized in any legal proceeding, or a Borrower fails to pay when due any tax on
the Collateral;
(e) makes or has made any representation or warranty in this Agreement or
in connection with inducing the Bank to make certain credit facilities available
pursuant to the Credit Agreement that is or was false or materially misleading
when made; or
(f) causes or permits any of the following to occur: the dissolution,
termination of existence, insolvency, business failure, appointment of a
receiver for any part of the property of any undersigned Borrower, or any
co-maker, accommodation maker, surety or guarantor of the obligations,
assignment for the benefit of creditors, the calling of a meeting of creditors,
or the commencement of any proceeding under any bankruptcy or insolvency laws,
by, or against any undersigned Borrower, or any co-maker, accommodation maker,
surety or guarantor of the obligations.
8. RIGHTS AND REMEDIES OF THE BANK. Upon the occurrence of an event of default,
or at any time thereafter, without further notice or demand, the Bank may
declare this Agreement to be in default and thereafter shall have all the rights
and remedies of a secured party afforded by the Uniform Commercial Code as then
in effect in the State of New York or afforded by other applicable law. Upon the
occurrence of an event of default, or at any time thereafter, without further
notice or demand, the Bank shall have the right to sell, assign and deliver any
or all of such Collateral at a private or public sale. Where reasonable
notification of the time and place of such sale or other disposition is required
by law, such requirement shall be met if the Bank gives to the Borrower, not
less than seven (7) days notice in writing mailed, postage prepaid, to the last
address of the Fund and the Borrowers known to it, of the time and place of any
public sale of the Collateral or after which any private sale or intended
disposition is to be made. The Bank may purchase the Collateral at a public sale
and if the Collateral is of a type customarily sold in a recognized market or
the subject of widely distributed standard price quotations, the Bank may
purchase the Collateral at a private sale. The Borrower acknowledges that some
or all of the Collateral which is not traded on a nationally recognized exchange
may be sold at a private sale at prices less favorable than those which could be
obtained at a public
sale and the Bank shall not be required to wait for completion of any
registration of any investment property in order to comply with state securities
laws prior to liquidating any Collateral. All commissions and charges relating
to sale of any Collateral shall constitute Obligations secured by the Collateral
and shall be payable upon demand. After deducting all costs and expenses of
collection, storage, custody, sale or other disposition and delivery and all
other charges against the Collateral, the residue of the proceeds of any such
sale or other disposition shall be applied to the payment of the Obligations in
order of preference as the Bank may determine, with any remaining balance
returned to the Borrower, as applicable.
9. WAIVERS. The Borrower hereby waives presentment, notice, protest, notice of
acceptance of this Agreement, notice of any credit or other financial
accommodations extended, extensions granted, Collateral received or delivered,
or any other action taken in reliance thereon, all demands and notices in
connection with the delivery, acceptance, performance, default or enforcement of
any note, or other evidence of indebtedness for which any of the Collateral is
pledged, and all other demand and notices of any description, and assents to any
extension or postponement of the time of payment or any other such indulgence to
any substitution, exchange or release of Collateral and to the addition or
release of any person primarily or secondarily liable.
10. NOTICES. Except as otherwise provided herein, notice to or demand upon the
Borrower or the Bank shall be deemed to have been sufficiently given or served
for all purposes thereof, if mailed, postage prepaid:
(i) if to the Borrower Heartland Group, Inc.
▇▇▇ ▇. ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: General Counsel
(ii) if to the Bank: ▇▇▇▇▇ Brothers ▇▇▇▇▇▇▇▇ & Co.
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telex: 62923BBHUW
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
S.W.I.F.T.: ▇▇▇▇▇▇▇▇
Attention: Office of the General Counsel
Investor Services
or to such other address as the party to whom such notice is directed may have
designated in writing to the other parties hereto.
11. MISCELLANEOUS. No delay or omission on the part of the Bank in exercising
any right or remedy shall operate as a waiver thereof of any other right or
remedy. Waiver on any one occasion shall not be construed as a bar to or waiver
of any right or remedy on any future occasion. All of the Bank's rights and
remedies, whether evidenced hereby or by any other agreement, instrument or
paper, shall be cumulative and may be exercised singularly or concurrently, and
nothing herein shall be deemed to limit in any way any rights the Bank might
otherwise have under any other instrument or by law, including, without limiting
the generality thereof, the right to negotiate any note or other instrument
together with any Collateral specifically described therein. This Agreement and
the security interest granted hereby shall terminate when all of the Obligations
secured hereby have been fully paid and performed. The invalidity or
unenforceability of any one or more phrases, clauses or sections of this
Agreement shall not affect the validity or enforceability of the remaining
portions of it. This Agreement constitutes an "account control agreement" for
purposes of the Bank's perfecting its interest in
the Collateral under Article 8 of the State of New York Uniform Commercial Code
and shall be binding upon and inure to the benefit of the Borrower and their
respective successors and assigns.
This instrument shall take effect as an instrument under seal and shall be
governed by the law of the State of New York this 21st day of December, 2004.
▇▇▇▇▇ BROTHERS ▇▇▇▇▇▇▇▇ & CO.
as Lender
By:
------------------------------------
Name:
Title:
HEARTLAND GROUP, INC. on behalf of
Heartland Value Fund, Heartland Select
Value Fund and Heartland Value Plus
Fund, each a Sub-Fund thereof
By:
------------------------------------
Name:
Title:
