<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 21, 1999
SECURITIES ACT FILE NO. 333-73137
INVESTMENT COMPANY ACT FILE NO. 811-09229
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 13E-4
ISSUER TENDER OFFER STATEMENT
(PURSUANT TO SECTION 13(e)(1) OF THE
SECURITIES EXCHANGE ACT OF 1934)
MERRILL LYNCH SENIOR FLOATING RATE FUND II, INC.
(Name of Issuer)
MERRILL LYNCH SENIOR FLOATING RATE FUND II, INC.
(Name of Person(s) Filing Statement)
SHARES OF COMMON STOCK, PAR VALUE $.10 PER SHARE
(Title of Class of Securities)
59021MR 10 2
(CUSIP Number of Class of Securities)
TERRY K. GLENN
MERRILL LYNCH SENIOR FLOATING RATE FUND II, INC.
800 SCUDDERS MILL ROAD
PLAINSBORO, NEW JERSEY 08536
(609) 282-2800
(Name, Address and Telephone Number of Person Authorized to
Receive Notices and Communications on Behalf of Person(s) Filing Statement)
COPIES TO:
<TABLE>
<S> <C>
FRANK P. BRUNO, ESQ. PATRICK D. SWEENEY, ESQ.
BROWN & WOOD LLP MERRILL LYNCH ASSET MANAGEMENT, L.P.
ONE WORLD TRADE CENTER P.O. BOX 9011
NEW YORK, NEW YORK 10048-0557 PRINCETON, NEW JERSEY 08543-9011
JULY 21, 1999
(Date Tender Offer First Published,
Sent or Given to Security Holders)
</TABLE>
CALCULATION OF FILING FEE
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<TABLE>
<S> <C> <C> <C>
Transaction Amount of Filing
Valuation: $10,020,000(a) Fee: $2,004(b)
</TABLE>
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(a) Calculated as the aggregate maximum purchase price to be paid for 1,000,000
shares in the offer, based upon the net asset value per share ($10.02) at
July 16, 1999.
(b) Calculated as 1/50th of 1% of the Transaction Valuation.
/ / Check box if any part of the fee is offset as provided by Rule 0-11(a)(2)
and identify the filing with which the offsetting fee was previously paid.
Identify the previous filing by registration statement number, or the Form
or Schedule and the date of its filing.
Amount Previously Paid: ________________________________________________________
Form or Registration No.: ______________________________________________________
Filing Party: __________________________________________________________________
Date of Filing: ________________________________________________________________
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<PAGE>
ITEM 1. SECURITY AND ISSUER.
(a) The name of the issuer is Merrill Lynch Senior Floating Rate Fund II,
Inc., a continuously offered, non-diversified, closed-end investment company
organized as a Maryland corporation (the "Fund"). The principal executive
offices of the Fund are located at 800 Scudders Mill Road, Plainsboro, New
Jersey 08536.
(b) The title of the securities being sought is shares of common stock, par
value $0.10 per share (the "Shares"). As of June 30, 1999 there were
approximately 17.9 million Shares issued and outstanding.
The Fund is seeking tenders for 1,000,000 Shares (the "Offer"), at net asset
value per Share (the "NAV") calculated on the day the tender offer terminates,
less any "Early Withdrawal Charge," upon the terms and subject to the conditions
set forth in the Offer to Purchase dated July 21, 1999 (the "Offer to
Purchase"). A copy of each of the Offer to Purchase and the related Letter of
Transmittal is attached hereto as Exhibit (a)(1)(ii) and Exhibit (a)(2),
respectively. Reference is hereby made to the Cover Page and Section 1 "Price;
Number of Shares" of the Offer to Purchase, which are incorporated herein by
reference. The Fund has been informed that no Directors, officers or affiliates
of the Fund intend to tender Shares pursuant to the Offer.
(c) The Shares are not currently traded on an established trading market.
(d) Not Applicable.
ITEM 2. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
(a)-(b) Reference is hereby made to Section 9 "Source and Amount of Funds"
of the Offer to Purchase, which is incorporated herein by reference.
ITEM 3. PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSALS OF THE ISSUER OR
AFFILIATE.
Reference is hereby made to Section 7 "Purpose of the Offer," Section 8
"Certain Effects of the Offer" and Section 9 "Source and Amount of Funds" of the
Offer to Purchase, which are incorporated herein by reference. The Fund is
currently engaged in a public offering, from time to time, of its Shares. The
Fund otherwise has no plans or proposals which relate to or would result in (a)
the acquisition by any person of additional securities of the Fund or the
disposition of securities of the Fund; (b) an extraordinary corporate
transaction, such as a merger, reorganization or liquidation, involving the
Fund; (c) a sale or transfer of a material amount of assets of the Fund; (d) any
change in the present Board of Directors or management of the Fund, including,
but not limited to, any plans or proposals to change the number or the term of
Directors, or to fill any existing vacancy on the Board or to change any
material term of the employment contract of any executive officer; (e) any
material change in the present dividend rate or policy, or indebtedness or
capitalization of the Fund; (f) any other material change in the Fund's
corporate structure or business, including any plans or proposals to make any
changes in its investment policy for which a vote would be required by Section
13 of the Investment Company Act of 1940, as amended; or (g) changes in the
Fund's articles of incorporation, bylaws or instruments corresponding thereto or
other actions which may impede the acquisition of control of the Fund by any
person. Paragraphs (h) through (j) of this Item 3 are not applicable.
ITEM 4. INTEREST IN SECURITIES OF THE ISSUER.
There have not been any transactions involving the Shares of the Fund that
were effected during the past 40 business days by the Fund, any executive
officer or Director of the Fund, any person controlling the Fund, any executive
officer or director of any corporation ultimately in control of the Fund or by
any
i
<PAGE>
associate or subsidiary of any of the foregoing including any executive officer
or director of any such subsidiary, except for the following:
(a) within the past 40 business days pursuant to the public offering of its
Shares the Fund has sold approximately 6.5 million Shares at a price equal to
the NAV of the Fund on the date of each such sale; and
(b) on June 25, 1999, Richard Kilbride, an officer of the Fund, purchased
499.50 shares at a price of $110.01 per share through his broker on the New York
Stock Exchange.
ITEM 5. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO
THE ISSUER'S SECURITIES.
The Fund does not know of any contract, arrangement, understanding or
relationship relating directly or indirectly, to the Offer (whether or not
legally enforceable) between the Fund, any of the Fund's executive officers or
Directors, any person controlling the Fund or any executive officer or director
of any corporation ultimately in control of the Fund and any person with respect
to any securities of the Fund (including, but not limited to, any contract,
arrangement, understanding or relationship concerning the transfer or the voting
of any such securities, joint ventures, loan or option arrangements, puts or
calls, guarantees of loans, guarantees against loss, or the giving or
withholding of proxies, consents or authorizations).
ITEM 6. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
No persons have been employed, retained or are to be compensated by the Fund
to make solicitations or recommendations in connection with the Offer.
ITEM 7. FINANCIAL INFORMATION.
(a) Reference is hereby made to the financial statements included as Exhibit
(g)(1) hereto, which is incorporated herein by reference.
(b) None.
ITEM 8. ADDITIONAL INFORMATION.
(a) None.
(b) None.
(c) Not Applicable.
(d) None.
(e) The Offer to Purchase, attached hereto as Exhibit (a)(1)(ii), is
incorporated herein by reference in its entirety.
ii
<PAGE>
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
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<S> <C> <C>
(a)(1) (i) Advertisement to be printed in THE WALL STREET JOURNAL.
(ii) Offer to Purchase.
(a)(2) Form of Letter of Transmittal.
(a)(3) Letter to Stockholders.
(b)(1) Loan Agreement by and between The Bank of New York and the Fund.
(c) Not Applicable.
(d)-(f) Not Applicable.
(g)(1) Unaudited Financial Statements of the Fund for the period beginning with
commencement of operations, March 26, 1999, and ending on May 31, 1999.
</TABLE>
iii
<PAGE>
SIGNATURE
After due inquiry and to the best of my knowledge and belief, I certify that
the information set forth in this statement is true, complete and correct.
MERRILL LYNCH SENIOR FLOATING RATE FUND
II, INC.
By /s/ TERRY K. GLENN
............................
(Terry K. Glenn,
President)
July 21, 1999
iv
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
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<S> <C>
(a)(1)(i) Advertisement to be printed in THE WALL STREET JOURNAL.
(a)(1)(ii) Offer to Purchase.
(a)(2) Form of Letter of Transmittal.
(a)(3) Letter to Stockholders.
(b)(1) Loan Agreement by and between The Bank of New York and the Fund.
(g)(1) Unaudited Financial Statements of the Fund for the period beginning with commencement of operations,
March 26, 1999, and ending on May 31, 1999.
</TABLE>
v
<PAGE>
EXHIBIT (a)(1)(i)
<PAGE>
THIS ANNOUNCEMENT IS NOT AN OFFER TO PURCHASE OR A SOLICITATION OF AN OFFER TO
SELL SHARES. THE OFFER IS MADE ONLY BY THE OFFER TO PURCHASE DATED JULY 21,
1999, AND THE RELATED LETTER OF TRANSMITTAL. THE OFFER IS NOT BEING MADE TO, NOR
WILL TENDERS BE ACCEPTED FROM OR ON BEHALF OF, HOLDERS OF SHARES IN ANY
JURISDICTION IN WHICH MAKING OR ACCEPTING THE OFFER WOULD VIOLATE THAT
JURISDICTION'S LAWS.
[LOGO]
NOTICE OF OFFER TO PURCHASE FOR CASH 1,000,000 OF ITS
ISSUED AND OUTSTANDING SHARES AT NET ASSET VALUE PER SHARE
THE EXPIRATION DATE AND THE WITHDRAWAL DEADLINE ARE 12:00 MIDNIGHT,
NEW YORK CITY TIME, ON TUESDAY, AUGUST 17, 1999, UNLESS EXTENDED.
Merrill Lynch Senior Floating Rate Fund II, Inc. (the "Fund") is offering to
purchase 1,000,000 of its issued and outstanding shares of common stock par
value $.10 per share (the "Shares") at a price equal to their net asset value
("NAV") less any applicable early withdrawal charge as of the close of the New
York Stock Exchange on the Expiration Date, August 17, 1999, unless extended,
upon the terms and conditions set forth in the Offer to Purchase dated July 21,
1999 (the "Offer"). The NAV on July 16, 1999, was $10.02 per Share. The purpose
of the Offer is to provide liquidity to stockholders since the Fund is unaware
of any secondary market which exists for the Shares. The Offer is not
conditioned upon the tender of any minimum number of Shares.
If more than 1,000,000 Shares are duly tendered prior to the expiration of
the Offer, assuming no changes in the factors originally considered by the Board
of Directors when it determined to make the Offer, the Fund will either extend
the Offer period, if necessary, and increase the number of Shares that the Fund
is offering to purchase to an amount which it believes will be sufficient to
accommodate the excess Shares tendered, as well as any Shares tendered during
the extended Offer period, or purchase 1,000,000 Shares (or such larger number
of Shares sought) on a pro rata basis.
Shares tendered pursuant to the Offer may be withdrawn at any time prior to
12:00 midnight, New York City time, on Tuesday, August 17, 1999, unless the
Offer is extended, and, if not yet accepted for payment by the Fund, Shares may
also be withdrawn after September 15, 1999.
The information required to be disclosed by paragraph (d)(1) of Rule 13e-4
under the Securities Exchange Act of 1934, as amended, is contained in the Offer
to Purchase and is incorporated herein by reference.
The Offer to Purchase and the related Letter of Transmittal contain
important information that should be read carefully before any decision is made
with respect to the Offer.
Questions and requests for assistance, for current NAV quotations or for
copies of the Offer to Purchase, Letter of Transmittal, and any other tender
offer documents, may be directed to the Merrill Lynch Response Center at the
address and telephone number below. Copies will be furnished promptly at no
expense to you and also may be obtained by completing and returning the coupon
below to the Merrill Lynch Response Center. Stockholders who do not own Shares
directly should effect a tender through their broker, dealer or nominee. For
example, stockholders who purchased Shares through Merrill Lynch, Pierce, Fenner
& Smith Incorporated should effect tenders through their Financial Consultant.
1-800-MERRILL, EXT. 4356
1-800-637-7455
<TABLE>
<S> <C>
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MAIL TO: MERRILL LYNCH RESPONSE CENTER,
P.O. BOX 30200, NEW BRUNSWICK, NJ 08989-0200
/ / PLEASE SEND ME MERRILL LYNCH SENIOR FLOATING RATE FUND II, INC. TENDER
OFFER MATERIALS
NAME ADDRESS
BUSINESS PHONE CITY
HOME PHONE STATE ZIP
MERRILL LYNCH CLIENTS, PLEASE GIVE THE NAME AND OFFICE ADDRESS OF YOUR
FINANCIAL CONSULTANT:
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4356
</TABLE>
July 21, 1999
[LOGO]
<PAGE>
EXHIBIT (a)(1)(ii)
<PAGE>
MERRILL LYNCH SENIOR FLOATING RATE FUND II, INC.
800 SCUDDERS MILL ROAD
PLAINSBORO, NEW JERSEY 08536
OFFER TO PURCHASE FOR CASH 1,000,000
OF ITS ISSUED AND OUTSTANDING SHARES
AT NET ASSET VALUE PER SHARE
THE EXPIRATION DATE AND THE WITHDRAWAL DEADLINE IS 12:00 MIDNIGHT,
NEW YORK CITY TIME, ON AUGUST 17, 1999, UNLESS EXTENDED.
To the Holders of Shares of
MERRILL LYNCH SENIOR FLOATING RATE FUND II, INC.:
The Fund is offering to purchase up to 1,000,000 of its shares of common
stock, par value $.10 per share (the "Shares"), for cash at a price equal to
their net asset value ("NAV"), less any applicable Early Withdrawal Charge, as
of the close of the New York Stock Exchange on August 17, 1999, the Expiration
Date, unless extended, upon the terms and conditions set forth in this Offer to
Purchase (the "Offer") and the related Letter of Transmittal. The Shares are not
currently traded on an established secondary market. The NAV on July 16, 1999
was $10.02 per Share. You can obtain current NAV quotations from your Merrill
Lynch Financial Consultant or the Merrill Lynch, Pierce, Fenner & Smith
Incorporated Response Center (the "Merrill Lynch Response Center") (See Section
1). The Fund presently intends each quarter to consider making a tender offer
for its Shares at a price equal to their current NAV.
If more than 1,000,000 Shares are duly tendered prior to the expiration of
the Offer, assuming no changes in the factors originally considered by the Board
of Directors when it determined to make the Offer, the Fund will either (1)
extend the Offer period, if necessary, and increase the number of Shares that
the Fund is offering to purchase to an amount which it believes will be
sufficient to accommodate the excess Shares tendered as well as any Shares
tendered during the extended Offer period or (2) purchase 1,000,000 Shares (or
such greater number of Shares sought) on a pro rata basis.
THIS OFFER IS BEING MADE TO ALL STOCKHOLDERS OF THE FUND AND IS NOT
CONDITIONED UPON ANY MINIMUM NUMBER OF SHARES BEING TENDERED.
IMPORTANT
If you desire to tender all or any portion of your Shares, you should either
(1) request your broker, dealer, commercial bank, trust company or other nominee
to effect the transaction for you or (2) if you own your Shares directly,
complete and sign the Letter of Transmittal and mail or deliver it along with
any Share certificate(s) and any other required documents to the Fund's transfer
agent, Financial Data Services, Inc. (the "Transfer Agent"). If your Shares are
registered in the name of a broker, dealer, commercial bank, trust company or
other nominee, you must contact such broker, dealer, commercial bank, trust
company or other nominee if you desire to tender your Shares. Shares held in
your Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch")
brokerage account are registered in the name of Merrill Lynch and are not held
by you directly. Merrill Lynch may charge its customers a $5.35 processing fee
to confirm a repurchase of Shares from such customers pursuant to the Offer.
NEITHER THE FUND NOR ITS BOARD OF DIRECTORS MAKES ANY RECOMMENDATION TO ANY
STOCKHOLDER AS TO WHETHER TO TENDER OR REFRAIN FROM TENDERING SHARES. EACH
STOCKHOLDER MUST MAKE HIS OWN DECISION WHETHER TO TENDER SHARES, AND IF SO, HOW
MANY SHARES TO TENDER.
NO PERSON HAS BEEN AUTHORIZED TO MAKE ANY RECOMMENDATION ON BEHALF OF THE
FUND AS TO WHETHER STOCKHOLDERS SHOULD TENDER SHARES PURSUANT TO THE OFFER. NO
PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS IN CONNECTION WITH THE OFFER OTHER THAN THOSE CONTAINED HEREIN
OR IN THE LETTER OF TRANSMITTAL. IF GIVEN OR MADE, SUCH RECOMMENDATION AND SUCH
INFORMATION AND REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE FUND.
<PAGE>
THIS TRANSACTION HAS NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE FAIRNESS OR MERITS OF
SUCH TRANSACTION NOR UPON THE ACCURACY OR ADEQUACY OF THE INFORMATION CONTAINED
IN THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
Questions and requests for assistance may be directed to your Merrill Lynch
Financial Consultant or other nominee, or to the Transfer Agent at the address
and telephone number set forth below. Requests for additional copies of this
Offer to Purchase and the Letter of Transmittal should be directed to the
Merrill Lynch Response Center.
<TABLE>
<S> <C>
July 21, 1999 MERRILL LYNCH SENIOR FLOATING RATE
FUND II, INC.
Merrill Lynch Response Center Transfer Agent: Financial Data
P.O. Box 30200 Services, Inc.
New Brunswick, New Jersey 08989-0200 Attn: Merrill Lynch Senior Floating Rate
Attn: Merrill Lynch Senior Floating Rate Fund II, Inc.
Fund II, Inc. P.O. Box 45289
(800) 637-7455, ext. 4356 Jacksonville, Florida 32232-5289
(800) 637-3863
</TABLE>
--------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
SECTIONS PAGE
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<C> <S> <C>
1. Price; Number of Shares......................................................................... 3
2. Procedure for Tendering Shares.................................................................. 3
3. Early Withdrawal Charge......................................................................... 4
4. Withdrawal Rights............................................................................... 5
5. Payment for Shares.............................................................................. 5
6. Certain Conditions of the Offer................................................................. 6
7. Purpose of the Offer............................................................................ 6
8. Certain Effects of the Offer.................................................................... 6
9. Source and Amount of Funds...................................................................... 6
10. Summary of Selected Financial Information....................................................... 7
11. Certain Information About the Fund.............................................................. 8
12. Additional Information.......................................................................... 8
13. Certain Federal Income Tax Consequences......................................................... 8
14. Extension of Tender Period; Termination; Amendments............................................. 9
15. Miscellaneous................................................................................... 10
</TABLE>
2
<PAGE>
1. PRICE; NUMBER OF SHARES. The Fund will, upon the terms and subject to
the conditions of the Offer, purchase up to 1,000,000 of its issued and
outstanding Shares which are tendered and not withdrawn prior to 12:00 midnight,
New York City time, on August 17, 1999 (such time and date being hereinafter
called the "Initial Expiration Date"), unless it determines to accept none of
them. The Fund reserves the right to extend the Offer (See Section 14). The
later of the Initial Expiration Date or the latest time and date to which the
Offer is extended is hereinafter called the "Expiration Date." The purchase
price of the Shares will be their NAV as of the close of the New York Stock
Exchange on the Expiration Date. An Early Withdrawal Charge to recover
distribution expenses will be assessed on Shares accepted for purchase which
have been held for less than the applicable holding period (See Section 3).
The Offer is being made to all stockholders of the Fund and is not
conditioned upon any number of Shares being tendered. If more than 1,000,000
Shares are duly tendered prior to the expiration of the Offer, assuming no
changes in the factors originally considered by the Board of Directors when it
initially determined to make the Offer, the Fund will either (1) extend the
Offer period, if necessary, and increase the number of Shares that the Fund is
offering to purchase to an amount which it believes will be sufficient to
accommodate the excess Shares tendered as well as any Shares tendered during the
extended Offer period or (2) purchase 1,000,000 Shares (or greater number of
Shares sought) on a pro rata basis.
As of June 30, 1999 there were approximately 17.9 million Shares issued and
outstanding and there were 8 holders of record of Shares (in addition, Merrill
Lynch maintains accounts for 3,918 beneficial owners of Shares). The Fund has
been informed that none of the Directors, officers or affiliates of the Fund
intends to tender any Shares pursuant to the Offer. The Shares currently are not
traded on any established secondary market. Current NAV quotations for the
Shares can be obtained from your Merrill Lynch Financial Consultant or from the
Merrill Lynch Response Center at (800) 637-7455, ext. 4356.
2. PROCEDURE FOR TENDERING SHARES. In order for you to tender any of your
Shares pursuant to the Offer, you may either: (a) request your broker, dealer,
commercial bank, trust company or other nominee to effect the transaction for
you, in which case a Letter of Transmittal is not required or (b) if the Shares
are registered in your name, send to the Transfer Agent, at the address set
forth on page 2, any certificates for such Shares, a properly completed and
executed Letter of Transmittal and any other documents required therein. Please
contact the Merrill Lynch Response Center at (800) 637-7455, ext. 4356 as to any
additional documents which may be required.
A. PROCEDURES FOR BENEFICIAL OWNERS HOLDING SHARES THROUGH MERRILL LYNCH OR
OTHER BROKERS OR NOMINEES.
If your Shares are registered in the name of a broker, dealer, commercial
bank, trust company or other nominee, you must contact such broker, dealer,
commercial bank, trust company or other nominee if you desire to tender your
Shares. You should contact such broker, dealer, commercial bank, trust company
or other nominee in sufficient time to permit notification of your desire to
tender to reach the Transfer Agent by the Expiration Date. No brokerage
commission will be charged on the purchase of Shares by the Fund pursuant to the
Offer. However, a broker or dealer may charge a fee for processing the
transaction on your behalf. Merrill Lynch may charge its customers a $5.35
processing fee to confirm a purchase of Shares pursuant to the Offer.
B. PROCEDURES FOR REGISTERED STOCKHOLDERS.
If you will be mailing or delivering the Letter of Transmittal and any other
required documents to the Transfer Agent in order to tender your Shares, they
must be received on or prior to the Expiration Date by the Transfer Agent at its
address set forth on page 2 of this Offer to Purchase.
Signatures on the Letter of Transmittal MUST be guaranteed by an "eligible
guarantor institution" as such is defined in Rule 17Ad-15 under the Securities
Exchange Act of 1934, the existence and validity of which may be verified by the
Transfer Agent through the use of industry publications. Notarized signatures
are not sufficient.
3
<PAGE>
Payment for Shares tendered and purchased will be made only after receipt by
the Transfer Agent on or before the Expiration Date of a properly completed and
duly executed Letter of Transmittal and any other required documents. If your
Shares are evidenced by certificates, those certificates must also be received
by the Transfer Agent on or prior to the Expiration Date.
THE METHOD OF DELIVERY OF ANY DOCUMENTS, INCLUDING CERTIFICATES FOR SHARES,
IS AT THE ELECTION AND RISK OF THE PARTY TENDERING THE SHARES. IF DOCUMENTS ARE
SENT BY MAIL, IT IS RECOMMENDED THAT THEY BE SENT BY REGISTERED MAIL, PROPERLY
INSURED, WITH RETURN RECEIPT REQUESTED.
C. DETERMINATIONS OF VALIDITY.
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance of tenders will be determined by the Fund, in its sole
discretion, whose determination shall be final and binding. The Fund reserves
the absolute right to reject any or all tenders determined by it not to be in
appropriate form or the acceptance of or payment for which would, in the opinion
of counsel for the Fund, be unlawful. The Fund also reserves the absolute right
to waive any of the conditions of the Offer or any defect in any tender with
respect to any particular Shares or any particular stockholder, and the Fund's
interpretations of the terms and conditions of the Offer will be final and
binding. Unless waived, any defects or irregularities in connection with tenders
must be cured within such times as the Fund shall determine. Tenders will not be
deemed to have been made until the defects or irregularities have been cured or
waived. Neither the Fund, its investment adviser and administrator, Merrill
Lynch Asset Management, L.P. ("MLAM"), nor the Transfer Agent, nor any other
person shall be obligated to give notice of any defects or irregularities in
tenders, nor shall any of them incur any liability for failure to give such
notice.
D. TENDER CONSTITUTES AN AGREEMENT.
A tender of Shares made pursuant to any one of the procedures set forth
above will constitute an agreement between the tendering stockholder and the
Fund in accordance with the terms and subject to the conditions of the Offer.
3. EARLY WITHDRAWAL CHARGE. The Fund will assess an Early Withdrawal
Charge of 1.0% on Shares accepted for purchase which have been held for less
than one year. The charge will be paid to Merrill Lynch Funds Distributor, Inc.
(the "Distributor"), a wholly owned subsidiary of MLAM and the distributor of
the Shares, to recover distribution expenses. The Early Withdrawal Charge will
be imposed on those Shares accepted for tender based on an amount equal to the
lesser of the then current net asset value of the Shares or the cost of the
Shares being tendered. Accordingly, the Early Withdrawal Charge is not imposed
on increases in the net asset value above the initial purchase price. In
addition, the Early Withdrawal Charge is not imposed on Shares derived from
reinvestments of dividends or capital gains distributions. In determining
whether an Early Withdrawal Charge is payable, it is assumed that the acceptance
of an offer to purchase tendered Shares will be made first from Shares acquired
through dividend reinvestment and then from the earliest outright purchase of
Shares.
In determining whether an Early Withdrawal Charge is applicable to a tender
of Shares, the calculation will be determined in the manner that results in the
lowest possible amount being charged. Therefore, it will be assumed that the
tender is first of Shares acquired through dividend reinvestment and of Shares
held for over one year and then of Shares held for less than one year. The Early
Withdrawal Charge will not be applied to dollar amounts representing an increase
in the net asset value since the time of purchase. The Early Withdrawal Charge
may be waived on Shares tendered following the death of all beneficial owners of
such Shares, provided the Shares are tendered within one year of death (a death
certificate and other applicable documents may be required) or if later,
reasonably promptly following completion of probate, or in connection with
involuntary termination of an account in which Fund Shares are held. At the time
of acceptance of the Offer, the record or succeeding beneficial owner must
notify the Transfer Agent either directly or indirectly through the Distributor
that the Early Withdrawal Charge should be waived. Upon confirmation of the
owner's entitlement, the waiver will be granted; otherwise, the waiver will be
lost.
4
<PAGE>
4. WITHDRAWAL RIGHTS. You may withdraw Shares tendered at any time prior
to the Expiration Date and, if the Shares have not yet been accepted for payment
by the Fund, at any time after September 15, 1999.
Stockholders whose accounts are maintained through Merrill Lynch should
notify their Financial Consultant prior to the Expiration Date if they wish to
withdraw Shares. Stockholders whose accounts are maintained through another
broker, dealer, commercial bank, trust company or other nominee should notify
such nominee prior to the Expiration Date. Shareholders whose accounts are
maintained directly through the Transfer Agent should submit written notice to
the Transfer Agent.
To be effective, any notice of withdrawal must be timely received by the
Transfer Agent at the address set forth on page 2 of this Offer to Purchase. Any
notice of withdrawal must specify the name of the person having deposited the
Shares to be withdrawn, the number of Shares to be withdrawn, and, if the
certificates representing such Shares have been delivered or otherwise
identified to the Transfer Agent, the name of the registered holder(s) of such
Shares as set forth in such certificates and the number of Shares to be
withdrawn. If the certificates have been delivered to the Transfer Agent, then,
prior to the release of such certificate, you must also submit the certificate
numbers shown on the particular certificates evidencing such Shares and the
signature on the notice of the withdrawal must be guaranteed by an Eligible
Institution. All questions as to the form and validity (including time of
receipt) of notices of withdrawal will be determined by the Fund in its sole
discretion, whose determination shall be final and binding. Shares properly
withdrawn shall not thereafter be deemed to be tendered for purposes of the
Offer. However, withdrawn Shares may be retendered by following one of the
procedures described in Section 2 prior to the Expiration Date.
5. PAYMENT FOR SHARES. For purposes of the Offer, the Fund will be deemed
to have accepted for payment (and thereby purchased) Shares which are tendered
as, if and when it gives oral or written notice to the Transfer Agent of its
election to purchase such Shares.
Payment for Shares will be made promptly by the Transfer Agent to tendering
stockholders as directed by the Fund. Certificates for Shares not purchased (see
Sections 1 and 6), or for Shares not tendered included in certificates forwarded
to the Transfer Agent, will be returned promptly following the termination,
expiration or withdrawal of the Offer, without expense to the tendering
stockholder.
The Fund will pay all transfer taxes, if any, payable on the transfer to it
of Shares purchased pursuant to the Offer. If tendered certificates are
registered in the name of any person other than the person signing the Letter of
Transmittal, the amount of any such transfer taxes (whether imposed on the
registered holder or such other person) payable on account of the transfer to
such person will be deducted from the purchase price unless satisfactory
evidence of the payment of such taxes, or exemption therefrom, is submitted. The
Fund will not pay any interest on the purchase price under any circumstances.
As noted above, Merrill Lynch may charge its customers a $5.35 processing
fee to confirm a purchase of Shares from such customers pursuant to the Offer.
6. CERTAIN CONDITIONS OF THE OFFER. The Fund shall not be required to
accept for payment or pay for any Shares tendered, and may terminate or amend
the Offer or may postpone the acceptance for payment of or payment for Shares
tendered, if: (1) such purchases would impair the Fund's status as a regulated
investment company under the Internal Revenue Code (which would make the Fund a
taxable entity, causing the Fund's income to be taxed at the corporate level in
addition to the taxation of stockholders who receive dividends from the Fund);
(2) the Fund would not be able to liquidate portfolio securities in a manner
which is orderly and consistent with the Fund's investment objective and
policies in order to purchase Shares tendered pursuant to the Offer; or (3)
there is, in the Board's judgment, any (a) legal action or proceeding instituted
or threatened challenging the Offer or otherwise materially adversely affecting
the Fund, (b) declaration of a banking moratorium by Federal or state
authorities or any suspension of payment by banks in the United States or New
York State, which is material to the Fund, (c) limitation imposed by Federal or
state authorities on the extension of credit by lending institutions, (d)
commencement of war, armed hostilities or other international or national
calamity directly or indirectly involving the United States which is material to
the Fund, or (e) other event or condition which
5
<PAGE>
would have a material adverse effect on the Fund or its stockholders if Shares
tendered pursuant to the Offer were purchased.
If the Fund determines to amend the Offer or to postpone the acceptance for
payment of or payment for Shares tendered, it will, to the extent necessary,
extend the period of time during which the Offer is open as provided in Section
14. Moreover, in the event any of the foregoing conditions are modified or
waived in whole or in part at any time, the Fund will promptly make a public
announcement of such waiver and may, depending on the materiality of the
modification or waiver, extend the Offer period as provided in Section 14.
7. PURPOSE OF THE OFFER. The Fund does not currently believe there will be
an active secondary market for its Shares. The Board of Directors has determined
that it would be in the best interest of stockholders for the Fund to take
action to attempt to provide liquidity to stockholders. To that end, the
Directors presently intend each quarter to consider the making of a tender offer
to purchase the Shares at NAV. The Fund will at no time be required to make any
such tender offer.
8. CERTAIN EFFECTS OF THE OFFER. The Purchase of Shares pursuant to the
Offer will have the effect of increasing the proportionate interest in the Fund
of stockholders who do not tender their Shares. If you retain your Shares,
however, you will be subject to any increased risks that may result from the
reduction in the Fund's aggregate assets resulting from payment for the Shares,
including, for example, the potential for greater volatility due to decreased
diversification and higher expenses. However, the Fund believes that those risks
will be reduced to the extent new Shares of the Fund are sold. All Shares
purchased by the Fund pursuant to the Offer will be retired by the Board of
Directors of the Fund.
9. SOURCE AND AMOUNT OF FUNDS. The aggregate purchase price if 1,000,000
Shares are tendered and accepted for payment pursuant to the Offer will be
approximately $10,020,000. The Fund anticipates that the purchase price for any
Shares acquired pursuant to the Offer may be derived from (i) cash on hand, (ii)
the proceeds of the sale of cash equivalents held by the Fund, (iii) the
proceeds of sales of portfolio investments held by the Fund and/or (iv)
borrowings by the Fund. If, in the judgment of the Directors, there is not
sufficient liquidity of the assets of the Fund, or availability of funds from
borrowings, to pay for tendered Shares, the Fund may terminate the Offer.
The Fund entered into an agreement with The Bank of New York ("BONY"),
providing for an unsecured revolving credit facility (the "Facility"). Unless
otherwise extended, the Facility will terminate on June 20, 2000. The proceeds
of the Facility may be used to finance the payment for Shares tendered in a
tender offer by the Fund and to pay fees and expenses incurred in connection
with the Facility. The Facility enables the Fund to borrow up to $25,000,000 at
a rate of interest equal to, at the Fund's option, the sum of the federal funds
rate (i.e., the rate at which BONY is offered overnight Federal funds by a
Federal funds broker selected by BONY) plus the Applicable Margin (defined
below) or the sum of the Eurodollar rate (based on the rates quoted by BONY to
leading banks in the London interbank eurodollar market as the rate at which
BONY is offering dollar deposits) plus the Applicable Margin (defined below).
The Applicable Margin means 0.50% per annum. Interest on borrowings is
calculated on the basis of a year of 360 days for the actual number of days
elapsed and is payable in arrears on the last day of each month in the case of
borrowings that bear interest at the Federal funds rate, and at the end of the
interest period selected by the Fund in the case of borrowings that bear
interest at the Eurodollar rate. The Fund agrees to pay to the Bank a fee (the
"commitment fee") for the period from and including the effective date to but
excluding the date of the expiration or other termination of the commitment,
equal to 0.08% per annum of the unused portion of the commitment, payable
quarterly in arrears on the last day of each June, September, December and March
of each year and on the date of the expiration or other termination of the
commitment. The commitment fee shall be calculated on the basis of a 360-day
year for the actual number of days elapsed. Each loan must be repaid at the
earlier of (i) 90 days from the borrowing date of such loan and (ii) one
business day prior to the date on which the Fund's next tender offer expires.
Borrowings under the Facility, if any, may be repaid with the proceeds of
portfolio investments sold by the Fund subsequent to the expiration date of a
tender offer.
The terms of the Facility may be modified by written agreement of the
parties thereto. The Facility requires the Fund to maintain a Borrowing Base
(defined as the sum of the value of all securities held by the Fund (less
liabilities) plus the debt outstanding under the Facility, less non-performing
assets) of not
6
<PAGE>
less than 300% of the outstanding principal balance of borrowings under the
Facility and accrued interest. During the term of the Facility, the Fund may not
incur indebtedness except for indebtedness incurred under the Facility, in
hedging transactions, for purchases of securities on short-term credit as may be
necessary for the clearance of sales or purchases of portfolio securities and
for overdrafts extended by the custodian. Additionally, during the term of the
Facility, the Fund is restricted with respect to the declaration or payment of
dividends and the repurchase of shares pursuant to tender offers. Pursuant to
such agreement, as long as certain defaults have not occurred and are not
continuing under the Facility, the Fund may (i) make its periodic dividend
payments to shareholders in an amount not in excess of its net investment income
(and net realized capital gains not previously distributed to shareholders) for
such period, (ii) distribute each year all of its net investment income
(including net realized capital gains) so that it will not be subject to tax
under the Federal tax laws and (iii) repurchase its shares pursuant to tender
offers.
Under the Investment Company Act of 1940 (the "1940 Act"), the Fund is not
permitted to incur indebtedness unless immediately after such incurrence the
Fund has an asset coverage of 300% of the aggregate outstanding principal
balance of indebtedness. Additionally, under the 1940 Act the Fund may not
declare any dividend or other distribution upon any class of its capital stock,
or purchase any such capital stock, unless the aggregate indebtedness of the
Fund has at the time of the declaration of any such dividend or distribution or
at the time of any such purchase an asset coverage of at least 300% after
deducting the amount of such dividend, distribution, or purchase price, as the
case may be.
10. SUMMARY OF SELECTED FINANCIAL INFORMATION. Set forth below is a
summary of selected unaudited financial information for the Fund for the period
beginning with the commencement of operations, March 26, 1999, and ending May
31, 1999. More comprehensive financial information is included in such reports
(copies of which have been filed as exhibits to the Schedule 13E-4 filed with
the Securities and Exchange Commission (the "SEC") in connection with the Offer
and may be obtained from the Transfer Agent) and the summary of selected
financial information set forth below is qualified in its entirety by reference
to such documents and the financial information, the notes thereto and related
matter contained therein.
7
<PAGE>
SUMMARY OF SELECTED FINANCIAL INFORMATION
(IN 000'S EXCEPT PER SHARE DATA AND RATIOS)
<TABLE>
<CAPTION>
FOR THE
PERIOD
BEGINNING
MARCH 26,
1999* TO
MAY 31, 1999
(UNAUDITED)
------------
INCOME STATEMENT
<S> <C>
Investment income.......................... $ 1,246
Total expenses before reimbursement........ 360
Reimbursement of expenses.................. 330
Total expenses after reimbursement......... 30
------------
Investment income--net..................... $ 1,216
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS--NET
Realized gain (loss) on investments--net... $ (10)
Unrealized appreciation on
investments--net......................... $ 124
FINANCIAL HIGHLIGHTS (AT END OF PERIOD)
Total assets............................... $ 159,925
Total liabilities.......................... 16,100
------------
Net assets................................. $ 141,825
Net asset value per share.................. $ 10
Shares of common stock outstanding......... 14,170
PER SHARE
Investment income--net..................... $ 0.10
Dividends from net investment income to
common shareholders...................... $ 0.10
RATIOS
Expenses, net of reimbursement, to average
net assets................................. .16**
Total expenses to average net assets....... 1.92**
Investment income--net, to average net
assets................................... 6.47**
</TABLE>
- ------------------------------
* Commencement of Operations.
** Annualized.
11. CERTAIN INFORMATION ABOUT THE FUND. The Fund was incorporated under
the laws of the State of Maryland on February 9, 1999 and is a non-diversified,
continuously offered, closed-end management investment company registered under
the 1940 Act. The Fund seeks as high a level of current income and such
preservation of capital as is consistent with investment in senior
collateralized corporate loans ("Corporate Loans") made by banks and other
financial institutions. The Corporate Loans pay interest at rates which float or
reset at a margin above a generally-recognized base lending rate such as the
prime rate of a designated U.S. bank, the Certificate of Deposit rate or the
London InterBank Offered Rate. MLAM, an affiliate of Merrill Lynch, acts as
investment adviser and administrator for the Fund.
There have not been any transactions involving the Shares of the Fund that
were effected during the past 40 business days by the Fund, any executive
officer or Director of the Fund, any person controlling the Fund, any executive
officer or director of any corporation ultimately in control of the Fund or by
any associate or subsidiary of any of the foregoing including any executive
officer or director of any such subsidiary, except for the following: (1) within
the past 40 business days pursuant to the public offering of its Shares the Fund
has sold approximately 6.5 million Shares at a price equal to NAV on the date of
each such sale and (2) on June 25, 1999, Richard Kilbride, an officer of the
Fund, purchased 499.50 shares at a price of $10.01 per share through his broker
on the New York Stock Exchange.
The principal executive offices of the Fund are located at 800 Scudders Mill
Road, Plainsboro, New Jersey 08536.
12. ADDITIONAL INFORMATION. The Fund has filed a statement on Schedule
13E-4 with the SEC which includes certain additional information relating to the
Offer. Such material may be inspected and copied at prescribed rates at the
SEC's public reference facilities at Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549; Seven World Trade Center, New York, New York 10048; and
Room 3190, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies
of such material may also be obtained by mail at prescribed rates from the
Public Reference Branch of the SEC at 450 Fifth Street, N.W., Washington, D.C.
20549. The SEC maintains a web site (http://www.sec.gov) that contains the
Schedule 13E-4 and other information regarding the Fund.
8
<PAGE>
13. CERTAIN FEDERAL INCOME TAX CONSEQUENCES. The following discussion is a
general summary of the Federal income tax consequences of a sale of Shares
pursuant to the Offer. You should consult your own tax adviser for a complete
description of the tax consequences to you of a sale of Shares pursuant to the
Offer.
The sale of Shares pursuant to the Offer will be a taxable transaction for
Federal income tax purposes, either as a "sale or exchange," or under certain
circumstances, as a "dividend." In general, the transaction should be treated as
a sale or exchange of the Shares under Section 302 of the Code, if the receipt
of cash (a) is "substantially disproportionate" with respect to the stockholder,
(b) results in a "complete redemption" of the stockholder's interest in the
Fund, or (c) is "not essentially equivalent to a dividend" with respect to the
stockholder. A "substantially disproportionate" distribution generally requires
a reduction of at least 20% in the stockholder's proportionate interest in the
Fund after all shares are tendered. A "complete redemption" of a stockholder's
interest generally requires that all Shares directly owned or attributed to such
stockholder under Section 318 of the Code be disposed of. A distribution "not
essentially equivalent to a dividend" requires that there be a "meaningful
reduction" in the stockholder's interest, which should be the case if the
stockholder has a minimal interest in the Fund, exercises no control over Fund
affairs and suffers a reduction in his proportionate interest in the Fund.
If the sale of your Shares meets any of these three tests for "sale or
exchange" treatment, you will recognize gain or loss equal to the difference
between the amount of cash received pursuant to the Offer and the adjusted tax
basis of the Shares sold. Such gain or loss will be a capital gain or loss if
the Shares sold have been held by you as a capital asset. In general, capital
gain or loss with respect to Shares sold will be long-term capital gain or loss
if the holding period for such Shares is more than one year. Under recent
legislation, the maximum capital gains rate applicable to such a sale of Shares
would be 20%.
If none of the Code Section 302 tests is met, you may be treated as having
received, in whole or in part, a dividend, return of capital or capital gain,
depending on (i) whether the Fund has sufficient earnings and profits to support
a dividend and (ii) your tax basis in the Shares. The tax basis in the Shares
tendered to the Fund will be transferred to any remaining Shares held by you. In
addition, if the sale of Shares pursuant to the Offer is treated as a "dividend"
to a tendering stockholder, a Code Section 305(c) constructive dividend may
result to a non-tendering stockholder whose proportionate interest in the
earnings and assets of the Fund has been increased as a result of such tender.
Accordingly, the differentiation between "dividend" and "sale or exchange"
treatment is important with respect to the amount and character of income that
tendering stockholders are deemed to receive. In addition, while the marginal
tax rates for dividends and capital gains remain the same for corporate
stockholders, under the Code the top income tax rate on ordinary income of
individuals (39.6%) will exceed the maximum tax rates on capital gains (20%).
In the event that the sale of Shares by a corporate stockholder pursuant to
the Offer is treated as a dividend, the corporate stockholder may be entitled to
claim a "dividends received deduction" on the cash received, which ordinarily
would be 70% of such dividend. However, corporate stockholders should consult
their tax advisers about certain provisions of the Code that may affect the
dividends received deduction.
The Transfer Agent will be required to withhold 31% of the gross proceeds
paid to a stockholder or other payee pursuant to the Offer unless either: (a)
the stockholder has provided the stockholder's taxpayer identification
number/social security number, and certifies under penalties of perjury: (i)
that such number is correct, and (ii) either that (A) the stockholder is exempt
from backup withholding, (B) the stockholder is not otherwise subject to backup
withholding as a result of a failure to report all interest or dividends, or (C)
the Internal Revenue Service has notified the stockholder that the stockholder
is no longer subject to backup withholding; or (b) an exception applies under
applicable law and Treasury regulations. Foreign stockholders may be required to
provide the Transfer Agent with a completed Form W-8, available from the
Transfer Agent, in order to avoid 31% backup withholding.
Unless a reduced rate of withholding or a withholding exemption is available
under an applicable tax treaty, a stockholder who is a nonresident alien or a
foreign entity may be subject to a 30% United States withholding tax on the
gross proceeds received by such stockholder, if the proceeds are treated as a
"dividend" under the rules described above. Foreign stockholders should consult
their tax advisers regarding application of these withholding rules.
9
<PAGE>
14. EXTENSION OF TENDER PERIOD; TERMINATION; AMENDMENTS. The Fund reserves
the right, at any time and from time to time, to extend the period of time
during which the Offer is pending by making a public announcement thereof. In
the event that the Fund so elects to extend the tender period, the NAV for the
Shares tendered will be determined as of the close of the New York Stock
Exchange on the Expiration Date, as extended. During any such extension, all
Shares previously tendered and not purchased or withdrawn will remain subject to
the Offer. The Fund also reserves the right, at any time and from time to time
up to and including the Expiration Date, to (a) terminate the Offer and not to
purchase or pay for any Shares, and (b) amend the Offer in any respect by making
a public announcement. Such public announcement will be issued no later than
9:00 a.m., New York City time, on the next business day after the previously
scheduled Expiration Date and will disclose the approximate number of Shares
tendered as of that date. Without limiting the manner in which the Fund may
choose to make a public announcement of extension, termination or amendment,
except as provided by applicable law (including Rule 13e-4(e)(2)), the Fund
shall have no obligation to publish, advertise or otherwise communicate any such
public announcement, other than by making a release to the Dow Jones News
Service.
15. MISCELLANEOUS. The Offer is not being made to, nor will tenders be
accepted from, stockholders in any jurisdiction in which the Offer or its
acceptance would not comply with the securities laws of such jurisdiction. The
Fund is not aware of any jurisdiction in which the Offer or tenders pursuant
thereto would not be in compliance with the laws of such jurisdiction. However,
the Fund reserves the right to exclude stockholders from the Offer in any
jurisdiction in which it is asserted that the Offer cannot lawfully be made. The
Fund believes such exclusion is permissible under applicable tender offer rules,
provided the Fund makes a good faith effort to comply with any state law deemed
applicable to the Offer. In any jurisdiction the securities laws of which
require the Offer to be made by a licensed broker or dealer the Offer shall be
deemed to be made on the Fund's behalf by Merrill Lynch.
MERRILL LYNCH SENIOR FLOATING
RATE FUND II INC.
July 21, 1999
10
<PAGE>
EXHIBIT (a)(2)
<PAGE>
LETTER OF TRANSMITTAL
TO BE USED TO TENDER SHARES OF
MERRILL LYNCH SENIOR FLOATING RATE FUND II, INC.
PURSUANT TO THE OFFER TO PURCHASE
DATED JULY 21, 1999
-------------------
THE EXPIRATION DATE AND THE WITHDRAWAL DEADLINE IS 12:00 MIDNIGHT,
NEW YORK CITY TIME, ON TUESDAY, AUGUST 17, 1999, UNLESS EXTENDED
-------------------
TRANSFER AGENT:
FINANCIAL DATA SERVICES, INC.
ATTENTION: MERRILL LYNCH SENIOR FLOATING RATE FUND II, INC.
P.O. BOX 45289
JACKSONVILLE, FLORIDA 32232-5289
TELEPHONE INFORMATION NUMBER: (800) 637-3863
DELIVERY TO AN ADDRESS OTHER THAN THAT SHOWN ABOVE DOES NOT CONSTITUTE VALID
DELIVERY.
THIS LETTER OF TRANSMITTAL IS TO BE USED ONLY IF THE STOCKHOLDER IS A RECORD
OWNER OF SHARES WHO DESIRES TO EFFECT THE TENDER OFFER TRANSACTION HIMSELF OR
HERSELF BY TRANSMITTING THE NECESSARY DOCUMENTS TO THE FUND'S TRANSFER AGENT AND
DOES NOT INTEND TO REQUEST HIS OR HER BROKER OR DEALER TO EFFECT THE TRANSACTION
FOR HIM OR HER. A STOCKHOLDER WHO HOLDS SHARES IN A MERRILL LYNCH ACCOUNT OR
THROUGH ANOTHER BROKER, DEALER, COMMERCIAL BANK, TRUST COMPANY OR OTHER NOMINEE
IS NOT THE RECORD OWNER AND SHOULD INSTRUCT HIS OR HER MERRILL LYNCH FINANCIAL
CONSULTANT OR SUCH OTHER NOMINEE TO EFFECT THE TENDER ON HIS OR HER BEHALF.
<PAGE>
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
LADIES AND GENTLEMEN:
The undersigned hereby tenders to the Merrill Lynch Senior Floating Rate
Fund II, Inc., a closed-end investment company incorporated under the laws of
the State of Maryland (the "Fund"), the shares described below of its common
stock, par value $.10 per share (the "Shares"), at a price equal to the net
asset value per Share ("NAV") calculated on the Expiration Date (as defined in
the Offer to Purchase), in cash, less any applicable Early Withdrawal Charge,
upon the terms and conditions set forth in the Offer to Purchase dated July 21,
1999, receipt of which is hereby acknowledged, and in this Letter of Transmittal
(which together constitute the "Offer").
The undersigned hereby sells to the Fund all Shares tendered hereby that are
purchased pursuant to the Offer and hereby irrevocably constitutes and appoints
the Transfer Agent as attorney in fact of the undersigned, with full power of
substitution (such power of attorney being deemed to be an irrevocable power
coupled with an interest), to present such Shares and any Share certificates for
cancellation of such Shares on the Fund's books. The undersigned hereby warrants
that the undersigned has full authority to sell the Shares tendered hereby and
that the Fund will acquire good title thereto, free and clear of all liens,
charges, encumbrances, conditional sales agreements or other obligations
relating to the sale thereof, and not subject to any adverse claim, when and to
the extent the same are purchased by it. Upon request, the undersigned will
execute and deliver any additional documents necessary to complete the sale in
accordance with the terms of the Offer.
The undersigned recognizes that under certain circumstances set forth in the
Offer to Purchase, the Fund may not be required to purchase any of the Shares
tendered hereby. In that event, the undersigned understands that, in the case of
Shares evidenced by certificates, certificate(s) for any Shares not purchased
will be returned to the undersigned at the address indicated above. In the case
of Shares not evidenced by certificates and held in an Investment Account, the
Transfer Agent will cancel the tender order and no Shares will be withdrawn from
the Account.
The check for the purchase price for the tendered Shares purchased will be
issued to the order of the undersigned and mailed to the address indicated in
the "Description of Shares Tendered" table below.
All authority herein conferred or agreed to be conferred shall survive the
death or incapacity of the undersigned and the obligation of the undersigned
hereunder shall be binding upon the heirs, personal representatives, successors
and assigns of the undersigned. Except as stated in the Offer, this tender is
irrevocable.
<PAGE>
DESCRIPTION OF SHARES TENDERED
(SEE INSTRUCTIONS 3 AND 4)
<TABLE>
<CAPTION>
NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S)
(PLEASE FILL IN EXACTLY THE NAME(S) IN WHICH SHARES ARE SHARES TENDERED
REGISTERED) (ATTACH ADDITIONAL SCHEDULE IF NECESSARY)
NO. OF SHARES
CERTIFICATE LISTED NO. OF SHARES
NO.(S)* ON CERTIFICATE* TENDERED**
<S> <C> <C> <C>
Account No. Total Shares Tendered...........
</TABLE>
* Need not be completed by stockholders whose Shares are not evidenced by
certificates.
** To be completed by all tendering stockholders, whether or not your Shares
are evidenced by certificates. If you desire to tender fewer than all
Shares held in your account or evidenced by a certificate listed above,
please indicate in this column the number you wish to tender. Otherwise all
Shares evidenced by such certificate or held in your account will be deemed
to have been tendered.
SIGNATURE FORM
--SIGN HERE--
(SEE INSTRUCTIONS 1, 5 AND 8)
Social Security No.
or Taxpayer Identification No. ................
Under penalty of perjury, I certify (1) that the number set forth above is
my correct Social Security No. or Taxpayer Identification No. and (2) that I
am not subject to backup withholding either because (a) I am exempt from
backup withholding, (b) I have not been notified by the Internal Revenue
Service (the "IRS") that I am subject thereto as a result of failure to
report all interest or dividends, or (c) the IRS has notified me that I am
no longer subject thereto. INSTRUCTION: You must strike out the language in
(2) above if you have been notified that you are subject to backup
withholding due to underreporting and you have not received a notice from
the IRS that backup withholding has been terminated.
...........................................................................
...........................................................................
(SIGNATURE(S) OF OWNER(S) EXACTLY AS REGISTERED)
Date ................ , 1999
Name(s) ....................................................................
Address(es) ................................................................
(PLEASE PRINT)
Telephone Number ( ) ................
Signature(s) Guaranteed ....................................................
....................................................
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER
1. GUARANTEE OF SIGNATURES. All signatures on this Letter of Transmittal
must be guaranteed by a member firm of a registered national securities
exchange, or a commercial bank or trust company having an office, branch or
agency in the United States. This Letter of Transmittal is to be used only if
you may effect the tender offer transaction yourself and do not intend to
request your broker or dealer to effect the transaction for you.
2. DELIVERY OF LETTER OF TRANSMITTAL AND CERTIFICATES. Certificates for all
tendered Shares, together with a properly completed and duly executed Letter of
Transmittal, should be mailed or delivered to the Transfer Agent on or prior to
the Expiration Date at the appropriate address set forth herein and must be
received by the Transfer Agent prior to the Expiration Date.
THE METHOD OF DELIVERY OF ALL DOCUMENTS, INCLUDING CERTIFICATES FOR SHARES,
IS AT THE ELECTION AND RISK OF THE TENDERING STOCKHOLDER.
3. INADEQUATE SPACE. If the space provided is inadequate, the certificate
numbers and number of Shares should be listed on a separate signed schedule
attached hereto.
4. PARTIAL TENDERS. If fewer than all of the Shares in your Investment
Account or evidenced by any certificate submitted are to be tendered, fill in
the number of Shares which are to be tendered in the column entitled "No. of
Shares Tendered." If applicable, a new certificate for the remainder of the
Shares evidenced by your old certificate(s) will be sent to you as soon as
practicable after the Expiration Date of the Offer. All Shares represented by
certificate(s) listed or in your Investment Account are deemed to have been
tendered unless otherwise indicated.
5. SIGNATURES ON LETTER OF TRANSMITTAL, AUTHORIZATION AND ENDORSEMENTS.
(a) If the Letter of Transmittal is signed by the registered holder of the
Shares tendered hereby, the signature(s) must correspond with the name(s) in
which the Shares are registered.
(b) If the Shares are held of record by two or more joint holders, all such
holders must sign this Letter of Transmittal.
(c) If any tendered Shares are registered in different names it will be
necessary to complete, sign and submit as many separate Letters of Transmittal
as there are different registrations of Shares.
(d) When this Letter of Transmittal is signed by the registered holder(s) of
the Shares listed and, if applicable, of the certificates transmitted hereby, no
endorsements of certificates or separate authorizations are required.
(e) If this Letter of Transmittal or any certificates or authorizations are
signed by trustees, executors, administrators, guardians, attorneys in fact,
officers of corporations or others acting in a fiduciary or representative
capacity, such persons should so indicate when signing, and must submit proper
evidence satisfactory to the Fund of their authority so to act.
6. TRANSFER TAXES. The Fund will pay all the taxes, if any, payable on the
transfer to it of Shares purchased pursuant to the Offer. If tendered
certificates are registered in the name of any person other than the person(s)
signing this Letter of Transmittal, the amount of any transfer taxes (whether
imposed on the registered holder or such other person) payable on account of the
transfer to such person will be deducted from the purchase price unless
satisfactory evidence of the payment of such taxes, or exemption therefrom, is
submitted.
<PAGE>
7. IRREGULARITIES. All questions as to the validity, form, eligibility
(including time of receipt) and acceptance of any tender of Shares will be
determined by the Fund, whose determinations shall be final and binding. The
Fund reserves the absolute right to reject any or all tenders determined by it
not to be in appropriate form or the acceptance of or payment for which would,
in the opinion of counsel for the Fund, be unlawful. The Fund also reserves the
absolute right to waive any of the conditions of the Offer or any defect in any
tender with respect to any particular Shares or any particular stockholder, and
the Fund's interpretations of the terms and conditions of the Offer (including
these instructions) will be final and binding. Unless waived, any defects or
irregularities in connection with tenders must be cured within such time as the
Fund shall determine. Tenders will not be deemed to have been made until all
defects and irregularities have been cured or waived. Neither the Fund, Merrill
Lynch Asset Management, L.P. nor the Transfer Agent, nor any other person shall
be obligated to give notice of defects or irregularities in tenders, nor shall
any of them incur any liability for failure to give any such notice.
8. IMPORTANT TAX INFORMATION. Under Federal income tax law, a stockholder
whose tendered Shares are accepted for payment is required by law to provide the
Transfer Agent (as payer) with his correct taxpayer identification number, which
is accomplished by completing and signing the Signature Form.
<PAGE>
EXHIBIT (a)(3)
<PAGE>
MERRILL LYNCH, PIERCE,
FENNER & SMITH
INCORPORATED
RESPONSE CENTER
P.O. BOX 30200
NEW BRUNSWICK, NJ
08989-0200
[LOGO]
Dear Stockholder:
As you requested, we are enclosing a copy of the Merrill Lynch Senior
Floating Rate Fund II, Inc. (the "Fund") Offer to Purchase dated July 21, 1999
(the "Offer to Purchase") 1,000,000 Issued and Outstanding Shares (the
"Shares"). The Offer to Purchase is for cash at Net Asset Value ("NAV") per
share as of the expiration date of the Offer, less any Early Withdrawal Charge.
Together with the Offer to Purchase we are sending you a Form Letter of
Transmittal (the "Letter") for use by holders of record of Shares which you
should read carefully. Certain selected financial information with respect to
the Fund is set forth in the Offer to Purchase.
If, after reviewing the information set forth in the Offer to Purchase and
Letter, you wish to tender Shares for purchase by the Fund, please either
contact your Merrill Lynch Financial Consultant or other broker, dealer or
nominee to effect the tender for you or, if you are the record owner of the
Shares, you may follow the instructions contained in the Offer to Purchase and
Letter.
Neither the Fund nor its Board of Directors is making any recommendation to
any holder of Shares as to whether to tender Shares. Each stockholder is urged
to consult his or her broker or tax adviser before deciding whether to tender
any Shares.
The Fund's annualized distribution rate for the period May 25, 1999 through
June 21, 1999, based on the amounts actually distributed by the Fund, was 6.22%.
The Fund's NAV on July 16, 1999 was $10.02 per Share. The Fund publishes its NAV
each week in BARRON'S. It appears in the "Investment Company Institute List"
under the sub-heading "Loan Participation Funds" within the listings of mutual
funds and closed-end funds.
Requests for current NAV quotations or for additional copies of the Offer to
Purchase, the Letter and any other tender offer documents may be directed to the
Merrill Lynch Response Center at (800) 637-7455, ext. 4356.
Should you have any other questions on the enclosed material, please do not
hesitate to contact your Merrill Lynch Financial Consultant or other broker or
dealer or call the Fund's Transfer Agent, Financial Data Services, Inc., at
(800) 637-3863. We appreciate your continued interest in Merrill Lynch Senior
Floating Rate Fund II, Inc.
Yours truly,
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
<PAGE>
EXHIBIT (b)(1)
<PAGE>
EXHIBIT (b)(1)
CREDIT AGREEMENT
DATED AS OF JUNE 21, 1999
BETWEEN
MERRILL LYNCH SENIOR FLOATING RATE FUND II, INC.
AND
THE BANK OF NEW YORK
------------------------
$25,000,000
------------------------
<PAGE>
CONFORMED COPY
CREDIT AGREEMENT, dated as of June 21, 1999, between MERRILL LYNCH SENIOR
FLOATING RATE FUND II, INC., a Maryland corporation (the "BORROWER"), and THE
BANK OF NEW YORK (the "BANK").
1. DEFINITIONS
1.1. DEFINED TERMS.
As used in this Agreement, terms defined in the preamble have the meanings
therein indicated, and the following terms have the following meanings:
"ACCOUNTANTS": Deloitte & Touche LLP, or any successor thereto, or such
other firm of independent public accountants of recognized international
standing selected by the Borrower.
"ADVANCE": Eurodollar Advance or a Federal Funds Advance.
"AFFECTED ADVANCE": as defined in paragraph 2.10(c).
"AFFILIATE": 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. For purposes of this definition, control of a Person shall mean the
power, direct or indirect, (i) to vote 5% or more of the securities having
ordinary voting power for the election of directors of such Person or (ii) to
direct or cause the direction of the management and policies of such Person
whether by contract or otherwise.
"AGREEMENT": this Credit Agreement, as the same may be amended,
supplemented or otherwise modified from time to time.
"APPLICABLE MARGIN": as to each Loan (whether consisting of a Federal Funds
Advance or a Eurodollar Advance), 0.50%.
"AUTHORIZED SIGNATORY": in respect of the Borrower (i) the president, the
executive vice president, the senior vice president, any vice president, the
chief financial officer, the treasurer or any other duly authorized officer of
such Person, and (ii) any employee of the Investment Adviser or the
Administrator designated by the directors of the Borrower as an Authorized
Signatory and set forth on a Certificate Regarding Authorized Signatories
substantially in the form attached hereto as Exhibit F, as the same may be
amended from time to time by written notice from the Borrower to the Bank,
provided, however, that until receipt by the Bank of such written notice, the
Bank shall be entitled to rely on the identity and authority of each person
listed on such Certificate Regarding Authorized Signatories.
"BORROWING BASE": at any date of determination, without duplication, an
amount equal to the sum of (i) Net Asset Value and (ii) the Indebtedness of the
Borrower under this Agreement LESS an amount equal to 100% of Non-Performing
Assets.
"BORROWING BASE CERTIFICATE": a certificate of the Borrower in
substantially the form of Exhibit C, duly executed by the chief financial
officer, a vice president or such other officer of the Borrower as shall be
reasonably acceptable to the Bank.
"BORROWING DATE": any date specified in a Borrowing Request delivered
pursuant to paragraph 2.3 as a date on which the Borrower requests the Bank to
make Loans.
"BORROWING REQUEST": as defined in paragraph 2.3.
"BUSINESS DAY": means any day other than a Saturday, a Sunday or a day on
which (i) commercial banks located in New York City or (ii) The New York Stock
Exchange are authorized or required by law or other governmental action to
close, provided that when used in connection with a Eurodollar Advance, the term
shall also exclude any day on which banks are not open for dealings in dollar
deposits in the London interbank market.
<PAGE>
"CHANGE IN LAW": (i) the adoption of any law, rule or regulation after the
Effective Date, (ii) the issuance or promulgation after the Effective Date of
any directive, guideline or request from any Governmental Body (whether or not
having the force of law), or (iii) any change after the Effective Date in the
interpretation of any existing law, rule, regulation, directive, guideline or
request by any Governmental Body charged with the administration thereof.
"CODE": the Internal Revenue Code of 1986, as the same may be amended from
time to time, or any successor thereto, and the rules and regulations issued
thereunder, as from time to time in effect.
"COMMITMENT": an aggregate principal amount not to exceed at any one time
outstanding $25,000,000, as the same may be reduced from time to time pursuant
to paragraph 2.4.
"COMMITMENT FEE": as defined in paragraph 3.1.
"COMMITMENT PERIOD": the period from the Effective Date to, but excluding,
the Termination Date.
"COMMONLY CONTROLLED ENTITY": a Person, whether or not incorporated, which
is, as of the date of determination, under common control with the Borrower
within the meaning of Section 414(b) or 414(c) of the Code.
"CONTINGENT OBLIGATION": as to any Person, any obligation of such Person
guaranteeing or in effect guaranteeing any Indebtedness, leases, dividends or
other obligations ("PRIMARY OBLIGATIONS") of any other Person (the "PRIMARY
OBLIGOR") in any manner, whether directly or indirectly, including, without
limitation, any obligation of such Person, whether or not contingent, (i) to
purchase any such primary obligation or any Property constituting direct or
indirect security therefor, (ii) to advance or supply funds (a) for the purchase
or payment of any such primary obligation or (b) to maintain working capital or
equity capital of the primary obligor or otherwise to maintain the net worth or
solvency of the primary obligor, (iii) to purchase Property, securities or
services primarily for the purpose of assuring the beneficiary 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 beneficiary
of such primary obligation against loss in respect thereof; provided, however,
that the term Contingent Obligation shall not include (i) the indorsement of
instruments for deposit or collection in the ordinary course of the Borrower's
activities or (ii) commitments of the Borrower to purchase Corporate Loans or
other investments or commitments of the Borrower to extend credit under
revolving credit or other credit facilities, in either case incurred by the
Borrower in the ordinary course of the Borrower's activities. The term
Contingent Obligation shall also include the liability of a general partner in
respect of the liabilities of a partnership in which it is a general partner.
The amount of any Contingent Obligation of a Person shall be deemed to be an
amount equal to the stated or determinable amount of the primary obligation in
respect of which such Contingent Obligation is made or, if not stated or
determinable, the maximum reasonably anticipated liability in respect thereof as
determined by such Person in good faith.
"CONVERSION DATE" means the date on which: (i) a Eurodollar Advance is
converted to a Federal Funds Advance, (ii) a Federal Funds Advance is converted
to a Eurodollar Advance or (iii) a Eurodollar Advance is converted to, or
continued as, a new Eurodollar Advance.
"CORPORATE LOAN": as defined in the Prospectus.
"CUSTODIAN": The Bank of New York.
"CUSTODY AGREEMENT": the Custody Agreement dated as of March 19, 1999
between the Borrower and the Custodian.
"DEFAULT": any of the events specified in paragraph 9.1, whether any
requirement for the giving of notice, the lapse of time, or any other condition,
has been satisfied.
2
<PAGE>
"DOLLARS" and "$": lawful currency of the United States of America.
"EFFECTIVE DATE": the date on which each of the conditions set forth in
paragraph 5 has been fulfilled.
"ERISA": the Employee Retirement Income Security Act of 1974, as amended
from time to time, and the rules and regulations issued thereunder, as from time
to time in effect.
"EURODOLLAR ADVANCES": collectively, the Loans (or any portions thereof),
at such time as they (or such portions) are made and/or being maintained at a
rate of interest based upon the Eurodollar Rate.
"EURODOLLAR RATE" means, with respect to each Eurodollar Advance, a rate of
interest per annum (rounded upwards, if necessary, to the nearest 1/100 of 1%),
as determined by the Bank, obtained by dividing:
(a) the rate of interest per annum quoted by the Bank to leading banks
in the London interbank eurodollar market as the rate at which the Bank is
offering Dollar deposits in an amount approximately equal to such Eurodollar
Advance and having a period to maturity approximately equal to the Interest
Period applicable to such Eurodollar Advance at approximately 11:00 a.m.,
London time, two Business Days prior to the commencement of such Interest
Period, by
(b) a number equal to 1.00 MINUS the aggregate of the then stated
maximum rates during such Interest Period of all reserve requirements
(including marginal, emergency, supplemental and special reserves),
expressed as a decimal, established by the Board of Governors of the Federal
Reserve System, and any other banking authority to which the Bank and other
major money center banks chartered under the laws of the United States or
any State thereof are subject, in respect of eurocurrency funding (currently
referred to as "EUROCURRENCY LIABILITIES" in Regulation D of the Board of
Governors of the Federal Reserve System) without benefit of credit for
proration, exceptions or offsets that may be available from time to time to
the Bank.
"EVENT OF DEFAULT": as defined in paragraph 9.1.
"FEDERAL FUNDS ADVANCE": collectively, the Loans (or any portions thereof),
at such time as they (or such portions) are made and/or being maintained at a
rate of interest based upon the Federal Funds Rate.
"FEDERAL FUNDS RATE": for any day, the rate per annum (rounded, if
necessary, to the next greater 1/16 of 1%) equal to the rate at which the Bank
is offered overnight Federal funds by a Federal funds broker selected by the
Bank at or about 2:00 p.m., New York City time, on such day, provided that if
such day is not a Business Day, the Federal Funds Rate for such day shall be
such rate at which the Bank is offered overnight Federal funds by such Federal
funds broker at or about 2:00 p.m., New York City time, on the next preceding
Business Day.
"GAAP": generally accepted accounting principles set forth in the opinions
and pronouncements of the Accounting Principles Board and the American Institute
of Certified Public Accountants and statements and pronouncements of the
Financial Accounting Standards Board, or such other statement by such other
entity as may be approved by a significant segment of the accounting profession,
which are applicable to the circumstances as of the date of determination,
consistently applied.
"GOVERNMENTAL BODY": any nation or government, any state or other political
subdivision thereof, any entity exercising executive, legislative, judicial,
regulatory or administrative functions of or pertaining to government and any
court or arbitrator.
"HIGHEST LAWFUL RATE": the maximum rate of interest, if any, that at any
time or from time to time may be contracted for, taken, charged or received on
the Note or which may be owing to the Bank pursuant to this Agreement under the
laws applicable to the Bank and this transaction.
3
<PAGE>
"INDEBTEDNESS": as to any Person, at a particular time, (a) indebtedness
for borrowed money, indebtedness evidenced by notes, bonds, debentures or
similar instruments (including, without limitation, the Note), (b) indebtedness
arising under acceptance facilities and the face amount of all letters of credit
issued for the account of such Person and, without duplication, all drafts drawn
thereunder to the extent such Person shall not have reimbursed the issuer in
respect of the issuer's payment of such drafts, (c) all liabilities secured by
any Lien on any Property owned by such Person even though such Person has not
assumed or otherwise become liable for the payment thereof, (d) obligations
under interest rate or foreign currency hedging arrangements, and (e) all
Contingent Obligations of such Person in respect of any of the foregoing.
"INDEMNIFIED LIABILITIES": as defined in paragraph 10.5.
"INTEREST PAYMENT DATE": (i) in the case of each Federal Funds Advance, the
last day of each month, and (ii) in the case of each Eurodollar Advance, on the
last day of the Interest Period applicable thereto.
"INTEREST PERIOD" means, subject to paragraph 2.8, as to each Eurodollar
Advance, the period commencing on, as the case may be, the Borrowing Date or
Conversion Date with respect thereto and ending one or two months thereafter, as
selected by the Borrower in its Borrowing Request or Notice of Conversion.
"INVESTMENT ADVISER": Merrill Lynch Asset Management, L.P., a Delaware
limited partnership, or any Affiliate of Merrill Lynch & Co., Inc. which
succeeds Merrill Lynch Asset Management, L.P., as investment adviser.
"LIEN": any mortgage, pledge, hypothecation, assignment, security deposit
arrangement, encumbrance, lien (statutory or other), or other security agreement
or security interest of any kind or nature whatsoever, including, without
limitation, any conditional sale or other title retention agreement and any
financing lease having substantially the same economic effect as any of the
foregoing.
"LOAN" and "LOANS": as defined in paragraph 2.1.
"LOAN DOCUMENTS": collectively, this Agreement and the Note.
"MARGIN STOCK": any "margin stock" as such term is defined in Regulation U
of the Board of Governors of the Federal Reserve System, as the same may be
amended or supplemented from time to time.
"MATERIAL ADVERSE CHANGE": a material adverse change in the activities,
Property, operations, or condition (financial or otherwise) of the Borrower.
"MATERIAL ADVERSE EFFECT": a material adverse effect on the activities,
Property, operations, or condition (financial or otherwise) of the Borrower.
"MATURITY DATE": as to (i) any Loan, the earlier of (x) 90 days from the
Borrowing Date in respect thereof, and (y) one Business Day prior to the date on
which the Borrower's next Tender Offer expires, or (ii) as to all Loans, such
earlier date that the Note shall become due and payable, whether by acceleration
or otherwise.
"MINIMUM AMOUNT": means in respect of a Federal Funds Advance or a
Eurodollar Advance, $1,000,000 or such amount plus a whole multiple of
$1,000,000 in excess thereof.
"MULTIEMPLOYER PLAN": a Plan which is a multiemployer plan as defined in
Section 4001(a)(3) of ERISA.
4
<PAGE>
"NET ASSET VALUE": as of any date of determination, the value of securities
held by the Borrower plus any cash or other assets (including interest and
dividends accumulated but not yet received) minus all liabilities (including
accrued expenses) and the aggregate liquidation value of the outstanding shares
of preferred stock, if any, determined in accordance with GAAP. Nothing herein
shall be deemed to permit the issuance by the Borrower of preferred stock.
"1940 ACT": the Investment Company Act of 1940, as amended, and the rules
and regulations promulgated thereunder.
"NON-PERFORMING ASSETS": at any time of determination, without duplication,
the value included by the Borrower in its Net Asset Value of (i) all capital
stock and (ii) all loans and other extensions of credit made, directly or
indirectly, to any Person in which the Borrower has an interest, including,
without limitation, a participation interest, if either (x) such Person has
defaulted in the making of any payment of principal or interest in respect of
such loan or other extension of credit when due or (y) the Borrower does not
receive any payment of principal or interest in respect of such loan or other
extension of credit when due for any reason, including, without limitation, any
default by the Person from which the Borrower acquired a participation.
"NOTICE OF CONVERSION": as defined in paragraph 2.7(a).
"NOTE": as defined in paragraph 2.2.
"PBGC": the Pension Benefit Guaranty Corporation established pursuant to
Subtitle A of Title IV of ERISA, or any Governmental Body succeeding to the
functions thereof.
"PERMITTED LIENS": Liens permitted to exist pursuant to paragraph 8.2.
"PERSON": an individual, a partnership, a corporation, a limited liability
company, a business trust, a joint stock company, a trust, an unincorporated
association, a joint venture, a Governmental Body or any other entity of
whatever nature.
"PLAN": any pension plan which is covered by Title IV of ERISA and which is
maintained by or to which contributions are made by the Borrower or a Commonly
Controlled Entity or in respect of which the Borrower or a Commonly Controlled
Entity has or may have any liability.
"PROPERTY": all types of real, personal, tangible, intangible or mixed
property.
"PROSPECTUS": the Borrower's Prospectus, dated March 22, 1999, as the same
may from time to time be amended or supplemented.
"REGULATED INVESTMENT COMPANY": as defined in Section 851 of the Code.
"SINGLE EMPLOYER PLAN": any Plan which is not a Multiemployer Plan.
"SPECIAL COUNSEL": Emmet, Marvin & Martin, LLP.
"STOCK": any and all shares, interests, participations, warrants or other
equivalents (however designated) of capital stock.
"SUBSIDIARY": as to any Person, any corporation, association, partnership,
joint venture or other business entity of which such Person, directly or
indirectly, either (i) in respect of a corporation, owns or controls at least
50% of the outstanding Stock having ordinary voting power to elect a majority of
the board of directors or similar managing body, irrespective of whether or not
a class or classes shall or might have voting power by reason of the happening
of any contingency or (ii) in respect of an association, partnership, joint
venture or other business entity, is entitled to share in at least 50% of the
profits and losses, however determined.
5
<PAGE>
"TAXES": any present or future income, stamp, excise or other taxes,
levies, imposts, duties, fees, assessments, deductions, withholdings, or other
charges of whatever nature, now or hereafter imposed, levied, collected,
withheld, or assessed by any Governmental Body.
"TENDER OFFER": an offer made by the Borrower to purchase its shares at a
price per share equal to the Net Asset Value per share as of the close of
business on the day such Tender Offer terminates as described in the Prospectus.
"TERMINATION DATE": the earlier of the date which is 364 days after the
Effective Date (provided that if such date is not a Business Day, the
immediately preceding Business Day), and the date the Commitment is terminated
pursuant to paragraph 2.4 or 9.1.
"TRANSACTION RECORD": as defined in paragraph 2.14.
1.2. OTHER DEFINITIONAL PROVISIONS.
(a) All terms defined in this Agreement shall have the meanings given
such terms herein when used in the Loan Documents or any certificate or
other document made or delivered pursuant hereto or thereto, unless
otherwise defined therein.
(b) As used herein, in the other Loan Documents and in any certificate
or other document made or delivered pursuant hereto or thereto, accounting
terms relating to the Borrower not defined in paragraph 1.1, and accounting
terms partly defined in paragraph 1.1, to the extent not defined, shall have
the respective meanings given to them under GAAP.
(c) The words "hereof", "herein", "hereto" and "hereunder" and similar
words when used in this Agreement shall refer to this Agreement as a whole
and not to any particular provision of this Agreement, and paragraph and
exhibit references contained herein shall refer to paragraphs hereof or
exhibits hereto unless otherwise expressly provided herein.
(d) The word "or" shall not be exclusive; "may not" is prohibitive and
not permissive; and the singular includes the plural and the plural includes
the singular, unless the context requires otherwise.
2. AMOUNT AND TERMS OF LOANS
2.1. LOANS.
Subject to the terms and conditions of this Agreement, the Bank agrees to
make Loans (each a "LOAN" and collectively, the "LOANS") to the Borrower from
time to time during the Commitment Period in an aggregate principal amount at
any one time outstanding not to exceed the Commitment. During such period, the
Borrower may borrow, prepay in whole or in part and reborrow under the
Commitment, all in accordance with the terms and conditions hereof. Each Loan
shall be due and payable on the Maturity Date in respect of such Loan.
2.2. NOTE.
The Loans made by the Bank shall be evidenced by a promissory note of the
Borrower, substantially in the form of Exhibit A, with appropriate insertions
therein as to date (as indorsed or modified from time to time, including all
replacements thereof and substitutions therefor, the "NOTE"), payable to the
order of the Bank and representing the obligation of the Borrower to pay the
lesser of (i) the Commitment and (ii) the aggregate unpaid principal balance of
all Loans, in each case with interest thereon as prescribed in paragraph 2.6.
The Bank shall record (a) the date and amount of each Loan made by it, (b) the
Maturity Date of such Loan, (c) its character as a Federal Funds Advance or a
Eurodollar Advance, (d) the initial Interest Period for each Eurodollar Advance
and (e) the amount of each payment or prepayment of such Loan on the Transaction
Record and, prior to any transfer of the Note, on the schedule (and any
continuations thereof) annexed to and constituting a part of the Note. Any
failure so to record and any
6
<PAGE>
error in so recording shall not affect the obligation of the Borrower to repay
the Loans, with interest thereon, as herein provided. Notwithstanding the
preceding sentence, in the event that the Bank transfers all or a portion of the
Note, any failure by the Bank to record the information required to be recorded
on the schedule annexed to the Note, or any error in so recording, shall not
obligate the Borrower to pay to such transferee more than the actual amount due
under the Note (or such transferee's portion thereof), with interest thereon, as
herein provided. The Note shall (i) be dated the Effective Date, (ii) be stated
to mature on the Termination Date and (iii) bear interest for the period from
and including the date thereof on the unpaid principal balance thereof from time
to time outstanding at the applicable interest rate or rates per annum
determined as provided in paragraph 2.6. Interest on the Note shall be payable
as specified in paragraph 2.6.
2.3. BORROWING PROCEDURE.
The Borrower may borrow a Loan on any Business Day from and after the
Effective Date to and including the day immediately preceding the Termination
Date, by giving or causing to be given to the Bank an irrevocable telephonic (to
be promptly confirmed in writing by telecopy by the close of business on such
day) or telecopy or other written notice of borrowing (each a "BORROWING
REQUEST") substantially in the form of Exhibit B no later than 11:00 a.m., New
York City time, three Business Days prior to the requested Borrowing Date in the
case of Eurodollar Advances and no later than 12 noon, New York City time, on
the requested Borrowing Date in the case of Federal Funds Advances, specifying
(i) the aggregate amount to be borrowed under the Commitment, (ii) the requested
Borrowing Date, (iii) whether such borrowing is to consist of one or more
Eurodollar Advances, Federal Funds Advances, or a combination thereof, and (iv)
if the Loan is to consist of one or more Eurodollar Advances, the amount and
length of the Interest Period for each Eurodollar Advance. Each Advance shall be
in a principal amount equal to the Minimum Amount, or, with respect to Federal
Funds Advances, if less, the unused amount of the Commitment. Upon receipt of
each Borrowing Request, the Bank will, subject to the satisfaction of the terms
and conditions of this Agreement as reasonably determined by the Bank, make
available to the Borrower, on the Borrowing Date, the amount of each borrowing
requested by or on behalf of the Borrower, at the office of the Bank specified
in or pursuant to paragraph 10.2 by crediting the account of the Borrower on the
books of such office with such amount in immediately available funds.
2.4. REDUCTION OF COMMITMENT.
(a) The Borrower shall have the right, upon at least five Business Days'
prior written notice to the Bank, to reduce permanently the Commitment in
whole at any time, or in part from time to time, to an amount not less than
the aggregate principal balance of the Loans then outstanding (after giving
effect to any contemporaneous prepayment thereof in accordance with
paragraph 2.5), without premium or penalty, provided that each partial
reduction of the Commitment shall be in an amount equal to $1,000,000 or
such amount plus a whole multiple of $1,000,000.
(b) Simultaneously with each reduction of the Commitment under this
paragraph 2.4, the Borrower shall pay the Commitment Fee accrued on the
amount by which the Commitment has been reduced.
2.5. PREPAYMENTS OF THE LOANS.
(a) VOLUNTARY PREPAYMENTS. The Borrower may, at its option, prepay the
Loans in whole or in part, without premium or penalty, by notifying or
causing such notice to be given to the Bank no later than 12 noon, New York
City time, on the proposed prepayment date in the case of Loans consisting
of Federal Funds Advances, and at least three Business Days prior to the
proposed prepayment date, in the case of Loans consisting of Eurodollar
Advances, specifying the amount to be prepaid, the date of prepayment and
whether the Loans to be prepaid consist of Federal Funds Advances,
Eurodollar Advances, or a combination thereof. If any such notice of the
Borrower is given pursuant to this paragraph 2.5, such notice shall be
irrevocable and payment of the amount specified in such notice shall be due
and payable on the date specified together with, in the case of Eurodollar
Advances,
7
<PAGE>
accrued interest to the date of such payment on the amount prepaid. Partial
prepayments shall be in a principal amount equal to the Minimum Amount or,
if less, the outstanding principal balance of the Loans.
(b) MANDATORY PREPAYMENTS RELATING TO TENDER OFFERS. The Borrower
shall prepay the outstanding principal balance of the Loans, together with
accrued interest to the date of such prepayment on the amount prepaid, no
later than one Business Day prior to the expiration of the Borrower's next
Tender Offer.
(c) MANDATORY BORROWING BASE PREPAYMENT OF THE LOANS. If, on any day
prior to the Termination Date, the Borrowing Base shall not exceed an amount
equal to 300% of the outstanding principal balance of the Loans and accrued
and unpaid interest thereon, the Borrower shall, within three Business Days
of such day, prepay the Loans by an amount equal to the difference between
the Borrowing Base and the amount equal to 300% of the outstanding principal
balance of the Loans and accrued and unpaid interest thereon.
2.6. INTEREST RATE AND PAYMENT DATES.
(a) PRIOR TO MATURITY. Prior to maturity, the outstanding principal
balance of each (i) Federal Funds Advance shall bear interest on the unpaid
principal balance thereof at the Federal Funds Rate plus the Applicable
Margin and (ii) Eurodollar Advance shall bear interest on the unpaid
principal balance thereof at the Eurodollar Rate for the applicable Interest
Period plus the Applicable Margin.
(b) LATE CHARGES. If all or any portion of the principal balance of
or, to the extent permitted by applicable law, interest payable on any of
the Loans or any other amount payable under the Loan Documents shall not be
paid when due (whether at the stated maturity thereof, by acceleration or
otherwise), such overdue balance or amount shall bear interest at a rate per
annum equal to the Federal Funds Rate plus 5% from the date of such
nonpayment to but not including the date such balance is paid in full
(whether before or after the entry of any judgment thereon).
(c) GENERAL. Interest shall be calculated on the basis of a 360 day
year for the actual number of days elapsed. Interest shall be payable in
arrears on each Interest Payment Date and upon payment (including, in the
case of Eurodollar Advances, prepayment) of the Loans. Any change in the
interest rate on a Loan resulting from a change in the Federal Funds Rate
shall become effective as of the opening of business on the day on which
such change in the Federal Funds Rate shall become effective. At no time
shall the interest rate payable on the Loans, together with the Commitment
Fee and all other fees and other amounts payable hereunder, to the extent
the same are construed to constitute interest, exceed the Highest Lawful
Rate. If interest payable to the Bank on any date would exceed the maximum
amount permitted by the Highest Lawful Rate, such interest payment shall
automatically be reduced to such maximum permitted amount, and interest for
any subsequent period, to the extent less than the maximum amount permitted
for such period by the Highest Lawful Rate, shall be increased by the unpaid
amount of such reduction. Any interest actually received for any period in
excess of such maximum allowable amount for such period shall be deemed to
have been applied as a prepayment of the Loans.
2.7. CONVERSIONS.
(a) The Borrower may elect from time to time to convert one or more
Eurodollar Advances to Federal Fund Advances by giving the Bank at least one
Business Day's prior irrevocable notice of such election, specifying the
amount to be converted, provided that any such conversion of Eurodollar
Advances shall only be made on the last day of the Interest Period
applicable thereto. In addition, the Borrower may elect from time to time to
(i) convert Federal Fund Advances to Eurodollar Advances and (ii) continue
Eurodollar Advances as new Eurodollar Advances by selecting a new Interest
Period therefor, in each case by giving the Bank at least three Business
Days' prior irrevocable notice of such election, in the case of a conversion
to, or continuation of, Eurodollar Advances, specifying the
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amount to be so converted or continued and the initial Interest Period
relating thereto, provided that any such conversion of Federal Fund Advances
to Eurodollar Advances shall only be made on a Business Day and any such
continuation of Eurodollar Advances as new Eurodollar Advances shall only be
made on the last day of the Interest Period applicable to the Eurodollar
Advances that are to be continued as such new Eurodollar Advances. Each such
notice (a "NOTICE OF CONVERSION") shall be substantially in the form of
Exhibit E, shall be irrevocable and shall be given by facsimile (confirmed
promptly, and in any event within five Business Days, by the delivery to the
Bank of a Notice of Conversion manually signed by the Borrower). Advances
may be converted or continued pursuant to this paragraph in whole or in
part, provided that the amount to be converted to, or continued as, a
Eurodollar Advance, when aggregated with any Eurodollar Advance to be made
on such date in accordance with paragraph 2.3 and having the same Interest
Period as such first Eurodollar Advance, shall equal the Minimum Amount.
(b) Notwithstanding anything in this Agreement to the contrary, upon the
occurrence and during the continuance of an Event of Default, the Borrower
shall have no right to elect to convert any existing Federal Fund Advance to
a new Eurodollar Advance or to continue any existing Eurodollar Advance as a
new Eurodollar Advance. In such event, all Federal Fund Advances shall be
automatically continued as Federal Fund Advances and each Eurodollar Advance
shall be automatically converted to Federal Fund Advances on the last day of
the Interest Period applicable to such Eurodollar Advance.
(c) Each conversion or continuation shall be effected by the Bank by
applying the proceeds of its new Federal Fund Advance or Eurodollar Advance,
as the case may be, to its Advances (or portion thereof) being converted (it
being understood that any such conversion or continuation shall not
constitute a borrowing for purposes of paragraphs 4 or 6).
2.8. CONCERNING INTEREST PERIODS.
(a) No Interest Period in respect of a Eurodollar Advance under a Loan
shall end after the Maturity Date of such Loan.
(b) With respect to Eurodollar Advances, any Interest Period that begins
on the last Business Day of a calendar month (or on a day for which there is
no numerically corresponding day in the calendar month at the end of such
Interest Period) shall end on the last Business Day of a calendar month.
(c) If an Interest Period would otherwise end on a day that is not a
Business Day, such Interest Period shall be extended to the next succeeding
Business Day, unless, in the case of an Interest Period, the result of such
extension would be to carry such Interest Period into another calendar
month, in which event such Interest Period shall end on the immediately
preceding Business Day.
(d) If the Borrower shall have failed timely to elect a Eurodollar
Advance under paragraph 2.3 or 2.7, as the case may be, in connection with
any borrowing of, conversion to, or continuation of, a Eurodollar Advance,
such borrowing or such Advance requested to be converted to, or continued
as, a Eurodollar Advance shall thereafter be a Federal Fund Advance until
such time, if any, as the Borrower shall elect a new Eurodollar Advance
pursuant to paragraph 2.7.
(e) The Borrower shall not be permitted to have more than five
Eurodollar Advances outstanding at any one time.
2.9. FUNDING LOSS.
Notwithstanding anything contained herein to the contrary, if the Borrower
shall fail to borrow, convert or continue a Eurodollar Advance on a Borrowing
Date or Conversion Date after it shall have given notice to do so in which it
shall have requested a Eurodollar Advance, or if a Eurodollar Advance shall be
terminated for any reason prior to the last day of the Interest Period
applicable thereto, or if, while
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a Eurodollar Advance is outstanding, any repayment or prepayment of such
Eurodollar Advance is made for any reason (including as a result of acceleration
or illegality) on a date that is prior to the last day of the Interest Period
applicable thereto, the Borrower agrees to indemnify the Bank against, and to
pay within 10 days of demand therefor directly to the Bank the amount
(calculated by the Bank using any reasonable method chosen by the Bank that is
customarily used by the Bank for such purpose) equal to any loss or
out-of-pocket expense suffered by the Bank as a result of such failure to
borrow, convert, or continue, or such termination, repayment or prepayment,
including any loss, cost or expense suffered by the Bank in liquidating or
employing deposits acquired to fund or maintain the funding of such Eurodollar
Advance or redeploying funds prepaid or repaid, in amounts that correspond to
such Eurodollar Advance and any reasonable internal processing charge
customarily charged by the Bank in connection therewith.
2.10 INCREASED COSTS; ILLEGALITY, ETC.
(a) INCREASED COSTS. If any Change in Law shall impose, modify or make
applicable any reserve, special deposit, compulsory loan, assessment,
increased cost or similar requirement against assets held by, or deposits
of, or advances or loans by, or other credit extended by, or any other
acquisition of funds by, any office of the Bank in respect of its Eurodollar
Advances that is not otherwise included in the determination of a Eurodollar
Rate and the result thereof is to increase the cost to the Bank of making,
renewing, converting or maintaining its Eurodollar Advances or its
commitment to make such Eurodollar Advances, or to reduce any amount
receivable under the Loan Documents in respect of its Eurodollar Advances,
then, in any such case, the Borrower shall pay the Bank such additional
amount as is sufficient to compensate the Bank for such additional cost or
reduction in such amount receivable that the Bank deems to be material as
determined by the Bank.
(b) ILLEGALITY. Notwithstanding any other provision hereof, if the
Bank shall reasonably determine that any law, regulation, treaty or
directive, or any change therein or in the interpretation or application
thereof, shall make it unlawful for the Bank to make or maintain any
Eurodollar Advance as contemplated by this Agreement, the Bank shall
promptly notify the Borrower and (i) the commitment of the Bank to make such
Eurodollar Advances or convert Federal Funds Advances to Eurodollar Advances
shall forthwith be suspended, (ii) the Bank shall fund its portion of each
requested Eurodollar Advance as a Federal Funds Advance and (iii) the Bank's
Loans then outstanding as such Eurodollar Advances, if any, shall be
converted automatically to Federal Funds Advances on the last day of the
then current Interest Period applicable thereto or at such earlier time as
may be required by law. If the commitment of the Bank with respect to
Eurodollar Advances is suspended pursuant to this paragraph and the Bank
shall have obtained actual knowledge that it is once again legal for the
Bank to make or maintain Eurodollar Advances, the Bank shall promptly notify
the Borrower thereof and, upon receipt of such notice by the Borrower, the
Bank's commitment to make or maintain Eurodollar Advances shall be
reinstated.
(c) SUBSTITUTED INTEREST RATE. In the event that (i) the Bank shall
have determined (which determination shall be conclusive and binding upon
the Borrower) that by reason of circumstances affecting the interbank
eurodollar market either adequate and reasonable means do not exist for
ascertaining the Eurodollar Rate applicable pursuant to paragraph 2.6 or
(ii) the Bank shall have determined (which determination shall be conclusive
and binding on the Borrower) that the applicable Eurodollar Rate will not
adequately and fairly reflect the cost to the Bank of maintaining or funding
loans bearing interest based on such Eurodollar Rate, with respect to any
portion of the Loans that the Borrower has requested be made as Eurodollar
Advances or Eurodollar Advances that will result from the requested
conversion or continuation of any portion of the Advances into or of
Eurodollar Advances (each, an "AFFECTED ADVANCE"), the Bank shall promptly
notify the Borrower (by telephone or otherwise), of such determination, on
or, to the extent practicable, prior to the requested Borrowing Date or
Conversion Date for such Affected Advances. If the Bank shall give such
notice, (A) any Affected Advances shall be made as Federal Funds Advances,
(B) the Advances (or any portion thereof) that were to have been converted
to Affected Advances shall be converted to Federal
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Funds Advances and (C) any outstanding Affected Advances shall be converted,
on the last day of the then current Interest Period with respect thereto, to
Federal Funds Advances. Until any notice under clauses (i) or (ii), as the
case may be, of this paragraph has been withdrawn by the Bank (by notice to
the Borrower promptly upon either (x) the Bank having determined that such
circumstances affecting the interbank eurodollar market no longer exist and
that adequate and reasonable means do exist for determining the Eurodollar
Rate pursuant to paragraph 2.6 or (y) the Bank having determined that
circumstances no longer render the Advances (or any portion thereof)
Affected Advances), no further Eurodollar Advances shall be required to be
made by the Bank, nor shall the Borrower have the right to convert all or
any portion of the Loans to or as Eurodollar Advances.
(d) PAYMENT; CERTIFICATES. Each payment pursuant to subparagraphs (a)
or (b) above shall be made within 10 days after demand therefor, which
demand shall be accompanied by a certificate of the Bank demanding such
payment setting forth the calculations of the additional amounts payable
pursuant thereto. Each such certificate shall be conclusive absent manifest
error. No failure by the Bank to demand, and no delay in demanding,
compensation for any increased cost shall constitute a waiver of its right
to demand such compensation at any time.
2.11. USE OF PROCEEDS.
The proceeds of the Loans shall be used to finance Tender Offers, and the
payment of the fees and expenses of Special Counsel, provided, that (i) no
portion of the proceeds of any Loan shall be used to repay any other Loan and
(ii) the use of the proceeds of the Loans shall conform with the provisions of
paragraph 4.12.
2.12. CAPITAL ADEQUACY.
If the Bank determines that any Change in Law relating to capital
requirements has or would have the effect of reducing the rate of return on the
Bank's capital or on the capital of the Bank's holding company, if any, as a
consequence of this Agreement or the Loans to a level below that which the Bank
(or its holding company) would have achieved or would thereafter be able to
achieve but for such Change in Law (taking into consideration the Bank's
policies and the policies of the Bank's holding company with respect to capital
adequacy), the Borrower shall pay to the Bank, within 10 days of demand
therefor, such additional amount or amounts as will compensate the Bank (or such
holding company) for such reduction. The Bank shall calculate the amounts
payable to it under this paragraph 2.12 in a manner consistent with the manner
in which it shall calculate similar amounts payable to it by other borrowers
having provisions in their credit agreements comparable to this paragraph 2.12.
Any demand under this paragraph 2.12 shall be accompanied by a written statement
submitted by the Bank to the Borrower as to the amount that will compensate the
Bank for such reduction which certificate shall be conclusive absent manifest
error.
2.13. TAXES; NET PAYMENTS.
Any and all payments by the Borrower hereunder, whether of principal,
interest, fees, expenses or otherwise, shall be paid in full, free and clear of
and without deduction for any and all Taxes with respect thereto, excluding any
Taxes imposed on the income of the Bank or any successor or assign thereof, and
franchise taxes imposed on any of them, by the jurisdiction under the laws of
which the Bank or any such successor or assign or any of their respective
lending offices is organized or located or any political subdivision thereof;
provided, however, that (i) except as otherwise provided in paragraph 10.6, the
obligation of the Borrower under this paragraph 2.13 shall not extend to any
Person that purchases a participation interest in any Loan and (ii) under no
circumstances shall the obligation of the Borrower under this paragraph 2.13 to
any successor or assignee exceed the amounts for which it would be liable but
for such succession or assignment. If the Borrower shall be required by law to
deduct any Taxes from or in respect of any such sum payable hereunder to the
Bank, (i) the sum payable to the Bank hereunder shall be increased as may be
necessary so that after making all required deductions the Bank receives an
amount equal to the sum it would have received had no such deductions been made,
(ii) subject to clause (i) above,
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the Borrower shall make such deductions and (iii) the Borrower shall pay the
full amount deducted to the relevant taxation authority or other authority in
accordance with applicable law. In the event that any such deduction or
withholding can be reduced or nullified as a result of the application of any
relevant double taxation convention, the Bank will, at the expense of the
Borrower, cooperate with the Borrower, to the extent reasonable, in making
application to the relevant taxing authorities seeking to obtain such reduction
or nullification, provided, however, that the Bank shall have no obligation to
engage in litigation with respect thereto.
2.14. TRANSACTION RECORD.
The Bank shall establish a transaction record (the "TRANSACTION RECORD")
with respect to this Agreement. The Transaction Record shall set forth the
Bank's Loans, the interest rates applicable thereto, each payment by the
Borrower of principal and interest on the Loans and fees, expenses and any other
amounts due and payable in connection with this Agreement. The Transaction
Record shall be presumptively correct absent manifest error as to the amount of
the Bank's Loans and as to the amount of principal and interest paid by the
Borrower in respect of such Loans and as to the other information relating to
the Loans and amounts paid and payable by the Borrower hereunder and under the
Note set forth in such Transaction Record.
3. FEES; PAYMENTS
3.1. COMMITMENT FEE.
The Borrower agrees to pay to the Bank a fee (the "COMMITMENT FEE") for the
period from and including the Effective Date to but excluding the date of the
expiration or other termination of the Commitment, equal to 0.08% per annum of
the unused portion of the Commitment, payable quarterly in arrears on the last
day of each June, September, December and March of each year and on the date of
the expiration or other termination of the Commitment, such payments commencing
on September 30, 1999. The Commitment Fee shall be calculated on the basis of a
360-day year for the actual number of days elapsed.
3.2. PAYMENTS.
All payments (including prepayments) made by the Borrower on account of
principal of or interest on the Loans or fees or expenses shall be made without
set-off or counterclaim and shall be made prior to 12:00 noon, New York City
time, on the date such payment is due, to the Bank at its office specified in or
pursuant to paragraph 10.2, in each case in lawful money of the United States of
America and in immediately available funds. The failure of the Borrower to make
any such payment by 12:00 noon, New York City time, on such due date shall not
constitute a Default or Event of Default hereunder, provided that such payment
is made on such due date. The Bank agrees to use its best efforts to notify the
Borrower promptly if it shall not receive any such payment by 12:00 noon, New
York City time, on the due date thereof, provided that the failure of the Bank
to give such prompt notice shall in no way affect the Borrower's obligation to
make any payment hereunder on the date such payment is due. If any payment
hereunder or on the Note becomes due and payable on a day other than a Business
Day, the maturity thereof shall be extended to the next succeeding Business Day
and, with respect to payments of principal, interest thereon shall be payable at
the then applicable rate or rates during such extension.
4. REPRESENTATIONS AND WARRANTIES
In order to induce the Bank to enter into this Agreement and to make the
Loans, the Borrower hereby makes the following representations and warranties to
the Bank:
4.1. SUBSIDIARIES.
The Borrower has no Subsidiaries.
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4.2. CORPORATE EXISTENCE AND POWER.
The Borrower is a corporation duly organized, validly existing and in good
standing under the laws of the State of Maryland, has all requisite corporate
power and authority to own its Property and to carry on its activities as now
conducted, and is in good standing and authorized to do business in each
jurisdiction in which the failure to be so authorized could reasonably be
expected to have a Material Adverse Effect.
4.3. CORPORATE AUTHORITY.
The Borrower has full corporate power and authority to enter into, execute,
deliver and carry out the terms of this Agreement, to make the borrowings
contemplated hereby, to execute, deliver and carry out the terms of the Note and
to incur the obligations provided for herein and therein, all of which have been
duly authorized by all proper and necessary corporate action and are not in
violation of the Borrower's Articles of Incorporation and By-Laws.
4.4. GOVERNMENTAL BODY APPROVALS.
No consent, authorization or approval of, filing with, notice to, or
exemption by, the Borrower's shareholders, any Governmental Body or any other
Person is required to authorize, or is required in connection with, the
execution and delivery by the Borrower of, and the performance by the Borrower
of its obligations under, the Loan Documents or is required as a condition to
the validity or enforceability of the Loan Documents with respect to or against
the Borrower. No provision of any applicable statute, law (including, without
limitation, any applicable usury or similar law), rule or regulation of any
Governmental Body will prevent the execution and delivery by the Borrower of, or
performance by the Borrower of its obligations under, or affect the validity
with respect to or against the Borrower of, the Loan Documents.
4.5. BINDING AGREEMENT.
This Agreement constitutes, and the Note, when issued and delivered pursuant
hereto for value received will constitute, the valid and legally binding
obligations of the Borrower enforceable in accordance with their respective
terms, except as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting
creditors' rights generally (regardless of whether considered in a proceeding at
law or in equity).
4.6. LITIGATION.
There are no actions, suits, arbitration proceedings or claims pending or,
to the knowledge of the Borrower, threatened against the Borrower or maintained
by the Borrower, at law or in equity, before any Governmental Body which, if
determined adversely to the Borrower, could reasonably be expected to have a
Material Adverse Effect. There are no proceedings pending or, to the knowledge
of the Borrower, threatened against the Borrower which call into question the
validity or enforceability of any of the Loan Documents.
4.7. NO CONFLICTING AGREEMENTS.
The Borrower is not in default under any mortgage, indenture, contract,
agreement, judgment, decree or order to which it is a party or by which it or
any of its Property is bound, which defaults, taken as a whole, could reasonably
be expected to have a Material Adverse Effect. The execution, delivery or
carrying out of the terms of the Loan Documents will not constitute a default
under, conflict with, require any consent under (other than consents which have
been obtained), or result in the creation or imposition of, or obligation to
create, any Lien upon the Property of the Borrower pursuant to the terms of any
such mortgage, indenture, contract, agreement, judgment, decree or order, which
defaults, conflicts and consents, if not obtained, could reasonably be expected
to have a Material Adverse Effect.
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4.8. TAXES.
The Borrower qualifies as a Regulated Investment Company and, as such,
because it intends to timely distribute all of its income (including capital
gains) to its shareholders, its income will not be subject to tax at the
corporate level under the Code. The Borrower has filed all tax returns required
to be filed and has paid, or has made adequate provision for the payment of, all
Taxes shown to be due and payable on said returns or in any assessments made
against it which if not so filed or paid could reasonably be expected to result
in a Material Adverse Effect, and no tax Liens have been filed against the
Borrower. The charges, accruals and reserves on the books of the Borrower with
respect to all Taxes are, in the judgment of the Borrower, adequate, and the
Borrower knows of no unpaid assessment which is due and payable against it or
any claims being asserted which could reasonably be expected to have a Material
Adverse Effect, except such thereof as are being contested in good faith and by
appropriate proceedings diligently conducted, and for which adequate reserves
have been set aside in accordance with GAAP.
4.9. COMPLIANCE WITH APPLICABLE LAWS.
The Borrower is not in default with respect to any judgment, order, writ,
injunction, decree or decision of any Governmental Body which default could
reasonably be expected to have a Material Adverse Effect. The Borrower is
complying in all material respects with all applicable statutes and regulations,
including the 1940 Act, of all Governmental Bodies, a violation of which could
reasonably be expected to have a Material Adverse Effect.
4.10. GOVERNMENTAL REGULATIONS.
The Borrower is registered under the 1940 Act as a continuously offered,
non-diversified, closed-end management investment company. The Borrower is a
Regulated Investment Company within the meaning of the Code. Except for the 1940
Act and state securities laws to the extent applicable, the Borrower is not
subject to any statute or regulation which prohibits or restricts the incurrence
of Indebtedness under the Loan Documents.
4.11. PROPERTY.
The Borrower has good and marketable title to all of its Property, with
respect to which the absence of such marketable title could reasonably be
expected to result in a Material Adverse Effect, subject to no Liens other than
Permitted Liens.
4.12. FEDERAL RESERVE REGULATIONS; USE OF LOAN PROCEEDS.
Except for Stock of the Borrower acquired by the Borrower with the proceeds
of a Loan in connection with a Tender Offer, no part of the proceeds of the
Loans will be used, directly or indirectly, to purchase or carry any Margin
Stock or for a purpose which violates any law, rule or regulation of any
Governmental Body, including, without limitation, the provisions of Regulation
T, U or X of the Board of Governors of the Federal Reserve System, as amended.
4.13. NO MISREPRESENTATION.
No representation or warranty made by the Borrower contained herein, and no
certificate or report furnished or to be furnished by the Borrower in connection
with the transactions contemplated hereby, contains or will contain a
misstatement of material fact, or omits or will omit to state a material fact
required to be stated in order to make the statements herein or therein
contained not misleading in the light of the circumstances under which made.
4.14. PLANS.
Neither the Borrower nor any Commonly Controlled Entity maintains, or has at
any time maintained, any Plan or Multiemployer Plan.
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4.15. NET ASSET VALUE; NO MATERIAL ADVERSE CHANGE.
The Net Asset Value of the Borrower as of May 31, 1999 was $141,824,937.16.
Since its inception, the Borrower has conducted its activities only in the
ordinary course and there has been no Material Adverse Change.
4.16. MATERIAL AGREEMENTS.
All material agreements between the Borrower and the Investment Adviser are
in full force and effect.
4.17. CAPITALIZATION.
The authorized capital stock of the Borrower consists of 1,000,000,000
shares of capital stock, $0.10 par value per share.
4.18. YEAR 2000.
The Investment Adviser has filed a Form ADV-Y2K with the Securities and
Exchange Commission, dated as of June 4, 1999 (the "Y2K FORM"). The information
disclosed in the Y2K Form was true and correct as of such date, and as of the
date hereof. The Borrower and the Investment Adviser are taking all necessary
action to comply with the remaining deadlines and other requirements set forth
in the Y2K Form in order to be in compliance therewith. Any failure to comply
with the deadlines or other requirements of the Y2K Form is not expected to
result in a Default or Event of Default or to have a material adverse effect on
the business, assets, operations, prospects or condition (financial or
otherwise) of the Borrower.
5. CONDITIONS TO EFFECTIVENESS
This Agreement shall become effective upon the fulfillment of the following
conditions precedent:
5.1. EVIDENCE OF CORPORATE ACTION.
The Bank shall have received a certificate, dated the Effective Date, of the
secretary or an assistant secretary of the Borrower (i) attaching a true and
complete copy of all documents evidencing necessary corporate action (in form
and substance satisfactory to the Bank and to Special Counsel) taken by it to
authorize the Loan Documents and the transactions contemplated thereby, (ii)
attaching a true and complete copy of its Articles of Incorporation and By-Laws,
(iii) setting forth the incumbency of its officer or officers who may sign the
Loan Documents, including therein a signature specimen of such and (iv)
attaching a certificate of good standing issued by the Department of Taxation
and Assessments of the State of Maryland, dated as of a recent date.
5.2. NOTE.
The Bank shall have received the Note duly executed by an Authorized
Signatory of the Borrower.
5.3. THIS AGREEMENT.
The Bank shall have received counterparts of this Agreement signed by each
of the parties hereto.
5.4. CERTAIN DOCUMENTS.
The Bank shall have received a true and complete copy of each of the
Borrower's most recent (i) Form N-2 and all amendments and exhibits thereto,
(ii) Prospectus and (iii) investment advisory and administrative agreements.
5.5. APPROVALS.
The Bank shall have received evidence reasonably satisfactory to it that all
approvals and consents of all Persons required to be obtained in connection with
the consummation of the transactions contemplated
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by the Loan Documents have been duly obtained and are in full force and effect
and that all required notices have been given and all required waiting periods
have expired.
5.6. LITIGATION.
There shall be no injunction, writ, preliminary restraining order or other
order of any nature issued by any Governmental Body in any respect affecting the
transactions provided for herein and no action or proceeding by or before any
Governmental Body shall have been commenced and be pending or, to the knowledge
of the Borrower, threatened, seeking to prevent or delay the transactions
contemplated hereby, or challenging any other terms and provisions hereof or
thereof or seeking any damages in connection therewith, and the Bank shall have
received a certificate of an Authorized Signatory of the Borrower to the
foregoing effects.
5.7. OPINION OF COUNSEL TO THE BORROWER.
The Bank shall have received an opinion of Brown & Wood LLP, counsel to the
Borrower, addressed to the Bank and dated the Effective Date, substantially in
the form of Exhibit D.
5.8. CERTIFICATE REGARDING AUTHORIZED SIGNATORIES.
The Bank shall have received a Certificate Regarding Authorized Signatories
substantially in the form of Exhibit F dated the Effective Date, duly executed
by a director.
5.9. FEES AND EXPENSES OF SPECIAL COUNSEL.
The Borrower shall have paid the reasonable fees and expenses of Special
Counsel.
6. CONDITIONS OF LENDING--ALL LOANS
The obligation of the Bank to make any Loan on a Borrowing Date is subject
to the satisfaction of the following conditions precedent as of the date of such
Loan:
6.1. COMPLIANCE.
On each Borrowing Date and after giving effect to the Loan to be made
thereon, (i) there shall exist no Default or Event of Default, (ii) the
representations and warranties contained in the Loan Documents shall be true and
correct with the same effect as though such representations and warranties had
been made on such Borrowing Date, except as the context otherwise requires and
except for those representations and warranties which by their terms or by
necessary implication are expressly limited to a state of facts existing as of
or prior to the Effective Date and except such matters relating thereto as are
indicated in each Borrowing Request (which shall be satisfactory to the Bank in
its sole discretion), (iii) the Borrowing Base shall exceed an amount equal to
300% of the outstanding principal balance of the Loans (after giving effect to
the Loan to be made on such Borrowing Date) and accrued and unpaid interest
thereon, and (iv) there shall have occurred no Material Adverse Change since May
31, 1999. Each borrowing by the Borrower shall constitute a certification by the
Borrower as of the date of such borrowing that each of the foregoing matters is
true and correct in all respects.
6.2. BORROWING REQUEST.
Subject to the provisions of Paragraph 2.3, with respect to any request for
a Loan, the Bank shall have received a Borrowing Request, duly executed by an
Authorized Signatory of the Borrower which Borrowing Request shall contain a
certification that no portion of the proceeds of such Loan shall be used to
repay any other Loan.
6.3. BORROWING BASE CERTIFICATE.
The Bank shall have received a Borrowing Base Certificate demonstrating that
after giving effect to the Loans to be made on such date the Borrower is in
compliance with Paragraph 7.10, duly executed by an Authorized Signatory of the
Borrower.
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7. AFFIRMATIVE COVENANTS
The Borrower hereby agrees that so long as this Agreement is in effect, any
Loan remains outstanding and unpaid, or any other amount is owing under any of
the Loan Documents to the Bank, the Borrower shall:
7.1. FINANCIAL STATEMENTS.
Maintain a system of accounting in accordance with GAAP, and furnish or
cause to be furnished to the Bank:
(a) As soon as available, but in any event within 60 days after the end
of each fiscal year of the Borrower, a copy of its Statement of Assets and
Liabilities as at the end of such fiscal year, together with the related
Schedule of Investments and Statements of Operations, Changes in Net Assets
and Cash Flows as of and through the end of such fiscal year. The Statement
of Assets and Liabilities and Schedules of Investments and Statements of
Operations, Changes in Net Assets and Cash Flows shall be certified without
qualification by the Accountants, which certification shall (i) state that
the examination by such Accountants in connection with such financial
statements has been made in accordance with generally accepted auditing
standards and (ii) include the opinion of such Accountants that such
financial statements have been prepared in conformity with GAAP, except as
otherwise specified in such opinion.
(b) As soon as available, but in any event not later than 60 days after
the end of the first semi-annual accounting period in each fiscal year of
the Borrower, a copy of its Statement of Assets and Liabilities and at the
end of such semi-annual period, together with the related Schedule of
Investments and Statements of Operations, Changes in Net Assets and Cash
Flows for such period. The reports to be delivered to the Bank pursuant to
this paragraph 7.1(b) shall be accompanied by a certificate of the
president, executive vice president or treasurer of the Borrower (or such
other Authorized Signatory as shall be acceptable to the Bank) in detail
reasonably satisfactory to the Bank (1) stating that there exists no
violation of any of the terms or provisions of the Loan Documents or
occurrence of any condition or event which would constitute a Default or
Event of Default, or, if any such violation, condition or event exists or
has occurred, specifying in such certificate all such violations, conditions
and events, and the nature and status thereof and (2) containing
computations showing compliance with the provisions of paragraphs 7.10 and
8.5.
(c) To the extent any Loans are outstanding, no later than 5 Business
Days after the end of each month and if no Loans are outstanding, no later
than the last day of each calendar quarter, a Borrowing Base Certificate
showing the Borrowing Base as of the last day of the prior month.
(d) As soon as available, but in any event not later than 10 days after
the filing thereof with the Securities and Exchange Commission, a copy of
each document filed with the Securities and Exchange Commission, including,
without limitation, each prospectus, registration statement, semi-annual
report or annual report of the Borrower and each Form ADV-Y2K of the
Investment Adviser.
(e) If at any time the Borrowing Base is less than 300% of the
outstanding principal balance of the Loans, a written notice to such effect
within 2 Business Days thereafter.
7.2. CERTIFICATES; OTHER INFORMATION.
Furnish to the Bank:
(a) Prompt written notice if (i) any Indebtedness of the Borrower in
excess of $1,000,000 is declared or shall become due and payable prior to
its stated maturity, or is called and not paid when due, (ii) a default
shall have occurred under any other Indebtedness (other than the Note) in
excess of $1,000,000 or the holder of any such note or other Indebtedness in
excess of $1,000,000 has the right
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to declare any such Indebtedness due and payable prior to its stated
maturity as a result of such default or (iii) there shall have occurred and
be continuing a Default or an Event of Default;
(b) Prompt written notice of (i) any citation, summons, subpoena, order
to show cause or other order naming the Borrower a party to any proceeding
before any Governmental Body which could reasonably be expected to have a
Material Adverse Effect or which calls into question the validity or
enforceability of any of the Loan Documents, and include with such notice a
copy of such citation, summons, subpoena, order to show cause or other
order, (ii) any lapse or other termination of any material license, permit,
franchise or other authorization issued to the Borrower by any Governmental
Body, the lapse or termination of which could reasonably be expected to
result in a Material Adverse Effect, (iii) any refusal by any Governmental
Body or any other Person to renew or extend any such material license,
permit, franchise or other authorization with respect to which such refusal
could reasonably be expected to result in a Material Adverse Effect and (iv)
any dispute between the Borrower and any Person, which dispute could
reasonably be expected to have a Material Adverse Effect;
(c) Promptly upon becoming available, copies of all financial
statements, reports and proxy statements which the Borrower may have sent to
its stockholders generally, and copies of all registration statements,
prospectuses and regular, periodic or special reports, schedules and other
material which the Borrower may now or hereafter be required to file with or
deliver to any securities exchange;
(d) Promptly after the execution thereof, copies of all amendments to
all investment advisory contracts and contracts with any principal
underwriter and any new investment advisory contracts and contracts with any
principal underwriter entered into after the Effective Date;
(e) Prompt written notice of any change in the Investment Adviser, the
directors or executive officers of the Borrower from those set forth in the
Prospectus or other informative report which has most recently been
delivered to the Bank pursuant to paragraph 7.2(c);
(f) To the extent the Borrower will incur any Loans hereunder in
connection with a Tender Offer, prior to the incurrence of such Loan, a copy
of each Tender Offer and all disclosure and other material furnished in
connection therewith; and
(g) Promptly, such other information and financial data as the Bank may
reasonably request.
7.3. LEGAL EXISTENCE.
Maintain its corporate existence in good standing in the jurisdiction of its
incorporation and in each other jurisdiction in which the failure so to do could
reasonably be expected to have a Material Adverse Effect.
7.4. REGULATED INVESTMENT COMPANY.
Maintain its qualifications as a Regulated Investment Company and, subject
to the provisions of this Agreement, distribute all of its income (including net
capital gain) so that it will not be subject to tax under the Code.
7.5. INSURANCE.
Maintain insurance with financially sound insurance carriers which is
required by applicable law including, without limitation, the 1940 Act, and file
with the Bank within 10 days after request therefor a detailed list of such
insurance then in effect, stating the names of the carriers thereof, the policy
numbers, the insureds thereunder, the amounts of insurance, dates of expiration
thereof, and the risks covered thereby, together with a certificate of the
president, the executive vice president or treasurer (or such other officer
acceptable to the Bank) of the Borrower certifying that in the opinion of such
officer such insurance
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is adequate in nature and amount, complies with the obligations of the Borrower
under this paragraph 7.5, and is in full force and effect.
7.6. PAYMENT OF INDEBTEDNESS AND PERFORMANCE OF OBLIGATIONS.
Pay and discharge when due all lawful Indebtedness, obligations and claims
for labor, materials and supplies or otherwise which, if unpaid, could
reasonably be expected to (i) have a Material Adverse Effect or (ii) become a
Lien upon Property of the Borrower other than Permitted Liens, unless and to the
extent only that the validity of such Indebtedness, obligation or claim shall be
contested in good faith and by appropriate proceedings diligently conducted by
the Borrower, and provided further that the Borrower shall give the Bank prompt
notice of any such contest and that such reserve or other appropriate provision
as shall be required in accordance with GAAP shall have been made therefor.
7.7. OBSERVANCE OF LEGAL REQUIREMENTS.
Observe and comply in all material respects with all laws (including the
1940 Act and the Code), ordinances, orders, judgments, rules, regulations,
certifications, franchises, permits, licenses, directions and requirements of
all Governmental Bodies, which may then be applicable to the Borrower, a
violation of which could reasonably be expected to have a Material Adverse
Effect, except such thereof as shall be contested in good faith and by
appropriate proceedings diligently conducted by the Borrower, provided that the
Borrower shall give the Bank prompt notice of such contest and that such reserve
or other appropriate provision as shall be required in accordance with GAAP
shall have been made therefor.
7.8. INSPECTION OF PROPERTY; BOOKS AND RECORDS; DISCUSSIONS.
Keep proper books of record and account in which complete, true and correct
entries in conformity with GAAP and all requirements of law shall be made of all
material dealings and transactions in relation to its activities; and upon
reasonable notice, permit representatives of the Bank to visit the offices of
the Borrower, at any reasonable time during business hours and as often as may
reasonably be desired, to discuss the operations, and financial condition of the
Borrower with the officers thereof and with the Investment Adviser and the
Accountants.
7.9. COMPLIANCE WITH PROSPECTUS.
Comply at all times with the investment objectives and other requirements
and restrictions set forth in the Borrower's currently effective Prospectus, a
violation of which could reasonably be expected to have a Material Adverse
Effect.
7.10. BORROWING BASE.
Maintain at all times a Borrowing Base of not less than 300% of the
outstanding principal balance of the Loans and accrued and unpaid interest
thereon.
8. NEGATIVE COVENANTS
The Borrower hereby agrees that, so long as this Agreement is in effect, any
Loan remains outstanding and unpaid, or any other amount is owing under any Loan
Document to the Bank, the Borrower shall not, directly or indirectly:
8.1. INDEBTEDNESS.
Create, incur, assume or suffer to exist any liability for Indebtedness,
except (i) Indebtedness hereunder and under the Note, (ii) Indebtedness in
respect of swap, cap or other interest rate or foreign currency hedging
arrangements (where used for hedging purposes), (iii) purchases of securities on
short-term credit as may be necessary for the clearance of purchases and sales
of portfolio securities as described in the Prospectus and (iv) overdrafts
extended by the Custodian under the Custody Agreement.
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8.2. LIENS.
Create, incur, assume or suffer to exist any Lien upon any of its Property
or assets, whether now owned or hereafter acquired, except that the Borrower (i)
may make purchases of securities on short-term credit as may be necessary for
the clearance of purchases and sales of portfolio securities as described in the
Prospectus, (ii) Liens in respect of Indebtedness permitted under paragraph
8.1(ii), (iii) Liens for Taxes, assessments or similar charges incurred in the
ordinary course of business which are not delinquent or which are being
contested in good faith and by appropriate proceedings diligently conducted, and
for which adequate reserves have been set aside in accordance with GAAP,
provided that enforcement of such Liens is stayed pending such contest, (iv)
statutory Liens arising by operation of law such as mechanics', materialmen's,
carriers', and warehousemen's liens incurred in the ordinary course of business
which are not delinquent or which are being contested in good faith and by
appropriate proceedings diligently conducted, and for which adequate reserves
have been set aside in accordance with GAAP, provided that enforcement of such
Liens is stayed pending such contest, (v) Liens arising out of judgments or
decrees which are being contested in good faith and by appropriate proceedings
diligently conducted, and for which adequate reserves have been set aside in
accordance with GAAP, provided that enforcement thereof is stayed pending such
contest and (vi) Liens of the Custodian under the Custody Agreement.
8.3. COMPLIANCE WITH ERISA.
Adopt any Plan or Multiemployer Plan; or become a Commonly Controlled Entity
with respect to another Person; or engage in any "prohibited transaction", as
such term is defined in Section 4975 of the Code or Section 406 of ERISA, with
respect to any Plan; or incur any Accumulated funding deficiency, as such term
is defined in Section 412 of the Code or Section 302 of ERISA.
8.4. CONSOLIDATIONS, MERGERS AND SALES OF PROPERTY.
Consolidate or merge into or with any Person, or sell, lease or otherwise
transfer, directly or indirectly, all or substantially all of the Property of
the Borrower, except that the Borrower may sell Property in the ordinary course
of business as described in the Prospectus.
8.5. DIVIDENDS AND PURCHASE OF STOCK.
Declare or pay any dividends payable in cash or otherwise or apply any of
its Property to the purchase, redemption or other retirement of, or set apart
any sum for the payment of any dividends on, or make any other distribution by
reduction of capital or otherwise in respect of, any shares of its share capital
or other similar equity interest or warrants or other rights issued in respect
thereof, except that provided that no (a) Event of Default described in
subparagraphs 9.1(h) or 9.1(i), (b) Default described in subparagraphs 9.1(a) or
9.1(b), or (c) Default or Event of Default relating to subparagraph 7.10, in
which the Borrowing Base is less than 200% of the outstanding principal balance
of the Loans and accrued and unpaid interest thereon, in each case would exist
or be continuing after giving effect thereto (i) the Borrower may make dividend
payments to shareholders each monthly dividend period in an amount not in excess
of its net investment income and realized capital gains not previously
distributed to shareholders in accordance with the Prospectus for such period,
(ii) without duplication, may distribute each year all of its net investment
income (including net realized capital gains) so that it will not be subject to
tax (including corporate and/or excise taxes) under the Code; provided, that if
the Borrower's net investment income (including net realized capital gains)
calculated on a tax basis exceeds its net investment income calculated on a GAAP
basis, the Borrower may also distribute such excess to its shareholders, and
(iii) the Borrower may repurchase shares pursuant to Tender Offers in compliance
with its Articles of Incorporation and Prospectus.
8.6. INVESTMENT POLICIES.
Permit to exist at any time investments other than as described in the
Prospectus.
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8.7. ARTICLES OF INCORPORATION AND BY-LAWS.
Amend or otherwise modify its Articles of Incorporation and By-Laws in any
way which would materially adversely affect the Bank under the Loan Documents.
8.8. FISCAL YEAR.
Change its fiscal year.
8.9. CHANGE IN ACCOUNTING PRINCIPLES.
Change or permit any change in accounting principles applied to the
Borrower, except as required by GAAP.
8.10. SUBSIDIARIES.
Create or acquire any Subsidiary.
8.11. ISSUANCE OF ADDITIONAL CAPITAL STOCK.
Issue any additional Stock (other than common Stock).
8.12. MARGIN STOCK.
Following application of the proceeds of the Loans provided for herein,
permit more than 25% of the assets of the Borrower to consist of Margin Stock.
9. DEFAULT
9.1. EVENTS OF DEFAULT.
The following shall each constitute an "EVENT OF DEFAULT" hereunder:
(a) the failure of the Borrower to make any payment of principal on any
Note on the date when due and payable; or
(b) the failure of the Borrower to make any payment of interest or any
fees or expenses payable hereunder or under any other Loan Document for five
or more Business Days after the same shall be due and payable; or
(c) the use by the Borrower of the proceeds of any Loan in a manner
inconsistent with or in violation of paragraph 2.11; or
(d) the failure of the Borrower to observe or perform any covenant or
agreement contained in paragraph 7.3 (solely to the extent it requires the
Borrower to maintain its legal existence) or paragraph 8; or
(e) the failure of the Borrower to observe or perform (i) the covenant
contained in paragraph 7.10 and such failure shall have continued unremedied
for a period of three Business Days, or (ii) any other term, covenant, or
agreement contained in this Agreement and such failure shall have continued
unremedied for a period of 30 days after the Borrower shall have obtained
knowledge thereof; or
(f) any representation or warranty of the Borrower (or of any Authorized
Signatory on its behalf) made in this Agreement or any other Loan Document
or in any certificate, report or other document delivered or to be delivered
pursuant to this Agreement or any other Loan Document, shall prove to have
been incorrect or misleading (whether because of misstatement or omission)
in any material respect when made; or
(g) obligations of the Borrower, whether as principal, guarantor, surety
or other OBLIGOR, for the payment of Indebtedness in an aggregate amount in
excess of $1,000,000, shall become or shall be declared to be due and
payable prior to the expressed maturity or expiration thereof, or shall not
be
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paid when due or within any grace period for the payment thereof, or the
holder thereof shall have the right to declare such obligation due and
payable prior to the expressed maturity thereof; or
(h) the Borrower shall (i) make an assignment for the benefit of
creditors, or (ii) generally not be paying its debts as such debts become
due, or (iii) admit in writing its inability to pay its debts as they become
due, or (iv) file a voluntary petition in bankruptcy, or (v) file any
petition or answer seeking for itself any reorganization, arrangement,
composition, readjustment of debt, liquidation or dissolution or similar
relief under any present or future statute, law or regulation of any
jurisdiction, or (vi) petition or apply to any tribunal for any receiver,
custodian or any trustee for any substantial part of its Property, or (vii)
be the subject of any such proceeding filed against it which remains
undismissed for a period of 60 days, or (viii) file any answer (excluding
motions relating to preliminary matters) admitting or not contesting the
material allegations of any such petition filed against it or any order,
judgment or decree approving such petition in any such proceeding, or (ix)
seek, approve, consent to, or acquiesce in any such proceeding, or in the
appointment of any trustee, receiver, custodian, liquidator, or fiscal agent
for it, or any substantial part of its Property, or an order is entered
appointing any such trustee, receiver, custodian, liquidator or fiscal agent
and such order remains in effect for 60 days, or (x) take any formal action
for the purpose of effecting any of the foregoing or looking to the
liquidation or dissolution of the Borrower; or
(i) an order for relief is entered under any bankruptcy, insolvency or
similar laws or any other decree or order is entered by a court having
jurisdiction (i) adjudging the Borrower a bankrupt or insolvent, or (ii)
approving as properly filed a petition seeking reorganization, liquidation,
arrangement, adjustment or composition of or in respect of the Borrower
under any bankruptcy, insolvency or similar law, or (iii) appointing a
receiver, liquidator, assignee, trustee, custodian, sequestrator, fiscal
agent (or other similar official) of the Borrower or of any substantial part
of the Property thereof, or (iv) ordering the winding up or liquidation of
the affairs of the Borrower, and any such decree or order continues unstayed
and in effect for a period of 60 days; or
(j) judgments or decrees against the Borrower aggregating in excess of
$1,000,000 shall remain unpaid, unstayed on appeal, undischarged, unbonded
or undismissed for a period of 60 days, or
(k) the Borrower shall change the Investment Adviser.
9.2. CONTRACT REMEDIES.
(a) Upon the occurrence of an Event of Default or at any time thereafter
during the continuance thereof, (1) if such event is an Event of Default
specified in clause (i) above, the Commitment shall immediately and
automatically terminate and the Loans and all accrued and unpaid interest on
any thereof and all other amounts owing under the Loan Documents shall
immediately become due and payable, and the Bank may, in its sole
discretion, exercise any and all remedies and other rights provided pursuant
to the Loan Documents, and (2) if such event is any other Event of Default,
any or all of the following actions may be taken: (x) the Bank may, in its
sole discretion, by notice to the Borrower, declare the Commitment to be
terminated forthwith, whereupon the Commitment shall immediately terminate
and (y) the Bank may, by written notice of default to the Borrower, declare
the Loans, all accrued and unpaid interest thereon and all other amounts
owing under the Loan Documents to be due and payable forthwith, whereupon
the same shall immediately become due and payable, and in all cases the Bank
may, in its sole discretion, exercise any and all remedies and other rights
provided pursuant to the Loan Documents or by law. Except as otherwise
provided in this paragraph 9.1, presentment, demand, protest and all other
notices of any kind are hereby expressly waived.
(b) In the event that the Commitment shall have been terminated or the
Note shall have been declared due and payable pursuant to the provisions of
this paragraph 9.1, any funds received by the Bank from or on behalf of the
Borrower shall be applied by the Bank in liquidation of the Loans and
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the obligations of the Borrower hereunder and under the Note in the
following manner and order: (i) first, to reimburse the Bank for any
expenses due pursuant to the provisions of paragraph 10.5; (ii) second, to
the payment of accrued and unpaid Commitment Fee and all other fees,
expenses and amounts due hereunder (other than principal and interest on the
Note); (iii) third, to the payment of interest due on the Note; (iv) fourth,
to the payment of principal outstanding on the Note; and (v) fifth, to the
payment of any other amounts owing to the Bank under any of the Loan
Documents. Any funds remaining after the foregoing applications shall be
paid over to the Borrower or as a court may otherwise direct.
10. OTHER PROVISIONS
10.1. AMENDMENTS AND WAIVERS.
The Bank and the Borrower may from time to time enter into written
amendments, supplements or modifications hereof and the Bank may, in its sole
discretion, execute and deliver a written instrument waiving or consenting to
the departure from, on such terms and conditions as the Bank may specify in such
instrument, any of the requirements of the Loan Documents or any Default or
Event of Default and its consequences. Any such amendment, supplement,
modification, waiver or consent shall be binding upon the Borrower, the Bank and
all future holders of the Note. In the case of any waiver, the Borrower and the
Bank shall be restored to their former position and rights under the Loan
Documents, and any Default or Event of Default waived shall not extend to any
subsequent or other Default or Event of Default, or impair any right consequent
thereon.
10.2. NOTICES.
All notices, requests and demands to or upon the respective parties hereto
to be effective shall be in writing and, unless otherwise expressly provided
herein, shall be deemed to have been duly given or made when delivered by hand,
or when deposited in the mail, first-class postage prepaid, or, in the case of
telecopier notice, when sent, addressed as follows, or to such other addresses
as to which the Bank may be hereafter notified by the Borrower in accordance
with the provisions of this paragraph 10.2:
The Borrower:
MERRILL LYNCH SENIOR FLOATING RATE FUND II, INC.
800 Scudders Mill Road
Plainsboro, New Jersey 08536
Attention: Portfolio Manager
Telephone: (609) 282-2059
Telecopy: (609) 282-2756
with a copy to:
MERRILL LYNCH ASSET MANAGEMENT, L.P.
800 Scudders Mill Road
Plainsboro, New Jersey 08536
Attention: Patrick D. Sweeney, Esq.
Telephone: (609) 282-3651
Telecopy: (609) 282-3222
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The Bank:
THE BANK OF NEW YORK
One Wall Street
New York, New York 10286
Attention: Scott Buitekant
Vice President
Telephone: (212) 635-6958
Telecopy: (212) 635-6348
except that any notice, request or demand by the Borrower to or upon the Bank
pursuant to paragraphs 2.3, 2.4, 2.5 or 2.7 shall not be effective until
received.
10.3. 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 under any Loan Document shall operate as a
waiver thereof; nor shall any single or partial exercise of any right, remedy,
power or privilege under any Loan Document preclude any other or further
exercise thereof or the exercise of any other right, remedy, power or privilege.
The rights, remedies, powers and privileges under the Loan Documents are
cumulative and not exclusive of any rights, remedies, powers and privileges
provided by law.
10.4. SURVIVAL OF REPRESENTATIONS AND WARRANTIES.
All representations and warranties made hereunder and in any document,
certificate or statement delivered pursuant hereto or in connection herewith
shall survive the execution and delivery of the Loan Documents.
10.5. PAYMENT OF EXPENSES AND TAXES; INDEMNIFIED LIABILITIES.
The Borrower agrees, promptly upon presentation of a statement or invoice
therefor, and whether or not any Loan is made, (i) to pay or reimburse the Bank
for all out-of-pocket costs and expenses incurred in connection with the
development, preparation and execution of, the Loan Documents and any amendment,
supplement or modification thereto, or waiver or consent thereunder, any
documents prepared in connection therewith and the consummation of the
transactions contemplated thereby, including, without limitation, the reasonable
fees and disbursements of counsel, (ii) to pay or reimburse the Bank for its
costs and expenses incurred in connection with the enforcement of any rights
under this Agreement, the Note and any such other documents, including, without
limitation, reasonable fees and disbursements of counsel, (iii) to pay,
indemnify, and hold the Bank harmless from, any and all recording and filing
fees and any and all liabilities with respect to, or resulting from any delay in
paying, present and future stamp and other similar taxes, if any, which may be
payable or determined to be payable in connection with the execution and
delivery of, or consummation of any of the transactions contemplated by, or any
amendment, supplement or modification of, or any waiver or consent under or in
respect of, the Loan Documents and any such other documents, and (iv) to pay,
indemnify and hold the Bank and each of its officers, directors and employees
harmless from and against any and all other liabilities, obligations, claims,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements of any kind or nature whatsoever that may be or become payable to
any third party (including, without limitation, reasonable counsel fees and
disbursements) with respect to the execution, delivery, enforcement and
performance of the Loan Documents or the use of the proceeds of the Loans (all
the foregoing, collectively, the "INDEMNIFIED LIABILITIES") and, if and to the
extent that the foregoing indemnity may be unenforceable for any reason, the
Borrower agrees to make the maximum payment permitted under applicable law;
provided, however, that the Borrower shall have no obligation hereunder to pay
Indemnified Liabilities to any Person arising from the gross negligence or
willful misconduct of such Person. The agreements in this paragraph shall
survive the termination of the Commitment and the payment of the Note, and all
other amounts payable hereunder.
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10.6. SUCCESSORS AND ASSIGNS.
(a) This Agreement and the Note shall be binding upon and inure to the
benefit of the Borrower, the Bank, all future holders of the Note and their
respective successors and assigns, except that the Borrower may not assign,
delegate or transfer any of its rights or obligations under the Loan
Documents without the prior written consent of the Bank.
(b) With the prior written consent of the Borrower (which consent shall
not be unreasonably withheld), the Bank shall have the right at any time,
upon written notice to the Borrower of its intent to do so, subject to
compliance with applicable securities laws, to sell, assign, transfer or
negotiate all or any part of the Bank's rights (but not its obligations)
with respect to the Loans, the Commitment and the Note to one or more of its
Affiliates or, with the prior written consent of the Borrower (which consent
shall not be unreasonably withheld), to sell, assign, transfer or negotiate
all or any part of the Bank's rights and obligations with respect to its
Loans, its Commitment and its Note to one or more commercial banks. Upon any
such assignment, the assignee thereunder shall be a party hereto and the
assignor thereunder shall be released from its obligations under this
Agreement. The Borrower agrees upon written request of such assignor to
execute and deliver (1) to such assignee, a Note, dated the effective date
of such assignment, in an aggregate principal amount equal to the Loans
assigned to, and Commitment assumed by, such assignee and (2) to such
assignor, a Note, dated the effective date of such assignment, in an
aggregate principal amount equal to the balance of such assignor's Loans and
Commitment, if any, and such assignor shall cancel and return to the
Borrower its existing Note.
(c) The Bank may without the consent of the Borrower but subject to
compliance with applicable securities laws, grant participations in all or
any part of its Loans, the Note or the Commitment to the parent, any
Affiliate, Subsidiary or branch of the Bank or to one or more commercial
banks, provided that the Bank shall not grant more than 25 participations
without the prior written consent of the Borrower and provided further that
(i) the Bank's obligations under this Agreement shall remain unchanged, (ii)
the Bank shall remain solely responsible to the other parties hereto for the
performance of such obligations, (iii) the Borrower shall continue to deal
directly with the Bank in connection with the Bank's rights and obligations
under this Agreement and (iv) the rights of any holder of any such
participation shall be limited to the right to consent to any action taken
or omitted to be taken by the Bank under this Agreement which would (1)
increase the Commitment, (2) reduce the Commitment Fee or the interest rate
payable on, or increase or forgive the principal amount of the Note or (3)
extend the maturity date of the Note or extend the Termination Date, or
postpone the payment or scheduled due dates for payments of principal,
interest and Commitment Fee. The Borrower hereby acknowledges and agrees
that any such participant shall for purposes of paragraphs 2.9, 2.10, 2.12
and 2.13, be deemed to be the "Bank", provided that in no event shall the
Borrower be liable for any amounts under said paragraphs in excess of the
amounts for which it would be liable but for such participation.
(d) The Bank shall not, as between and among the Borrower and the Bank,
be relieved of any of its obligations hereunder as a result of any sale,
assignment, transfer or negotiation of, or granting of participations in,
all or any part of its Loans, the Commitment or the Note, except that the
Bank shall be relieved of its obligations to the extent of any sale,
assignment, transfer, or negotiation of all or any part of its Loans, the
Commitment or the Note pursuant to paragraph (b) above.
(e) Notwithstanding anything to the contrary contained in this paragraph
10.6, the Bank may at any time or from time to time assign all or any
portion of its rights under this Agreement with respect to its Loans and the
Note to a Federal Reserve Bank. No such assignment shall release the Bank
from its obligations hereunder.
10.7. COUNTERPARTS.
This Agreement may be executed by one or more of the parties to this
Agreement on any number of separate counterparts and all of said counterparts
taken together shall be deemed to constitute one and the same instrument. It
shall not be necessary in making proof of this Agreement to produce or account
for more than one counterpart signed by the party to be charged.
25
<PAGE>
10.8. GOVERNING LAW.
The Loan Documents and the rights and obligations of the parties thereunder
shall be governed by, and construed and interpreted in accordance with, the
internal laws of the State of New York, without regard to principles of conflict
of laws, but including Section 5-1401 of the General Obligations Law.
10.9. HEADINGS.
Paragraph headings have been inserted herein for convenience only and shall
not be construed to be a part hereof.
10.10. SEVERABILITY.
Every provision of the Loan Documents is intended to be severable, and if
any term or provision thereof shall be invalid, illegal or unenforceable for any
reason, the validity, legality and enforceability of the remaining provisions
thereof shall not be affected or impaired thereby, and any invalidity,
illegality or unenforceability in any jurisdiction shall not affect the
validity, legality or enforceability of any such term or provision in any other
jurisdiction.
10.11. INTEGRATION.
This Agreement and the Note embody the entire agreement and understanding
between the Borrower and the Bank with respect to the subject matter hereof and
thereof and supersede all prior agreements and understandings between the
Borrower and the Bank with respect to the subject matter hereof and thereof.
10.12. CONSENT TO JURISDICTION.
The Borrower hereby irrevocably submits to the jurisdiction of any New York
State or Federal Court sitting in the City of New York over any suit, action or
proceeding arising out of or relating to the Loan Documents. The Borrower hereby
irrevocably waives, to the fullest extent permitted by law, any objection which
it may now or hereafter have to the laying of the venue of any such suit, action
or proceeding brought in such a court and any claim that any such suit, action
or proceeding brought in such a court has been brought in an inconvenient forum.
The Borrower hereby agrees that a final judgment in any such suit, action or
proceeding brought in such a court, after all appropriate appeals, shall be
conclusive and binding upon it.
10.13. NO LIMITATION ON SERVICE OR SUIT.
Nothing contained in the Loan Documents or in any modification, waiver,
consent or amendment thereto shall affect the right of the Bank to serve process
in any manner permitted by law or limit the right of the Bank to bring
proceedings against the Borrower in the courts of any jurisdiction or
jurisdictions.
10.14. WAIVER OF TRIAL BY JURY.
THE BANK AND THE BORROWER HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY
WAIVE ANY RIGHT THEY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION
ARISING OUT OF, UNDER OR IN CONNECTION WITH THE LOAN DOCUMENTS OR THE
TRANSACTIONS CONTEMPLATED THEREIN. FURTHER, THE BORROWER HEREBY CERTIFIES THAT
NO REPRESENTATIVE OR AGENT OF THE BANK, OR COUNSEL TO THE BANK, HAS REPRESENTED,
EXPRESSLY OR OTHERWISE, THAT THE BANK WOULD NOT, IN THE EVENT OF SUCH
LITIGATION, SEEK TO ENFORCE THIS WAIVER OF RIGHT TO JURY TRIAL PROVISION. THE
BORROWER ACKNOWLEDGES THAT THE BANK HAS BEEN INDUCED TO ENTER INTO THIS
AGREEMENT BY, INTER ALIA, THE PROVISIONS OF THIS PARAGRAPH.
10.15. SET-OFF.
In addition to any rights and remedies of the Bank provided by law, upon the
occurrence of an Event of Default and acceleration of the obligations owing in
connection with the Loan Documents, or at any time upon the occurrence and
during the continuance of an Event of Default under paragraphs 9.1(a) or 9.1(b),
the Bank shall have the right, to the extent permitted by applicable law,
without prior notice to the Borrower, any such notice being expressly waived, to
the extent permitted by applicable law, by the Borrower, to set off and apply
against any indebtedness, whether matured or unmatured, of the Borrower to the
Bank, any amount owing from the Bank to the Borrower at, or at any time after,
the happening of
26
<PAGE>
any of the above- mentioned events. To the extent permitted by applicable law,
the aforesaid right of set-off may be exercised by the Bank against the
Borrower, or against any trustee in bankruptcy, custodian, debtor in possession,
assignee for the benefit of creditors, receiver, or execution, judgment or
attachment creditor of the Borrower or against anyone else claiming through or
against the Borrower or such trustee in bankruptcy, custodian, debtor in
possession, assignee for the benefit of creditors, receiver, or execution,
judgment or attachment creditor, notwithstanding the fact that such right of
set-off shall not have been exercised by the Bank prior to the making, filing or
issuance, or service upon the Bank of, or of notice of, any such petition,
assignment for the benefit of creditors, appointment or application for the
appointment of a receiver, or issuance of execution, subpoena, order or warrant.
The Bank agrees promptly to notify the Borrower 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.
10.16. CONFIDENTIALITY.
The Bank agrees that it will use its best efforts not to disclose without
the prior written consent of the Borrower (other than to the directors,
employees, auditors or counsel of the Bank for the sole purpose of enabling the
Bank to administer the Loans hereunder) any information with respect to the
Borrower which is furnished pursuant to this Agreement except that the Bank may
disclose any such information (a) as has become generally available to the
public other than by a breach of this paragraph 10.16, (b) as may be required or
appropriate in any report, statement or testimony submitted to any Governmental
Body (whether in the United States or elsewhere), (c) as may be required or
appropriate in response to any summons or subpoena or any law, order, regulation
or ruling applicable to the Bank and (d) to any prospective participant or
assignee in connection with any contemplated transfer pursuant to paragraph
10.6, provided that prior to the delivery of any information to a prospective
participant or assignee it shall execute an agreement with such Person
containing provisions substantially identical to those contained in this
paragraph 10.16.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed and delivered by their proper and duly authorized directors or
officers, as the case may be, as of the day and year first above written.
MERRILL LYNCH SENIOR FLOATING RATE
FUND II, INC.
By: /S/_DONALD C. BURKE____________
Name: __Donald C. Burke______________
Title: __Treasurer__________________
THE BANK OF NEW YORK
By: /s/_SCOTT H. BUITEKANT_________
Name: __Scott H. Buitekant___________
Title: __Vice President_____________
27
<PAGE>
SENIOR FLOATING RATE FUND II--EXHIBIT A
FORM OF NOTE
<TABLE>
<CAPTION>
<S> <C>
$25,000,000 JUNE 21, 1999
NEW YORK, NEW YORK
</TABLE>
FOR VALUE RECEIVED, MERRILL LYNCH SENIOR FLOATING RATE FUND II, INC., a
Maryland corporation (the "BORROWER"), hereby promises to pay to the order of
THE BANK OF NEW YORK (the "BANK"), at its office located at One Wall Street, New
York, New York, in lawful money of the United States of America, the principal
sum of $25,000,000 or such lesser unpaid principal balance as shall be
outstanding hereunder, together with interest from the date hereof on the unpaid
principal balance hereof, payable on the dates and at the rate or rates provided
for in the Credit Agreement, dated as of June 21, 1999, by and between the
Borrower and the Bank (as the same may be amended, modified or otherwise
supplemented from time to time, the "AGREEMENT"). Capitalized terms used herein
which are defined in the Agreement shall have the meanings therein defined. In
no event shall the interest rate payable in respect hereof exceed the Highest
Lawful Rate. If not sooner paid, the balance of all Loans shall be due and
payable on the Termination Date.
This Note is the Note referred to in the Agreement, and is subject to the
terms and is entitled to the benefits set forth therein. The principal of this
Note is payable in the amounts and under the circumstances, and its maturity is
subject to acceleration upon the terms, set forth in the Agreement. Except as
otherwise provided in the Agreement, if any payment on this Note becomes due and
payable on a day which is not a Business Day, the maturity thereof shall be
extended to the next Business Day, and, with respect to payments of principal,
interest thereon shall be payable at the then applicable rate or rates specified
in the Agreement during such extension periods.
The Bank is hereby authorized to record on the schedule annexed hereto, and
any continuation sheets which the Bank may attach hereto, (a) the date of each
Loan made by the Bank to the Borrower, (b) the character thereof as a Federal
Funds Advance, a Eurodollar Advance, or a combination thereof, and the amount of
each thereof, (c) the interest rate (without regard to the Applicable Margin)
and Interest Period applicable to each Eurodollar Advance, and (d) the date and
amount of each conversion of, and each payment or prepayment of the principal
of, any such Loan. No failure to so record or any error in so recording shall
affect the obligation of the Borrower to repay the Loans, together with interest
thereon, as provided in the Credit Agreement, and the outstanding principal
balance of the Loans made by the Bank as set forth in such schedule shall be
presumed to be correct absent manifest error.
Presentment for payment, demand, notice of dishonor, protest, notice of
protest and all other demands and notices in connection with the delivery,
performance and enforcement of this Note are hereby waived, except as
specifically otherwise provided in the Agreement.
THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF
CONFLICT OF LAWS, BUT INCLUDING SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW.
This Note may only be amended by an instrument in writing executed pursuant
to the provisions of paragraph 10.1 of the Agreement.
MERRILL LYNCH SENIOR
FLOATING RATE FUND II, INC.
BY: /S/_DONALD C. BURKE____________
NAME: __DONALD C. BURKE_______________
TITLE: __TREASURER___________________
<PAGE>
SCHEDULE TO NOTE
<TABLE>
<CAPTION>
INTEREST RATE
ON EURODOLLAR
ADVANCES
TYPE OF AMOUNT OF (WITHOUT INTEREST
ADVANCE PRINCIPAL REGARD TO PERIOD (IF
(FED FUNDS OR AMOUNT OF PAID OR APPLICABLE EURODOLLAR NOTATION
DATE EURODOLLAR) ADVANCE PREPAID MARGIN) ADVANCE) MADE BY
- --------- ------------- ---------- ---------- ------------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
</TABLE>
<PAGE>
SENIOR FLOATING RATE FUND II--EXHIBIT B
FORM OF BORROWING REQUEST
, 199
The Bank of New York
One Wall Street
New York, New York 10286
Attention: Scott Buitekant,
Vice President
Re: Credit Agreement, dated as of June 21, 1999, by and between Merrill
Lynch Senior Floating Rate Fund II, Inc. (the "BORROWER") and The Bank
of New York (as the same may be amended or otherwise modified from time
to time, the "AGREEMENT")
1. Capitalized terms used herein which are defined in the Agreement shall
have the meanings therein defined.
2. Pursuant to paragraph 2.3 of the Agreement, the undersigned hereby gives
notice on behalf of the Borrower of the Borrower's intention to borrow $
on , 199 , which borrowing shall consist of the following Advances:
<TABLE>
<CAPTION>
TYPE OF ADVANCE (EURODOLLAR OR INITIAL INTEREST PERIOD FOR
FEDERAL FUNDS ADVANCE) AMOUNT EURODOLLAR ADVANCES
- --------------------------------- --------------------------------- ---------------------------------
<S> <C> <C>
------------ Advance $ ------------ ------------ months
------------ Advance $ ------------ ------------ months
------------ Advance $ ------------ ------------ months
------------ Advance $ ------------ ------------ months
------------ Advance $ ------------ ------------ months
</TABLE>
3. The undersigned hereby certifies on behalf of the Borrower that on the
date hereof and on the Borrowing Date set forth above, and after giving effect
to the Loan requested hereby:
(a) There exists and there shall exist no Default or Event of Default
under the Agreement.
(b) The representations and warranties contained in the Loan Documents
are and shall be true and correct.
(c) The Borrowing Base exceeds an amount equal to 300% of the
outstanding principal balance of the Loans (after giving effect to the Loan
requested hereby).
(d) There has been no Material Adverse Change since the inception date
of the Borrower.
(e) That no portion of the proceeds of the Loan requested hereby shall
be used to repay any other Loan.
4. The undersigned hereby certifies that he is an Authorized Signatory.
IN WITNESS WHEREOF, the Borrower has caused this certificate to be executed
by its Authorized Signatory as of the date and year first written above.
MERRILL LYNCH SENIOR FLOATING
RATE FUND II, INC.
By: __________________________________
Name: ________________________________
Title: _______________________________
<PAGE>
SENIOR FLOATING RATE FUND II--EXHIBIT C
FORM OF BORROWING BASE CERTIFICATE
I, , do hereby certify that I am the of Merrill
Lynch Senior Floating Rate Fund II, Inc., a Maryland corporation (the
"BORROWER"), and that, as such, I am duly authorized to execute and deliver this
Borrowing Base Certificate on the Borrower's behalf pursuant to paragraphs 6.3
and 7.1(c) of the Credit Agreement, dated as of June 21, 1999, by and between
the Borrower and The Bank of New York (as the same may be amended or otherwise
modified from time to time, the "AGREEMENT"). Capitalized terms used herein that
are defined in the Agreement shall have the meanings therein defined.
I hereby certify on behalf of the Borrower that:
1. The Borrowing Base as of the date hereof is $ , computed as
shown on Schedule 1.
2. The Borrowing Base exceeds an amount equal to 300% of the
outstanding principal balance of the Loans (after giving effect to any Loans
to be made on the date hereof).
3. There exists no Default or Event of Default.
4. There has occurred no Material Adverse Change since the inception
date of the Borrower.
IN WITNESS WHEREOF, I have executed this Borrowing Base Certificate on this
day of , 199 .
______________________________________
Authorized Signatory
<PAGE>
Schedule 1 to the Borrowing Base
Certificate dated / /
COMPUTATION OF BORROWING BASE
<TABLE>
<S> <C> <C>
1. Net Asset Value $
2. Indebtedness under the Agreement $
3. Sum of Items 1 and 2 $
4. Non-Performing Assets $
5. Borrowing Base (Item 3 minus Item 4) $
</TABLE>
<PAGE>
SENIOR FLOATING RATE FUND II -- EXHIBIT E
FORM OF NOTICE OF CONVERSION
, 199
The Bank of New York
One Wall Street
New York, New York 10286
Attention: Scott Buitekant,
Vice President
Reference is made to the Credit Agreement, dated as of June 21, 1999, by and
between Merrill Lynch Senior Floating Rate Fund II, Inc., a Maryland corporation
(the "Borrower") and The Bank of New York (as the same may be amended, modified
or otherwise supplemented from time to time, the "Agreement"). Capitalized terms
used herein that are defined in the Agreement shall have the meanings therein
defined.
1. Pursuant to paragraph 2.7 of the Agreement, the Borrower hereby gives
notice of its intention to convert Advances, as set forth below:
(a) on , to convert $ in principal amount of
presently outstanding Eurodollar Advances having an Interest Period that
expires on to Federal Funds Advances;
(b) on , to convert $ in principal amount of
presently outstanding Eurodollar Advances having an Interest Period that
expires on to new Eurodollar Advances that have an initial
Interest Period of months; and
(c) on , to convert $ in principal amount of
presently outstanding Federal Funds Advances to Eurodollar Advances that
have an initial Interest Period of months.
2. The Borrower hereby certifies that, on the date hereof and on each
Conversion Date set forth above (after giving effect to the conversion requested
hereby), there exists and there shall exist no Default.
IN WITNESS WHEREOF, the undersigned has caused this Notice of Conversion to
be duly executed on its behalf as of the date and year first written above.
MERRILL LYNCH SENIOR FLOATING RATE
FUND II, INC.
By: _______________________________
Name: ________________________________
Title: ______________________________
<PAGE>
SENIOR FLOATING RATE FUND II -- EXHIBIT F
FORM OF CERTIFICATE REGARDING AUTHORIZED SIGNATORIES
I, , do hereby certify that I am a director of
Merrill Lynch Senior Floating Rate Fund II, Inc., a Maryland corporation (the
"BORROWER"), and I hereby certify that each of the individuals set forth below
has been designated by the Borrower as an Authorized Signatory as defined in the
Credit Agreement, dated as of June 21, 1999, between the Borrower and The Bank
of New York (as from time to time amended, the "AGREEMENT") and the signature of
each such individual is his or her signature. The Bank of New York may rely on
the identity and authority of each such individual until it receives written
notice from an Authorized Signatory of the Borrower to the contrary.
<TABLE>
<CAPTION>
NAME SPECIMEN SIGNATURE
- ------------------------------ --------------------------
<C> <S>
------------ ------------
------------ ------------
------------ ------------
------------ ------------
------------ ------------
</TABLE>
IN WITNESS WHEREOF, I have executed this Certificate on this day of
, 1999.
--------------------------------------
Director
<PAGE>
EXHIBIT (g)(1)
<PAGE>
<TABLE>
<CAPTION>
Senior Floating Rate II May 31, 1999
SCHEDULE OF INVESTMENTS (IN US DOLLARS)
- ------------------------------------------------------------------------------------------------------------------------------------
INDUSTRIES S&P MOODY'S FACE SENIOR SECURED FLOATING COST VALUE
RATING RATING AMOUNT RATE LOAN INTERESTS*
<S> <C> <C> <C> <C> <C> <C>
Automotive & B Ba3 $2,750,000 Accuride, Term C, due 1/21/2007 $2,743,206 $2,763,750
Equipment - 8.6% NR+ NR+ 500,000 Americanbump, Term B, due 10/31/2002 498,753 498,750
Collins & Aikman Corp.:
BB- B1 2,480,000 Term B, due 6/30/2005 2,486,200 2,472,250
BB- B1 1,500,000 Term C, due 12/31/2005 1,496,271 1,501,875
NR+ Ba2 3,000,000 Federal-Mogul Corp., Term B,
due 2/24/2005 3,011,250 3,004,688
BB B1 2,000,000 Johnstown America Industrial, Inc.,
Term B, due 4/29/2005 1,997,528 2,001,250
------------ ------------
12,233,208 12,242,563
Chancellor Media Corp.:
Broadcasting Radio BB- Ba2 971,897 Revolving Credit, due 1/31/2003 971,897 951,244
& Television - 1.7%
BB- Ba2 444,965 Term A, due 1/31/2003 425,607 442,184
NR+ NR+ 1,000,000 Quoram Broadcasting, Term B,
due 9/30/2007 997,519 1,001,875
------------ ------------
2,395,023 2,395,303
Cable Television BB- Ba1 5,000,000 Charter Communications, Term B,
due 3/18/2008 5,000,000 5,011,719
Services - 7.1%
NR+ NR+ 5,000,000 TW Fanch-One Co., Term B,
due 12/31/2007 5,031,250 5,007,813
------------ ------------
10,031,250 10,019,532
Chemicals - 3.6% Ba2 NR+ 5,000,000 Lyondell Petrochemical Co., Term E,
due 5/17/2006 4,993,770 5,050,000
Fairchild Semiconductors Corp.:
Computer Related NR+ Ba3 1,000,000 Term, due 4/30/2006 998,024 1,006,250
Products - 1.8%
BB- B+ 1,500,000 Term B, due 4/12/2007 1,497,035 1,509,375
------------ ------------
2,495,059 2,515,625
Diversified - 3.9% NR+ NR+ 2,500,000 Bridge Information, Term B,
due 5/29/2005 2,510,000 2,506,250
Thermadyne:
NR+ NR+ 1,488,750 Term B, due 5/22/2005 1,492,472 1,489,215
NR+ NR+ 1,488,750 Term C, due 5/22/2006 1,492,472 1,489,215
------------ ------------
5,494,944 5,484,680
------------ ------------
Drug/Proprietary B+ B1 2,468,750 Duane Reade Co., Term B,
due 2/15/2005 2,464,191 2,459,492
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Senior Floating Rate II May 31, 1999
SCHEDULE OF INVESTMENTS (IN US DOLLARS)
- ------------------------------------------------------------------------------------------------------------------------------------
INDUSTRIES S&P MOODY'S FACE SENIOR SECURED FLOATING COST VALUE
RATING RATING AMOUNT RATE LOAN INTERESTS*
<S> <C> <C> <C> <C> <C> <C>
Stores - 1.7%
Electronics / B+ B1 2,000,000 DD Inc. Term B, due 10/31/2003 1,970,511 1,960,000
Electrical
Components - 4.9%
B+ Ba3 5,000,000 Superior Telecom, Term A,
due 5/27/2004 5,000,000 5,006,250
------------ ------------
6,970,511 6,966,250
Specialty Foods, Inc.:
Food & Kindred NR+ Ba3 734,114 Revolving Credit, due 1/31/2000 734,114 734,114
Products - 1.4%
NR+ Ba3 1,262,625 Term, due 1/31/2000 1,262,625 1,263,414
------------ ------------
1,996,739 1,997,528
Grocery - 1.4% B B2 2,000,000 Grand Union Co., Term, due 8/17/2003 2,005,000 2,003,750
Hotels & Motels - NR+ Ba1 5,000,000 Starwood Hotels & Resorts Trust,
3.5% Term, due 2/23/2003 5,000,000 5,009,375
WEC Company:
Manufacturing - NR+ NR+ 1,166,667 Term B, due 9/30/2005 1,165,228 1,163,750
1.4%
NR+ NR+ 833,333 Term C, due 9/30/2006 832,303 831,250
------------ ------------
1,997,531 1,995,000
Metals & Mining - NR+ Ba3 3,000,000 UCAR Global Enterprises, Term B,
2.1% due 12/31/2002 3,007,500 3,007,500
Packaging Co.:
Packaging - 2.0% BB NR+ 1,407,025 Term B, due 4/12/2007 1,401,812 1,418,017
BB NR+ 1,407,025 Term C, due 4/12/2008 1,401,801 1,418,017
------------ ------------
2,803,613 2,836,034
Paper - 3.5% B+ Ba3 2,487,500 Jefferson Smurfit Company/Container
Corp. of America, Term B,
due 3/24/2006 2,487,500 2,495,274
B+ Ba3 2,407,322 Stone Container Corp., Term E,
due 10/01/2003 2,407,322 2,413,341
------------ ------------
4,894,822 4,908,615
Pharmaceuticals - NR+ NR+ 2,000,000 Express Scripts, Term B,
1.4% due 3/31/2007 2,000,000 1,997,750
Printing & NR+ Ba3 1,243,142 Penton Media, Term B, due 5/31/2006 1,241,594 1,240,034
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Senior Floating Rate II May 31, 1999
SCHEDULE OF INVESTMENTS (IN US DOLLARS)
- ------------------------------------------------------------------------------------------------------------------------------------
INDUSTRIES S&P MOODY'S FACE SENIOR SECURED FLOATING COST VALUE
RATING RATING AMOUNT RATE LOAN INTERESTS*
<S> <C> <C> <C> <C> <C> <C>
Publishing - 0.9%
Wireless B B1 2,000,000 Nextel Communications Inc., Term C,
Telecommunications due 3/31/2007 2,000,000 2,007,500
Services - 3.5%
NR+ NR+ 2,000,000 PowerTel PCS, Inc., Term B,
due 2/06/2003 2,000,000 1,995,000
NR+ B1 1,000,000 Tritel Holdings, Term B,
due 12/31/2007 987,654 1,005,000
------------ ------------
4,987,654 5,007,500
TOTAL SENIOR SECURED FLOATING
RATE LOAN INTERESTS - 54.4% 77,012,409 77,136,531
</TABLE>
<TABLE>
<CAPTION>
FACE SHORT-TERM SECURITIES COST VALUE
AMOUNT
<S> <C> <C> <C> <C>
Commercial Paper** - $3,000,000 American Express Credit Corporation,
28.4% 4.85% due 6/07/1999 $2,997,575 $2,997,575
5,000,000 Block Financial Corp., 4.85%
due 6/25/1999 4,983,833 4,983,833
5,000,000 CSW Credit Inc., 4.79%
due 6/07/1999 4,996,008 4,996,008
5,000,000 First Data Corporation, 4.80%
due 6/22/1999 4,986,000 4,986,000
General Electric Capital Corp.:
1,392,000 4.93% due 6/01/1999 1,392,000 1,392,000
5,000,000 4.79% due 6/09/1999 4,994,678 4,994,678
6,000,000 General Motors Acceptance Corp.,
4.94% due 6/01/1999 6,000,000 6,000,000
5,000,000 Newell Company, 4.79% due 6/14/1999 4,991,351 4,991,351
5,000,000 Paccar Financial, 4.79%
due 6/03/1999 4,998,669 4,998,669
------------ ------------
40,340,114 40,340,114
Federal Home Loan Mortgage Corporation
Participation Certificates:
US Government Agency 4,890,000 4.72% due 6/02/1999 4,889,361 4,889,361
Obligations** - 14.7%
7,500,000 4.76% due 6/21/1999 7,480,167 7,480,167
4,000,000 4.75% due 7/02/1999 3,983,639 3,983,639
Federal National Mortgage Association:
1,446,000 4.75% due 6/10/1999 1,444,283 1,444,283
3,000,000 4.75% due 7/02/1999 2,987,729 2,987,729
------------ ------------
20,785,179 20,785,179
TOTAL SHORT-TERM SECURITIES - 43.1% 61,125,293 61,125,293
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Senior Floating Rate II May 31, 1999
SCHEDULE OF INVESTMENTS (IN US DOLLARS)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
TOTAL INVESTMENTS - 97.5% 138,137,702 138,261,824
OTHER ASSETS LESS LIABILITIES - 2.5% 3,563,113
------------
NET ASSETS - 100.0% $141,824,937
------------
------------
</TABLE>
* The interest rates on senior secured floating rate loan interests are
subject to change periodically based on the change in the prime rate of a
US Bank, LIBOR (London Interbank Offered Rate), or, in some cases,
another base lending rate.
** Commercial Paper and certain US Government Agency Obligations are traded
on a discount basis; the interest rates shown reflect the discount rates
paid at the time of purchase by the Fund.
+ Not Rated.
