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Exhibit (K)(3)
CREDIT AGREEMENT
Dated as of June 12, 1996
between
COLONIAL INTERMEDIATE HIGH INCOME FUND
and
BANK OF AMERICA ILLINOIS
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Page
TABLE OF CONTENTS
I DEFINITIONS AND INTERPRETATION ............................... 1
1.1. Defined Terms .................................. 1
1.2. Interpretation ................................. 1
1.3. Accounting Terms ............................... 2
1.4. Authority of Adviser; Adviser Disclaimer ....... 2
II THE CREDITS .................................................. 3
2.1. Amounts and Terms of Commitments ............... 3
2.2. Note ........................................... 3
2.3. Transfer of Proceeds. .......................... 3
2.4. Prepayments .................................... 3
2.5. Repayment ...................................... 4
2.6. Interest ....................................... 4
2.7. Computation of Fees and Interest ............... 5
2.8. Payments ....................................... 5
2.9. Source of Repayment ............................ 5
III TAXES, YIELD PROTECTION AND ILLEGALITY ....................... 6
3.1. Taxes .......................................... 6
3.3. Increased Costs and Reduction of Return ........ 7
3.4. Prepayment Fee ................................. 8
3.4. Certificates of Bank ........................... 9
3.5. Survival ....................................... 9
IV CONDITIONS TO LOAN ........................................... 9
4.1. Conditions of Loan ............................. 9
V REPRESENTATIONS AND WARRANTIES ............................... 11
5.1. Existence ...................................... 11
5.2. Authorization .................................. 12
5.3. No Conflicts ................................... 12
5.4. Validity and Binding Effect .................... 12
5.5. No Default ..................................... 12
5.6. Financial Statements ........................... 12
5.7. Litigation ..................................... 13
5.8. Liens .......................................... 13
5.9. Partnerships ................................... 13
5.10. Purpose ........................................ 13
5.11. Compliance and Government Approvals ............ 14
5.12. Pension and Welfare Plans ...................... 14
5.13. Taxes .......................................... 14
5.14. Subsidiaries; Investments ...................... 14
5.15. Full Disclosure ................................ 14
5.16. Investment Policies ............................ 14
5.17. Tax Status ..................................... 14
5.18. Status of Loans ................................ 15
VI COVENANTS .................................................... 15
6.1. Financial Statements and Other Reports ......... 15
6.2. Notices ........................................ 16
6.3. Existence ...................................... 17
6.4. Nature of Business ............................. 17
6.5. Books, Records and Access ...................... 17
6.6. Insurance ...................................... 18
6.7. Investment Policies and Restrictions ........... 18
6.8. Taxes .......................................... 18
6.9. Compliance ..................................... 19
6.10. Pension Plans .................................. 19
6.11. Merger, Purchase and Sale ...................... 19
6.12. Asset Coverage Ratio ........................... 19
6.13. Liens .......................................... 19
6.14. Guaranties ..................................... 20
6.15. Other Agreements ............................... 20
6.16. Transactions with Related Parties .............. 20
6.17. Other Indebtedness ............................. 20
6.18. Changes to Organization Documents, etc ......... 20
6.19. Violation of Investment Restrictions, etc ...... 21
6.20. Proceeds of Loan ............................... 21
6.21. Adviser ........................................ 21
6.22. Service Providers to Fund ...................... 21
VII EVENTS OF DEFAULT ............................................ 21
7.1. Events of Default .............................. 21
7.2. Remedies ....................................... 24
VIII MISCELLANEOUS PROVISIONS ..................................... 24
8.1. Amendments and Waivers ......................... 24
8.2. Notices ........................................ 24
8.3. No Waiver; Cumulative Remedies ................. 25
8.4. Costs and Expenses ............................. 25
8.5. Fund Indemnification ........................... 26
8.6. Payments Set Aside ............................. 27
8.7. Successors and Assigns ......................... 27
8.8. Confidentiality ................................ 28
8.9. Set-off ........................................ 29
8.10. Counterparts ................................... 29
8.11. Survival ....................................... 29
8.12. Disclaimer ..................................... 29
8.13. Severability ................................... 29
8.14. No Third Parties Benefited ..................... 30
8.15. Governing Law and Jurisdiction ................. 30
8.16. Waiver of Jury Trial ........................... 30
8.17. Entire Agreement ............................... 30
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CREDIT AGREEMENT
THIS CREDIT AGREEMENT, dated as of June 12, 1996, is made by and
between COLONIAL INTERMEDIATE HIGH INCOME FUND (the "Fund"), and BANK OF AMERICA
ILLINOIS (the "Bank"),
W I T N E S S E T H:
WHEREAS, the Fund is a closed-end management investment company
registered under the Act;
WHEREAS, the Fund desires to obtain a term loan in the amount of
$27,400,000; and
WHEREAS, the Bank is willing, on the terms and subject to the
conditions hereinafter set forth, to make such term loan to the Fund,
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS AND INTERPRETATION
1.1 Defined Terms. Unless a clear contrary intention appears, terms
defined in Schedule I have the same respective meanings when used in this
Agreement.
1.2 Interpretation. In this Agreement, unless a clear contrary
intention appears:
(a) the singular number includes the plural number
and vice versa;
(b) reference to any Person includes such Person's
successors and assigns but, if applicable, only if such successors and
assigns are permitted by this Agreement, and reference to a Person in a
particular capacity excludes such Person in any other capacity or
individually;
(c) reference to any gender includes each other gender;
(d) reference to any agreement (including this Agreement),
document or instrument means such agreement, document or instrument as
amended or modified and in effect from time to time in accordance with
the terms thereof and, if applicable, the terms hereof and the other
Credit Documents and reference to any promissory note includes any
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promissory note which is an extension or renewal thereof or a
substitute or replacement therefor;
(e) reference to any applicable law means such applicable
law as amended, modified, codified, replaced or reenacted, in whole or
in part, and in effect from time to time, including rules and
regulations promulgated thereunder, and reference to any section or
other provision of any applicable law means that provision of such
applicable law from time to time in effect and constituting the
substantive amendment, modification, codification, replacement or
reenactment of such section or other provision;
(f) reference to any Article, Section, Annex, Schedule or
Exhibit means such Article or Section hereof or Annex, Schedule or Exhibit
hereto;
(g) "hereunder", "hereof", "hereto" and words of similar
import shall be deemed references to this Agreement as a whole and not to any
particular Article, Section or other provision hereof;
(h) "including" (and with the correlative meaning
"include") means including without limiting the generality of any description
preceding such term;
(i) "or" is not exclusive; and
(j) relative to the determination of any period of time,
"from" means "from and including" and "to" and "through" mean "to but
excluding".
1.3. Accounting Terms. In this Agreement, unless expressly otherwise
provided, accounting terms shall be construed and interpreted, and accounting
determinations and computations shall be made, in accordance with GAAP.
1.4. Authority of Adviser; Adviser Disclaimer. The Fund hereby confirms
that the Adviser has been duly authorized to act on its behalf for purposes of
this Agreement and the Note and to take all actions which the Fund is entitled
or required to take hereunder or thereunder, including, without limitation,
requesting the making of the Loan pursuant to Section 2, and executing and
delivering Borrowing Base Certificates and any and all other certificates,
reports, financial information and notices required to be delivered to the Bank
hereunder. Notwithstanding the foregoing or anything to the contrary contained
in this Agreement, the parties hereto acknowledge and agree that (a) in taking
any such action hereunder or under a Note, the Adviser is acting solely in its
capacity as investment
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adviser for the Fund and not in its individual capacity, (b) neither the Adviser
nor any of its officers, employees or agents (with the Adviser, collectively,
"Adviser Persons") shall have any liability whatsoever for any action taken or
omitted to be taken by any of them in connection with this Agreement or the Note
nor shall any of them be bound by or liable for any indebtedness, liability or
obligation hereunder or under the Note and (c) no Adviser Person shall be
responsible in any manner to the Bank for the truth, completeness or accuracy of
any statement, representation, warranty or certification contained in this
Agreement or in any information, report, certificate or other document furnished
by the Adviser on behalf of the Fund in connection with this Agreement,
including, without limitation, any Borrowing Base Certificate, and any
certificate or notice furnished pursuant to Section 6.1 or 6.2 hereof; provided
that, in the case of clauses (b) and (c) above, the conduct of the Adviser
Persons or any of them did not constitute gross negligence or willful
misconduct.
ARTICLE II
THE CREDITS
2.1. Amounts and Terms of Commitments. The Bank agrees, on the terms and
conditions set forth herein, to make a Loan to the Fund on June 14, 1996 in the
amount of $27,400,000, provided that the principal amount of the Loan shall not
exceed the Borrowing Base. Only one Loan shall be made hereunder and if all or
any portion thereof is repaid, it cannot be reborrowed.
2.2. Note. The Loan shall be evidenced by a Note in the form of Exhibit
2.2. The Bank shall endorse on the schedules annexed to the Note the date and
amount of the Loan and the amount of each payment of principal made by the Fund
with respect thereto. The Bank is irrevocably authorized by the Fund to endorse
the Note, and the Bank's record shall be conclusive absent manifest error;
provided that the failure of the Bank to make, or an error in making, a notation
thereon with respect to the Loan shall not limit or otherwise affect the
obligations of the Fund hereunder or under the Note to the Bank.
2.3 Transfer of Proceeds. The proceeds of the Loan will be made available
to the Fund by the Bank in accordance with written instructions provided to the
Bank by the Fund.
2.4. Prepayments. (a) If at any time the outstanding principal balance of
the Obligations shall exceed the Borrowing Base, the Fund shall immediately
prepay the outstanding principal amount of the Loan in an amount equal to such
excess, together
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with interest accrued thereon and amounts required under Section 3.4.
(b) Subject to Section 3.4, the Fund may, at any time or
from time to time, upon not less than three Business Days' irrevocable notice to
the Bank, prepay the Loan, in whole or in part, in minimum amounts of $1,000,000
or any multiple of $1,000,000 in excess thereof. Such notice of prepayment shall
specify the date and amount of such prepayment. If such notice is given by the
Fund, the Fund shall make such prepayment to the Bank, and the payment amount
specified in such notice shall be due and payable on the date specified therein,
together with accrued interest to each such date on the amount prepaid and any
amounts required pursuant to Section 3.4.
(c) Each prepayment of the Loan pursuant to this Section
shall be without premium or penalty, except as may be required by Section 3.4.
2.5. Repayment. The Fund shall repay to the Bank on the Termination Date
the aggregate principal amount of the Loan outstanding on such date.
2.6. Interest. (a) The Loan shall bear interest on the outstanding
principal amount thereof from the date of the Loan at a rate per annum equal
to 7.33%.
(b) Interest on the Loan shall be paid in arrears on each
Interest Payment Date. Interest shall also be paid on the date of any prepayment
of the Loan under Section 2.4 for the portion of the Loan so prepaid and upon
payment (including prepayment) in full thereof, and during the existence of any
Event of Default, interest shall be paid on demand of the Bank.
Notwithstanding subsection (a) of this Section, if any
amount of principal of or interest on any Loan, or any other amount payable
hereunder or under any other Credit Document, is not paid in full when due
(whether at stated maturity or by acceleration, demand or otherwise), the Fund
agrees to pay interest on such unpaid principal or other amount from the date
such amount becomes due until the date such amount is paid in full, and after
as well as before any entry of judgment thereon to the extent permitted by law,
payable on demand at a fluctuating rate per annum equal to the greater of
(i) 9.33% or (ii) the Base Rate plus 2%.
(c) Anything herein to the contrary notwithstanding, the
obligations of the Fund to the Bank hereunder shall be subject to the limitation
that payments of interest shall not be required for any period for which
interest is computed hereunder, to the extent (but only to the extent) that
contracting for or
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receiving such payment by the Bank would be contrary to the provisions of any
law applicable to the Bank limiting the highest rate of interest that may be
lawfully contracted for, charged or received by the Bank, and in such event the
Fund shall pay the Bank interest at the highest rate permitted by applicable
law.
2.7. Computation of Fees and Interest. (a) All computations of interest
shall be made on the basis of a 360-day year and actual days elapsed (which
results in more interest being paid than if computed on the basis of a 365- or
366-day year). Interest and fees shall accrue during each period during which
interest or such fees are computed from the first day thereof to the last day
thereof.
(b) Each determination of an interest rate by the Bank
shall be conclusive and binding on the Fund in the absence of manifest error.
The Bank will, at the request of the Fund, deliver to the Fund a statement
showing the quotations used by the Bank in determining any interest rate and the
resulting interest rate.
2.8. Payments. (a) All payments to be made by the Fund shall be made
without set-off, recoupment or counterclaim. Except as otherwise expressly
provided herein, all such payments shall be made to the Bank at the Bank's
Payment Office and shall be made in Dollars and in immediately available funds
no later than 11:00 a.m. (San Francisco time) on the date specified herein. Any
payment received by the Bank later than 11:00 a.m. (San Francisco time) shall be
deemed to have been received on the following Business Day, and any applicable
interest shall continue to accrue.
(b) Whenever any payment is due on a day other than a
Business Day, such payment shall be made on the following Business Day (unless
such Business Day shall be in the next calendar month in which case such payment
shall be made on the prior Business Day), and such extension or reduction of
time shall in such case be included in the computation of interest.
2.9. Source of Repayment. The parties hereto acknowledge that the Trust
Agreement for the Fund is on file with the Secretary of State of The
Commonwealth of Massachusetts and the Clerk of the City of Boston. The parties
hereby agree that this Agreement is not executed on behalf of the trustees of
the Fund as individuals; and that the obligations of the Fund under this
Agreement, the Note and any claims, obligations or liabilities arising hereunder
are not binding on any of the trustees, officers or shareholders of the Fund
individually but are binding upon only the assets and property of the Fund.
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(c) Nothing in this Section 2.9 shall affect the Bank's
rights against Adviser Persons as provided in Section 1.4.
ARTICLE III
TAXES, YIELD PROTECTION AND ILLEGALITY
3.1. Taxes. (a) Any and all payments by the Fund to the Bank under this
Agreement and any other Credit Document shall be made free and clear of, and
without deduction or withholding for, any Taxes. In addition, the Fund shall pay
all Other Taxes.
(b) The Fund agrees to indemnify and hold harmless the Bank
for the full amount of Taxes or Other Taxes in connection with a payment by it
(including any Taxes or Other Taxes imposed by any jurisdiction on amounts
payable by it under this Section) paid by the Bank and any liability (including
penalties, interest, additions to tax and expenses) arising therefrom or with
respect thereto, whether or not such Taxes or Other Taxes were correctly or
legally asserted. Payment under this indemnification shall be made within 30
days after the date the Bank makes written demand therefor.
(c) If the Fund shall be required by law to deduct or
withhold any Taxes or Other Taxes from or in respect of any sum payable
hereunder to the Bank, then:
(i) the sum payable shall be increased as necessary
so that after making all required deductions and withholdings
(including deductions and withholdings applicable to additional sums
payable under this Section), the Bank receives an amount equal to the
sum it would have received had no such deductions or withholdings been
made;
(ii) the Fund shall make such deductions and
withholdings;
(iii) the Fund shall pay the full amount deducted
or withheld to the relevant taxing authority or other authority
in accordance with applicable law; and
(iv) the Fund shall also pay to the Bank, at
the time interest is paid, all additional amounts which the Bank
specifies as necessary to preserve the after-tax yield the Bank would
have received if such Taxes or Other Taxes had not been imposed.
(d) Within 30 days after the date of any payment by the Fund
of Taxes or Other Taxes, the Fund shall furnish the Bank
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the original or a certified copy of a receipt evidencing payment thereof or
other evidence of payment satisfactory to the Bank.
(e) If the Fund is required to pay additional amounts to
the Bank pursuant to subsection (c) of this Section, then the Bank shall use
reasonable efforts (consistent with legal and regulatory restrictions) to change
the jurisdiction of its Lending Office so as to eliminate any such additional
payment by the Fund which may thereafter accrue, if such change in the judgment
of the Bank is not otherwise disadvantageous to the Bank.
3.2. Illegality. If the Bank reasonably determines that it is unlawful to
maintain the Loan if funded by deposits in the interbank eurodollar market, the
Bank shall so notify the Fund. The Bank and the Fund shall negotiate to
determine an appropriate interest rate to be applicable to the Loan while the
maintenance of the Loan funded in the interbank eurodollar market is unlawful.
If the Bank and the Fund shall fail to so agree on a rate, the Fund shall, upon
demand from the Bank, immediately prepay in full the Loan, together with
interest accrued thereon and amounts required under Section 3.4.
3.3. Increased Costs and Reduction of Return. (a) If the Bank reasonably
determines that, due to the introduction of or any change in or in the
interpretation of any law or regulation or the compliance by the Bank with any
guideline or request from any central bank or other Governmental Authority
(whether or not having the force of law), there shall be any increase in the
cost to the Bank of agreeing to make or making, funding or maintaining the Loan,
then the Fund shall be liable for, and shall from time to time upon demand pay
to the Bank, additional amounts as are sufficient to compensate the Bank for the
increased costs.
(b) If the Bank shall have determined that (i) the
introduction of any Capital Adequacy Regulation, (ii) any change in any Capital
Adequacy Regulation, (iii) any change in the interpretation or administration of
any Capital Adequacy Regulation by any central bank or other Governmental
Authority charged with the interpretation or administration thereof or (iv)
compliance by the Bank (or its Lending Office) or any corporation controlling
the Bank with any Capital Adequacy Regulation affects or would affect the amount
of capital required or expected to be maintained by the Bank or any corporation
controlling the Bank and (taking into consideration the Bank's or such
corporation's policies with respect to capital adequacy and the Bank's desired
return on capital) determines that the amount of such capital is increased as a
consequence of the Loan or other obligations under this Agreement, then, upon
demand of the Bank to the Fund, the Fund shall pay to the Bank, from time to
time as specified by the
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Bank, additional amounts sufficient to compensate the Bank for such increase.
3.4. Prepayment Fee. Upon the prepayment or repayment of the Loan on any
date other than the Termination Date or upon the failure of the Fund to borrow
the full amount of the Loan on June 14, 1996, the Fund shall pay a Prepayment
Fee. The Prepayment Fee shall be the sum of fees calculated as follows:
(a) Determine the amount of interest which would have
accrued each semi-annual period for the Prepaid Amount had it remained
outstanding until the Termination Date, using the Initial IBOR Rate;
(b) Subtract from each semi-annual interest amount
determined in (a), above, the amount of interest which would accrue for the
Prepaid Amount if it were reinvested from the date of prepayment through the
Termination Date, using the Subsequent IBOR Rate;
(c) If the difference determined pursuant to (b) for the
Prepaid Amount is greater than zero, discount the semi-annual difference to the
date of prepayment by the Subsequent IBOR Rate. The sum of the discounted
semi-annual differences is the Prepayment Fee for that Prepaid Amount.
For purposes of this section,
(a) "Initial IBOR Rate" means the fixed interest rate per
annum which the Bank reasonably estimates as the rate of interest at which
dollar deposits in the approximate amount of the Loan for the period from June
14, 1996 to the Termination Date would be offered by the Grand Cayman Branch of
Bank of America National Trust and Savings Association, Grand Cayman, B.W.I. (or
such other office as may be designated for such purpose by the Bank), to major
banks in the offshore dollar interbank market upon request of such banks at
approximately 11:00 a.m. (New York City time) two Business Days prior to the
commencement of such period.
(b) "Prepaid Amount" means the principal amount of the
Loan being prepaid or not being borrowed.
(c) "Subsequent IBOR Rate" means the fixed interest rate
per annum which the Bank reasonably estimates as the rate of interest at which
dollar deposits in the approximate amount of the Prepaid Amount for the period
from the date of prepayment to the Termination Date would be offered by the
Grand Cayman Branch of Bank of America National Trust and Savings Association,
Grand Cayman, B.W.I. (or such other office as may be designated for such purpose
by the Bank), to major banks in the offshore dollar
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interbank market upon request of such banks at approximately 11:00 a.m. (New
York City time) two Business Days prior to the commence of such period.
3.5 Certificates of Bank. The Bank shall deliver to the Fund a certificate
setting forth in reasonable detail the amount payable to the Bank hereunder, and
such certificate shall be conclusive and binding on the Fund in the absence of
manifest error.
3.6. Survival. The agreements and obligations of the Fund in this Article
III shall survive the payment of all other Obligations.
ARTICLE IV
CONDITIONS TO LOAN
4.1. Conditions of Loan. The obligation of the Bank to make the Loan shall
b subject to the following conditions precedent.
(a) The Bank shall have received from the Fund a certificate of its
Secretary or Assistant Secretary as to
(i) resolutions of its board of trustees then in full force and
effect authorizing the execution, delivery and performance of this
Agreement, the Note and each other Credit Document to be executed by it;
(ii) the incumbency and signatures of those of its officers or
agents authorized to act with respect to this Agreement, the Note and each
other Credit Document executed by it;
(iii) the Fund's valid existence as evidenced by a certificate
issued by the Secretary of State of The Commonwealth of Massachusetts and
appended to the relevant certificate of its Secretary or Assistant
Secretary; and
(iv) the fact that the agreements delivered by the Fund pursuant to
Section 4.1(e) constitute all such agreements between the Fund and the
Adviser;
upon which certificates the Bank may conclusively rely until they shall have
received a further certificate from the Fund cancelling or amending such prior
certificate.
(b) The Bank shall have received a Note duly executed and delivered
by the Fund and made payable to the order of the Bank.
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(c) The Bank shall have received an opinion addressed to the Bank,
from Ropes & ▇▇▇▇, counsel to the Fund, substantially in the form of Exhibit
4.1(c), which the Fund hereby expressly authorizes and instructs such counsel to
prepare and deliver.
(d) The Bank shall have received evidence of payment of all accrued
and unpaid fees, costs and expenses to the extent then due and payable on the
Closing Date, together with Attorney Costs of the Bank to the extent invoiced
prior to or on the Closing Date, plus such additional amounts of Attorney Costs
as shall constitute the Bank's reasonable estimate of Attorney Costs incurred or
to be incurred by it through the closing proceedings (provided that such
estimate shall not thereafter preclude final settling of accounts between the
Fund and the Bank), including any such costs, fees and expenses then due and
payable pursuant to Section 8.4.
(e)The Bank shall have received copies of the investment advisory
agreement between the Fund and the Adviser, together with all sub-advisory
agreements, if any.
(f) The Bank shall have received an initial Borrowing Base
Certificate.
(g) The Bank shall have received copies of the most recent
prospectus for the Fund.
(h) No Default shall have occurred and be continuing.
(i) The representations and warranties contained in Article V
(except to the extent such representations and warranties relate solely to an
earlier date, in which case they shall be true and correct as of such earlier
date) shall be true and correct in all material respects on and as of the date
of the Loan, both immediately before and after giving effect to the Loan.
(j) The acceptance by the Fund of the proceeds of the Loan shall
constitute a representation and warranty by the Fund that on the date of the
Loan (both immediately before and after giving effect to the Loan and the
application of the proceeds thereof) or continuation or conversion, as the case
may be, the statements made in Sections 4.1(h), (i) and (l), and in the document
referred to in Section 4.1(k) are true and correct.
(k) The Bank shall have received a duly executed FRB Form F U-1 as
required pursuant to FRB Regulation U (12 C.F.R. ss. 221.1 et seq.), in form and
substance satisfactory to the Bank and its counsel, together with all
information requested by the
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Bank in connection therewith, including updates of information, if any, required
by such Regulation U.
(l) Both before and after giving effect to the Loan, the Asset
Coverage Ratio shall be at least 3 to 1.
Any instrument, agreement or other document to be received by the
Bank pursuant to this Article IV, and any other condition precedent required to
be met or satisfied under this Article IV, shall be in form and substance
reasonably satisfactory to the Bank.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
In order to induce the Bank to enter into this Agreement and to make
the Loan hereunder, the Fund represents and warrants to the Bank.
5.1. Existence. The Fund is a closed-end management investment
company within the meaning of the Act and is duly organized, validly existing
and in good standing under the laws of the state of its organization. The Fund
is in good standing and is duly qualified to do business in The Commonwealth of
Massachusetts. The Fund's shares have been and will be duly authorized, validly
issued, fully paid and non-assessable.
5.2. Authorization. The Fund is duly authorized to execute and
deliver this Agreement and the Note and, so long as this Agreement shall remain
in effect with respect to it, the Fund will continue to be duly authorized to
borrow monies hereunder on its own behalf and to perform its obligations under
this Agreement and the Note. The execution, delivery and performance by the Fund
of this Agreement and the Note and the borrowing of the Loan do not and will not
require any consent or approval of or registration with any governmental agency
or authority.
5.3. No Conflicts. The execution, delivery and performance by the
Fund of this Agreement and the Note do not and, so long as this Agreement shall
remain in effect with respect to them, will not (i) conflict with any provision
of law, (ii) conflict with the Trust Agreement of the Fund, (iii) conflict with
any agreement binding upon them, (iv) conflict with the Fund's most recent
prospectus, (v) conflict with any court or administrative order or decree
applicable to them or (vi) require or result in the creation or imposition of
any Lien on any of the Fund's assets.
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5.4. Validity and Binding Effect. This Agreement is, and the Note
when duly executed and delivered will be, the legal, valid and binding
obligation of the Fund, enforceable against it in accordance with their terms,
except as enforceability may be limited by bankruptcy, insolvency,
reorganization, receivership, fraudulent conveyance, fraudulent transfer,
moratorium or other similar laws of general application affecting the
enforcement of creditors' rights or by general principles of equity limiting the
availability of equitable remedies.
5.5. No Default. The Fund is not in default under any agreement or
instrument to which it is a party or by which any of its properties or assets is
bound or affected, other than minor defaults that could not reasonably be
expected to result in a Material Adverse Change. To the best of its knowledge,
no Default with respect to it has occurred and is continuing.
5.6. Financial Statements. The most recent audited Statement of
Assets and Liabilities of the Fund and the most recent semi-annual asset
statement, copies of which have been or will be furnished to the Bank, have been
prepared in conformity with GAAP applied on a basis consistent with that of the
preceding Fiscal Year or period and present fairly its financial condition as at
such dates and the results of its operations for the periods then ended, subject
(in the case of the interim financial statement) to year-end audit adjustments.
Since the date of its most recent Statement of Assets and Liabilities and such
semi-annual asset statement, there has been no Material Adverse Change.
5.7. Litigation. No claims, litigation, arbitration proceedings or
governmental proceedings that could reasonably be expected to result in a
Material Adverse Change are pending against the Fund or, to the best of its
knowledge, threatened against or are affecting it, except those referred to in
Exhibit 5.7-1. Other than any liability incident to such claims, litigation or
proceedings or provided for or disclosed in the financial statements referred to
in Section 5.6 or listed on Exhibit 5.7-2, to the best of its knowledge, it has
no contingent liabilities which are material to it other than those incurred in
the ordinary course of business.
5.8. Liens. None of the property, revenues or assets of the Fund is
subject to any Lien, except (i) Liens in favor of the Banks, if any, (ii) Liens
for current Taxes not delinquent or Taxes being contested in good faith and by
appropriate proceedings and as to which such reserves or other appropriate
provisions as may be required by GAAP are being maintained, (iii) Liens as are
necessary in connection with a secured letter of credit opened by or for it in
connection with the trustees' and officers' errors and omissions liability
insurance policy of the
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Fund, (iv) Liens in connection with the payment of initial and variation margin
in connection with authorized futures and options transactions and collateral
arrangements with respect to options, futures contracts, options on futures
contracts, when-issued or delayed delivery securities or other authorized
investments, (v) Liens arising under any custodian agreement to which it or the
Fund is a party, (vi) Liens in connection with reverse repurchase transactions,
and (vii) Liens on Deposit Securities deposited with the trustee under the
Indenture.
5.9. Partnerships. The Fund is not a general partner or joint
venturer in any partnership or joint venture.
5.10. Purpose. The proceeds of the Loan will be used to purchase
Deposit Securities, which will be deposited in an account with the trustee under
the Indenture. The proceeds of such Deposit Securities will be used to fund the
redemption of the Fund's Senior Extendable Notes. Neither the making of the Loan
nor the use of the proceeds thereof will violate or be inconsistent with the
provisions of Federal Reserve Board Regulations G, T, U or X. Neither the Trust
nor the Fund is engaged in the business of extending credit for the purpose of
purchasing or carrying margin stock. It acknowledges that the Loan may be deemed
by the Federal Reserve Board to be a "purpose loan" under Regulation U because
of the status of the Trust as an investment company (or the functional
equivalent thereof).
5.11. Compliance and Government Approvals. The Fund is in compliance
with all statutes and governmental rules and regulations applicable to it,
including, without limitation, the Act other than immaterial incidents of
non-compliance that could not reasonably be expected to result in a Material
Adverse Change. No authorization or approval or other action by, and no notice
to or filing with, any governmental authority or regulatory body or other person
is required for the due execution, delivery or performance by the Fund of this
Agreement, the Note or any of the other Credit Documents.
5.12. Pension and Welfare Plans. The Fund has not established or
maintained, nor is it liable under, any Plan.
5.13. Taxes. The Fund has filed all tax returns that are required to
have been filed and have paid, or made adequate provisions for the payment of,
all Taxes that are due and payable, except such Taxes, if any, as are being
contested in good faith and by appropriate proceedings and as to which such
reserves or other appropriate provisions as may be required by GAAP have been
maintained. The Fund is not aware of any proposed assessment against it for
additional Taxes (or any basis for any such assessment) which might be material
in amount to it. The Fund has substantially complied with all requirements of
the Code
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applicable to regulated investment companies so as to be relieved of federal
income tax on net investment income and net capital gains distributed to its
shareholders.
5.14. Subsidiaries; Investments. The Fund does not have Subsidiaries
or equity investments or any interest in any other Person other than portfolio
securities (including investment company securities) which may have been
acquired in the ordinary course of business.
5.15. Full Disclosure. No representation or warranty contained in
this Agreement or in any other document or instrument furnished by the Fund to
the Bank in connection herewith contains any untrue statement of any material
fact as of the date when made or omits to state any material fact necessary to
make the statements herein or therein not misleading as of the date when made in
light of the circumstances in which the same were made.
5.16. Investment Policies. The Fund's assets are being invested
substantially in accordance with the investment policies and restrictions set
forth in each of its most recent prospectus and its most recent statement of
additional information.
5.17. Tax Status. The Fund has taken all steps reasonably necessary
to maintain its status as a regulated investment company under the Code with
respect to net investment income and net capital gains.
5.18. Status of Loans. The Fund's obligation in connection with the
repayment of any Loans made to it hereunder shall at all times constitute its
unconditional Indebtedness and will rank at least pari passu in priority of
payment with all of its other present and future unsecured and unsubordinated
Indebtedness.
ARTICLE VI
COVENANTS
From the date of this Agreement and thereafter until all Obligations
have been paid or performed in full, the Fund shall perform the obligations made
applicable to it in this Article VI.
6.1. Financial Statements and Other Reports. The Fund shall deliver
to the Bank:
(a) As soon as available and in any event within 60 days
after each of its Fiscal Years, a copy of its annual audited Statement
of Assets and Liabilities, including a statement of investments,
prepared in conformity with GAAP
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and certified by an independent certified public accountant who, in
the commercially reasonable judgment of the Bank, shall be
satisfactory to the Bank, together with a certificate from such
accountant (i) acknowledging to the Bank such accountant's
understanding that the Bank is relying on such Statement of Assets and
Liabilities, (ii) containing a computation of, and showing compliance
with, the financial ratios contained in Sections 6.12, 6.23 and 6.24
and (iii) to the effect that, in making the examination necessary for
the signing of such Statement of Assets and Liabilities, such
accountant has not become aware of any Default that has occurred and
is continuing, or if such accountant has become aware of any such
event, describing it and the steps, if any, being taken to cure it;
(b) Within 60 days after the end of the first six months of
its Fiscal Year, a copy of its published semi-annual asset statement,
prepared in conformity with GAAP;
(c) Within 15 days after the end of each calendar month, (i)
a certificate substantially in the form of Exhibit 6.1 (a "Borrowing
Base Certificate") setting forth (A) borrowing base (as calculated in
the manner contemplated by the form of Borrowing Base Certificate, the
"Borrowing Base") and (B) Asset Coverage Ratio as of the last day of
such calendar month and (ii) a certificate signed by an Authorized
Officer certifying that, to the best of such Person's knowledge, no
Default has occurred and is continuing or, if an Event of Default has
occurred and is continuing, the steps being taken to remedy the same;
(d) within 15 days after each month, a list of all assets of
the Fund and their most recent valuations;
(e) Within 15 days following the filing thereof, any
preliminary proxy materials filed with the Securities and Exchange
Commission;
(f) Promptly from time to time such other reports or
information as the Bank may reasonably request.
6.2. Notices. The Fund shall notify the Bank in writing of any of
the following immediately upon learning of the occurrence thereof, describing
the same and, if applicable, stating the steps being taken by the Person(s)
affected with respect thereto:
(a) the occurrence of a Default;
(b) the institution of any litigation, arbitration
proceeding or governmental proceeding which is likely to result in a
Material Adverse Change;
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(c) the entry of any judgment or decree against it if the
aggregate amount of all judgments and decrees then outstanding against
it exceeds the lesser of 3% of its Net Asset Value or $3,000,000 after
deducting (i) the amount with respect to which it is insured and with
respect to which the insurer has assumed responsibility in writing and
(ii) the amount for which it is otherwise indemnified if the terms of
such indemnification and the Person providing such indemnification are
satisfactory to the Bank;
(d) the occurrence of a change of its name (whether of its
legal name or a "d/b/a" designation). The Fund shall promptly execute
and deliver to each Bank a new Note for the Fund executed in its new
name, together with such other documents in connection therewith as
the Bank shall reasonably request;
(e) the scheduling of consideration by the board of
trustees of the Fund of a change in the Fund's Adviser, administrator,
custodian (unless such custodian is the Bank) or independent
accountant, or the appointment of any sub-adviser or any Person acting
in a similar capacity to an Adviser; provided that a mailing to
shareholders with respect to any of the foregoing shall not be deemed
to be sufficient notice hereunder;
(f) within 15 days following any change in investment
policy, a copy of such change; and
(g) the occurrence of such other events as the Bank may from
time to time reasonably specify.
Notwithstanding anything to the contrary in the foregoing, in the case
of the matters described in subparagraph (e), the notice contemplated by this
Section 6.2 shall be given not later than 30 days prior to the time (i) the
board of trustees of the Fund is to consider approval of such change or
appointment or otherwise determines to recommend such change or appointment (if
necessary) to the Fund's shareholders for their approval and (ii) of any change
of the Fund's custodian; provided, however, if in the case of the matters
contemplated by subparagraph (e) the Fund could not in good faith have provided
the specified advance notice, such notice shall be given by the Fund immediately
following the earliest feasible time the notice could have been provided.
6.3. Existence. The Fund, except as specified in Section 6.11(a), shall
maintain and preserve its existence as a registered investment company within
the meaning of the Act, and maintain and preserve all rights, privileges,
licenses, copyrights, trademarks, trade names, franchises and other
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authority to the extent material and necessary for the conduct of its business
in the ordinary course.
6.4. Nature of Business. The Fund shall continue in, and limit its
operations to, the business of a closed-end management investment company,
within the meaning of the Act, and maintain in full force and effect at all
times all governmental licenses, registrations, permits and approvals necessary
for the continued conduct of its business, including, without limitation, its
registration with the Securities and Exchange Commission under the Act as a
closed-end investment company.
6.5. Books, Records and Access. The Fund shall maintain complete and
accurate books and records in which full and correct entries in conformity with
GAAP shall be made of all transactions in relation to its business and
activities; upon reasonable notice, the Fund shall permit access by the Bank to
its books and records during normal business hours and permit the Bank to make
copies of such books and records.
6.6. Insurance. The Fund shall maintain in full force and effect insurance
to such extent and against such liabilities as is commonly maintained by
companies similarly situated, including, but not limited to (i) such fidelity
bond coverage as shall be required by Rule 17g-1 promulgated under the Act or
any similar or successor provision and (ii) errors and omissions, director and
officer liability and other insurance against such risks and in such amounts
(and with such co-insurance and deductibles) as is usually carried by other
companies of established reputation engaged in the same or similar businesses
and similarly situated and will, upon request of the Bank, furnish to the Bank a
certificate of an Authorized Officer setting forth the nature and extent of all
insurance maintained by the Fund in accordance with this Section.
6.7. Investment Policies and Restrictions. (a) The Fund, without prior
written notice to the Bank of at least 30 days, shall not rescind, amend or
modify any investment policy described as "fundamental" in any prospectus or any
registration statement(s) that may be on file with the Securities and Exchange
Commission with respect thereto (collectively herein, a "proposed change"). If,
in the reasonable judgment of the Bank, such proposed change will result in a
change in the Bank's analysis of the creditworthiness of the Fund, the Bank
shall notify the Fund of such decision; thereafter, if such proposed change is
implemented with respect to the Fund, the Loan shall become immediately due and
payable.
(b) The Fund's investment in any of its assets shall be made in
accordance with its investment policies and restrictions set forth in its most
recent prospectus.
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6.8. Taxes. The Fund shall pay when due all of its Taxes, unless and only
to the extent that such Taxes are being contested in good faith and by
appropriate proceedings and it shall have set aside on its books such reserves
or other appropriate provisions therefor as may be required by GAAP. The Fund
shall at all times comply with all requirements of the Code applicable to
regulated investment companies, to such effect as not to be subject to federal
income taxes on net investment income and net capital gains distributed to its
shareholders.
6.9. Compliance. The Fund shall comply in all material respects with all
statutes and governmental rules and regulations applicable to it, including,
without limitation, the Act.
6.10. Pension Plans. The Fund will not enter into, or incur any liability
relating to, any Plan.
6.11. Merger, Purchase and Sale. The Fund shall not:
(a) be a party to any merger or consolidation.
(b) except for sales or other dispositions of portfolio securities in
the ordinary course of its business or to meet shareholder redemption requests,
sell, transfer, convey, lease or otherwise dispose of all or any substantial
part of its assets; or
(c) purchase or otherwise acquire all or substantially all the assets
of any Person without the review and consent thereto of the Bank, which consent
shall not be unreasonably withheld.
For purposes of this Section 6.11 only, a sale, transfer, conveyance,
lease or other disposition of assets shall be deemed to be a "substantial part"
of the assets of the Fund only if the value of such assets, when added to the
value of all other assets sold, transferred, conveyed, leased or otherwise
disposed of by the Fund (other than in the normal course of business or in a
manner otherwise consistent with the Fund's investment policies) during the same
Fiscal Year, exceeds 15% of the Fund's Total Assets determined as of the end of
the immediately preceding Fiscal Year.
6.12. Asset Coverage Ratio. The Fund shall not at any time permit its
Asset Coverage Ratio to be less than 3 to 1 or such other more restrictive ratio
as may be set forth in any prospectus with respect to the Fund.
6.13. Liens. The Fund shall not create or permit to exist any Lien with
respect to any property, revenues or assets now owned or hereafter acquired by
it, except (i) Liens in favor of
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the Bank, if any, (ii) Liens for current Taxes not delinquent or Taxes being
contested in good faith and by appropriate proceedings and as to which such
reserves or other appropriate provisions as may be required by GAAP are being
maintained, (iii) Liens as are necessary in connection with a secured letter of
credit opened by or on behalf of the Fund in connection with the Fund's
trustees' errors and omissions liability insurance policy, (iv) Liens incurred
in the ordinary course of business in connection with authorized futures and
options transactions and collateral arrangements with respect to options,
futures contracts, options on futures contracts, when-issued or delayed delivery
securities or other authorized investments, (v) Liens arising under any
custodian agreement to which the Fund is a party, (vi) Liens in connection with
reverse repurchase agreements and (vii) Liens on Deposit Securities deposited
with the trustee under the Indenture; provided, however, the value of any of its
assets subject to a Lien shall be excluded from calculation of the Borrowing
Base.
6.14. Guaranties. The Fund shall not become or be a guarantor or surety
of, or otherwise become or be responsible in any manner (whether by agreement to
purchase any obligations, stock, assets, goods or services, or to supply or
advance any funds, assets, goods or services, or otherwise) with respect to, any
undertaking of any other Person, except for the endorsement, in the ordinary
course of collection, of instruments payable to it or its order.
6.15. Other Agreements. The Fund shall not enter into any agreement
containing any provision that would be violated or breached by performance of
its obligations hereunder or under any instrument or document delivered or to be
delivered by it hereunder or in connection herewith.
6.16. Transactions with Related Parties. The Fund shall not enter into or
be a party to any transaction or arrangement, including, without limitation, the
purchase, sale, loan, lease or exchange of property or the rendering of any
service, with any Related Party, except in the ordinary course of and pursuant
to the reasonable requirements of its business and upon fair and reasonable
terms no less favorable to it than would be obtainable in a comparable
arm's-length transaction with a Person not a Related Party, provided that any
such transaction must be made in substantial compliance with Section 17 of the
Act or an exemption therefrom.
6.17. Other Indebtedness. The Fund shall not incur or permit to exist any
Indebtedness or issue any preferred stock, other than (i) the Loan; (ii)
unsecured Indebtedness owing to its custodian with respect to Indebtedness
arising from failed trades that will not exceed the greater of $4,000,000 and 3%
of its
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then-current Net Asset Value; and (iii) reverse repurchase transactions in an
amount not exceeding that permitted by the Fund's investment policies and
restrictions.
6.18. Changes to Organization Documents, etc. The Fund shall not make or
permit to be made any material changes to its Organization Documents without the
prior written consent of the Bank.
6.19. Violation of Investment Restrictions, etc. The Fund shall not
violate or take any action which would result in a violation of any of the
investment restrictions or fundamental investment policies of the Fund as from
time to time in effect.
6.20. Proceeds of Loan. None of the proceeds of the Loan shall be used
directly for the purpose, whether immediate, incidental or ultimate, of
acquiring any "margin stock" within the meaning of Regulation U.
6.21. Adviser. The Fund shall maintain Colonial Management Associates,
Inc. or one of its Affiliates as Adviser to it.
6.22. Service Providers to Fund. The Fund not shall change its custodian,
accountant or administrator unless the Bank provides its prior written consent
to such change, which consent shall not be withheld by the Bank unless, based
upon its reasonable judgment, the Bank in good faith concludes that such change
will result in a change in the creditworthiness of the Fund.
6.23. Single Issuer. The Fund shall not permit its largest investment
other than investments in securities issued or guaranteed by the government of
the United States or agencies or instrumentalities thereof (including as one
investment multiple investments in one Person or one Person and its Subsidiaries
and Affiliates) to exceed 5% of the Total Assets of the Fund.
6.24. Liquidity. The Fund shall not permit at any time its Cash Equivalent
Investments to be an amount less than the sum of (i) the amount of dividends
payable by the Fund to its shareholders in the month following the date of
determination, plus (ii) the amount of interest payable hereunder on the next
interest payment date following the date of determination.
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ARTICLE VII
EVENTS OF DEFAULT
7.1. Events of Default. Each of the following shall constitute an Event of
Default:
(a) Default in payment by the Fund (i) when and as required
to be paid herein of any amount of principal of any Loan or (ii)
within five days after the same becomes due of any interest, fee or
any other amount payable hereunder or under any other Credit Document.
(b) Default by the Fund in the payment when due, whether by
acceleration or otherwise (subject to any applicable grace period), of
any Indebtedness of, or guaranteed by, the Fund in excess of 3% of the
Fund's then-current Net Asset Value.
(c) Any event or condition shall occur that results in the
acceleration of the maturity of any Indebtedness of, or guaranteed by,
the Fund or enables the holder or holders of such other Indebtedness
or any trustee or agent for such holders (any required notice of
default having been given and any applicable grace period having
expired) to accelerate the maturity of such other Indebtedness in
excess of 3% of the Fund's then-current total Net Asset Value.
(d) Default by the Fund in the payment when due, whether by
acceleration or otherwise, or in the performance or observance
(subject to applicable grace periods, if any, having expired) of (i)
any obligation or agreement of the Fund to or with the Bank (other
than any obligation or agreement of the Fund hereunder or under the
Note) or (ii) any material obligation or agreement of the Fund to or
with any other Person, except only to the extent that the existence of
any such default is being contested by the Fund in good faith and by
appropriate proceedings and the Fund shall have set aside on its books
such reserves or other appropriate provisions therefor as may be
required by GAAP, provided that the amount of such obligation arising
from any default is in excess of 3% of the Fund's then-current total
Net Asset Value.
(e) The Fund (i) ceases or fails to be solvent, or generally
fails to pay, or admits in writing its inability to pay, its debts as
they become due, subject to applicable grace periods, if any, whether
at stated maturity or otherwise; (ii) voluntarily ceases to conduct
its business in the ordinary course; (iii) commences any
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Insolvency Proceeding with respect to itself; or (iv) takes any action
to effectuate or authorize any of the foregoing.
(f) (i) Any involuntary Insolvency Proceeding is commenced
or filed against the Fund, or any writ, judgment, warrant of
attachment, execution or similar process is issued or levied against a
substantial part of its assets, and any such proceeding or petition
shall not be dismissed, or such writ, judgment, warrant of attachment,
execution or similar process shall not be released, vacated or fully
bonded within 60 days after commencement, filing or levy; (ii) the
Fund admits the material allegations of a petition against it in any
Insolvency Proceeding, or an order for relief (or similar order under
non-U.S. law) is ordered in any Insolvency Proceeding; or (iii) it
acquiesces in the appointment of a receiver, trustee, custodian,
conservator, liquidator, mortgagee in possession (or agent therefor)
or other similar Person for itself or a substantial portion of its
property or business.
(g)The Fund shall default in the performance of its
agreement under Section 6.4, 6.7, 6.11, 6.12 or 6.24.
(h) The Fund shall default in the performance of its other
agreements herein set forth (and not constituting an Event of Default
under any of the other subsections of this Section 7.1), and such
default shall continue for 30 days or three Business Days in the case
of the agreement contained in the last sentence of the definition of
"Total Assets" after notice thereof to the Fund from the Bank.
(i) Any representation or warranty made by the Fund herein,
or in any schedule, statement, report, notice, certificate or other
writing furnished by it on or as of the date as of which the facts set
forth therein are stated or certified, is untrue or misleading in any
material respect when made or deemed made or any certification made or
deemed made by it to the Bank is untrue or misleading in any material
respect on or as of the date made or deemed made.
(j) There shall be entered against the Fund one or more
judgments or decrees which, when taken together, will exceed the
lesser of (x) 3% of the Fund's then-current total Net Asset Value and
(y) $3,000,000, excluding those judgments or decrees (i) that shall
have been stayed or discharged less than 30 calendar days from the
entry thereof and (ii) those judgments and decrees for and to the
extent which the Fund is insured and with respect to which the insurer
has assumed responsibility in writing or for and to the extent which
the Fund is otherwise indemnified if the
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terms of such indemnification and the Person providing such
indemnification are satisfactory to the Bank.
(k) The Bank shall have reasonably determined in good faith
that a Material Adverse Change as to the Fund has occurred.
(l) The Fund shall no longer be in compliance with all
material provisions of the Act after giving effect to all notice, cure
and contest periods thereunder.
(m) Colonial Management Associates, Inc. or one of its
Affiliates shall cease to be the Adviser or administrator of the Fund,
or the Fund is otherwise in breach of the covenant set forth in
Section 6.22.
(n) The Fund shall violate or take any action that would
result in a violation of any of its investment restrictions or
fundamental investment policies as from time to time in effect, except
for violations or the taking of such actions that could not reasonably
be expected to result in a Material Adverse Change.
(o) There occurs a Change in Control of the Adviser.
7.2. Remedies. If any Event of Default described in Section 7.1 shall have
occurred and be continuing, the Bank may declare the Obligations under the Note
to be due and payable, whereupon the Obligations shall become immediately due
and payable, all without advance notice of any kind (except that if an event
described in Section 7.1(e) or Section 7.1(f) occurs, the Obligations shall
become immediately due and payable without declaration or advance notice of any
kind). The Bank shall promptly advise the Fund of any such declaration, but
failure to do so shall not impair the effect of such declaration. If an Event of
Default shall have occurred, the Bank may exercise all rights and remedies
available to it against the Fund under the Credit Documents or applicable law.
ARTICLE VIII
MISCELLANEOUS PROVISIONS
8.1. Amendments and Waivers. No amendment or waiver of any provision of
this Agreement or any other Credit Document, and no consent with respect to any
departure by the Fund therefrom, shall be effective unless the same shall be in
writing and signed by the Bank and the Fund, and then any such waiver or consent
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shall be effective only in the specific instance and for the specific purpose
for which given.
8.2. Notices. All notices, requests and other communications shall be in
writing (including, unless the context expressly otherwise provides, by
facsimile transmission, provided that any matter transmitted by the Fund by
facsimile (i) shall be immediately confirmed by a telephone call to the
recipient at the number specified on Schedule II and (ii) shall be followed
promptly by delivery of a hard copy original thereof) and mailed, faxed or
delivered to the address or facsimile number specified for notices on Schedule
II, or, as directed to the Fund or the Bank, to such other address as shall be
designated by such party in a written notice to the other party, and as directed
to the other party, at such other address as shall be designated by such party
in a written notice to the Fund or the Bank.
(b) All such notices, requests and communications shall, when
transmitted by overnight delivery or faxed, be effective when delivered for
overnight (next-day) delivery or transmitted in legible form by facsimile
machine, respectively, or if mailed, upon the third Business Day after the date
deposited into the U.S. mail, or if delivered, upon delivery; provided that
notices pursuant to Article II shall not be effective until actually received by
the Bank.
(c) Any agreement of the Bank herein to receive certain notices by
telephone or facsimile is solely for the convenience and at the request of the
Fund. The Bank shall be entitled to rely on the authority of any Person
purporting to be a Person authorized by the Fund to give such notice, and the
Bank shall not have any liability to the Fund or other Person on account of any
action taken or not taken by the Bank in reliance upon such telephonic or
facsimile notice. The obligation of the Fund to repay the Loan shall not be
affected in any way or to any extent by any failure by the Bank to receive
written confirmation of any telephonic or facsimile notice or the receipt by the
Bank of a confirmation which is at variance with the terms understood by the
Bank to be contained in the telephonic or facsimile notice.
8.3. No Waiver; Cumulative Remedies. No failure to exercise and no delay
in exercising, on the part of the Bank, any right, remedy, power or privilege
hereunder 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.
8.4. Costs and Expenses. The Fund shall:
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(a) whether or not the transactions contemplated hereby are
consummated, pay or reimburse the Bank within five Business Days after demand
for all reasonable costs and expenses incurred by the Bank in connection with
the development, preparation, delivery, administration and execution of, and any
amendment, supplement, waiver or modification to (in each case, whether or not
consummated), this Agreement, any Credit Document and any other documents
prepared in connection herewith or therewith, and the consummation of the
transactions contemplated hereby and thereby, including reasonable Attorney
Costs incurred by the Bank with respect thereto; provided notwithstanding
anything to the contrary in the foregoing, the responsibility of the Fund to
reimburse the Bank for Attorney Costs in connection with the development,
preparation, delivery and execution of this Agreement and such other documents
and the consummation of such transactions shall be limited to the reasonable
fees and disbursements of outside counsel to the Bank; and
(b) pay or reimburse the Bank within five Business Days after demand
for all costs and expenses (including Attorney Costs) incurred by them in
connection with the enforcement, attempted enforcement, or preservation of any
rights or remedies under this Agreement or any other Credit Document during the
existence of an Event of Default or after acceleration of the Loan (including in
connection with any "workout" or restructuring regarding the Loan and including
in any Insolvency Proceeding or appellate proceeding).
8.5. Fund Indemnification. (a) Whether or not the transactions
contemplated hereby are consummated, the Fund shall indemnify and hold the Bank
and its officers, directors, employees, counsel, agents and attorneys-in-fact
(each, an "Indemnified Person"), harmless from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, charges, expenses and disbursements (including Attorney Costs) of any
kind or nature whatsoever which may at any time (including at any time following
repayment of the Loan or replacement of the Bank) be imposed on, incurred by or
asserted against any such Person in any way relating to or arising out of this
Agreement or any document contemplated by or referred to herein, or the
transactions contemplated hereby, or any action taken or omitted by any such
Person under or in connection with any of the foregoing, including with respect
to any investigation, litigation or proceeding (including any Insolvency
Proceeding or appellate proceeding) related to or arising out of this Agreement
or the Loan or the use of the proceeds thereof, whether or not any Indemnified
Person is a party thereto (all the foregoing, collectively, the "Indemnified
Liabilities"); provided that no Fund shall have an obligation hereunder to any
Indemnified Person with respect to Indemnified Liabilities resulting solely from
the gross negligence or willful
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misconduct of such Indemnified Person. The agreements in this Section shall
survive payment of all other Obligations.
(b) Promptly after receipt by an Indemnified Person under subsection
(a) above of notice of the commencement of any action, such Indemnified Person
shall, if a claim in respect thereof is to be made against the Fund under such
subsection, notify the Fund in writing of the commencement thereof, but the
omission so to notify the Fund shall not relieve it from any liability which it
may have to any Indemnified Person otherwise than under such subsection. In case
any such action shall be brought against any Indemnified Person and it shall
notify the Fund of the commencement thereof, the Fund shall be entitled to
participate therein and, to the extent that it shall wish to assume the defense
thereof, with counsel reasonably satisfactory to such Indemnified Person (who
shall not, except with the consent of the Indemnified Person, be counsel to the
Fund), and after notice from the Fund to such Indemnified Person of its election
so to assume the defense thereof; provided that in no event shall any settlement
or compromise of any such claims, actions or demands be made without the consent
of the Indemnified Person, the consent of which shall not be unreasonably
withheld.
(c) The agreements in this Section 8.5 shall survive payment of all
other Obligations.
8.6. Payment Set Aside. To the extent that the Fund makes a payment to the
Bank, or the Bank exercises its right of set-off, and such payment or the
proceeds of such set-off or any part thereof are subsequently invalidated,
declared to be fraudulent or preferential, set aside or required (including
pursuant to any settlement entered into by the Bank in its discretion) to be
repaid to a trustee, receiver or any other party, in connection with any
Insolvency Proceeding or otherwise, then to the extent of such recovery, the
obligation or part thereof originally intended to be satisfied shall be revived
and continued in full force and effect as if such payment had not been made or
such set-off had not occurred.
8.7. Successors and Assigns(a) The provisions of this Agreement shall be
binding upon and shall inure to the benefit of the Fund and the Bank and their
respective successors and assigns, except that the Fund may not assign or
otherwise transfer any of its rights under this Agreement without the prior
written consent of the Bank. The Bank may at any time assign, subject to the
Fund's consent, which consent shall not be unreasonably withheld, to a bank (as
defined in Section 2(a)(5) of the Act) not an affiliate (as defined in the Act)
of the Fund or the Adviser (the "Assignee") all of its rights under this
Agreement and the Note.
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29
(b) The Bank may at any time grant to one or more banks (as defined
in Section 2(a)(5) of the Act) not an affiliate (as defined in the Act) of the
Fund or Colonial Management Associates, Inc. (each a "Participant")
participating interests in the Loan. In the event of any such grant by the Bank
of a participating interest to a Participant, whether or not upon notice to the
Fund, the Bank shall remain responsible for the performance of its obligations
hereunder, and the Fund shall continue to deal solely and directly with the Bank
in connection with the Bank's rights and obligations under this Agreement. Any
agreement pursuant to which the Bank may grant such a participating interest
shall provide that the Bank shall retain the sole right and responsibility to
enforce the obligations of the Fund hereunder, including, without limitation,
the right to approve any amendment, modification or waiver of any provision of
this Agreement; provided that such participation agreement may provide that the
Bank will not agree to any modification, amendment or waiver of this Agreement
which (i) reduces the principal of or rate of interest on the Loan or (ii)
postpones the date fixed for any payment of principal of or interest on the Loan
without the consent of the Participant. The Fund agrees that each Participant
shall, to the extent provided in its participation agreement, be entitled to the
benefits of Article III with respect to its participating interest.
(c) The Bank may at any time assign all or any portion of its rights
under this Agreement and the Notes to a Federal Reserve Bank. No such assignment
shall release the Bank from its obligations hereunder.
(d) No Participant or other transferee of the Bank's rights shall be
entitled to receive any greater payment under Section 3.1 or Section 3.3 than
the Bank would have been entitled to receive with respect to the rights
transferred, unless such transfer is made with the Fund's prior written consent
or at a time when the circumstances giving rise to such greater payment did not
exist.
8.8. Confidentiality. The Bank agrees to take and to cause its Affiliates
to take normal and reasonable precautions and exercise due care to maintain the
confidentiality of all written information identified as "confidential" or
"secret" by the Fund and provided to it by or on behalf of the Fund, under this
Agreement or any other Credit Document, and neither it nor any of its Affiliates
shall use any such information other than in connection with or in enforcement
of this Agreement and the other Credit Documents, except to the extent such
information (i) was or becomes generally available to the public other than as a
result of disclosure by the Bank or (ii) was or becomes available on a
non-confidential basis from a source other than the Fund, provided that such
source is not bound by a confidentiality
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agreement with the Fund known to the Bank; provided that the Bank may disclose
such information (A) at the request or pursuant to any requirement of any
Governmental Authority to which the Bank is subject or in connection with an
examination of the Bank by any such authority; (B) pursuant to subpoena or other
court process; (C) when required to do so in accordance with the provisions of
any applicable Requirement of Law; (D) to the extent reasonably required in
connection with any litigation or proceeding to which the Bank or its Affiliates
may be party; (E) to the extent reasonably required in connection with the
exercise of any remedy hereunder or under any other Credit Document; (F) to the
Bank's independent auditors and other professional advisors; (G) to any
Participant or Assignee, actual or potential, provided that such Person agrees
in writing to keep such information confidential to the same extent as required
by the Banks hereunder; (H) as to the Bank or its Affiliate, as expressly
permitted under the terms of any other document or agreement regarding
confidentiality to which the Fund is party or is deemed party with the Bank or
such Affiliate; and (I) to its Affiliates.
8.9. Set-Off. In addition to any rights and remedies of the Bank provided
by law, if an Event of Default exists and is continuing or the Loan has been
accelerated pursuant to the terms of the Credit Documents, the Bank is
authorized at any time and from time to time, without prior notice to the Fund
(any such notice being waived by the Fund to the fullest extent permitted by
law), to set off and apply any and all deposits (general or special, time or
demand, provisional or final) at any time held by, and other indebtedness at any
time owing by, the Bank to or for the credit or the account of the Fund against
any and all Obligations owing to the Bank, now or hereafter existing,
irrespective of whether or not the Bank shall have made demand under this
Agreement or any Credit Document and although such Obligations may be contingent
or unmatured. The Bank agrees promptly to notify the Fund after any such set-off
and application made by the Bank; provided that the failure to give such notice
shall not affect the validity of such set-off and application.
8.10. Counterparts. This Agreement may be executed in any number of
separate counterparts, each of which, when so executed, shall be deemed an
original, and all of said counterparts taken together shall be deemed to
constitute but one and the same instrument.
8.11. Survival. The obligations of the Fund under Sections 8.4 and 8.5
shall in each case survive any termination of this Agreement, the payment in
full of all Obligations. The representations and warranties made by the Fund in
this Agreement
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and in each other Credit Document shall survive the execution and delivery of
this Agreement and each such other Credit Document.
8.12. Disclaimer. None of the shareholders, trustees, officers, employee
and other agents of the Fund shall be personally bound by or liable for any
indebtedness, liability or obligation hereunder or under the Note, nor shall
resort be had to their private property for the satisfaction of any obligation
or claim hereunder. Nothing in this Section 8.12 shall affect the Bank's rights
against Adviser Persons as provided in Section 1.4.
8.13. Severability. The illegality or unenforceability of any provision of
this Agreement or any instrument or agreement required hereunder shall not in
any way affect or impair the legality or enforceability of the remaining
provisions of this Agreement or any instrument or agreement required hereunder.
8.14. No Third Parties Benefited. This Agreement is made and entered into
for the sole protection and legal benefit of the Fund and the Bank and their
permitted successors and assigns, and no other Person shall be a direct or
indirect legal beneficiary of, or have any direct or indirect cause of action or
claim in connection with, this Agreement or any of the other Credit Documents.
8.15. Governing Law and Jurisdiction. THIS AGREEMENT AND THE NOTE SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF ILLINOIS;
PROVIDED THAT THE BANK SHALL RETAIN ALL RIGHTS ARISING UNDER FEDERAL LAW.
(b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR
ANY OTHER CREDIT DOCUMENT MAY BE BROUGHT IN THE COURTS OF THE STATE OF ILLINOIS
OR OF THE UNITED STATES FOR THE NORTHERN DISTRICT OF ILLINOIS, AND BY EXECUTION
AND DELIVERY OF THIS AGREEMENT, THE FUND AND THE BANK CONSENT, FOR THEMSELVES
AND IN RESPECT OF THEIR PROPERTY, TO THE NON-EXCLUSIVE JURISDICTION OF THOSE
COURTS. THE FUND AND THE BANK IRREVOCABLY WAIVE ANY OBJECTION, INCLUDING ANY
OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON
CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY ACTION OR
PROCEEDING IN SUCH JURISDICTION IN RESPECT OF THIS AGREEMENT OR ANY DOCUMENT
RELATED HERETO. THE FUND AND THE BANK EACH WAIVE PERSONAL SERVICE OF ANY
SUMMONS, COMPLAINT OR OTHER PROCESS, WHICH MAY BE MADE BY ANY OTHER MEANS
PERMITTED BY ILLINOIS LAW.
8.16. Waiver of Jury Trial. THE FUND AND THE BANK EACH WAIVE THEIR
RESPECTIVE RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION BASED UPON
OR ARISING OUT OF OR RELATED TO THIS AGREEMENT, THE OTHER CREDIT DOCUMENTS, OR
THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, IN ANY ACTION, PROCEEDING OR
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32
OTHER LITIGATION OF ANY TYPE BROUGHT BY ANY OF THE PARTIES AGAINST ANY OTHER
PARTY OR ANY PARTICIPANT OR ASSIGNEE, WHETHER WITH RESPECT TO CONTRACT CLAIMS,
TORT CLAIMS OR OTHERWISE. THE FUND AND THE BANK EACH AGREE THAT ANY SUCH CLAIM
OR CAUSE OF ACTION SHALL BE TRIED BY A COURT TRIAL WITHOUT A JURY. WITHOUT
LIMITING THE FOREGOING, THE PARTIES FURTHER AGREE THAT THEIR RESPECTIVE RIGHT TO
A TRIAL BY JURY IS WAIVED BY OPERATION OF THIS SECTION AS TO ANY ACTION,
COUNTERCLAIM OR OTHER PROCEEDING WHICH SEEKS, IN WHOLE OR IN PART, TO CHALLENGE
THE VALIDITY OR ENFORCEABILITY OF THIS AGREEMENT OR THE OTHER CREDIT DOCUMENTS
OR ANY PROVISION HEREOF OR THEREOF. THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT
AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT AND THE
OTHER CREDIT DOCUMENTS.
8.17. Entire Agreement. This Agreement, together with the other Credit
Documents, embodies the entire agreement and understanding between the Fund and
the Bank and supersedes all prior or contemporaneous agreements and
understandings of such Persons, verbal or written, relating to the subject
matter hereof and thereof.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized as of the day
and year first above written.
COLONIAL INTERMEDIATE HIGH INCOME FUND
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
----------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: Vice President
Address: ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: Fund Accounting
with a copy to:
Address: ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: Legal
S-1
▇▇
▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
By: /s/ ▇▇▇▇▇▇ ▇. Deg
-----------------
▇▇▇▇▇▇ ▇. Deg
Title: Vice President
Address for Payments:
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Account No: 47-03421
ABA No: ▇▇▇-▇▇▇-▇▇▇
Reference: Colonial Intermediate
High Income Fund
Attention: Ms. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Account Administrator
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
S-2
35
SCHEDULE I
Definitions
"Act" means the Investment Company Act of 1940.
"Adviser" means Colonial Management Associates, Inc. or one of
its Affiliates, as investment adviser, sub-adviser or
administrator to the Fund, together with any successor thereto permitted
hereunder.
"Adviser Persons" is defined in Section 1.4.
"Affiliate" means, as to any Person, any other Person which, directly
or indirectly, is in control of, is controlled by, or is under common control
with, such Person. A Person shall be deemed to control another Person if the
controlling Person possesses, directly or indirectly, the power to direct or
cause the direction of the management and policies of the other Person, whether
through the ownership of voting securities, membership interests, by contract,
or otherwise.
"Agreement" means this Credit Agreement.
"Asset Coverage Ratio" means, at any time, the "asset coverage" (as
defined in Section 18(h) of the Act) of the Loan; provided that, in calculating
total assets for the purpose of determining asset coverage, both (x) any asset
with respect to which any payment is due but unpaid for at least thirty days or
which is classified as in default by the Adviser and (y) any asset that is not
then-rated at least B-by Standard & Poor's Ratings Group or B-3 by ▇▇▇▇▇'▇
Investors Service shall be excluded from total assets; provided, however,
notwithstanding clause (y) of the foregoing proviso, assets (at all times less
than 5% of its total assets) rated at least CCC by Standard & Poor's Ratings
Group or at least Caa by ▇▇▇▇▇'▇ Investors Service (but not at least B- by
Standard & Poor's Ratings Group or B-3 by ▇▇▇▇▇'▇ Investors Service) may be
included in total assets for the purpose of the Asset Coverage Ratio, so long as
said assets are publicly issued as a part of an issue of at least $100,000,000
and said assets were underwritten by at least two major dealers; provided,
further, that all assets subject to a Lien shall be excluded; and; provided,
further, that the Bank may exclude any assets on notice to the Fund, which it
reasonably determines not to be liquid assets.
"Assignee" is defined in Section 8.7(a).
I-1
36
"Attorney Costs" means and includes any and all fees and disbursements
of any law firm or other external counsel, the allocated cost of internal legal
services and all disbursements of internal counsel.
"Authorized Officer" means, relative to the Fund, those of its officers
or agents whose signatures and incumbency shall have been certified to the Bank
pursuant to Section 4.1(a).
"Bank" is defined in the preamble.
"Bankruptcy Code" means the Bankruptcy Reform Act of 1978.
"Base Rate" means, for any day, the rate of interest in effect for such
day as publicly announced from time to time by the Bank of America National
Trust and Savings Association ("BofA") in San Francisco, California, as its
"reference rate." The "reference rate" is a rate set by BofA based upon various
factors, including BofA's costs and desired return, general economic conditions
and other factors and is used as a reference point for pricing some loans, which
may be priced at, above or below such announced rate. Any change in the
reference rate announced by BofA shall take effect at the opening of business on
the day specified in the public announcement of such change.
"Borrowing Base" has the meaning set forth in Section 6.1(c).
"Borrowing Base Certificate" means a Borrowing Base Certificate as
defined in Section 6.1(c) and substantially in the form of Exhibit 6.1 attached
hereto.
"Business Day" means any day other than a Saturday, Sunday or other day
on which commercial banks in New York City or San Francisco are authorized or
required by law to close.
"Capital Adequacy Regulation" means any guideline, request or directive
of any central bank or other Governmental Authority, or any other law, rule or
regulation, whether or not having the force of law, in each case, regarding
capital adequacy of any bank or of any corporation controlling a bank.
"Cash Equivalents" means:
(a) any evidence of Indebtedness, maturing not more than one
year after such time, issued or guaranteed by the United States
Government or any agency thereof;
(b) any commercial paper, maturing not more than nine months
from the date of issue, which is issued by
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37
(i) a corporation (other than an Affiliate of the
Fund) organized under the laws of any state of the United
States or of the District of Columbia and rated A-1 by
Standard & Poor's Ratings Group or P-1 by ▇▇▇▇▇'▇ Investors
Service, Inc., or
(ii) the Bank (or its holding company);
(c) any certificate of deposit or bankers' acceptance,
maturing not more than one year after such time, which is issued by
either
(i) a commercial banking institution that is a
member of the Federal Reserve System and has a combined
capital and surplus and undivided profits of not less than
$500,000,000, or
(ii) the Bank; or
(d) any repurchase agreement entered into with the Bank (or
other commercial banking institution of the stature referred to in
clause (c)(i)) which
(i) is secured by a fully perfected security
interest in any obligation of the type described in any of
clauses (a) through (c), and
(ii) has a market value at the time such
repurchase agreement is entered into of not less than 100%
of the repurchase obligation of the Bank (or other
commercial banking institution) thereunder.
"Change in Control" means any transaction or series of transactions
where (i) any "person" (as such term is used in Section 13(d) and 14(d) of the
Securities Exchange Act of 1934 (the "Exchange Act") as in effect on the date
hereof) becomes the "beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act, as in effect on the date hereof), directly or indirectly, of
securities of another Person (the "Target") representing 20% or more of the
combined voting power of the Target's then-outstanding securities; (ii) at any
time less than a majority of the members of the Target's board of directors
shall be persons who were either nominated for election or were elected by such
board of directors; (iii) the Target's stockholders approve a merger or
consolidation of the Target with any other Person, other than a merger or
consolidation that would result in the voting securities of the Target
outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting
I-3
38
securities of the surviving entity) at least 75% of the combined voting power of
the voting securities of the Target or such surviving entity outstanding
immediately after such merger or consolidation; or (iv) the Target's
stockholders approve a plan of complete liquidation of the Target or an
agreement for the sale or disposition of all or substantially all of the
Target's assets.
"Closing Date" means the date on which all conditions precedent set
forth in Section 4.1 are satisfied or waived by all the Banks (or, in the case
of Section 4.1(d), waived by the Person entitled to receive such payment).
"Code" means the Internal Revenue Code of 1986.
"Contingent Obligation" means, as to any Person, any direct or indirect
liability of that Person, whether or not contingent, with or without recourse,
(a) with respect to any Indebtedness, lease, dividend, letter of credit or other
obligation (the "primary obligations") of another Person (the "primary
obligor"), including any obligation of that Person (i) to purchase, repurchase
or otherwise acquire such primary obligations or any security therefor, (ii) to
advance or provide funds for the payment or discharge of any such primary
obligation, or to maintain working capital or equity capital of the primary
obligor, or otherwise to maintain the net worth or solvency or any balance sheet
item, level of income or financial condition 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 holder of any such primary obligation against loss in respect
thereof (each, a "Guaranty Obligation"); (b) with respect to any Surety
Instrument issued for the account of that Person or as to which that Person is
otherwise liable for reimbursement of drawings or payments; (c) to purchase any
materials, supplies or other property from, or to obtain the services of,
another Person if the relevant contract or other related document or obligation
requires that payment for such materials, supplies or other property, or for
such services, shall be made regardless of whether delivery of such materials,
supplies or other property is ever made or tendered, or such services are ever
performed or tendered; or (d) in respect of any Swap Contract. The amount of any
Contingent Obligation shall, in the case of Guaranty Obligations, be deemed
equal to the stated or determinable amount of the primary obligation in respect
of which such Guaranty Obligation is made or, if not stated or if
indeterminable, the maximum reasonably anticipated liability in respect thereof,
and in the case of other Contingent
I-4
39
Obligations, shall be equal to the maximum reasonably anticipated liability in
respect thereof.
"Credit Documents" means this Agreement, the Note and all other
documents delivered to the Bank in connection herewith.
"Default" means any Event of Default or any condition, occurrence or
event which, with notice or lapse of time or both, would, unless cured or
waived, constitute an Event of Default.
"Deposit Securities" is defined in the Indenture.
"Dollar" and the symbol "$" mean the lawful money of the United States.
"ERISA" means the Employee Retirement Income Security Act of 1974.
"Event of Default" means any of the events described in Section 7.1.
"Exchange Act" has the meaning specified in the definition of "Change
in Control".
"Federal Funds Rate" means, for any day, the rate as quoted by the
Federal Reserve Bank of New York and confirmed in the weekly statistical release
designated as H.15(519), or any successor publication, published by the Federal
Reserve Bank of New York (including any such successor, "H.15(519)") on the
preceding Business Day opposite the caption "Federal Funds (Effective)"; or, if
for any relevant day such rate is not so published on any such preceding
Business Day, the rate for such day will be the arithmetic mean as determined by
the Agent of the rates for the last transaction in overnight Federal funds
arranged prior to 9:00 a.m. (New York City time) on that day by each of three
leading brokers of Federal funds transactions in New York City selected by the
Agent.
"Fiscal Quarter" means any quarter of a Fiscal Year.
"Fiscal Year" means any period of twelve consecutive calendar months
ending on the last day of such twelve-month period; references to a Fiscal Year
with a number corresponding to any calendar year (e.g., the "1995 Fiscal Year")
refer to the Fiscal Year ending on or before December 31 during such calendar
year.
"FRB" means the Board of Governors of the Federal Reserve System and any
Governmental Authority succeeding to any of its principal functions.
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40
"Fund" is defined in the preamble.
"GAAP" means United States generally accepted accounting principles.
"Governmental Authority" means any nation or government, any state or
other political subdivision thereof, any central bank (or similar monetary or
regulatory authority) thereof, any entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to government,
and any corporation or other entity owned or controlled, through stock or
capital ownership or otherwise, by any of the foregoing.
"Guaranty Obligation" has the meaning specified in the definition of
"Contingent Obligation."
"Indebtedness" of any Person means, without duplication, (a) all
indebtedness for borrowed money; (b) all obligations issued, undertaken or
assumed as the deferred purchase price of property or services (other than trade
payables entered into in the ordinary course of business on ordinary terms); (c)
all non-contingent reimbursement or payment obligations with respect to Surety
Instruments; (d) all obligations evidenced by notes, bonds, debentures or
similar instruments, including, without limitation, obligations so evidenced
incurred in connection with the acquisition of property, assets or businesses;
(e) all indebtedness created or arising under any conditional sale or other
title retention agreement, or incurred as financing, in either case with respect
to property acquired by the Person (even though the rights and remedies of the
seller or bank under such agreement in the event of default are limited to
repossession or sale of such property); (f) all obligations as lessee under
leases that have been or should be, in accordance with GAAP, recorded as capital
leases; (g) all net obligations with respect to Swap Contracts; (h) all
indebtedness referred to in clauses (a) through (g) above secured by (or for
which the holder of such Indebtedness has an existing right, contingent or
otherwise, to be secured by) any Lien upon or in property (including accounts
and contracts rights) owned by such Person, even though such Person has not
assumed or become liable for the payment of such Indebtedness; (i) all Guaranty
Obligations in respect of indebtedness or obligations of others of the kinds
referred to in clauses (a) through (g) above; (j) all Contingent Obligations;
and (k) all other items which, in accordance with GAAP, would be included as
liabilities on the liability side of the balance sheet of such Person as of the
date at which Indebtedness is to be determined.
"Indemnified Liabilities" is defined in Section 8.5.
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41
"Indemnified Persons" is defined in Section 8.5.
"Indenture" means the Indenture dated as of July 15, 1988 between the
Fund and The First National Bank of Boston, as trustee.
"Insolvency Proceeding" means, with respect to any Person, (a) any case,
action or proceeding before any court or other Governmental Authority relating
to bankruptcy, reorganization, insolvency, liquidation, receivership,
dissolution, winding-up or relief of debtors or (b) any general assignment for
the benefit of creditors, composition, marshalling of assets for creditors, or
other similar arrangement in respect of its creditors generally or any
substantial portion of its creditors, undertaken under U.S. Federal, state or
foreign law, including the Bankruptcy Code.
"Interest Payment Date" means each June 13 and December 13 hereafter
commencing December 13 to and including the Termination Date.
"IRS" means the Internal Revenue Service and any Governmental Authority
succeeding to any of its principal functions under the Code.
"Lien" means any security interest, mortgage, deed of trust, pledge,
hypothecation, assignment, charge or deposit arrangement, segregated asset
arrangement established in connection with reverse repurchase transactions,
encumbrance, lien (statutory or other), or preferential arrangement of any kind
or nature whatsoever in respect of any property (including those created by,
arising under or evidenced by any conditional sale or other title retention
agreement, the interest of a lessor under a capital lease, any financing lease
having substantially the same economic effect as any of the foregoing, or the
filing of any financing statement naming the owner of the asset to which such
lien relates as debtor, under the Uniform Commercial Code or any comparable law)
and any contingent or other agreement to provide any of the foregoing, but not
including the interest of a lessor under an operating lease.
"Loan" means the extension of credit by the Bank to the Fund under
Article II.
"Material Adverse Change" means (a) a material adverse change in, or a
material adverse effect upon, the business, properties, condition (financial or
otherwise) or prospects of the Fund; (b) a material impairment of the ability of
the Fund to make payments of principal and interest on the Loan and to avoid any
Event of Default (not including any Event of Default under Section 7.1(k) or any
Event of Default arising from a
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42
possible breach of Section 6.12 which has not yet occurred); or (c) a material
adverse effect upon the legality, validity, binding effect or enforceability
against the Fund of the Loan.
"Net Asset Value" means, at any date, Total Assets less Total
Liabilities.
"Non-United States Person" means any corporation, partnership,
association or trust that is organized under the laws of a jurisdiction other
than the United States of America or one of its states.
"Note" means the promissory note of the Fund, substantially in the form
set forth as Exhibit 2.2.
"Obligations" means all obligations (monetary or otherwise) of the Fund
to the Bank under the Credit Documents, including (a) all obligations to make
payments to the Bank of, and in respect of the principal amount of and interest
on, the Loan and (b) all obligations of the Fund to the Bank in respect of fees,
costs, expenses and indemnification under Sections 8.4 and 8.5.
"Organization Documents" means, for the Fund, the Trust Agreement, the
bylaws, any certificate of determination or instrument relating to the rights of
preferred shareholders of the Fund and all applicable resolutions of the board
of trustees (or any committee thereof) of the Fund.
"Other Taxes" means any present or future stamp or documentary taxes or
any other excise or property taxes, charges or similar levies that arise from
any payment made hereunder or from the execution, delivery or registration of,
or otherwise with respect to, this Agreement or any other Credit Documents.
"Participant" is defined in Section 8.7(b).
"Person" means any natural person, corporation, partnership, firm,
association, trust, government, governmental agency or any other entity, whether
acting in an individual, fiduciary or other capacity.
"Plan" means any "pension plan" or "welfare benefit plan" as such terms
are defined in ERISA.
"Regulation U" means the FRB's Regulation U.
"Related Party" means, with respect to the Fund and for purposes of
Section 6.16 only, any Person (i) which directly or indirectly through one or
more intermediaries controls, or is controlled by, or is under common control
with, the Fund, (ii) which beneficially owns or holds 5% or more of the equity
I-8
43
interest of the Fund or (iii) 5% or more of the equity interest of which is
beneficially owned or held by the Fund. The term "control" means the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of a Person, whether through the ownership of voting
securities, by contract or otherwise.
"Requirement of Law" means, as to any Person, any law (statutory or
common), treaty, rule or regulation or determination of an arbitrator or of a
Governmental Authority, in each case applicable to or binding upon the Person or
any of its property or to which the Person or any of its property is subject.
"Senior Extendable Notes" means the notes issued pursuant to the
Indenture.
"Subsidiary" means, with respect to any Person, any corporation of which
more than 50% of the outstanding capital stock having ordinary voting power to
elect a majority of the board of directors of such corporation (irrespective of
whether at the time capital stock of any other class or classes of such
corporation shall or might have voting power upon the occurrence of any
contingency) is at the time directly or indirectly owned by such Person, by such
Person and one or more other Subsidiaries of such Person, or by one or more
other Subsidiaries of such Person.
"Surety Instruments" means all letters of credit (including standby and
commercial), banker's acceptances, bank guaranties, shipside bonds, surety bonds
and similar instruments.
"Swap Contract" means any agreement (including any master agreement and
any agreement, whether or not in writing, relating to any single transaction)
that is an interest rate swap agreement, basis swap, forward rate agreement,
commodity swap, commodity option, equity or equity index swap or option, bond
option, interest rate option, forward foreign exchange agreement, rate cap,
collar or floor agreement, currency swap agreement, cross-currency rate swap
agreement, swaption, currency option or any other similar agreement (including
any option to enter into any of the foregoing).
"Target" has the meaning specified in the definition of "Change in
Control".
"Taxes" means any and all present or future taxes, levies, imposts,
deductions, charges or withholdings, and all liabilities with respect thereto,
excluding, in the case of the Bank, such taxes (including income taxes or
franchise taxes) as are imposed on or measured by the Bank's net income by the
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44
jurisdiction (or any political subdivision thereof) under the laws of which the
Bank is organized or maintains a lending office.
"Termination Date" means June 14, 1999.
"Total Assets" means, with respect to the Fund as of any date, the
aggregate amount of all items that would be set forth as assets on a balance
sheet of the Fund on such date prepared in accordance with GAAP. The assets of
the Fund shall be valued in accordance with the Act, the rules and regulations
under the Act, and the valuation procedures set forth in its original
prospectus. Upon the written request of the Bank, the Fund shall promptly
furnish all such information as the Bank shall reasonably request relating to
the value of any portfolio security or other asset of the Fund or the assignment
of values thereto by the Fund or any other Person.
"Total Liabilities" means, with respect to the Fund as of any date, the
aggregate amount of all items that would be set forth as liabilities on a
balance sheet of the Fund on such date prepared in accordance with GAAP.
"Trust Agreement" means the Fund's Agreement and Declaration of Trust or
similar instrument, as amended from time to time.
"United States" or "U.S." means the United States of America, its 50
States and the District of Columbia.
I-10
45
SCHEDULE II
ADDRESSES FOR NOTICES
BANK OF AMERICA ILLINOIS
Bank of America Illinois
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Money Managers Group
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
46
EXHIBIT 2.2
Non-Negotiable
PROMISSORY NOTE
$27,400,000.00 as of June 14, 1996
FOR VALUE RECEIVED, the undersigned (the "Fund"), promises to pay to
Bank of America Illinois (the "Bank"), as set forth in the Credit Agreement
hereinafter referred to and on the Termination Date (as defined in the Credit
Agreement) the principal sum of TWENTY SEVEN MILLION FOUR HUNDRED THOUSAND AND
00/100 DOLLARS ($27,400,000.00) or, if less, the then aggregate unpaid principal
amount of the Loan, (as such term is defined in the Credit Agreement) as has
been borrowed by the Fund under the Credit Agreement. The Loan and all payments
of principal shall be recorded by the holder in its records.
Anything in this Note to the contrary notwithstanding, the Fund shall be
liable hereunder only for the Loan borrowed by the Fund under the Credit
Agreement and other obligations with respect thereto. The sole source of
repayment of the principal of and interest on the Loan hereunder and other
obligations with respect thereto shall be the revenues and assets of such Fund.
The Fund further promises to pay to the order of the Bank interest on
the aggregate unpaid principal amount hereof from time to time outstanding from
the date hereof until paid in full at the rates per annum which shall be
determined in accordance with the provisions of the Credit Agreement. Accrued
interest shall be payable on the dates specified in the Credit Agreement.
All payments of principal and interest under this Note shall be made in
lawful money of the United States of America in immediately available funds at
Bank of America Illinois, or at such other place as may be designated by the
Bank to the Fund in writing.
This Note is the Note referred to in, and evidences indebtedness
incurred under, a Credit Agreement dated as of June 12, 1996 (herein, as it may
be amended, modified or supplemented from time to time, called the "Credit
Agreement") among the Fund, the other parties thereto and the Bank, to which
Credit Agreement reference is made for a statement of the terms and provisions
thereof, including those under which the Fund is permitted and required to make
prepayments and repayments of principal of such indebtedness and under which
such indebtedness may be declared to be immediately due and payable.
47
A copy of the Agreement and Declaration of Trust of the Fund is on file
with the Secretary of State of The Commonwealth of Massachusetts and the Clerk
of the City of Boston, and notice is hereby given that none of the shareholders,
trustees, officers, employees and other agents of the Fund shall be personally
bound by or liable for any indebtedness, liability or obligation arising
hereunder, nor shall resort be had to their private property for the
satisfaction of any obligations or claim arising hereunder.
All parties hereto, whether as makers, endorsers or otherwise, severally
waive presentment, demand, protest and notice of dishonor in connection with
this Note.
This Note is made under and governed by the internal laws of the State
of Illinois.
COLONIAL INTERMEDIATE HIGH
INCOME FUND
By:
-------------------------------
Title:
-------------------------------
48
LOANS AND PRINCIPAL PAYMENTS
Amount of Unpaid
Amount of Principal Principal Notation
Date Loan Made Repaid Balance Total Made By
----- --------- ---------- --------- ----- ----------
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
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49
EXHIBIT 5.7-1
SCHEDULE OF LITIGATION
NONE
50
EXHIBIT 5.7-2
SCHEDULE OF CONTINGENT LIABILITIES
NONE
51
EXHIBIT 6.1
FORM OF BORROWING BASE CERTIFICATE
Reference is made to that certain Credit Agreement, dated as of June
12, 1996 (the "Credit Agreement"), between Colonial Intermediate High Income
Fund and Bank of America Illinois. Capitalized terms used herein and not
otherwise defined shall have the meanings given to such terms in the Credit
Agreement.
Pursuant to the terms of the Credit Agreement, the undersigned (the
"Fund"), hereby represents and certifies to the Bank that as of __________ __,
199_, (i) the Borrowing Base of the Fund was the amount shown in subparagraph
(j) below and (ii) the Asset Coverage Ratio was the ratio set forth in
subparagraph (i) below, each calculated as follows:
(a) Value of Total Assets _____________
(b) minus all liabilities and
indebtedness not represented
by senior securities _____________
(c) minus any asset with respect
to which any payment is due
but unpaid for at least thirty
days or which is classified in
default by the Advisor _____________
(d) minus any asset not rated or
not rated at least B- or B-3 _____________
(e) plus any asset (which is part
of an issue of at least
$100,000,000 underwritten by
at least two major dealers)
subtracted under clause (d)
but rated at least CCC or Caa
(but the amount under this
clause (e) shall not exceed
5% of total assets) _____________
(f) minus (without duplication)
value of assets subject
to Liens ______________
(g) Adjusted Net Asset Value
((a) minus (b) minus (c)
minus (d) plus (e) minus (f)) ______________
52
(h) Indebtedness ______________
(i) Asset Coverage - Ratio
((g) divided by (h)) ______________
(j) Borrowing Base - Indebtedness
Permitted [(g) times 1/3) ______________
The Asset Coverage Ratio of the Fund as set forth in its prospectus
is not more restrictive than 3 to 1.
A copy of the Agreement and Declaration of Trust of the Fund is on
file with the Secretary of State of The Commonwealth of Massachusetts and the
Clerk of the City of Boston, and notice is hereby given that none of the
shareholders, trustees, officers, employees and other agents of the Fund shall
be personally bound by or liable for any indebtedness, liability or obligation
arising hereunder, nor shall resort be had to their private property for the
satisfaction of any obligations or claim arising hereunder.
Date: _______________ COLONIAL INTERMEDIATE
HIGH INCOME FUND
By:
Title: [Must be an Authorized
Officer]