<PAGE> 1
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. ___)
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
Preliminary Proxy Statement
Confidential, for Use of the Commission Only (as Permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
Definitive Additional Materials
Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
ALLIED CAPITAL CORPORATION
--------------------------
(Name of Registrant as Specified in Its Charter)
----------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[ ] Fee previously paid with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
<PAGE> 2
[ALLIED CAPITAL LOGO]
ALLIED CAPITAL CORPORATION
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To the Stockholders:
The 1997 Annual Meeting of Stockholders of Allied Capital Corporation (the
"Company") will be held in the Montgomery Room at The Residence Inn by
Marriott, 7335 Wisconsin Avenue, Bethesda, Maryland 20814 on May 1, 1997 at
10:00 a.m. for the following purposes:
1. To elect eight directors of the Company to serve until the
next annual meeting of stockholders or until their
successors are elected and qualified.
2. To ratify the selection of Matthews, Carter and Boyce,
P.C. to serve as independent public accountants for the
Company for the year ending December 31, 1997.
3. To consider and approve an amendment to the Company's
Stock Option Plan (the "Plan").
4. To transact such other business as may properly come
before the meeting.
The Board of Directors of the Company has fixed the close of business on March
13, 1997 as the record date for the determination of stockholders entitled to
notice of, and to vote at, the meeting and any adjournment thereof.
The Company's stock transfer books will not be closed.
By order of the Board of Directors
Tricia B. Daniels
Secretary
March 24, 1997
VOTING YOUR PROXY IS IMPORTANT
THIS IS AN IMPORTANT MEETING. TO ENSURE PROPER REPRESENTATION AT THE MEETING,
YOU ARE REQUESTED TO COMPLETE, DATE, SIGN AND RETURN THE PROXY CARD IN THE
ENCLOSED SELF-ADDRESSED ENVELOPE PROVIDED FOR THAT PURPOSE. STOCKHOLDERS WHO
EXECUTE A PROXY CARD MAY ATTEND THE MEETING AND VOTE THEIR SHARES IN PERSON.
<PAGE> 3
ALLIED CAPITAL CORPORATION
C/O ALLIED CAPITAL ADVISERS, INC.
1666 K STREET, NW, NINTH FLOOR
WASHINGTON, DC 20006
PROXY STATEMENT
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Allied Capital Corporation (the "Company")
for use at the Company's 1997 Annual Meeting of Stockholders (the "Meeting") to
be held on May 1, 1997 at 10:00 a.m. in the Montgomery Room at The Residence
Inn by Marriott, 7335 Wisconsin Avenue, Bethesda, Maryland 20814, and at any
adjournments thereof. This Proxy Statement, the accompanying proxy card and the
Company's Annual Report to Stockholders for the year ended December 31, 1996
are first being sent to stockholders on or about March 24, 1997.
If the accompanying proxy card is properly signed and dated and is received in
time for the Meeting, those shares held of record by you (e.g., those shares
registered directly in your name) will be voted as specified on that proxy
card. If no instructions are given on that proxy card, the shares covered
thereby will be voted FOR the election of the nominees as directors and FOR the
other matters listed in the accompanying Notice of Annual Meeting of
Stockholders. Stockholders of record may revoke a proxy at any time before it
is exercised by so notifying the Secretary of the Company in writing at the
above address, by submitting a properly executed, later-dated proxy or by
voting in person at the Meeting. Any stockholder of record attending the
Meeting may vote in person whether or not he or she has previously executed and
returned a proxy card. If your shares are held for your account by a broker,
bank or other institution or nominee ("Broker Shares"), you may vote such
shares at the Meeting only if you obtain proper written authority from your
institution or nominee that you present at the Meeting.
VOTING
On March 13, 1997, there were 7,326,626 shares of the Company's common stock
outstanding. The stockholders entitled to vote at the Meeting are those of
record on that date. Each share of the Company's common stock is entitled to
one vote.
A majority of the shares entitled to vote at the Meeting constitutes a quorum.
If a share is represented in person or by proxy for any purpose at the Meeting,
it is deemed to be present for quorum purposes. Abstentions and Broker Shares
that are voted on any matter at the Meeting are included in determining the
presence of a quorum for the transaction of business at the commencement of the
Meeting and on those matters for which the broker, nominee or fiduciary has
authority to vote. In the event that a quorum is not present at the Meeting, or
in the event that a quorum is present but sufficient votes to approve any of
the proposals are not received, the persons named as proxies may propose one or
more adjournments of the Meeting to permit further solicitation of proxies. Any
such adjournment will require the affirmative vote of a majority of the shares
represented at the Meeting in person or by proxy. The persons named as proxies
will vote those proxies for such adjournment unless marked to be voted against
any proposal for which an adjournment is sought to permit further solicitation
of proxies. A stockholder vote may be taken on one or more of the proposals in
this Proxy Statement prior to any such adjournment if sufficient votes have
been received for approval.
The eight nominees for election as directors who receive a plurality of the
affirmative votes cast at the Meeting in person or by proxy in the election of
directors will be so elected. Stockholders may not cumulate their votes. Votes
that are withheld, abstentions and Broker Shares that are not voted in the
election of directors will not be included in determining the number of votes
cast, and will have no effect on the election of directors.
The approval of the Plan requires the affirmative vote of the holders of a
majority of the Company's outstanding shares present or represented at the
Meeting or any adjournment thereof, if the holders of a majority of the shares
entitled to vote at the Meeting are present or represented by proxy. Shares
that are voted
<PAGE> 4
as abstentions will be counted among those shares represented at the Meeting
for the purpose of calculating whether a quorum is present, and will have the
effect of a vote against the proposal, since they will not be counted in favor
of the proposal. Those shares that are intentionally not voted will not be
included for the purpose of establishing a quorum. Therefore, such non-voted
shares could have the effect of giving additional weight to the shares of those
shareholders who do choose to vote.
INFORMATION REGARDING THIS SOLICITATION
The expense of the Company's solicitation of proxies for the Meeting, including
the cost of preparing, printing and mailing this Proxy Statement and the
accompanying notice of the Meeting and proxy card will be borne by the Company.
The Company will request that brokers, nominees, fiduciaries and other persons
holding shares in their names for others forward this Proxy Statement and
certain accompanying material to their principals and request authority for the
execution of a proxy. The Company will reimburse such persons for their
expenses in so doing.
In addition to the solicitation of proxies by the use of the mails, proxies may
be solicited in person and by telephone, facsimile transmission or telegram by
directors or officers of the Company or by regular employees of Allied Capital
Advisers, Inc. ("Advisers"), without special compensation therefor, or by a
proxy solicitor. Advisers, the Company's investment adviser, has its offices at
1666 K Street, NW, Ninth Floor, Washington, DC 20006. The Company expects to
retain Shareholder Communications Corporation to aid in the solicitation of
proxies for the Meeting at an estimated fee of $3,500 plus reimbursement of
out-of-pocket expenses.
BENEFICIAL OWNERSHIP OF COMMON STOCK
As of March 13, 1997, there were 7,326,626 shares outstanding. The Company
knows of no person who owned beneficially more than 5% of its shares at that
date. The following table sets forth certain information regarding the shares
of the Company's common stock beneficially owned by: (i) each of the Company's
directors, (ii) the four most highly compensated officers of Advisers ("named
executive officers ") who are also officers of the Company; (iii) David
Gladstone, who served as the Company's Chief Executive Officer during 1996; and
(iv) all directors and executive officers as a group:
<TABLE>
<CAPTION>
Number of Shares
Name of Beneficial Owner (6) Owned Beneficially (1) Percentage of Class (1)
- ------------------------ ------------------ -------------------
<S> <C> <C>
William L. Walton (2,3) 0 0
George C. Williams (3) 69,121 *
T. Murray Toomey (3) 25,418 *
Joseph A. Clorety III (3) 8,422 *
Guy T. Steuart II (3,5) 171,296 2.3%
Warren K. Montouri (3) 157,183 2.2%
G. Cabell Williams III (2,3,4) 128,892 1.7%
Michael I. Gallie (3) 7,066 *
Joan M. Sweeney (2,4) 23,464 *
John M. Scheurer (4) 17,136 *
Katherine C. Marien (4) 8,080 *
David Gladstone 99,895 1.4%
Directors and executive officers 706,917 9.4%
as a group (11 in number)
</TABLE>
2
<PAGE> 5
- ------------
* Less than 1 percent
(1) Based on a total of 7,326,626 shares of the Company's common stock issued
and outstanding as of March 13, 1997. For purposes of the calculation of
beneficial ownership by a particular person, these numbers assume that
shares of the Company's common stock issuable upon the exercise of
immediately exercisable stock options held by such persons are outstanding.
The shares issuable are as follows: 38,444 for Williams, 93,840 for
Williams III, 8,080 for Sweeney, 9,056 for Scheurer, 8,080 for Marien,
6,666 for each of Messrs. Toomey, Clorety, Steuart, Montouri and Gallie and
46,846 for Gladstone; directors and executive officers as a group hold
immediately exercisable stock options for a total of 228,620 shares.
(2) Executive Officer
(3) Director
(4) "Named executive officer" for proxy reporting purposes
(5) Includes 18,282 shares held directly by Mr. Steuart and 146,348 shares held
by a corporation for which Mr. Steuart serves as an executive officer and
for which he shares voting power.
(6) All directors and executive officers' addresses are care of Advisers, 1666
K Street, NW, Ninth Floor, Washington, DC 20006.
ELECTION OF DIRECTORS
At the Meeting, stockholders will be asked to elect eight directors,
constituting the entire membership of the Board of Directors of the Company, to
serve until the next Annual Meeting of Stockholders or until their successors
have been elected and qualified. All such nominees have consented to be named
as such in this Proxy Statement and to serve as directors if elected.
If they are elected as directors, it is expected that the Company will vote to
cause all or some directors also to serve as directors of the Company's wholly
owned subsidiaries, Allied Investment Corporation, Allied Capital Financial
Corporation and Allied Development Corporation.
A stockholder using the enclosed form of proxy can vote for or withhold his or
her vote from any or all of the nominees. If the proxy card is properly
executed but unmarked, it is the intention of the persons named as proxies to
vote such proxy FOR the election of all the nominees named below. In the event
that any of the nominees should decline or be unable to serve as a director, it
is intended that the enclosed proxy will be voted for the election of such
person or persons as are nominated as replacements.
On February 1, 1997, David Gladstone, the Company's former Chairman and Chief
Executive Officer stepped down from those positions. On February 12, 1997, the
Board of Directors appointed William L. Walton as a director, and as Chairman
and Chief Executive Officer. Mr. Gladstone resigned as a director on March 19,
1997 and will not stand for election to the Board of Directors. The director
nominees, their ages and principal occupations are as follows:
WILLIAM L. WALTON (1,2)
Age 47. Chairman and Chief Executive Officer of the Company, and of Allied
Capital Corporation II, Allied Capital Lending Corporation, Allied Capital
Commercial Corporation and Advisers since February 1997; President of
Allied Capital Corporation II since November 1996; Manager of Allied
Capital Midwest LLC since December 1996; Chief Executive Officer of Success
Lab, Inc. (children's educational services) from 1993 to 1996; Chief
Executive Officer of Language Odyssey (educational publishing and services)
from 1992 to 1996; and Managing Director of Butler Capital Corporation from
1987 to 1991. He has served as a director of Advisers since 1986, served as
a director of the Company from 1986 until 1991, and has served as a
director of the Company since February 1997.
3
<PAGE> 6
G. CABELL WILLIAMS III (1,2,5)
Age 42. President and Chief Operating Officer of the Company; Executive
Vice President of Allied Capital Corporation II, Allied Capital Commercial
Corporation, Allied Capital Lending Corporation, Business Mortgage
Investors, Inc. and Advisers. He has held positions with the Company since
1981 and with Advisers, Allied Capital Corporation II, Allied Capital
Commercial Corporation, Allied Capital Lending Corporation and Business
Mortgage Investors, Inc. since the later of 1981 or the inception of the
relevant entity. He has served as a director since 1993.
GEORGE C. WILLIAMS (2,5)
Age 70. Financial consultant since 1996; Director of Allied Capital
Corporation II, Allied Capital Commercial Corporation, Allied Capital
Lending Corporation, Business Mortgage Investors, Inc., and Advisers;
Manager of Allied Capital Mortgage LLC. He has been affiliated with the
Company since 1958 when it was founded. He served as President or Chairman
and Chief Executive Officer of the Company from 1964 to 1991. He served as
Vice Chairman until July 1996, and currently serves as a consultant to
Advisers. He has served as a director of the Company since 1964.
JOSEPH A. CLORETY III (3,4)
Age 54. President of Clorety & Company, Inc. (registered investment
adviser) since 1987. He has served as a director since 1984.
MICHAEL I. GALLIE (1,3,4)
Age 51. Principal of The Millennium Group Inc. (financial and management
consulting firm) since 1991; Trustee and Chairman of The Investment
Committee of the District of Columbia Retirement Board from 1991 to 1995.
He has served as a director since 1994.
WARREN K. MONTOURI (3,4)
Age 67. Investor since 1958; Director of Franklin National Bank. He has
served as a director since 1986.
GUY T. STEUART II (1,3)
Age 65. Director and President of Steuart Investment Company (manages,
operates, and leases real and personal property and holds stock in
operating subsidiaries engaged in various businesses) since 1960; Trustee
Emeritus of Washington and Lee University. He has served as a director
since 1984.
T. MURRAY TOOMEY (1)
Age 73. Attorney at Law since 1949; Director of The National Capital Bank
of Washington; Director of Federal Center Plaza Corporation, and The
Donohoe Companies, Inc.; Trustee of The Catholic University of America. He
has served as a director since 1959.
- ---------
(1) Member of the Executive Committee
(2) Messrs. Walton and Williams III, as officers of the Company and of
Advisers, and Mr. Williams, as a shareholder of Advisers, are "interested
persons" as defined in the Investment Company Act of 1940.
(3) Member of the Compensation Committee
(4) Member of the Audit Committee
(5) George C. Williams is the father of G. Cabell Williams III.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE TO ELECT THE FOREGOING NOMINEES
TO SERVE AS DIRECTORS OF THE COMPANY.
4
<PAGE> 7
MEETINGS OF THE BOARD OF DIRECTORS AND COMMITTEES
The Board of Directors has established an Executive Committee, an Audit
Committee and a Compensation Committee. During 1996, the Board of Directors
held five regular meetings and six committee meetings. All directors attended
at least 75% of the aggregate number of meetings of the Board and of the
committees on which they served.
The Executive Committee has and may exercise those rights, powers and authority
of the Board of Directors as may from time to time be granted to it by the
Board of Directors, except where action by the Board is required by statute, an
order of the Securities and Exchange Commission (the "Commission") or the
Company's Articles of Incorporation or By-Laws. The Executive Committee met
twice during 1996.
The Audit Committee recommends the selection of independent public accountants
for the Company, reviews with such independent public accountants the planning,
scope and results of their audit of the Company's financial statements and the
fees for services performed, reviews with the independent public accountants
the adequacy of internal control systems, reviews the quarterly and annual
financial statements of the Company and receives audit reports and financial
statements of the Company. The Audit Committee met twice during 1996.
The Compensation Committee determines and issues stock option grants for
officers of the Company under the Company's Stock Option Plan, which is the
only form of compensation paid by the Company to its officers for serving as
such. The Compensation Committee met twice during 1996.
COMPENSATION OF EXECUTIVE OFFICERS AND DIRECTORS
Under Commission rules applicable to business development companies, the
Company is required to set forth certain information regarding its three most
highly compensated executive officers who receive compensation from the Company
in excess of $60,000. However, the Company has no employees and does not pay
any cash compensation to any of its officers (other than directors' fees to
those of its officers who are also directors). All of the Company's officers
and staff are employed by Advisers, which pays all of their cash compensation.
The Company, from time to time, grants stock options to its officers under the
Company's Stock Option Plan. As described in "Compensation of Directors"
below, the Company also has granted stock options to its non-officer directors
under the Company's Stock Option Plan.
INCENTIVE STOCK OPTIONS
The following table sets forth as to (i) the named executive officers, (ii)
George C. Williams, who ceased to be an officer of Advisers and the Company
during 1996, but who would have been a named executive officer but for the fact
that he resigned during the calendar year, and (iii) David Gladstone, who
served as the Company's Chief Executive Officer during 1996, the details
relating to option grants in 1996 and the potential realizable value of each
grant, as prescribed to be calculated by the Commission.
5
<PAGE> 8
OPTION GRANTS DURING 1996
<TABLE>
<CAPTION>
Potential realizable
Percent of value at assumed
Number of total options annual rates of stock
securities granted to Exercise price appreciation
underlying officers in price per Expiration over 10-year term (1)
Name Options granted 1996 share date 5% ($) 10% ($)
---- -------------- ---- ----- ---- ------ -------
<S> <C> <C> <C> <C> <C> <C>
G. Cabell Williams III 21,618 13.3% $13.625 5/6/06 $185,238 $469,429
John M. Scheurer 0 -- -- -- -- --
Joan M. Sweeney 0 -- -- -- -- --
Katherine C. Marien 0 -- -- -- -- --
George C. Williams 0 -- -- -- -- --
David Gladstone 14,412 8.9% 13.625 5/6/06 123,492 312,953
</TABLE>
(1) Potential realizable value is net of the option exercise price but before
any tax liabilities that may be incurred. These amounts represent certain
assumed rates of appreciation, as mandated by the Commission. Actual
gains, if any, or stock option exercises are dependent on the future
performance of the shares, overall market conditions, and the continued
employment by the Company of the option holder. The potential realizable
value will not necessarily be realized.
OPTION EXERCISES AND FISCAL YEAR END VALUES
The following table sets forth the details of option exercises during 1996 and
the values of those unexercised options at December 31, 1996.
<TABLE>
<CAPTION>
Number of Securities
Underlying Value of Unexercised In-
Unexercised Option the-Money Options
Shares as of 12/31/96 as of 12/31/96 (2)
Acquired --------------- ---------------
on Value
Name Exercise Realized (1) Vested Unvested Vested Unvested
---- -------- -------- ------ -------- ------ --------
<S> <C> <C> <C> <C> <C> <C>
G. Cabell Williams III 8,309 $12,048 100,273 43,596 $230,931 $106,378
John M. Scheurer 8,080 28,280 9,056 0 21,404 0
Joan M. Sweeney 15,384 42,306 8,080 0 27,270 0
Katherine C. Marien 0 0 8,080 0 27,270 0
George C. Williams 8,309 14,125 38,444 0 35,651 0
David Gladstone 14,742 12,884 46,846 61,728 82,754 175,894
</TABLE>
- ---------
(1) Value realized is calculated as the closing market price on the date of
exercise, net of option exercise price but before any tax liabilities or
transaction costs. This is the deemed market value, which may actually be
realized only if the shares are sold at that price.
(2) Value of unexercised options is calculated as the closing market price on
December 31, 1996 ($15.75), net of the option exercise price, but before
any tax liabilities or transaction costs. "In-the-Money " Options are
options with an exercise price that is less than the market price as of
December 31, 1996.
6
<PAGE> 9
COMPENSATION OF DIRECTORS
During 1996, each director received a fee of $1,000 for each meeting of the
Board of the Company and its wholly owned subsidiaries or each separate
committee meeting attended and $500 for each committee meeting attended on the
same day as a Board meeting. There is no duplication of directors' fees and
expenses even though some directors also take action on behalf of the Company's
wholly owned subsidiaries. Aggregate directors' fees for 1996 were $65,500. In
addition, on December 26, 1995 each non-officer director (Messrs. Clorety,
Steuart, Montouri, Toomey and Gallie) received a one-time grant of options to
purchase 10,000 shares, which vest over a two year period in equal increments,
at the then-current market price ($13.625) pursuant to the Company's Stock
Option Plan. The following table sets forth certain details of compensation
paid to directors during 1996, as well as compensation paid for serving as a
director of the two other investment companies with which the Company may be
deemed to be related. Mr. Walton was appointed Chairman in February 1997 and
therefore received no directors' fees during 1996.
<TABLE>
<CAPTION>
Pension or retirement Total compensation
Aggregate benefits accrued from Company and
compensation from as part of related companies
Name and position the Company (1) Company expenses paid to directors (2)
- ----------------- ----------- ----------------- -----------------
<S> <C> <C> <C>
G. Cabell Williams III,
Director, President and Chief $ 7,000 $0 $ 7,000
Operating Officer
George C. Williams, Director $ 5,000 $0 $15,000
Joseph A. Clorety III, Director $ 8,000 $0 $ 8,000
Guy T. Steuart II, Director $ 9,000 $0 $ 9,000
Warren K. Montouri, Director $ 7,500 $0 $ 7,500
T. Murray Toomey, Director $ 7,000 $0 $ 7,000
Michael I. Gallie, Director $10,000 $0 $10,000
David Gladstone, former $ 7,000 $0 $20,000
Chairman of the Board and
Chief Executive Officer
</TABLE>
(1) Consists only of directors' fees.
(2) Includes amounts paid as compensation to directors by Allied Capital
Corporation II and Allied Capital Lending Corporation, which may be deemed
to be related to the Company.
CERTAIN TRANSACTIONS
INVESTMENT ADVISORY AGREEMENT
The Company is a party to an investment advisory agreement with Advisers.
Pursuant to the investment advisory agreement, Advisers is entitled to be paid,
on a quarterly basis, a fee equal to 0.625% (2.5% per annum) of the quarter-end
value of the Company's invested assets, less the value of the shares of Allied
Capital Lending Corporation owned by the Company, interim investments, cash and
cash equivalents and 0.125% (0.5% per annum) of the quarter-end value of the
Company's interim investments, cash and cash equivalents. For 1996, the Company
paid $2.9 million in investment advisory fees to Advisers.
7
<PAGE> 10
Messrs. Walton, Williams, and Williams III own shares of Advisers, and their
beneficial ownership of Advisers shares as of March 15, 1997 represented
approximately 0.2%, 3.4% and 3.9%, respectively, of Advisers' shares then
outstanding or deemed to be outstanding, including shares allocated to their
Employee Stock Option Plan ("ESOP") stock account through December 31, 1996.
Mr. Walton, the Company's Chairman and Chief Executive Officer and a nominee
for re-election as a director, is the Chairman and Chief Executive Officer of
Advisers; Mr. Williams, the Company's former Vice Chairman of the Board and a
nominee for re-election as a director, is also a director and former Vice
Chairman of Advisers; Mr. Williams III, the Company's President and Chief
Operating Officer and a nominee for re-election as a director, is an executive
officer of Advisers. Each officer of the Company is also an officer of
Advisers.
INDEBTEDNESS OF MANAGEMENT
The following table sets forth certain information regarding indebtedness to
the Company in excess of $60,000 of any person serving as a director or
executive officer of the Company and of any nominee for election as a director
at any time since January 1, 1996. All of such indebtedness results from loans
made by the Company to enable officers to exercise stock options. The interest
rate charged generally reflects the applicable federal rate on the date of the
loan.
<TABLE>
<CAPTION>
Highest
Amount Amount
Capacity in Outstanding Interest Outstanding
Name which Served in 1996 Rate at March 15, 1997
- ---- ------------ ------- ---- -----------------
<S> <C> <C> <C>
Jon A. DeLuca Executive Vice President, $ 99,990 6.16% $ 99,990
Treasurer and Chief
Financial Officer
William F. Dunbar Former Executive Vice $665,772 5.71% $ 0
President
David Gladstone Former Chairman of the $100,483 6.16% $100,483
Board and Chief Executive 200,000 5.34% 199,762
Officer 100,123 6.21% 99,984
Joan M. Sweeney Executive Vice President $199,992 6.16% $199,992
G. Cabell Williams, III Director, President and $100,123 6.21% $100,019
Chief Operating Officer 135,327 8.50% 0
37,475 8.32% 0
28,311 7.02% 0
</TABLE>
COMPLIANCE WITH REPORTING REQUIREMENTS OF SECTION 16(A) OF THE SECURITIES
EXCHANGE ACT OF 1934
Pursuant to Section 16(a) of the Securities Exchange Act of 1934, the Company's
directors, executive officers, directors of the Company's investment adviser,
and any persons holding 10% or more of its common stock are required to report
their beneficial ownership and any changes therein to the Commission, the
National Association of Securities Dealers, Inc. and the Company. Specific due
dates for those reports have been established, and the Company is required to
report herein any failure to file such reports by those due dates. Based on the
Company's review of Forms 3, 4 and 5 filed by such persons, the Company has
identified no deficiencies in the filing of reports pursuant to Section 16(a)
of the Securities Exchange Act of 1934 in its most recent fiscal year, except
as to three reports. Mr. Montouri purchased 18,814 shares in the Company's
non-transferable rights offering in March and reported this transaction in
October; Mr. Walton sold 1,312 shares in May and reported the transaction in
July; Mr. Swep Davis, as a newly appointed director of Advisers in November,
delinquently filed a Form 3 showing he owned no shares of the Company.
8
<PAGE> 11
RATIFICATION OF SELECTION OF INDEPENDENT PUBLIC ACCOUNTANTS
The disinterested members of the Board of Directors have selected Matthews,
Carter and Boyce, P.C. as independent public accountants for the Company for
the year ending December 31, 1997. This selection is subject to ratification or
rejection by the stockholders of the Company.
If the stockholders ratify the selection of Matthews, Carter and Boyce, P.C. as
the Company's independent public accountants, they will also be the independent
public accountants for the Company's subsidiaries, Allied Investment
Corporation, Allied Capital Financial Corporation and Allied Development
Corporation. This selection is subject to ratification or rejection by the
stockholders of the Company pursuant to an undertaking by the Company to the
Commission. Thus, stockholders who vote to ratify the selection of Matthews,
Carter and Boyce, P.C. will, likewise, be voting to ratify their selection as
independent public accountants for the Company's subsidiaries, Allied
Investment Corporation, Allied Capital Financial Corporation and Allied
Development Corporation.
Matthews, Carter and Boyce, P.C., or its predecessor, has served as the
Company's independent public accountants since its inception and has no
financial interest in the Company.
It is not expected that a representative of Matthews, Carter and Boyce, P.C.
will be present, or available to answer questions, at the Meeting, but a
representative would have an opportunity to make a statement if he or she chose
to attend.
The expense recorded during the fiscal year ended December 31, 1996 for the
professional services provided to the Company by Matthews, Carter and Boyce,
P.C. consisted of fees for audit services (which included examination of the
consolidated financial statements of the Company and its subsidiaries and
review of the filings by the Company of reports and registration statements)
and for non-audit services, the fees for which aggregated approximately 23% of
the fees for audit services. The non-audit services, which were arranged for by
management without prior consideration by the Board of Directors, consisted of
non-audit related consultation and the preparation of tax returns for the
Company and its subsidiaries.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE TO RATIFY THE SELECTION OF
MATTHEWS, CARTER AND BOYCE, P.C. AS INDEPENDENT PUBLIC ACCOUNTANTS FOR THE
COMPANY.
APPROVAL OF AN AMENDMENT TO THE STOCK OPTION PLAN
The following discussion of the Stock Option Plan, as amended (the "Plan ") is
qualified in its entirety by reference to the Plan, a copy of which is attached
hereto as Exhibit A.
On December 20, 1983, the Company's shareholders approved the Plan, under which
an aggregate of 585,937 shares, as adjusted for the 3-for-2 stock split on
February 28, 1986, the 5-for-4 stock split on January 30, 1987, the 5-for-4
stock split on October 14, 1988, and the distribution of shares of Advisers on
December 31, 1990, were reserved for grant to officers of the Company. On May
17, 1990, the Company's shareholders approved an amendment to that plan to
increase the number of shares available under the Plan to 708,909. On February
17, 1993, the Board adopted an amendment to increase the number of shares
available under the Plan to 1,013,909 shares, which was approved by
shareholders on May 6, 1993. On February 16, 1994, the Board unanimously
adopted an amendment to the Plan to (a) allow grants of options to directors of
the Company who are not officers of the Company or of the Company's investment
adviser ("non-officer directors ") and (b) increase the number of shares
available under the Plan to 1,350,000 shares. This amendment was approved by
shareholders on May 5, 1994 and, with respect to the granting of options to
non-officer directors, approved by the Commission on December 26, 1995.
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The proposed Plan amendments now being considered would (a) increase the number
of shares available under the Plan by 440,248 shares from 1,350,000 shares to
1,790,248 shares, and (b) provide for the automatic vesting of options granted
under the Plan in the event of a change of control of the Company. These
proposed Plan amendments were approved by the Board of Directors, subject to
shareholder approval, on February 12, 1997 and May 6, 1996, respectively.
As of March 13, 1997, options relating to 45,471 shares of the Company's common
stock were available to be granted and a total of 612,063 shares underlying
options were outstanding. As of this date, 7,326,626 shares of the Company's
common stock were issued and outstanding. Based on that figure, if the Plan
amendments are approved, the total number of shares on which options may be
granted under the Plan would amount to approximately 15% of the outstanding
shares on a fully diluted basis. In addition, all outstanding options granted
under the Plan would become fully vested and immediately exercisable in the
event of a change of control of the Company. For these purposes, a "change of
control " is defined as the sale of substantially all of the Company's assets
or the acquisition by any person, entity or group (excluding certain affiliates
of the Company) of ownership (whether direct or indirect, beneficial or of
record) of securities of the Company representing 20% or more of the voting
power of the Company's then-outstanding common stock.
The purpose of the Plan is to advance the interests of the Company by providing
directors and officers who have substantial responsibility for the direction
and management of the Company with additional incentives to exert their best
efforts on behalf of the Company, to increase their proprietary interest in the
success of the Company, to reward outstanding performance and to provide a
means to attract and retain persons of outstanding ability to the service of
the Company. The Company believes that it cannot attract or retain qualified
officers and directors without this type of compensation.
The Plan is administered by the Compensation Committee (the "Committee")
consisting of two or more "disinterested" members of the Company's Board of
Directors in accordance with the provisions of Rule 16b-3 promulgated under the
Securities Exchange Act of 1934, as amended. The Committee determines and
designates from time to time those key officers of the Company and those
non-officer directors who are eligible to participate in the Plan. As of March
15, 1997, a total of 29 officers and non-officer directors were eligible to
participate in the Plan.
The Committee may award incentive stock options (within the meaning of section
422 of the Internal Revenue Code of 1986, as amended (the "Code")) or
non-qualified stock options to participants under the Plan. Each non-officer
director receives a one-time grant of non-qualified options to purchase 10,000
shares upon his or her election as a director of the Company, which vests over
a period of two years; such non-officer directors may not receive any other
award under the Plan.
The Committee determines the number of shares to be offered from time to time
to each optionee who is an officer of the Company. In making these
determinations, the Committee takes into account the past service of the
optionee to the Company, that officer's present and potential contributions to
the success of the Company and such other factors as the Committee deems
relevant in connection with accomplishing the purposes of the Plan. The options
contain such terms and conditions as the Committee deems advisable, including
but not limited to being exercisable only in such installments as the Committee
may determine. Options granted to different optionees or at different times
need not contain similar provisions.
The price at which a share may be purchased upon the exercise of an option will
generally be equal to the then-current fair market value of the shares at the
time an option is granted. However, with respect to options granted to any
holder of 10% or more of the Company's shares, the price may not be less than
110% of the then-current fair market value of the shares on the day of grant.
The day on which the Committee approves the granting of an option is considered
the date on which such option is granted.
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The Committee determines, within limits, the period or periods of time within
which the option may be exercised, in whole or in part, by the optionee.
Accordingly, the option period of each option shall end, and the option shall
cease to be exercisable, on the earliest of (i) the date specified in the
option grant, (ii) ten years (or, in the case of incentive stock options
awarded to a holder of 10% or more of the Company's shares, five years) from
the date the option is granted, (iii) the last day of the two-month period
beginning on the date on which the optionee ceases to be an officer or director
of the Company for any cause other than death or total and permanent
disability, or (iv) the first anniversary of the date on which the optionee
ceases to be an officer or director of the Company as a result of the
optionee's death or total and permanent disability. The time period during
which an option may be exercised may be extended only upon the approval of the
Committee but in no event shall an option term be extended beyond ten years
from the date of the original grant (or five years, if such option has been
awarded to a holder of 10% or more of the Company's shares). As noted above, if
the amendments are approved, outstanding options will become fully vested and
immediately exercisable in the event of a change of control of the Company,
subject to certain limitations.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of certain federal income tax consequences of
transactions under the Plan based on current federal income tax laws. This
summary is not intended to be exhaustive and does not describe state, local or
other tax consequences.
INCENTIVE STOCK OPTIONS. In general, no income will be recognized by an
optionee and no deduction will be allowed to the Company with respect to the
grant or exercise of an incentive stock option granted under the Plan. The
difference between the exercise price and the fair market value of the shares
of common stock on the date the option is exercised is, however, an adjustment
item for the participant for purposes of the alternative minimum tax. When the
stock received upon exercise of the option is sold, provided that the stock is
held for more than two years from the date of grant of the option and more than
one year from the date of exercise, the participant will recognize long-term
capital gain or loss equal to the difference between the amount realized and
the exercise price of the option related to such stock. If the above mentioned
holding period requirements of the Code are not satisfied, the subsequent sale
of stock received upon exercise of an incentive stock option is treated as a
"disqualifying disposition." In general, the participant will recognize taxable
income at the time of such disqualifying disposition as follows: (i) ordinary
income in an amount equal to the excess of (A) the lesser of the fair market
value of the shares of common stock on the date the incentive stock option is
exercised or the amount realized on such disqualifying disposition over (B) the
exercise price and (ii) capital gain to the extent of any excess of the amount
realized on such disqualifying disposition over the fair market value of the
shares of common stock on the date the incentive stock option is exercised (or
capital loss to the extent of any excess of the exercise price over the amount
realized on disposition). Any capital gain or loss recognized by the
participant will be long-term or short-term depending upon the holding period
for the stock sold. The Company may claim a deduction at the time of the
disqualifying disposition equal to the amount of ordinary income the
participant recognizes.
NON-QUALIFIED STOCK OPTIONS. The grant of a non-qualified stock option under
the Plan will not result in the recognition of taxable income to the
participant or in a deduction to the Company. In general, upon exercise, a
participant will recognize ordinary income in an amount equal to the excess of
the fair market value of the shares of common stock purchased over the exercise
price. The Company is required to withhold tax on the amount of income so
recognized, and is entitled to a tax deduction equal to the amount of such
income. Gain or loss upon a subsequent sale of any shares of common stock
received upon the exercise of a non-qualified stock option is taxed as capital
gain or loss (long-term or short-term, depending upon the holding period of the
stock sold).
The approval of the amendments to the Plan requires the affirmative vote of the
holders of a majority of the Company's outstanding shares present or
represented at the Meeting or any adjournment thereof, if the holders of a
majority of the shares entitled to vote at the Meeting are present or
represented by proxy. Shares that are voted as abstentions will be counted
among those shares represented at the Meeting for the purpose of
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calculating whether a quorum is present, and will have the effect of a vote
against the proposal, since they will not be counted in favor of the proposal.
Those shares that are intentionally not voted will not be included for the
purpose of establishing a quorum. Therefore, such non-voted shares could have
the effect of giving additional weight to the shares of those shareholders who
do choose to vote.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE IN FAVOR OF THE STOCK OPTION
PLAN, AS AMENDED.
OTHER BUSINESS
The Board of Directors knows of no other business to be presented for action at
the Meeting. If any matters do come before the Meeting on which action can
properly be taken, it is intended that the proxies shall vote in accordance
with the judgment of the person or persons exercising the authority conferred
by the proxy at the Meeting.
1998 ANNUAL MEETING OF STOCKHOLDERS
The Company expects that the 1998 Annual Meeting of Stockholders will be held
in May 1998, but the exact date, time, and location of such meeting have yet to
be determined. A stockholder who intends to present a proposal at that annual
meeting must submit the proposal in writing to the Company no later than
December 10, 1997 in order for the proposal to be considered for inclusion in
the Company's proxy statement for that meeting. The submission of a proposal
does not guarantee its inclusion in the Company's proxy statement or
presentation at the meeting.
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EXHIBIT A
ALLIED CAPITAL CORPORATION
STOCK OPTION PLAN
1. PURPOSE OF THE PLAN
The purpose of this Stock Option Plan (this "Plan") is to advance
the interests of Allied Capital Corporation (the "Company") by providing to
directors of the Company and to officers of the Company who have substantial
responsibility for the direction and management of the Company with additional
incentives to exert their best efforts on behalf of the Company, to increase
their proprietary interest in the success of the Company, to reward outstanding
performance and to provide a means to attract and retain persons of outstanding
ability to the service of the Company. It is recognized that the Company cannot
attract or retain these officers and directors without this compensation.
Options granted under this Plan may qualify as "incentive stock options," as
defined in Section 422 of the Internal Revenue Code of 1986, as amended (the
"Code").
2. ADMINISTRATION
This Plan shall be administered by a Compensation Committee (the
"Committee") comprised of at least two (2) members of the Company's Board of
Directors who each shall (a) be a "disinterested person," as defined in Rule
16b-3 promulgated under the Securities Exchange Act of 1934, as amended, (b)
have no financial interest in grants of stock options to officers of the
Company under this Plan and (c) not be an "interested person," as defined in
ss.2(a)(19) of the Investment Company Act of 1940, as amended (the "Act"), of
the Company. The Committee shall interpret this Plan and, to the extent and in
the manner contemplated herein, shall exercise the discretion reserved to it
hereunder. The Committee may prescribe, amend and rescind rules and regulations
relating to this Plan and to make all other determinations necessary for its
administration. The decision of the Committee on any interpretation of this
Plan or administration hereof, if in compliance with the provisions of the Act
and regulations promulgated thereunder, shall be final and binding with respect
to the Company, any optionee or any person claiming to have rights as, or on
behalf of, any optionee.
3. SHARES SUBJECT TO THE PLAN
The shares subject to option and the other provisions of this Plan
shall be shares of the Company's common stock, par value $1.00 per share
("shares"). Subject to the provisions hereof concerning adjustment, the total
number of shares which may be purchased upon the exercise or surrender of stock
options granted under this Plan shall not exceed 1,790,248 shares, which
includes all shares with respect to which options have been granted or
surrendered for payment in cash or other consideration pursuant to this Plan or
predecessor forms of this Plan. In the event any option shall cease to be
exercisable in whole or in part for any reason, the shares which were covered
by such option, but as to which the option had not been exercised, shall again
be available under this Plan. Shares may be made available from authorized,
unissued or reacquired stock or partly from each.
4. PARTICIPANTS
(a) Officers. The Committee shall determine and designate from time
to time those key officers of the Company who shall be eligible to participate
in this Plan. The Committee shall also determine the number of shares to be
offered from time to time to each optionee. In making these determinations, the
Committee shall take into account the past service of each such officer to the
Company, the present and potential contributions of such officer to the success
of the Company and such other factors as the Committee shall deem relevant in
connection with accomplishing the purposes of this Plan; provided that the
Committee shall determine that each grant of options to an optionee, the number
of shares offered thereby and the terms of such option are in the best
interests of the Company and its shareholders. The date on which the Committee
approves a grant of options to an officer of the Company shall be the date of
issuance of such option; provided, however, that if (1) any such action by the
Committee does not constitute approval thereof by both (A) a majority of the
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Company's directors who each has no financial interest in such action and (B) a
majority of the Company's directors who each is not an "interested person," as
defined in ss.2(a)(19) of the Act, of the Company and (2) such approval is then
required by ss.61(a)(3)(B)(I)(I) of the Act, the grant of any option by such
action shall not be effective until there has been approval of such action by a
majority of the Company's directors who each has no financial interest in such
action and a majority of the Company's directors who each is not an "interested
person" of the Company on the basis that such action is in the best interests
of the Company and its shareholders, and the last date on which such required
approval is obtained shall be the date of issuance of such option. The
agreement documenting the award of any option granted pursuant to this
paragraph 4(a) shall contain such terms and conditions as the Committee shall
deem advisable, including but not limited to being exercisable only in such
installments as the Committee may determine.
(b) Non-Officer Directors. A one-time grant of options in accordance
with the provisions of this paragraph (b) shall be made to each director of the
Company who is not an officer of the Company or of the Company's investment
adviser (a "non-officer director"). A one-time grant of options in accordance
with the provisions of this paragraph shall be made to each non-officer
director other than any non-officer director who received a grant pursuant to
the first sentence of this paragraph (b) upon his or her initial election as a
director of the Company. Each grant pursuant to this paragraph (b) shall award
the non-officer director an option to purchase ten thousand (10,000) shares at
a price equal to the current fair market value of the shares at the date of
issuance of such option; provided, that if any non-officer director then holds
ten percent (10%) or more of the outstanding shares, the exercise price of such
option shall not be less than one hundred ten percent (110%) of such current
fair market value. The agreement documenting the award of any option granted
pursuant to this paragraph 4(b) shall contain such terms and conditions as the
Committee shall deem advisable; provided, however, that any such option shall
vest in three annual installments (so that the recipient can first exercise the
option with respect to not more than 3,333 shares on or after the date of
issuance of such option, can exercise the option with respect to not more than
an additional 3,333 shares on or after the first anniversary of the date of
issuance of such option and can exercise such option with respect to the all of
the shares covered thereby on or after the second anniversary of the date of
issuance of such option).
(c) General. Agreements evidencing options granted to different
optionees or at different times need not contain similar provisions.
5. OPTION PRICE
Shares shall be optioned from time to time at a exercise price not
less than the current fair market value, as defined in paragraph 15(d) of this
Plan, of the shares at the date of issuance of an option; provided, that the
exercise price of any option granted to a holder of 10% or more of the
Company's shares shall not be less than 110% of such current fair market value.
6. OPTION PERIOD
Each option agreement shall state the period or periods of time
within which the subject option may be exercised, in whole or in part, by the
optionee which shall be such period or periods of time as may be determined by
the Committee; provided, that the option period shall not exceed ten years from
the date of issuance of the option and shall not exceed five years if the
option is granted to a holder of 10% or more of the Company's shares.
7. PAYMENT FOR SHARES
Full payment for shares purchased shall be made at the time of
exercising the option in whole or in part. Payment of the purchase price shall
be made in cash (including check, bank draft or money order) or, if authorized
pursuant to paragraph 9 hereof, by a loan from the Company in accordance with
paragraph 9.
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8. TRANSFERABILITY OF OPTIONS
Options shall not be transferable other than by will or the laws of
descent and distribution, and during an optionee's lifetime shall be
exercisable only by the optionee.
9. LOANS BY THE COMPANY
Upon the exercise of any option by an officer-optionee, the Company,
at the request of the officer- optionee, and subject to the approval of both
(a) a majority of the Company's directors who each has no financial interest in
such loan and (b) a majority of the Company's directors who each is not an
"interested person," as defined in ss.2(a)(19) of the Act, of the Company, on
the basis that such loan is in the best interests of the Company and its
stockholders (whether such approval is by the Committee or otherwise), may lend
to such officer-optionee, as of the date of exercise, an amount equal to the
exercise price of such option; provided, that such loan (a) shall have a term
of not more than ten years, (b) shall become due within sixty days after the
recipient of the loan ceases to be an officer of the Company, (c) shall bear
interest at a rate no less than the prevailing rate applicable to 90-day United
States Treasury bills at the time the loan is made, and (d) shall be fully
collateralized at all times, which collateral may include securities issued by
the Company. Loan terms and conditions may be changed by the Committee to
comply with applicable IRS and SEC regulations.
10. TERMINATION OF OPTION
All rights to exercise options shall terminate sixty days after any
optionee ceases to be a director or an officer of the Company for any cause
other than death or total and permanent disability.
11. RIGHTS IN THE EVENT OF TERMINATION OF SERVICE
If an optionee's service as a director or officer is terminated for
any reason other than death or total and permanent disability prior to
expiration of his or her option and before such option is fully exercised, the
optionee shall have the right to exercise the option during the balance of the
60-day period referred to in paragraph 10.
12. RIGHTS IN THE EVENT OF TOTAL AND PERMANENT DISABILITY OR DEATH
If an optionee becomes totally and permanently disabled or dies
prior to expiration of the option without having fully exercised it, he or the
executors or administrators or legatees or distributees of the estate, as the
case may be, shall, have the right, from time to time within one year after the
optionee's total and permanent disability or death and prior to the expiration
of the term of the option, to exercise the option in whole or in part, as
provided in the respective option agreement.
13. EFFECT OF CHANGE IN STOCK SUBJECT TO THE PLAN
Subject to any required action by the shareholders of the Company
and the provisions of applicable corporate law, the number of shares
represented by the unexercised portion of an option, the number of shares which
has been authorized or reserved for issuance hereunder, and the number of
shares covered by any applicable vesting schedule hereunder, as well as the
exercise price of a share represented by the unexercised portion of an option,
shall be proportionately adjusted for (a) a division, combination or
reclassification of any of the shares of common stock of the Company or (b) a
dividend payable in shares of common stock of the Company.
14. GENERAL RESTRICTION
Each option shall be subject to the requirement that, if at any time
the Board of Directors shall determine, at its discretion, that the listing,
registration or qualification of the shares subject to such option upon any
securities exchange or under any state or federal law, or the consent or
approval of any government regulatory body, is necessary or desirable as a
condition of, or in connection with, the granting of such option or the issue
or purchase of the shares thereunder, such option may not be exercised in whole
or in part unless such listing, registration, qualification, consent or
approval shall have been effected or obtained free of any conditions not
acceptable to the Company. Subject to the limitations of paragraph 6, no option
shall expire
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during any period when exercise of such option has been prohibited by the Board
of Directors, but shall be extended for such further period so as to afford the
optionee a reasonable opportunity to exercise his option.
15. MISCELLANEOUS PROVISIONS
(a) No optionee shall have rights as a shareholder with respect to
shares covered by his option until the date of exercise of his option.
(b) The granting of any option shall not impose upon the Company any
obligation to appoint or to continue to appoint as a director or officer any
optionee, and the right of the Company to terminate the employment of any
officer or other employee, or service of any director, shall not be diminished
or affected by reason of the fact that an option has been granted to such
optionee.
(c) Options shall be evidenced by stock option agreements in such
form and subject to the terms and conditions of this Plan as the Committee
shall approve from time to time, consistent with the provisions of this Plan.
Such stock option agreements may contain such other provisions as the Committee
in its discretion may deem advisable.
(d) For purposes of this Plan, the fair market value of the shares
shall be the closing sales price of the stock as quoted on the National
Association of Securities Dealers Automated Quotation System for the date of
issuance of such option, as provided herein. If the Company's shares are traded
on an exchange, the price shall be the closing price of the Company's stock as
reported in The Wall Street Journal for such date of issuance of an option.
(e) Any option issued hereunder before January 1, 1987 shall not be
exercisable while there is outstanding any stock option which was granted
before the granting of such option to the same optionee to purchase shares of
the Company or of any corporation which (at the time of the granting of such
option) was a parent or subsidiary corporation of the Company, or any
predecessor of any of any such corporations.
(f) (1) The aggregate fair market value (determined as of the date
of issuance of an option) of the shares for which any optionee may be granted
options before January 1, 1987 in any calendar year (under all incentive stock
option plans of the Company and its parent and subsidiary corporations) shall
not exceed $100,000 plus any unused limit carryover to such year, calculated in
accordance with the provisions of Section 422A(c)(4) of the Code as it existed
before enactment of the Tax Reform Act of 1986, P.L. No. 99-514.
(f) (2) The aggregate fair market value (determined as of the date
of issuance of an option) of the shares with respect to which an option, or
portion thereof, intended to be an incentive stock option and granted after
December 31, 1986 are exercisable for the first time by any optionee during any
calendar year (under all incentive stock option plans of the Company and
subsidiary corporations) shall not exceed $100,000.
(g) All options issued pursuant to this Plan shall be granted within
ten years from the earlier of the date of adoption of this Plan (or any
amendment thereto requiring shareholder approval pursuant to the Code) or the
date this Plan (or any amendment thereto requiring shareholder approval
pursuant to the Code) is approved by the shareholders of the Company.
(h) No option may be issued if exercise of all warrants, options and
rights of the Company outstanding immediately after issuance of such option
would result in the issuance of voting securities in excess of 20% of the
Company's outstanding voting securities.
(i) A leave of absence granted to an employee does not constitute an
interruption in continuous employment for purposes of this Plan as long as the
leave of absence does not extend beyond one year.
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(j) Any notices given in writing shall be deemed given if delivered
in person or by certified mail; if given to the Company at Allied Capital
Corporation, 1666 K Street, N.W., 9th Floor, Washington, D.C. 20006; and, if to
an optionee, in care of the optionee at his or her last known address.
(k) This Plan and all actions taken by those acting under this Plan
shall be governed by the substantive laws of Maryland without regard to any
rules regarding conflict-of-law or choice-of-law.
(l) All costs and expenses incurred in the operation and
administration of this Plan shall be borne by the Company.
16. CHANGE OF CONTROL
In the event of a Change of Control (as hereinafter defined), all
then-outstanding options will become fully vested and exercisable as of the
Change of Control. For purposes of the Plan, "Change of Control" means the sale
of substantially all of the Company's assets or the acquisition, whether
directly, indirectly, beneficially (within the meaning of Rule 13d-3 of the
1934 Act, or of record, of securities of the Company representing twenty
percent (20%) or more in the aggregate voting power of the Company's
then-outstanding Common Stock by any "person" (within the meaning of Sections
13(d) and 14(d) of the 1934 Act), including any corporation or group of
associated persons acting in concert, other than (i) the Company or its
subsidiaries and/or (ii) any employee pension benefit plan (within the meaning
of Section 3(2) of the Employee Retirement Income Security Act of 1974) of the
Company or its subsidiaries, including a trust established pursuant to any such
plan.
17. AMENDMENT AND TERMINATION
The Board of Directors may modify, revise or terminate this Plan at
any time and from time to time; provided, however, that no modification or
revision of any material provision of this Plan may be made without shareholder
approval except for such modifications or revisions which are necessary in
order to ensure the options issued as incentive stock options under this Plan
comply with Section 422 or any successor provision of the Code, applicable
provisions of the Act or any exemptive order therefrom issued to the Company in
connection with this Plan, Rule 16b-3 promulgated under the Securities Exchange
Act of 1934, as amended, or other applicable law. This Plan shall terminate
when all shares reserved for issuance hereunder have been issued upon the
exercise of options, by action of the Board of Directors pursuant to this
paragraph, or on February 12, 2007, whichever shall first occur.
18. EFFECTIVE DATE OF THE PLAN
This Plan shall become effective upon (1) adoption by the Board of
Directors and (2) approval of this Plan by the shareholders of the Company.
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PROXY
ALLIED CAPITAL CORPORATION
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned stockholder of ALLIED CAPITAL CORPORATION (the "Company")
appoints WILLIAM L. WALTON, GEORGE C. WILLIAMS and TRICIA B. DANIELS, or any of
them, proxies with full power of substitution, to vote at the 1997 Annual
Meeting of Stockholders of the Company to be held in the Montgomery Room of The
Residence Inn by Marriott, 7335 Wisconsin Avenue, Bethesda, Maryland 20814 at
10:00 a.m., Thursday, May 1, 1997, and any adjournment or adjournments thereof,
the shares of Common Stock of the Company that the undersigned is entitled to
vote, on all matters that may properly come before that meeting
1. FOR ____ WITHHOLD AUTHORITY ____ the election of all the following
nominees as directors for the ensuing year for Allied Capital
Corporation:
WILLIAM L. WALTON
GEORGE C. WILLIAMS
T. MURRAY TOOMEY
JOSEPH A. CLORETY III
GUY T. STEUART II
WARREN K. MONTOURI
G. CABELL WILLIAMS III
MICHAEL I. GALLIE
INSTRUCTION: To withhold your vote for one or more individual nominees, write
the names of each nominee with respect to whom you choose to withhold authority
to vote in the space provided below.)
2. To ratify the selection of Matthews, Carter and Boyce,
P.C. to serve as independent public accountants for the
Company for the year ending December 31, 1997.
3. To consider and approve an amendment to the Company's
Stock Option Plan.
4. In their discretion, the Proxies are authorized to vote
upon such other business as may properly come before the
meeting.
YOU ARE URGED TO CAST YOUR VOTE BY MARKING THE APPROPRIATE BOXES. PLEASE NOTE
THAT, UNLESS A CONTRARY INSTRUCTION IS INDICATED, THIS PROXY WILL BE VOTED FOR
ELECTION OF ALL NOMINEES IDENTIFIED IN ITEM 1 AND FOR RATIFICATION OF THE
SELECTION OF INDEPENDENT PUBLIC ACCOUNTANTS DESCRIBED IN ITEM 2 AND FOR
APPROVAL OF AN AMENDMENT TO THE COMPANY'S STOCK OPTION PLAN DESCRIBED IN ITEM
3.
(Please mark, sign and return this proxy in the enclosed envelope.)
Signature Date Signature Date
------------------- ------- ------------------- --------
IF HELD JOINTLY
Important: Please sign your name or names exactly as shown hereon and date your
proxy in the blank space provided above. For joint accounts, each joint owner
should sign. When signing as attorney, executor, administrator, trustee or
guardian, please give your full title as such. If the signer is a corporation
or partnership, please sign in full corporate or partnership name by duly
authorized officer or partner.
