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EXHIBIT 99.2f.12.a
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ALLIED CAPITAL CORPORATION
NOTE AGREEMENT
DATED AS OF AUGUST 31, 2000
RE: $75,000,000 AUCTION RATE RESET SENIOR NOTES SERIES A
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TABLE OF CONTENTS
(Not a part of the Agreement)
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SECTION HEADING PAGE
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SECTION 1. DESCRIPTION OF NOTES AND COMMITMENT .........................................1
Section 1.1. Description of Notes ................................................1
Section 1.2. Commitment, Closing Date ............................................1
SECTION 2. PAYMENT OF NOTES ............................................................2
Section 2.1. Payments of Principal ...............................................2
Section 2.2 Optional Prepayment Prior to a Remarketing ..........................3
Section 2.3. Notice of Optional Prepayment .......................................2
Section 2.4 Mandatory Redemption upon a Qualifying Offering .....................3
Section 2.5 Interest ............................................................3
Section 2.6 Extension of Interest Payment Period ................................4
Section 2.7. Direct Payment ......................................................5
SECTION 3. REPRESENTATIONS .............................................................5
Section 3.1. Representations of the Company ......................................5
Section 3.2. Representations of the Purchaser ....................................5
SECTION 4. CLOSING CONDITIONS ..........................................................6
Section 4.1. Conditions ..........................................................6
Section 4.2. Waiver of Conditions ................................................7
SECTION 5. COVENANTS ...................................................................8
Section 5.1. Corporate Existence, Etc ............................................8
Section 5.2. Insurance ...........................................................8
Section 5.3. Taxes, Claims for Labor and Materials, Compliance with Laws .........8
Section 5.4. Maintenance, Etc ....................................................8
Section 5.5. Nature of Business ..................................................9
Section 5.6. Investment Company Status ...........................................9
Section 5.7. Capital Maintenance .................................................9
Section 5.8. Interest Charges Coverage Ratio .....................................9
Section 5.9. Limitations on Debt; Interest Rate Swaps ............................9
Section 5.10. Limitation on Liens ................................................10
Section 5.11. Restricted Payments ...............................................12
Section 5.12. Mergers, Consolidations and Sales of Assets .......................12
Section 5.13. Repurchase of Notes ...............................................14
Section 5.14. Transactions with Affiliates of the Company .......................15
Section 5.15. Termination of Pension Plans ......................................15
Section 5.16. Reports and Rights of Inspection ..................................15
SECTION 6. EVENTS OF DEFAULT AND REMEDIES THEREFOR ....................................18
Section 6.1. Events of Default ..................................................18
Section 6.2. Notice to Holders ..................................................19
Section 6.3. Acceleration of Maturities .........................................19
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Section 6.4. Rescission of Acceleration .........................................20
SECTION 7. AMENDMENTS, WAIVERS AND CONSENTS ...........................................20
Section 7.1. Consent Required ...................................................20
Section 7.2. Solicitation of Holders ............................................20
Section 7.3. Effect of Amendment or Waiver ......................................21
SECTION 8. INTERPRETATION OF AGREEMENT; DEFINITIONS ...................................21
Section 8.1. Definitions ........................................................21
Section 8.2. Accounting Principles ..............................................32
Section 8.3. Directly or Indirectly .............................................32
SECTION 9 REMARKETING ................................................................32
Section 9.1 Incorporation of Remarketing Agreement .............................32
Section 9.2 Determination of Reset Date; Remarketing ...........................32
Section 9.3 Reset of Interest Rate and Maturity Date ...........................32
Section 9.4 Replacement Notes ..................................................32
Section 9.5 Power of Attorney ..................................................33
SECTION 10. MISCELLANEOUS ..............................................................33
Section 10.1. Registered Notes; Transfer ........................................33
Section 10.2. Exchange of Notes .................................................33
Section 10.3. Loss, Theft, Etc. of Notes ........................................34
Section 10.4. Expenses, Stamp Tax Indemnity ....................................34
Section 10.5. Powers and Rights Not Waived; Remedies Cumulative .................34
Section 10.6. Notices ...........................................................35
Section 10.7. Successors and Assigns ............................................35
Section 10.8. Survival of Covenants and Representations .........................35
Section 10.9. Severability ......................................................35
Section 10.10. Governing Law ....................................................35
Section 10.11. Captions .........................................................35
Section 10.12. Limitation of Liability of the Owner Trustee .....................36
SIGNATURE ................................................................................37
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Attachments to Note Agreement:
Schedule I - Name and Address of Purchaser
Exhibit A-1 - Form of Note
Exhibit A-2 - Form of Replacement Note
Exhibit B - Representations and Warranties
Exhibit C - Form of Opinion of Counsel to the Company
Exhibit D - Form of Remarketing Agreement
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ALLIED CAPITAL CORPORATION
NOTE AGREEMENT
Re: $75,000,000 Auction Rate Reset Senior Notes Series A
August 31, 2000
Intrepid Funding Master Trust
c/o Wilmington Trust Company, as Owner-Trustee
Rodney Square North
1100 North Market Street
Wilmington, DE 19890-001
Ladies and Gentlemen:
The undersigned, ALLIED CAPITAL CORPORATION (the "COMPANY"), a Maryland
corporation, hereby agrees with Intrepid Funding Master Trust, a statutory
business trust formed under the laws of the State of Delaware (the "PURCHASER"),
as follows:
SECTION 1. DESCRIPTION OF NOTES AND COMMITMENT.
Section 1.1. Description of Notes. The Company will authorize the issue
and sale of $75,000,000 Auction Rate Reset Senior Notes Series A (the "NOTES",
such term to include any such notes issued in substitution therefor pursuant to
SECTION 10 or any Replacement Notes issued pursuant to SECTION 9.4). Prior to
the Remarketing Settlement Date on which Replacement Notes are issued, the Notes
shall be substantially in the form set out in Exhibit A-1, with such changes
therefrom, if any, as may be approved by the Company and the Holders thereof.
After the Remarketing Settlement Date on which Replacement Notes are issued, the
Notes shall be substantially in the form set out in Exhibit A-2, with such
changes therefrom, if any, as may be approved by the Company and the Holders
thereof. The Notes are not subject to prepayment or redemption at the option of
the Company prior to their expressed maturity dates except on the terms and
conditions and in the amounts set forth in SECTION 2 of this Agreement.
Section 1.2. Commitment, Closing Date. Subject to the terms and
conditions hereof and on the basis of the representations and warranties
hereinafter set forth, the Company agrees to issue and sell to the Purchaser,
and the Purchaser agrees to purchase from the Company, Notes in the principal
amount of $75,000,000.00 at a price (the "PURCHASE PRICE") equal to the
principal amount thereof. The Company will deliver to the Purchaser the Notes to
be purchased by the Purchaser in the form of a single Note (or such greater
number of Notes in denominations of at least $500,000 as the Purchaser may
request) dated the Closing Date and registered in the Purchaser's name (or in
the name of the Purchaser's nominee), against delivery by the Purchaser
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to the Company or its order of an amount in cash equal to the Purchase Price by
wire transfer via Fedwire of immediately available funds for the account of the
Company to Account Number 3931033237 at Bank of America, Bethesda, Maryland,
(ABA #052-001-633). Such delivery and payment shall be made at the offices of
Davis Polk & Wardwell, 450 Lexington Avenue, New York, NY 10017 on the date
hereof (the "CLOSING DATE"); provided that the Closing Date may be postponed to
such other date (but not more than ten days after the originally scheduled
Closing Date) as shall mutually be agreed upon by the Company and the Purchaser.
On the Closing Date, the Company will pay, or cause to be paid, to Banc of
America Securities LLC a placement fee in cash in an amount equal to 2.50% of
the Purchase Price by wire transfer of immediately available funds to an account
designated by Banc of America Securities LLC.
SECTION 2. PAYMENT OF NOTES.
Section 2.1. Payments of Principal. The entire principal amount of the
Notes shall become due and payable on the Maturity Date.
Section 2.2. Optional Prepayment Prior to a Remarketing. Prior to the
delivery of a Remarketing Notice pursuant to the Remarketing Agreement, in
addition to the payments required by SECTION 2.1, upon compliance with SECTION
2.3, the Company shall have the privilege, at any time and from time to time, of
prepaying the outstanding Notes, either in whole or in part (but if in part then
in a principal amount of $1,000,000 or an integral multiple thereof). If the
Prepayment Date (as defined below) is an Interest Payment Date, such prepayment
shall be made by payment of the outstanding principal amount of the Notes, or
portion thereof to be prepaid, plus any accrued and unpaid interest thereon to
the Interest Payment Date. If the Prepayment Date is any day other than an
Interest Payment Date, such prepayment shall be made by payment of the
outstanding principal amount of the Notes, or portion thereof to be prepaid,
plus any accrued and unpaid interest thereon as adjusted for any LIBOR breakage
adjustments (as determined by the Calculation Agent in accordance with normal
industry standards) for the period from such Prepayment Date to the next
following Interest Payment Date or, if there is no following Interest Payment
Date, the Maturity Date.
Section 2.3. Notice of Optional Prepayment. The Company will give notice
of any prepayment of the Notes pursuant to SECTION 2.2 to each Holder thereof
not less than 30 days nor more than 60 days (the "PREPAYMENT NOTICE PERIOD")
before the date fixed for such optional prepayment (the "PREPAYMENT DATE")
specifying (i) the Prepayment Date, (ii) the principal amount of the Notes to be
prepaid on the Prepayment Date and (iii) the accrued interest, applicable to the
prepayment. Notice of prepayment having been so given, the aggregate principal
amount of the Notes specified in such notice, together with accrued interest
thereon, adjusted for LIBOR breakage adjustments if so required pursuant to
SECTION 2.2, shall become due and payable on the Prepayment Date specified in
said notice. Notwithstanding the provisions of this SECTION 2.3, if a
Remarketing Notice shall be delivered to the Company during the Prepayment
Notice Period, no notice of prepayment shall be deemed to have been delivered by
the Company and no prepayment (nor any accrued interest) shall become due or
payable by the Company on the Prepayment Date.
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Section 2.4. Mandatory Redemption upon a Qualifying Offering. If at any
time a Qualifying Offering occurs, the Company shall redeem Notes having an
aggregate principal amount equal to the proceeds of such Qualifying Offering
(after deduction of any applicable underwriting or placement discounts and
commissions), on the 90th day (the "REDEMPTION DATE") following the closing of
such Qualifying Offering at a redemption price (the "REDEMPTION PRICE") equal to
100% of the principal amount of such Notes plus any accrued and unpaid interest
thereon to the Redemption Date; provided that if the aggregate Redemption Price
necessary to redeem all Notes then outstanding exceeds the amount of such
proceeds, the Notes shall be redeemed on a pro rata basis, in accordance with
the principal amount of Notes held by each Holder as a percentage of the
aggregate principal amount of Notes then outstanding. The Company will give
notice of any redemption of the Notes pursuant to this SECTION 2.4 to each
Holder thereof not fewer than 30 days nor more than 60 days before the
Redemption Date. Any such notice shall specify (1) the Redemption Date, (2) the
principal amount of such Holder's Notes to be redeemed and (3) the Redemption
Price. The aggregate principal amount of the Notes specified in such notice,
together with accrued interest thereon, shall become due and payable on the
Redemption Date.
Section 2.5. Interest.
(a) Interest on the principal amount of each Note will accrue
and be payable at a rate per annum (the "INTEREST RATE") equal to:
(1) from and including the Closing Date to but excluding
the earlier of (A) the Remarketing Settlement Date on which
Replacement Notes are issued and (B) the date such principal
amount is paid, LIBOR plus 175 basis points; and
(2) from and including the Remarketing Settlement Date
on which Replacement Notes are issued to but excluding the date
such principal amount is paid, the Winning Bid Rate.
Interest that is not paid when due and interest that would be payable but
for SECTION 2.6 will bear Additional Interest thereon compounded
quarterly at the applicable periodic Interest Rate specified above (to
the extent permitted by applicable law) in accordance with this SECTION
2.5. The term "INTEREST", as used herein, includes any such Additional
Interest unless otherwise stated.
(b) Until the Remarketing Settlement Date on which Replacement
Notes are issued, interest on the Notes will be payable quarterly in
arrears (A) on the last calendar day of November, February, May, and
August of each year, commencing November 30, 2000 and (B) on the earlier
of the Maturity Date or such Remarketing Settlement Date (each, a
"PRE-REMARKETING INTEREST PAYMENT DATE"), except as otherwise described
below. The Interest Rate for each quarterly period shall be determined by
the Calculation Agent on the date (a "DATE OF DETERMINATION") two London
Banking Days prior to the Pre-Remarketing Interest Payment Date
immediately preceding the Pre-Remarketing Interest Payment Date on which
interest for such quarterly period is due (or, in the case of the
quarterly period beginning on the Closing Date, two London Banking Days
prior to
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the Closing Date). Prior to the Remarketing Settlement Date on which
Replacement Notes are issued, the amount of interest payable for any
period shall be computed on the basis of a 360-day year and the actual
number of days elapsed in such period. If a Pre-Remarketing Interest
Payment Date would otherwise not be a Business Day, then such
Pre-Remarketing Interest Payment Date shall be the next succeeding
Business Day (and no interest shall accrue for the intervening period);
provided that if such next succeeding Business Day is in the next
succeeding calendar month, such Pre-Remarketing Interest Payment Date
shall be the immediately preceding Business Day.
(c) From and including the Remarketing Settlement Date on which
Replacement Notes are issued, interest on the Replacement Notes will be
payable quarterly in arrears (A) on the last calendar day of November,
February, May and August of each year, commencing on the first such date
following such Remarketing Settlement Date and (B) on the Maturity Date
(each, a "POST-REMARKETING INTEREST PAYMENT DATE"), except as otherwise
described below. From and including such Remarketing Settlement Date on
which Replacement Notes are issued, the amount of interest payable for
any quarterly period shall be computed on the basis of a 360-day year of
twelve 30-day months. Except as provided in the last sentence of this
paragraph, from and including such Remarketing Settlement Date the amount
of interest payable for any period shorter than a full quarterly period
for which interest is computed will be computed on the basis of the
actual number of days elapsed per 30-day month. If a Post-Remarketing
Interest Payment Date would otherwise not be a Business Day, then such
next succeeding Post Remarketing Interest Payment Date will be postponed
to the next succeeding Business Day (and no interest shall accrue for the
intervening period).
(d) Interest on any Note shall be paid to the Person in whose
name such Note is registered on the Note Register at the close of
business on the date (a "RECORD DATE") fifteen (15) days prior to the
Interest Payment Date on which such interest is due.
Section 2.6. Extension of Interest Payment Period. The Company shall
have the right, at any time during the term of the Notes, so long as no Event of
Default has occurred and is continuing, from time to time to extend the interest
payment period for the Notes (each such deferral period, an "Extension Period"),
during which Extension Period the Company shall have the right to not make
payments of interest on any Interest Payment Date, and at the end of which
Extension Period the Company shall pay all interest then accrued and unpaid
thereon (to the extent permitted by applicable law). Prior to the termination of
any such Extension Period, the Company may further extend such Extension Period;
provided that no such Extension Period shall extend beyond the Maturity Date.
Upon termination of any Extension Period and upon the payment of all accrued and
unpaid interest then due, the Company may select a new Extension Period, subject
to the above requirements. No interest shall be due and payable during an
Extension Period, except at the end thereof. The Company shall give the Holders
of the outstanding Notes notice of its selection of any such Extension Period at
least ten Business Days prior to the date interest on the Notes would have been
payable but for the election to begin such Extension Period. Such notice shall
specify the period selected. For the avoidance of doubt, except as provided in
this SECTION 2.6, all provisions of this Agreement including without limitation
SECTION 5, shall remain in full force and effect during any Extension Period.
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Section 2.7. Direct Payment. Notwithstanding anything to the contrary
contained in this Agreement or the Notes (but giving effect to Section 2.6), in
the case of any Note owned by any Holder that is the Purchaser or any other
Institutional Holder which has given written notice to the Company requesting
that the provisions of this SECTION 2.7 shall apply, the Company will punctually
pay when due the principal thereof, interest thereon and premium, if any, due
with respect to said principal, without any presentment thereof, directly to
such Holder at its address set forth in Schedule I hereto or such other address
as such Holder may from time to time designate in writing to the Company or, if
a bank account with a United States bank is so designated for such Holder on
Schedule I hereto the Company will make such payments in immediately available
funds to such bank account, marked for attention as indicated, or in such other
manner or to such other account in any United States bank as such Holder may
from time to time direct in writing.
SECTION 3. REPRESENTATIONS.
Section 3.1. Representations of the Company. The Company represents and
warrants that all representations and warranties set forth in Exhibit B are true
and correct as of the date hereof and are incorporated herein by reference with
the same force and effect as though herein set forth in full.
Section 3.2. Representations of the Purchaser. The Purchaser represents,
and in entering into this Agreement the Company understands, that the Purchaser
is acquiring the Notes in a private placement for the purpose of investment and
not with a view to the distribution thereof, and that the Purchaser has no
present intention of selling, negotiating or otherwise disposing of the Notes;
it being understood, however, that the disposition of the Purchaser's property
shall at all times be and remain within its control. The Purchaser represents
that it is an institutional "accredited investor" within the meaning of Rule 501
of Regulation D as promulgated under the Securities Act and at least one of the
following statements is an accurate representation as to each source of funds (a
"SOURCE") to be used by it to pay the Purchase Price:
(a) the Source is an "insurance company general account" within
the meaning of Department of Labor Prohibited Transaction Exemption
("PTE") 95-60 (issued July 12, 1995) and there is no employee benefit
plan, treating as a single plan all plans maintained by the same employer
(or affiliate thereof as defined in Section V(a)(1) of PTE 95-60) or
employee organization, with respect to which the amount of the general
account reserves and liabilities for all contracts held by or on behalf
of such plan exceeds ten percent (10%) of the total reserves and
liabilities of such general account (exclusive of separate account
liabilities) plus surplus, as set forth in the NAIC Annual Statement
filed with the Purchaser's state of domicile; or
(b) the Source is either (i) an insurance company pooled
separate account, within the meaning of PTE 90-1 (issued January 29,
1990), or (ii) a bank collective investment fund, within the meaning of
the PTE 91-38 (issued July 12, 1991) and, except as the Purchaser has
disclosed to the Company in writing pursuant to this paragraph (b), no
employee benefit plan or group of plans maintained by the same employer
or employee organization beneficially owns more than 10% of all assets
allocated to such pooled separate account or collective investment fund;
or
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(c) the Source constitutes assets of an "investment fund"
(within the meaning of Part V of the QPAM Exemption) managed by a
"qualified professional asset manager" or "QPAM" (within the meaning of
Part V of the QPAM Exemption), no employee benefit plan's assets that are
included in such investment fund, when combined with the assets of all
other employee benefit plans established or maintained by the same
employer or by an affiliate (within the meaning of Section V(c)(1) of the
QPAM Exemption) of such employer or by the same employee organization and
managed by such QPAM, exceed 20% of the total client assets managed by
such QPAM, the conditions of Part I(c) and (g) of the QPAM Exemption are
satisfied, neither the QPAM nor a person controlling or controlled by the
QPAM (applying the definition of "control" in Section V(e) of the QPAM
Exemption) owns a 5% or more interest in the Company and (i) the identity
of such QPAM and (ii) the names of all employee benefit plans whose
assets are included in such investment fund have been disclosed to the
Company in writing pursuant to this paragraph (c); or
(d) the Source is a governmental plan; or
(e) the Source is one or more employee benefit plans, or a
separate account or trust fund comprised of one or more employee benefit
plans, each of which has been identified to the Company in writing
pursuant to this paragraph (e); or
(f) the Source does not include assets of any employee benefit
plan, other than a plan exempt from the coverage of ERISA.
If the Purchaser or any subsequent transferee of the Notes indicates that
the Purchaser or such transferee is relying on any representation contained in
paragraphs (b), (c) or (e) above, the Company shall deliver on the Closing Date
or on the date of any applicable transfer, as the case may be, a certificate,
which shall either state that (i) it is neither a party in interest nor a
"disqualified person" (as defined in Section 4975(e)(2) of the Code), with
respect to any plan identified pursuant to paragraphs (b) or (e) above, or (ii)
with respect to any plan, identified pursuant to paragraph (c) above, neither it
nor any "affiliate" (as defined in Section V(c) of the QPAM Exemption) has at
such time, and during the immediately preceding one year, exercised the
authority to appoint or terminate said QPAM as manager of any plan identified in
writing pursuant to paragraph (c) above or to negotiate the terms of said QPAM's
management agreement on behalf of any such identified plan.
As used in this SECTION 3.2, the terms "employee benefit plan,"
"governmental plan," "party in interest" and "separate account" shall have the
respective meanings assigned to such terms in Section 3 of ERISA.
SECTION 4. CLOSING CONDITIONS.
Section 4.1. Conditions. The obligation of the Purchaser to purchase the
Notes on the Closing Date shall be subject to the performance by the Company of
its agreements hereunder
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which by the terms hereof are to be performed at or prior to the time of
delivery of the Notes and to the following further conditions precedent:
(a) Closing Certificates. On the Closing Date the Purchaser
shall have received a certificate dated the Closing Date, signed by the
President or a Vice President or a Managing Director or a Principal of
the Company, the truth and accuracy of which shall be a condition to the
Purchaser's obligation to purchase the Notes proposed to be sold to the
Purchaser on the Closing Date and to the effect that (i) the
representations and warranties of the Company set forth in Exhibit B
hereto are true and correct on and with respect to the Closing Date, (ii)
the Company has performed all of its obligations hereunder that are to be
performed on or prior to the Closing Date and (iii) no Default or Event
of Default has occurred and is continuing.
(b) Legal Opinions. The Purchaser shall have received (1) the
opinion of Davis Polk & Wardwell, special counsel to the Purchaser, dated
the Closing Date, in form and substance satisfactory to the Purchaser and
(2) the opinion of Sutherland Asbill & Brennan LLP, counsel for the
Company, dated the Closing Date, in form and substance satisfactory to
the Purchaser, and covering the matters set forth in Exhibit C hereto.
(c) Purchase Permitted By Applicable Law, Etc. On the Closing
Date, the purchase of Notes shall (a) be permitted by the laws and
regulations of each jurisdiction to which the Purchaser is subject, (b)
not violate any applicable law or regulation (including, without
limitation, Regulation U, T or X of the Board of Governors of the Federal
Reserve System) and (c) not subject the Purchaser to any tax, penalty or
liability under or pursuant to any applicable law or regulation, which
law or regulation was not in effect on the date hereof. If requested by
the Purchaser, the Purchaser shall have received an officer's certificate
certifying as to such matters of fact as the Purchaser may reasonably
specify to enable the Purchaser to determine whether such purchase is so
permitted.
(d) Satisfactory Proceedings. All proceedings taken in
connection with the transactions contemplated by this Agreement, and all
documents necessary to the consummation thereof, shall be satisfactory in
form and substance to the Purchaser and the Purchaser's special counsel,
and the Purchaser shall have received a copy (executed or certified as
may be appropriate) of all legal documents or proceedings taken in
connection with the consummation of said transactions.
Section 4.2. Waiver of Conditions. If on the Closing Date the Company
fails to tender to the Purchaser the Notes to be issued to the Purchaser on such
date or if the conditions specified in SECTION 4.1 have not been fulfilled, the
Purchaser may thereupon elect to be relieved of all further obligations under
this Agreement. Without limiting the foregoing, if the conditions specified in
SECTION 4.1 have not been fulfilled, the Purchaser may waive compliance by the
Company with any such condition to such extent as the Purchaser may in its sole
discretion determine. Nothing in this SECTION 4.2 shall operate to relieve the
Company of any of its obligations hereunder or to waive the Purchaser's rights
against the Company.
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SECTION 5. COVENANTS.
From and after the Closing Date and continuing so long as any amount
remains unpaid on any Note:
Section 5.1. Corporate Existence, Etc. The Company will preserve and
keep in full force and effect, and will cause each Consolidated Subsidiary to
keep in full force and effect, its corporate existence and all registrations,
licenses, permits and governmental approvals necessary to the proper conduct of
its business except, in the case of a Consolidated Subsidiary, where the failure
to do so would not have a Material Adverse Effect; provided, however, that the
foregoing shall not prevent any transaction permitted by SECTION 5.12.
Section 5.2. Insurance. The Company will maintain, and will cause each
Consolidated Subsidiary to maintain, insurance coverage by financially sound and
reputable insurers in such forms and amounts and against such risks as are
customary for corporations of established reputation engaged in the same or a
similar business and owning and operating similar properties.
Section 5.3. Taxes, Claims for Labor and Materials, Compliance with
Laws. The Company will promptly pay and discharge, and will cause each
Consolidated Subsidiary to pay and discharge, all lawful taxes, assessments and
governmental charges or levies imposed upon the Company or such Consolidated
Subsidiary, respectively, or upon or in respect of all or any part of the
property or business of the Company or such Consolidated Subsidiary, all trade
accounts payable in accordance with usual and customary business terms, and all
claims for work, labor or materials, which if unpaid might become a Lien upon
any property of the Company or such Consolidated Subsidiary; provided, however,
that the Company or such Consolidated Subsidiary shall not be required to pay
any such tax, assessment, charge, levy, account payable or claim if (i) the
validity, applicability or amount thereof is being contested in good faith by
appropriate actions or proceedings which will prevent the forfeiture or sale of
any property of the Company or such Consolidated Subsidiary or any material
interference with the use thereof by the Company or such Consolidated
Subsidiary, and (ii) the Company or such Consolidated Subsidiary shall set aside
on its books, reserves deemed by it to be adequate with respect thereto. The
Company will promptly comply and will cause each Consolidated Subsidiary to
promptly comply with all laws, ordinances or governmental rules and regulations
to which it is subject including, without limitation, the Occupational Safety
and Health Act of 1970, as amended, ERISA and all laws, ordinances, governmental
rules and regulations relating to environmental protection in all applicable
jurisdictions, the violation of which could have a Material Adverse Effect or
would result in any Lien not permitted under SECTION 5.10.
Section 5.4. Maintenance, Etc. The Company will maintain, preserve and
keep, and will cause each Consolidated Subsidiary to maintain, preserve and
keep, its properties which are used in the conduct of its business (whether
owned in fee or a leasehold interest) in good repair and working order, ordinary
wear and tear excepted, and from time to time will make all necessary repairs,
replacements and renewals as the Company may determine to be appropriate to the
conduct of its business.
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Section 5.5. Nature of Business. Neither the Company nor any
Consolidated Subsidiary will engage in any business if, as a result, the general
nature of the business, taken on a consolidated basis, which would then be
engaged in by the Company and its Consolidated Subsidiaries would be
substantially changed from the general nature of the business engaged in by the
Company and its Consolidated Subsidiaries on the date of this Agreement as
described in the SEC Disclosure Documents.
Section 5.6. Status of Business Development Company. The Company shall
at all times maintain its status as a "business development company" under the
Investment Company Act.
Section 5.7. Capital Maintenance. The Company shall at all times
maintain Consolidated Shareholders Equity in an amount not less than (i)
$375,000,000 plus (ii) 75% of the Net Proceeds of all Equity Issuances effected
by the Company or any of its Consolidated Subsidiaries at any time after
September 30, 1998 (excluding the Net Proceeds of any Equity Issuance by a
Consolidated Subsidiary to a Consolidated Subsidiary or to the Company).
Section 5.8. Interest Charges Coverage Ratio. The Company shall maintain
the ratio of Adjusted EBIT to Interest Expense of the Company and its
Consolidated Subsidiaries, determined on a consolidated basis as of the last day
of each fiscal quarter for the period of four consecutive fiscal quarters ending
on such day, at not less than 1.8 to 1.
Section 5.9. Limitations on Debt; Interest Rate Swaps. (a) The Company
will have on the last day of each quarterly fiscal period a ratio of
Consolidated Debt to Consolidated Shareholders' Equity not exceeding 1.5 to 1.
(b) The Company will not at any time permit the aggregate
principal amount of Priority Debt to exceed 25% of Consolidated
Shareholders' Equity; provided that in the case of any determination of
Priority Debt made prior to April 30, 2001, outstanding Indebtedness
secured by Real Estate Assets in an aggregate principal amount of up to
$100,000,000 shall be excluded from Priority Debt.
(c) The Company will not at any time permit the Asset Coverage
Ratio to be less than 2 to 1.
(d) The Company will not permit any Consolidated Subsidiary to
enter into any Subsidiary Bank Guaranty or Subsidiary Existing Note
Guaranty, unless the Company shall first furnish to each Holder of the
Notes (i) an unconditional Subsidiary Note Guaranty, (ii) an
Intercreditor Agreement, and (iii) an opinion of counsel to the effect
that such Subsidiary Note Guaranty has been duly authorized, executed and
delivered by such Consolidated Subsidiary and constitutes the legal,
valid and binding obligation of such Consolidated Subsidiary, enforceable
against such Consolidated Subsidiary in accordance with the terms
thereof, and covering such other matters as the Holders of 51% or more of
the principal amount of the Notes at the time outstanding may reasonably
request.
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(e) The Company will not and will not permit any Consolidated
Subsidiary to enter into any Interest Rate Swap except in the ordinary
course of business pursuant to transactions that are entered into for
bona fide purposes of managing the Company's interest rate risk and not
for speculation.
Section 5.10. Limitation on Liens. The Company will not, and will not
permit any Consolidated Subsidiary to, create or incur, or suffer to be incurred
or to exist, any Lien on its or their property or assets, whether now owned or
hereafter acquired, or upon any income or profits therefrom, or transfer any
property for the purpose of subjecting the same to the payment of obligations in
priority to the payment of its or their general creditors, or acquire or agree
to acquire any property or assets upon conditional sales agreements or other
title retention devices, except:
(a) Liens for property taxes and assessments or governmental
charges or levies and Liens securing claims or demands of mechanics and
materialmen, provided payment thereof is not at the time required by
SECTION 5.3;
(b) Liens of or resulting from any judgment or award, the time
for the appeal or petition for rehearing of which shall not have expired,
or in respect of which the Company or a Consolidated Subsidiary shall at
any time in good faith be prosecuting an appeal or proceeding for a
review and in respect of which a stay of execution pending such appeal or
proceeding for review shall have been secured;
(c) Liens incidental to the conduct of business or the
ownership of properties and assets (including Liens in connection with
the making of loans to customers, worker's compensation, unemployment
insurance and other like laws, warehousemen's and attorneys' liens and
statutory landlords' liens) and Liens to secure the performance of bids,
tenders or trade contracts, or to secure statutory obligations, surety or
appeal bonds or other Liens of like general nature incurred in the
ordinary course of business and not in connection with (i) the borrowing
of money or (ii) obligations pursuant to ERISA, provided in each case,
the obligation secured is not overdue or, if overdue, is being contested
in good faith by appropriate actions or proceedings;
(d) minor survey exceptions or minor encumbrances, easements or
reservations, or rights of others for rights-of-way, utilities and other
similar purposes, or zoning or other restrictions as to the use of real
properties, which are necessary for the conduct of the activities of the
Company and its Consolidated Subsidiaries or which customarily exist on
properties of corporations engaged in similar activities and similarly
situated and which do not in any event materially impair their use in the
operation of the business of the Company and its Consolidated
Subsidiaries;
(e) Liens securing Indebtedness of a Consolidated Subsidiary to
the Company or to another Wholly-owned Consolidated Subsidiary;
(f) Liens existing as of June 30, 2000 and reflected on Annex B
to Exhibit B hereto;
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(g) Liens incurred after the Closing Date given to secure the
payment of the purchase price or cost of construction incurred in
connection with the acquisition of, or improvements to, fixed assets
useful and intended to be used in carrying on the business of the Company
or a Consolidated Subsidiary, including Liens existing on such assets at
the time of acquisition thereof or at the time of acquisition by the
Company or a Consolidated Subsidiary of any business entity then owning
such assets, whether or not such existing Liens were given to secure the
payment of the purchase price of the assets to which they attach so long
as they were not incurred, extended or renewed in contemplation of such
acquisition, provided that (i) the Lien shall attach solely to the assets
acquired or purchased, (ii) the Lien (other than Liens that are existing
on such assets at the time of acquisition thereof and that are permitted
as aforesaid) shall have been created or incurred within 180 days of the
date of acquisition of such fixed assets, except in the case of
construction or acquisition of improvements to real estate, the land on
which such improvements are located shall not be required to have been
acquired within such 180 period; (iii) at the time of acquisition of such
assets, the aggregate amount remaining unpaid on all Indebtedness secured
by Liens on such assets whether or not assumed by the Company or a
Consolidated Subsidiary shall not exceed an amount equal to 80% (or 100%
in the case of Capitalized Leases) of the lesser of the total purchase
price or fair market value at the time of acquisition of such assets (as
determined in good faith by the Board of Directors of the Company), and
(iv) all Indebtedness secured by such Liens shall be permitted hereunder;
(h) Liens on Real Estate Assets securing Non-Recourse
Indebtedness; provided that such Non-Recourse Indebtedness shall be
permitted within the limitations of SECTION 5.9; and
(i) Liens securing Indebtedness under Mortgage Repurchase
Facilities or Interest Rate Swaps; provided that (i) the Lien of any such
Mortgage Repurchase Facility shall extend only to the Commercial Mortgage
Loans which are financed or refinanced under such Mortgage Repurchase
Facility and the Related Collateral, (ii) the aggregate advances under
such Mortgage Repurchase Facility shall not exceed 80% of the aggregate
unpaid principal amount of the Commercial Mortgage Loans securing such
Mortgage Repurchase Facility, (iii) the Lien securing any Interest Rate
Swap shall extend only to Commercial Mortgage Loans and Related
Collateral, and (iv) all such Indebtedness shall be permitted within the
limitations of SECTION 5.9.
The Company will not, and will not permit any Consolidated Subsidiary to,
directly or indirectly, create, incur, assume or permit to exist (upon the
happening of a contingency or otherwise) any Lien on or with respect to any
property which secures Debt outstanding under the Bank Credit Agreement or the
Existing Note Agreements, unless the Company makes, or causes to be made,
effective provision whereby the Notes will be equally and ratably secured with
any and all other obligations thereby secured; provided that such security is
granted pursuant to an agreement reasonably satisfactory to the Holders of 51%
or more of the principal amount of the Notes at the time outstanding.
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Section 5.11. Restricted Payments. The Company will not except as
hereinafter provided:
(a) Declare or pay any dividends, either in cash or property,
on any shares of its capital stock of any class (except dividends or
other distributions payable solely in shares of capital stock of the
Company);
(b) Directly or indirectly, or through any Subsidiary,
purchase, redeem or retire any shares of its capital stock of any class
or any warrants, rights or options to purchase or acquire any shares of
its capital stock (other than in exchange for or out of the net cash
proceeds to the Company from the substantially concurrent issue or sale
of other shares of capital stock of the Company or warrants, rights or
options to purchase or acquire any shares of its capital stock); or
(c) Make any other payment or distribution, either directly or
indirectly or through any Subsidiary, in respect of its capital stock;
(such declarations or payments of dividends, purchases,
redemptions or retirements of capital stock and warrants, rights or
options and all such other payments or distributions being herein
collectively called "RESTRICTED PAYMENTS"), if after giving effect
thereto (i) an Event of Default described in paragraph (a) or (b) of
SECTION 6.1 shall exist, (ii) as the result of an occurrence of any other
Event of Default described in SECTION 6.1 the Notes shall have been
accelerated under SECTION 6.3 or (iii) the Company would not be in
compliance with the limitations of SECTION 5.9.
The Company will not declare any regular quarterly dividend which
constitutes a Restricted Payment payable more than 60 days after the date of
declaration thereof; provided that any year-end extra dividend which constitutes
a Restricted Payment shall not be payable more than 120 days after the date of
declaration thereof.
For the purposes of this SECTION 5.11, the amount of any Restricted
Payment declared, paid or distributed in property shall be deemed to be the
greater of the book value or fair market value (as determined in good faith by
the Board of Directors of the Company) of such property at the time of the
making of the Restricted Payment in question.
Section 5.12. Mergers, Consolidations and Sales of Assets. (a) The
Company will not, and will not permit any Consolidated Subsidiary to,
consolidate with or be a party to a merger with any other Person or dispose of
all or a substantial part of the assets of the Company and its Consolidated
Subsidiaries; provided that:
(1) any Consolidated Subsidiary may merge or consolidate
with or into, sell, lease or otherwise dispose of all or a
substantial part of its assets to the Company or any Wholly-owned
Subsidiary so long as (A) (i) in any merger or consolidation
involving the Company, the Company shall be the surviving or
continuing corporation and (ii) in any merger or consolidation
involving a Wholly-owned Subsidiary (and not the Company), a
Wholly-owned Subsidiary shall be the surviving or continuing
corporation, and (B) at the time of such
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<PAGE> 16
consolidation or merger and immediately after giving effect
thereto, no Default or Event of Default would exist;
(2) the Company may consolidate or merge with or into
any other corporation if (i) the corporation which results from
such consolidation or merger (the "SURVIVING CORPORATION") is
organized under the laws of any state of the United States or the
District of Columbia, (ii) the due and punctual payment of the
principal of and premium, if any, and interest on all of the
Notes, according to their tenor, and the due and punctual
performance and observation of all of the covenants in the
Transaction Documents, to be performed or observed by the Company
are expressly assumed in writing by the surviving corporation and
the surviving corporation shall furnish to the Holders of the
Notes an opinion of counsel reasonably satisfactory to the Holder
or Holders of 51% or more of the principal amount of the Notes at
the time outstanding to the effect that the instrument of
assumption has been duly authorized, executed and delivered and
constitutes the legal, valid and binding contract and agreement of
the surviving corporation enforceable in accordance with its
terms, except as enforcement of such terms may be limited by
bankruptcy, insolvency, reorganization, moratorium and similar
laws affecting the enforcement of creditors' rights generally and
by general equitable principles, and (iii) at the time of such
consolidation or merger and immediately after giving effect
thereto and to the incurrence of any Debt assumed or incurred in
connection therewith, (x) the aggregate amount of outstanding
Consolidated Debt and Priority Debt of the surviving corporation
would be permitted by the terms of SECTION 5.9 as of the last day
of the fiscal quarter immediately preceding the date of such
consolidation or merger, and (y) no Default or Event of Default
would exist; and
(3) the Company and any Consolidated Subsidiary may,
sell, transfer or otherwise dispose of all or any part of its
Investments in the ordinary course of business including, without
limitation, in securitization transactions.
(b) The Company will not permit any Consolidated Subsidiary to
issue any Voting Stock of such Consolidated Subsidiary except to satisfy
the rights of minority shareholders to receive issuances of stock which
are non-dilutive to the Company and/or any Consolidated Subsidiary;
provided that the foregoing restrictions do not apply to issuances to the
Company or to a Wholly-owned Subsidiary or the issuance of directors'
qualifying shares.
(c) The Company will not sell, transfer or otherwise dispose of
stock or Debt of any Consolidated Subsidiary (except issuance of
directors' qualifying shares and sales, transfers and dispositions of all
the stock of a special purpose Consolidated Subsidiary for consideration
if (x) substantially all the assets of such Consolidated Subsidiary
constitute Investments and (y) the sale, transfer or disposition of all
such Investments for substantially the same consideration would be
permitted by Section 5.12(a)(3)) and will not permit any Consolidated
Subsidiary to sell, transfer or otherwise dispose of stock (otherwise
than by purchase or redemption of preferred stock) of a Consolidated
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Subsidiary or Debt of any other Consolidated Subsidiary (except issuances
to the Company or to a Wholly-owned Subsidiary or issuance of directors'
qualifying shares); provided that the foregoing restrictions do not apply
if the following conditions are met:
(1) all shares of stock and all Debt of such
Consolidated Subsidiary held by the Company and its Subsidiaries
shall be sold simultaneously;
(2) in the opinion of the Company's Board of Directors:
(i) such sale of stock or Debt is in the best
interests of the Company; and
(ii) the consideration paid for such stock and
Debt is deemed adequate and satisfactory.
(3) the Consolidated Subsidiary being disposed of shall
not have any continuing investment in the Company or any
Consolidated Subsidiary that is not being disposed of
simultaneously; and
(4) such sale or disposition does not involve a
substantial part of assets of the Company and its Consolidated
Subsidiaries.
As used in this SECTION 5.12, a sale of assets will be deemed a
"substantial part" of the assets of the Company and its Consolidated
Subsidiaries if (i) the Book Value of such assets sold in a given fiscal year
(except those sold in the ordinary course of business) exceeds 15% of the
Consolidated Total Assets of the Company and its Consolidated Subsidiaries
determined at the close of the immediately preceding fiscal year, or (ii) the
operations of such assets sold (except those sold in the ordinary course of
business) generated 15% or more of the consolidated operating profit of the
Company and its Consolidated Subsidiaries during the immediately preceding
fiscal year; provided, however, that for purposes of the foregoing calculation,
there shall not be included any assets if a portion of the proceeds of such
assets equal to the aggregate Book Value thereof immediately prior to such sale
was or is applied within 365 days of the date of sale of such assets to either
(A) the acquisition of Investments useful and intended to be used in the
operation of the business of the Company and its Consolidated Subsidiaries and
having a fair market value (as determined in good faith by the Board of
Directors of the Company) at least equal to the Book Value of the assets so
disposed of, or (B) the prepayment at any applicable prepayment premium, on a
pro rata basis, of Senior Funded Debt of the Company. It is understood and
agreed by the Company that any such proceeds paid and applied to the prepayment
of the Notes as hereinabove provided shall be prepaid as and to the extent
provided in SECTION 2.2.
Section 5.13. Repurchase of Notes. Neither the Company nor any Affiliate
of the Company, directly or indirectly, may repurchase or make any offer to
repurchase any Notes unless an offer has been made to repurchase Notes, pro
rata, from all Holders of the Notes at the same time and upon the same terms. In
case the Company repurchases or otherwise acquires any Notes, such Notes shall
immediately thereafter be canceled and no Notes shall be issued in
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<PAGE> 18
substitution therefor. Without limiting the foregoing, upon the repurchase or
other acquisition of any Notes by the Company, any Consolidated Subsidiary or
any Affiliate of the Company, such Notes shall no longer be outstanding for
purposes of any section of this Agreement relating to the taking by the Holders
of the Notes of any actions with respect hereto, including without limitation,
SECTION 6.3, SECTION 6.4 and SECTION 7.1.
Section 5.14. Transactions with Affiliates of the Company. The Company
will not, and will not permit any Consolidated Subsidiary to, enter into or be a
party to any transaction or arrangement with any Affiliate of the Company other
than any Consolidated Subsidiary (including, without limitation, the purchase
from, sale to or exchange of property with, or the rendering of any service by
or for, any such Affiliate of the Company), except transactions in the ordinary
course of and pursuant to the reasonable requirements of the Company's or such
Consolidated Subsidiary's business and upon fair and reasonable terms no less
favorable to the Company or such Consolidated Subsidiary than would be obtained
in a comparable arm's-length transaction with a Person other than an Affiliate
of the Company.
Section 5.15. Termination of Pension Plans. The Company will not, and
will not permit any Consolidated Subsidiary to, withdraw from any Multiemployer
Plan to which it may hereafter contribute or permit any employee benefit plan
hereafter maintained by it to be terminated if such withdrawal or termination
could result in withdrawal liability (as described in Part 1 of Subtitle E of
Title IV of ERISA) or the imposition of a Lien on any property of the Company or
any Consolidated Subsidiary pursuant to Section 4068 of ERISA.
Section 5.16. Reports and Rights of Inspection. The Company will keep,
and will cause each Consolidated Subsidiary to keep, proper books of record and
account in which full and correct entries will be made of all dealings or
transactions of, or in relation to, the business and affairs of the Company or
such Consolidated Subsidiary, in accordance with GAAP consistently applied
(except for changes disclosed in the financial statements furnished to the
Holders pursuant to this SECTION 5.16 and concurred with by the independent
public accountants referred to in SECTION 5.16(b) hereof), and will furnish to
each Institutional Holder of the then outstanding Notes (in duplicate if so
specified below or otherwise requested):
(a) Quarterly Statements. As soon as available and in any event
within 45 days after the end of each quarterly fiscal period (except the
last) of each fiscal year, copies of:
(1) consolidated balance sheets of the Company and its
Consolidated Subsidiaries as of the close of such quarterly fiscal
period, setting forth in comparative form the consolidated figures
for the fiscal year then most recently ended,
(2) consolidated statements of operations of the Company
and its Consolidated Subsidiaries for such quarterly fiscal period
and for the portion of the fiscal year ending with such quarterly
fiscal period, in each case setting forth in comparative form the
consolidated figures for the corresponding periods of the
preceding fiscal year, and
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(3) consolidated statements of changes in net assets and
cash flows of the Company and its Consolidated Subsidiaries for
the portion of the fiscal year ending with such quarterly fiscal
period, setting forth in comparative form the consolidated figures
for the corresponding period of the preceding fiscal year,
all in reasonable detail and certified as complete and correct by a
Senior Financial Officer of the Company;
(b) Annual Statements. As soon as available and in any event
within 90 days after the close of each fiscal year, copies of:
(1) consolidated and consolidating balance sheets of the
Company and its Consolidated Subsidiaries as of the close of such
fiscal year,
(2) consolidated and consolidating statements of
operations and cash flows, and
(3) consolidated statement of investments
setting forth in comparative form the consolidated figures for the
preceding fiscal year (except in the case of such statement of
investments) and in each case all in reasonable detail and accompanied by
a report thereon of a firm of independent public accountants of
recognized national standing selected by the Company to the effect that
the consolidated financial statements present fairly, in all material
respects, the consolidated financial position of the Company and its
Consolidated Subsidiaries as of the end of the fiscal year being reported
on and the consolidated results of their operations, changes in net
assets and cash flows for said year in conformity with GAAP and that the
examination of such accountants in connection with such financial
statements has been conducted in accordance with generally accepted
auditing standards and included such tests of the accounting records and
such other auditing procedures as said accountants deemed necessary in
the circumstances;
(c) Audit Reports. Promptly upon receipt thereof, one copy of
each interim or special audit made by independent accountants of the
books of the Company or any Consolidated Subsidiary and any management
letter received from such accountants;
(d) SEC and Other Reports. Promptly upon their becoming
available, one copy of each financial statement, report, notice, press
releases or proxy statement sent by the Company to stockholders generally
and of each regular or periodic report, and any registration statement or
prospectus filed by the Company with any securities exchange or the
Securities and Exchange Commission or any successor agency (the
"COMMISSION"), and copies of any orders in any proceedings to which the
Company or any Consolidated Subsidiary is a party, issued by any
governmental agency, Federal or state, having jurisdiction over the
Company or any of its Consolidated Subsidiaries;
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<PAGE> 20
(e) ERISA Reports. Promptly upon the occurrence thereof,
written notice of (i) a Reportable Event with respect to any Plan
hereafter maintained by the Company or any ERISA Affiliate; (ii) the
institution of any steps by the Company, any ERISA Affiliate, the PBGC or
any other person to terminate any such Plan; (iii) the institution of any
steps by the Company or any ERISA Affiliate to withdraw from any such
Plan; (iv) a non-exempt "prohibited transaction" within the meaning of
Section 406 of ERISA in connection with any such Plan; (v) any material
contingent liability of the Company or any Consolidated Subsidiary with
respect to any post-retirement welfare liability hereafter existing; or
(vi) the taking of any action by, or the threatening of the taking of any
action by, the Internal Revenue Service, the Department of Labor or the
PBGC with respect to any of the foregoing;
(f) Officer's Certificates. Within the periods provided in
paragraphs (a) and (b) above, a certificate of a Senior Financial Officer
of the Company stating that such officer has reviewed the provisions of
this Agreement and setting forth: (i) the information and computations
(in sufficient detail) required in order to establish whether the Company
was in compliance with the requirements of SECTION 5.6 through SECTION
5.12 at the end of the period covered by the financial statements then
being furnished and (ii) whether there existed as of the date of such
financial statements and whether, to the best of such officer's
knowledge, there exists on the date of the certificate or existed at any
time during the period covered by such financial statements any Default
or Event of Default and, if any such condition or event exists on the
date of the certificate, specifying the nature and period of existence
thereof and the action the Company is taking and proposes to take with
respect thereto;
(g) Accountant's Certificates. Within the period provided in
paragraph (b) above, a certificate of the accountants who render an
opinion with respect to such financial statements acknowledging that the
Company was in compliance with the financial covenants of SECTION 5.7,
SECTION 5.8 and SECTION 5.9(a), (b) and (c), and setting forth the
procedures used to make such determination; and
(h) Requested Information. With reasonable promptness, such
other data and information as any Holder or any such Institutional Holder
may reasonably request.
Without limiting the foregoing, the Company will permit each
Institutional Holder of the then outstanding Notes (or such Persons as such
Holder may designate), to visit and inspect, under the Company's guidance, any
of the properties of the Company or any Consolidated Subsidiary, to examine all
of their books of account, records, reports and other papers, to make copies and
extracts therefrom and to discuss their respective affairs, finances and
accounts with their respective officers, employees, and independent public
accountants (and by this provision the Company authorizes said accountants to
discuss with such Holder the finances and affairs of the Company and its
Consolidated Subsidiaries) all at such reasonable times and as often as may be
reasonably requested. Any visitation shall be at the sole expense of such
Institutional Holder, unless a Default or Event of Default shall have occurred
and be continuing or the Holder of any Note or of any other evidence of
Indebtedness of the Company or any Consolidated Subsidiary
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gives any written notice or takes any other action with respect to a claimed
default, in which case, any such visitation or inspection shall be at the sole
expense of the Company.
SECTION 6. EVENTS OF DEFAULT AND REMEDIES THEREFOR.
Section 6.1. Events of Default. Any one or more of the following shall
constitute an "EVENT OF DEFAULT" as such term is used herein:
(a) Default shall occur in the payment of interest on any Note
when the same shall have become due and such default shall continue for
more than five Business Days; or
(b) Default shall occur in the making of any payment of the
principal of any Note or premium, if any, thereon at the expressed or any
accelerated maturity date or at any date fixed for prepayment or
redemption; or
(c) Default shall be made in the payment when due (whether by
lapse of time, by declaration, by call for redemption or otherwise) of
the principal of or interest on any Consolidated Debt (other than the
Notes) of the Company or any Consolidated Subsidiary having an aggregate
unpaid principal amount in excess of $5,000,000 and such default shall
continue beyond the period of grace, if any, allowed with respect
thereto; or
(d) Default or the happening of any event shall occur under any
indenture, agreement or other instrument under which Consolidated Debt of
the Company or any Consolidated Subsidiary having an aggregate unpaid
principal amount in excess of $5,000,000 may be issued and such default
or event shall continue for a period of time sufficient to permit the
acceleration of the maturity of such Consolidated Debt or the Company or
a Consolidated Subsidiary has become obligated to purchase such
Consolidated Debt or one or more Persons have the right to require the
Company or any Consolidated Subsidiary to purchase such Consolidated
Debt; or
(e) Default shall occur in the observance or performance of any
covenant or agreement contained in SECTION 5.7 through SECTION 5.12 and
such default shall continue for more than five Business Days; or
(f) Default shall occur in the observance or performance of any
other provision of this Agreement which is not remedied within 30 days
after the earlier of (i) the day on which a Senior Financial Officer
first obtains actual personal knowledge of such default or (ii) the day
on which written notice thereof is given to the Company by the Holder of
any Note; or
(g) Any representation or warranty made by the Company herein,
or made by the Company in any statement or certificate furnished by the
Company in connection with the consummation of the issuance and delivery
of the Notes or furnished by the Company pursuant hereto, is untrue in
any material respect as of the date of the issuance or making thereof; or
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(h) Final judgment or final judgments for the payment of money
aggregating in excess of $5,000,000 is or are outstanding against the
Company or any Material Subsidiary or against any property or assets of
the Company or any Material Subsidiary and any such final judgment or
final judgments have remained unpaid, unvacated, unbonded or unstayed by
appeal or otherwise for a period of 60 days from the date of its entry;
or
(i) A custodian, liquidator, receiver or similar official is
appointed for the Company or any Material Subsidiary or for the major
part of its property and is not discharged within 60 days after such
appointment; or
(j) The Company or any Material Subsidiary becomes insolvent or
bankrupt, is generally not paying its debts as they become due or makes
an assignment for the benefit of creditors, or the Company or any
Material Subsidiary applies for or consents to the appointment of a
custodian, liquidator, trustee or receiver for the Company or such
Material Subsidiary or for the major part of its property; or
(k) Bankruptcy, reorganization, arrangement or insolvency
proceedings, or other proceedings for relief under any bankruptcy or
similar law or laws for the relief of debtors, are instituted by or
against the Company or any Material Subsidiary and, if instituted against
the Company or such Material Subsidiary, are consented to or are not
dismissed within 60 days after such institution.
Section 6.2. Notice to Holders. When any Event of Default described in
the foregoing SECTION 6.1 has occurred, or if the Holder of any Note or of any
other evidence of Debt of the Company gives any notice or takes any other action
with respect to a claimed default, the Company agrees to give notice within
three Business Days of such event to all Holders of the Notes then outstanding.
Section 6.3. Acceleration of Maturities. When any Event of Default
described in paragraph (a) or (b) of SECTION 6.1 has happened and is continuing,
any Holder of any Note may declare the entire principal and all interest accrued
on such Holder's Notes to be and such Notes shall thereupon become, forthwith
due and payable, without any presentment, demand, protest or other notice of any
kind, all of which are hereby waived. When any Event of Default described in
paragraphs (a) through (i), inclusive, of SECTION 6.1 has happened and is
continuing, the Holder or Holders of 51% or more of the principal amount of
Notes at the time outstanding may, by notice to the Company, declare the entire
principal and all interest accrued on all Notes to be, and all Notes shall
thereupon become, forthwith due and payable, without any presentment, demand,
protest or other notice of any kind, all of which are hereby expressly waived.
When any Event of Default described in paragraph (j) or (k) of SECTION 6.1 has
occurred, then all outstanding Notes shall immediately become due and payable
without presentment, demand or notice of any kind. Upon any Note becoming due
and payable as a result of any Event of Default as aforesaid, the Company will
forthwith pay to the Holder of such Note the entire principal and interest
accrued on such Note. No course of dealing on the part of the Holder or Holders
of any Notes nor any delay or failure on the part of any Holder of Notes to
exercise any right shall operate as a waiver of such right or otherwise
prejudice such Holder's rights, powers and remedies. The Company
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further agrees, to the extent permitted by law, to pay to the Holder or Holders
of the Notes all costs and expenses incurred by them in the collection of any
Notes upon any default hereunder or thereon, including reasonable compensation
to such Holder's or Holders' attorneys for all services rendered in connection
therewith.
Section 6.4. Rescission of Acceleration. The provisions of SECTION 6.3
are subject to the condition that if the principal of and accrued interest on
all or any outstanding Notes have been declared immediately due and payable by
reason of the occurrence of any Event of Default described in paragraphs (a)
through (i), inclusive, of SECTION 6.1, the Holders of 66-2/3% in aggregate
principal amount of the Notes then outstanding may, by written instrument filed
with the Company, rescind and annul such declaration and the consequences
thereof, provided that at the time such declaration is annulled and rescinded:
(a) no judgment or decree has been entered for the payment of
any monies due pursuant to the Notes or this Agreement;
(b) all arrears of interest upon all the Notes and all other
sums payable under the Notes and under this Agreement (except any
principal, interest or premium on the Notes which has become due and
payable solely by reason of such declaration under SECTION 6.3) shall
have been duly paid; and
(c) each and every other Default and Event of Default shall
have been made good, cured or waived pursuant to SECTION 7.1;
and provided further, that no such rescission and annulment shall extend
to or affect any subsequent Default or Event of Default or impair any
right consequent thereto.
SECTION 7. AMENDMENTS, WAIVERS AND CONSENTS.
Section 7.1. Consent Required. Any term, covenant, agreement or
condition of this Agreement may, with the consent of the Company, be amended or
compliance therewith may be waived (either generally or in a particular instance
and either retroactively or prospectively), if the Company has obtained the
consent in writing of the Holders of at least 66-2/3% in aggregate principal
amount of outstanding Notes; provided that without the written consent of the
Holders of all of the Notes then outstanding, no such amendment or waiver shall
be effective that will (i) change the time of payment of the principal of or the
interest on any Note or change the principal amount thereof or change the rate
of interest thereon, (ii) change any of the provisions with respect to optional
prepayments or mandatory redemption or (iii) change the percentage of Holders of
the Notes required to consent to any such amendment or waiver of any of the
provisions of this SECTION 7 or SECTION 6.
Section 7.2. Solicitation of Holders. So long as there are any Notes
outstanding, the Company will not solicit, request or negotiate for or with
respect to any proposed waiver or amendment of any of the provisions of this
Agreement or the Notes unless each Holder of Notes (irrespective of the amount
of Notes then owned by it) shall be informed thereof by the Company and shall be
afforded the opportunity of considering the same and shall be supplied by the
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Company with sufficient information to enable it to make an informed decision
with respect thereto. The Company will not, directly or indirectly, pay or cause
to be paid any remuneration, whether by way of supplemental or additional
interest, fee or otherwise, to any Holder of Notes as consideration for or as an
inducement to entering into by any Holder of Notes of any waiver or amendment of
any of the terms and provisions of this Agreement or the Notes unless such
remuneration is concurrently paid on the same terms, ratably to each Holder of
Notes then outstanding even if such Holder did not consent to such waiver or
amendment.
Section 7.3. Effect of Amendment or Waiver. Any such amendment or waiver
shall apply equally to all of the Holders of the Notes and shall be binding upon
them, upon each future Holder of any Note and upon the Company, whether or not
such Note shall have been marked to indicate such amendment or waiver. No such
amendment or waiver shall extend to or affect any obligation not expressly
amended or waived or impair any right consequent thereon.
SECTION 8. INTERPRETATION OF AGREEMENT; DEFINITIONS.
Section 8.1. Definitions. Unless the context otherwise requires, the
terms hereinafter set forth when used herein shall have the following meanings
and the following definitions shall be equally applicable to both the singular
and plural forms of any of the terms herein defined:
"ADDITIONAL INTEREST" means the interest, if any, that shall accrue on
any interest on the Notes that is in arrears for more than one interest payment
period or not paid during any Extension Period, which in either case shall
accrue at the stated rate per annum specified or determined as specified in such
Note.
"ADJUSTED EBIT" means, for any period with respect to the Company and its
Consolidated Subsidiaries on a consolidated basis, income after deduction of all
expenses and other proper charges other than taxes and Interest Expense, all as
determined in accordance with GAAP.
"AFFILIATE" of any Person (the "first Person") shall mean any Person (i)
which directly or indirectly, or through one or more intermediaries controls, or
is controlled by, or is under common control with such first Person, (ii) which
beneficially owns or holds 5% or more of any class of the Voting Stock of such
first Person (iii) 5% or more of the Voting Stock (or in the case of a Person
which is not a corporation, 5% or more of the equity interest) of which is
directly or indirectly beneficially owned by such first Person or any of its
Subsidiaries. The term "CONTROL" means the possession, directly or indirectly,
of the power to direct or cause the direction of the management and policies of
a Person, whether through the ownership of Voting Stock, by contract or
otherwise, other than by investment advisory contracts entered into in the
ordinary course of business of such first Person or its Subsidiaries.
"ASSET COVERAGE RATIO" shall mean on a consolidated basis for the Company
and its Consolidated Subsidiaries the ratio which the value of total assets,
less all liabilities and indebtedness not represented by senior securities (all
as determined pursuant to the Investment Company Act and any orders of the
Commission issued to the Company thereunder), bears to the
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aggregate amount of senior securities representing indebtedness of the Company
and its Consolidated Subsidiaries.
"BANKS" means the banks or financial institutions that are party to the
Bank Credit Agreement from time to time.
"BANK CREDIT AGREEMENT" means the Amended and Restated Credit Agreement
between the Banks and the Company dated as of May 17, 2000, as amended from time
to time, pursuant to which the Banks have extended credit to the Company, and
any renewals, extensions or replacements thereof.
"BOOK VALUE" means, with respect to any asset at any time, the value
thereof as the same would be reflected on a consolidated balance sheet of the
Company and its Consolidated Subsidiaries as at such time prepared in accordance
with GAAP.
"BUSINESS DAY" means any day of the week (excluding Saturday or Sunday)
on which banks in Washington, D.C. and New York, New York are not obligated by
law to close.
"CALCULATION AGENT" means Banc of America Securities LLC.
"CAPITALIZED LEASE" shall mean any lease the obligation for Rentals with
respect to which is required to be capitalized on a consolidated balance sheet
of the lessee and its subsidiaries in accordance with GAAP.
"CAPITALIZED RENTALS" of any Person shall mean as of the date of any
determination thereof the amount at which the aggregate Rentals due and to
become due under all Capitalized Leases under which such Person is a lessee
would be reflected as a liability on a consolidated balance sheet of such
Person.
"CODE" shall mean the Internal Revenue Code of 1986, as amended and the
rules and regulations promulgated thereunder.
"COMMERCIAL MORTGAGE LOAN" means a loan secured by a Lien on improved
real estate used for commercial purposes.
"COMMISSION" shall have the meaning set forth in SECTION 5.15(d).
"COMPANY" shall have the meaning set forth in the first paragraph of this
Agreement.
"CONSOLIDATED DEBT" shall mean as of the date of any determination
thereof, the aggregate unpaid amount of all Debt of the Company and its
Consolidated Subsidiaries determined on a consolidated basis in accordance with
GAAP.
"CONSOLIDATED SHAREHOLDERS' EQUITY" as of the date of determination
thereof, shall mean the total shareholders' equity of the Company and its
Consolidated Subsidiaries as the same would appear on a consolidated balance
sheet of the Company and its Consolidated
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Subsidiaries prepared as of such date in accordance with GAAP, including, in any
case, common stock of the Company (valued at cost) held in the Allied Capital
Corporation Deferred Compensation Trust and Permitted Preferred Stock of the
Company and its Consolidated Subsidiaries but excluding any stock, common or
preferred, not both issued and outstanding.
"CONSOLIDATED SUBSIDIARY" shall mean any Subsidiary which is required to
be consolidated on financial statements of the Company prepared in accordance
with GAAP.
"CONSOLIDATED TOTAL ASSETS" shall mean total assets of the Company and
its Consolidated Subsidiaries on a consolidated basis.
"DATE OF DETERMINATION" has the meaning set forth in SECTION 2.5(b).
"DEBT" means, with respect to any Person, without duplication,
(a) its liabilities for borrowed money;
(b) its liabilities for the deferred purchase price of property
acquired by such Person (excluding accounts payable arising in the
ordinary course of business but including, without limitation, all
liabilities created or arising under any conditional sale or other title
retention agreement with respect to any such property);
(c) its Capitalized Rentals;
(d) all liabilities for borrowed money secured by any Lien with
respect to any property owned by such Person (whether or not it has
assumed or otherwise become liable for such liabilities); and
(e) any Guaranty of such Person with respect to liabilities of
a type described in any of clauses (a) through (d) hereof.
Debt of any Person shall include all obligations of such Person of the
character described in clauses (a) through (e) to the extent such Person remains
legally liable in respect thereof notwithstanding that any such obligation is
deemed to be extinguished under GAAP.
"DEFAULT" shall mean any event or condition the occurrence of which
would, with the lapse of time or the giving of notice, or both, constitute an
Event of Default.
"EQUITY ISSUANCE" means any issuance or sale by a Person of its capital
stock or other similar equity security, or any warrants, options or similar
rights to acquire, or securities convertible into or exchangeable for, such
capital stock or other similar equity security.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended, and any successor statute of similar import, together with the
regulations thereunder, in each case as in effect from time to time. References
to sections of ERISA shall be construed to also refer to any successor sections.
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"ERISA AFFILIATE" shall mean any corporation, trade or business that is,
along with the Company, a member of a controlled group of corporations or a
controlled group of trades or businesses, as described in section 414(b) and
414(c), respectively, of the Code or Section 4001 of ERISA.
"EVENT OF DEFAULT" shall have the meaning set forth in SECTION 6.1.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended from
time to time, or any successor legislation.
"EXISTING NOTE AGREEMENTS" means (i) the Note Agreement dated as of April
30, 1998, among the Company and the Purchasers named therein, pursuant to which
the Company has issued its $140,000,000 7.055% Senior Notes, Series A, due May
30, 2003, its $30,000,000 7.168% Senior Notes, Series B, due May 30, 2005 and
its $10,000,000 9.530% Senior Notes, Series C, due May 30, 2005, and any
replacement or renewal thereof, (ii) the Note Agreement dated as of May 1, 1999
among the Company and the Purchasers named therein, pursuant to which the
Company has issued its $112,000,000 7.39% Senior Notes, Series A due May 1, 2004
and $25,000,000 7.49% Senior Notes, Series B due May 1, 2006, and any
replacement or renewal thereof and (iii) the Note Agreement dated as of November
15, 1999 among the Company and the Purchasers named therein, pursuant to which
the Company has issued its $102,000,000 8.51% Senior Notes due November 15,
2004, and any replacement or renewal thereof.
"EXISTING NOTES" means the notes issued by the Company pursuant to the
Existing Note Agreements.
"EXTENSION PERIOD" has the meaning set forth in SECTION 2.6.
"FORWARD ISSUANCE AGREEMENT" means the Forward Issuance Agreement dated
as of August 31, 2000 between the Company and Banc of America Securities LLC.
"GAAP" shall mean generally accepted accounting principles at the time in
the United States.
"GUARANTIES" by any Person shall mean all obligations (other than
endorsements in the ordinary course of business of negotiable instruments for
deposit or collection) of such Person guaranteeing, or in effect guaranteeing,
any Indebtedness, dividend or other obligation of any other Person (the "PRIMARY
OBLIGOR") in any manner, whether directly or indirectly, including, without
limitation, all obligations incurred through an agreement, contingent or
otherwise, by such Person: (i) to purchase such Indebtedness or obligation or
any property or assets constituting security therefor, (ii) to advance or supply
funds (x) for the purchase or payment of such Indebtedness or obligation, (y) to
maintain working capital or other balance sheet condition or otherwise to
advance or make available funds for the purchase or payment of such Indebtedness
or obligation, (iii) to lease property or to purchase Securities or other
property or services primarily for the purpose of assuring the owner of such
Indebtedness or obligation of the ability of the primary obligor to make payment
of the Indebtedness or obligation, or
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(iv) otherwise to assure the owner of the Indebtedness or obligation of the
primary obligor against loss in respect thereof. For the purposes of all
computations made under this Agreement, a Guaranty in respect of any
Indebtedness for borrowed money shall be deemed to be Indebtedness equal to the
principal amount of such Indebtedness for borrowed money which has been
guaranteed, and a Guaranty in respect of any other obligation or liability or
any dividend shall be deemed to be Indebtedness equal to the maximum aggregate
amount of such obligation, liability or dividend.
"HOLDER" shall mean any Person which is, at the time of reference, the
registered Holder of any Note.
"INDEBTEDNESS" with respect to any Person means, at any time, without
duplication,
(a) its liabilities for borrowed money and its redemption
obligations in respect of mandatorily redeemable preferred stock;
(b) its liabilities for the deferred purchase price of property
acquired by such Person (excluding accounts payable arising in the
ordinary course of business but including all liabilities created or
arising under any conditional sale or other title retention agreement
with respect to any such property);
(c) all liabilities appearing on its balance sheet in
accordance with GAAP in respect of Capitalized Leases;
(d) all liabilities for borrowed money secured by any Lien with
respect to any property owned by such Person (whether or not it has
assumed or otherwise become liable for such liabilities);
(e) all its liabilities in respect of unreimbursed drawings
under letters of credit or instruments serving a similar function issued
or accepted for its account by banks and other financial institutions
(whether or not representing obligations for borrowed money);
(f) Interest Rate Swaps of such Person; and
(g) any Guaranty of such Person with respect to liabilities of
a type described in any of clauses (a) through (f) hereof.
Indebtedness of any Person shall include all obligations of such Person
of the character described in clauses (a) through (g) to the extent such Person
remains legally liable in respect thereof notwithstanding that any such
obligation is deemed to be extinguished under GAAP.
"INSTITUTIONAL HOLDER" shall mean any insurance company, bank, savings
and loan association, trust company, investment company, charitable foundation,
employee benefit plan (as defined in ERISA) or other institutional investor or
financial institution which is not principally engaged, or as one of its
important activities, in the business of making small business investments of
the type made by the Company.
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"INTERCREDITOR AGREEMENT" means an intercreditor agreement pursuant to
which the Banks, the Holders of the Existing Notes and the Holders of the Notes
have agreed to share payments made by any Consolidated Subsidiary under a
Subsidiary Existing Note Guaranty, a Subsidiary Note Guaranty or a Subsidiary
Bank Guaranty on an equal and ratable basis.
"INTEREST" has the meaning set forth in SECTION 2.5(a).
"INTEREST EXPENSE" means, with respect to a Person and for any period,
the total consolidated interest expense (including, without limitation,
capitalized interest expense and interest expense attributable to Capitalized
Leases) of such Person and in any event shall include all interest expense with
respect to any Debt in respect of which such Person is wholly or partially
liable.
"INTEREST PAYMENT DATE" means a Pre-Remarketing Interest Payment Date;
provided that following the Remarketing Settlement Date on which Replacement
Notes are issued, Interest Payment Date shall mean a Post-Remarketing Interest
Payment Date.
"INTEREST RATE" has the meaning set forth in SECTION 2.5(a).
"INTEREST RATE SWAP" means a currency swap, an interest rate swap or
other currency or interest rate hedge entered into by the Company or a
Consolidated Subsidiary. For the purposes of this Agreement, the amount of the
obligation under any Interest Rate Swap shall be the amount determined in
respect thereof as of the end of the then most recently ended fiscal quarter of
such Person, based on the assumption that such Interest Rate Swap had terminated
at the end of such fiscal quarter, and in making such determination, if any
agreement relating to such Interest Rate Swap provides for the netting of
amounts payable by and to such Person thereunder or if any such agreement
provides for the simultaneous payment of amounts by and to such Person, then in
each such case, the amount of such obligation shall be the net amount so
determined.
"INVESTMENT COMPANY ACT" shall mean the Investment Company Act of 1940,
as amended, and all rules and regulations promulgated thereunder.
"INVESTMENTS" shall mean all investments, in cash or by delivery of
property made, directly or indirectly in any Person, whether by acquisition of
shares of capital stock, Indebtedness or other obligations or Securities or by
loan, advance, capital contribution or otherwise.
"LIBOR" means the rate determined by the Calculation Agent as the
interest rate expressed in decimal figures for deposits in the London interbank
market for a period of three months in U.S. Dollars that appears on the Telerate
Page 3750 as of 11:00 a.m., London time, on the Date of Determination. If such
rate does not appear on the Telerate Page 3750, the rate on the Date of
Determination will be determined as if the parties had specified the LIBOR-
Reference Banks Rate as the applicable rate.
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"LIBOR-REFERENCE BANKS RATE" means the rate determined on the basis of
the rates at which three-month deposits in U.S. Dollars in the Representative
Amount are offered at approximately 11:00 a.m., London time, on the Date of
Determination by the Reference Banks to prime banks in the London interbank
market for deposits commencing two London Banking Days following such Date of
Determination. The Calculation Agent will request the principal London office of
each of the Reference Banks to provide a quotation of its rate. If at least two
such quotations are provided, the rate will be the arithmetic mean of the
quotations. If fewer than two quotations are provided, the rate will be the
arithmetic mean of the rates quoted at approximately 11:00 a.m., New York City
time, on the Date of Determination by major banks in New York City (selected by
the Calculation Agent) on the Date of Determination for three-month loans in
U.S. Dollars in the Representative Amount to leading banks for loans extended
two London Banking Days following such Date of Determination.
"LIEN" shall mean any interest in property securing an obligation owed
to, or a claim by, a Person other than the owner of the property, whether such
interest is based on the common law, statute or contract, and including but not
limited to the security interest lien arising from a mortgage, encumbrance,
pledge, conditional sale or trust receipt or a lease, consignment or bailment
for security purposes. The term "LIEN" shall include reservations, exceptions,
encroachments, easements, rights-of-way, covenants, conditions, restrictions,
leases and other title exceptions and encumbrances (including, with respect to
stock, stockholder agreements, voting trust agreements, buy-back agreements and
all similar arrangements) affecting property. For the purposes of this
Agreement, the Company or any Consolidated Subsidiary shall be deemed to be the
owner of any property which it has acquired or holds subject to a conditional
sale agreement, Capitalized Lease or other arrangement pursuant to which title
to the property has been retained by or vested in some other Person for security
purposes and such retention or vesting shall constitute a Lien.
"LONDON BANKING DAY" means any day on which dealings in deposits in U.S.
Dollars are transacted in the London interbank market.
"MATERIAL ADVERSE EFFECT" means a material adverse effect on (a) the
business, operations, affairs, financial condition, assets or properties of the
Company and its Consolidated Subsidiaries taken as a whole, (b) the ability of
the Company to perform its obligations under any Transaction Document or (c) the
validity or enforceability of any Transaction Document.
"MATERIAL SUBSIDIARY" shall mean any Consolidated Subsidiary which has
total assets having a value (determined in accordance with the market valuation
method pursuant to GAAP) greater than or equal to $40,000,000.
"MATURITY DATE" means December 2, 2002; provided that on or after the
Remarketing Settlement Date on which Replacement Notes are issued, the Maturity
Date shall be the Remarketed Maturity Date.
"MORTGAGE REPURCHASE FACILITY" means financing agreements providing for
(i) the pledge and assignment of Commercial Mortgage Loans owned by the Company
and its Consolidated Subsidiaries as security for loans to the Company and its
Consolidated
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Subsidiaries, or (ii) the sale of such Commercial Mortgage Loans to a commercial
lender pursuant to an agreement under which such loans shall be repurchased by
the Company or a Consolidated Subsidiary at a future date.
"MULTIEMPLOYER PLAN" shall have the same meaning as in ERISA.
"NET PROCEEDS" means, with respect to an Equity Issuance by a Person, the
aggregate amount of all cash received by such Person in respect of such Equity
Issuance net of investment banking fees, legal fees, accountants fees,
underwriting discounts and commissions and other customary fees and expenses
actually incurred by such Person in connection with such Equity Issuance.
"NON-RECOURSE INDEBTEDNESS" means Indebtedness secured by Real Estate
Assets if recourse for the payment of such Indebtedness is limited to such Real
Estate Assets.
"NOTE" has the meaning set forth in SECTION 1.1.
"NOTE REGISTER" has the meaning set forth in SECTION 10.1.
"PBGC" means the Pension Benefit Guaranty Corporation and any entity
succeeding to any or all of its functions under ERISA.
"PERMITTED PREFERRED STOCK" means (i) preferred stock that is issued from
time to time by a Subsidiary to the SBA having an aggregate stated value not
exceeding $7,000,000 at any one time outstanding or (ii) preferred stock that is
issued from time to time by a Subsidiary for the purpose of qualifying such
Subsidiary as a real estate investment trust under Sections 856 through 860 of
the Code and having an aggregate stated value not exceeding $500,000 at any one
time outstanding, provided that in any event Permitted Preferred Stock shall not
include any Voting Stock.
"PERSON" shall mean an individual, partnership, limited liability
company, corporation, trust or unincorporated organization, and a government or
agency or political subdivision thereof.
"PLAN" means a "pension plan," as such term is defined in ERISA,
established or maintained by the Company or any ERISA Affiliate or as to which
the Company or any ERISA Affiliate contributed or is a member or otherwise may
have any liability.
"PREPAYMENT DATE" has the meaning set forth in SECTION 2.3.
"POST-REMARKETING INTEREST PAYMENT DATE" has the meaning set forth in
SECTION 2.5(c).
"PRE-REMARKETING INTEREST PAYMENT DATE" has the meaning set forth in
SECTION 2.5(b).
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"PRIORITY DEBT" means the sum of (i) all Debt of the Company and its
Consolidated Subsidiaries secured by a Lien, and (ii) all unsecured Debt of
Consolidated Subsidiaries (excluding in each case, Debt owing to the Company or
another Consolidated Subsidiary).
"PTE" has the meaning set forth in SECTION 3.2.
"PURCHASE PRICE" has the meaning set forth in SECTION 1.2.
"PURCHASER" shall have the meaning set forth in the first paragraph of
this Agreement.
"QPAM EXEMPTION" means Prohibited Transaction Class Exemption 84-14
issued by the United States Department of Labor.
"QUALIFYING OFFERING" means an offering of debt, equity or other
securities of the Company pursuant to the Forward Issuance Agreement.
"REAL ESTATE" means fee ownership or co-ownership of, or leaseholds of,
land or improvements thereon.
"REAL ESTATE ASSETS" means (i) Real Estate securing Investments made in
the ordinary course of business, (ii) Commercial Mortgage Loans and (iii)
Related Collateral.
"RECORD DATE" has the meaning set forth in SECTION 2.5(d).
"REDEMPTION DATE" has the meaning set forth in SECTION 2.4.
"REDEMPTION PRICE" has the meaning set forth in SECTION 2.4.
"REFERENCE BANKS" means, for the purposes of any LIBOR rate, four major
banks in the London interbank market selected by the Calculation Agent.
"RELATED COLLATERAL" means, in respect of any Commercial Mortgage Loan:
(i) any and all documents, instruments, agreements, records or other collateral
of any kind evidencing, securing, guaranteeing or otherwise relating to such
Commercial Mortgage Loan, including without limitation all promissory notes or
other negotiable instruments, mortgages, deeds of trust or similar instruments,
assignments of leases or rents or other collateral assignments, financing
statements, guaranties, indemnities, servicing agreements, servicing records,
files, surveys, certificates, affidavits, title abstracts, title insurance
policies and commitments, correspondence, opinions, appraisals, closing
documents, computer programs, computer storage media, data bases, accounting
records and other books and records relating thereto, (ii) any and all mortgage
guaranties and insurance (issued by governmental agencies or otherwise) and
mortgage insurance certificates or other documents evidencing such mortgage
guaranties or insurance relating to any such Commercial Mortgage Loan and all
claims and payments thereunder, (iii) any and all other insurance policies and
insurance proceeds relating to such Commercial Mortgage Loan or the related real
property, (iv) all "general intangibles" as defined in the
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Uniform Commercial Code relating to or constituting any and all of the
foregoing, and (v) any and all replacements, substitutions or distributions on
or proceeds of any and all of the foregoing.
"REMARKETED MATURITY DATE" means the later of (i) the first anniversary
of the Remarketing Settlement Date on which Replacement Notes are issued and
(ii) December 2, 2002.
"REMARKETING AGENT" means Banc of America Securities LLC.
"REMARKETING AGREEMENT" means the Remarketing and Contingent Purchase
Agreement dated as of August 31, 2000 between the Company and the Remarketing
Agent.
"REMARKETING SETTLEMENT DATE" means the third Business Day immediately
following the Reset Date.
"RENTALS" shall mean and include as of the date of any determination
thereof all fixed payments (including as such all payments which the lessee is
obligated to make to the lessor on termination of the lease or surrender of the
property) payable by the Company or any Consolidated Subsidiary, as lessee or
sublessee under a lease of real or personal property, but shall be exclusive of
any amounts required to be paid by the Company or any Consolidated Subsidiary
(whether or not designated as rents or additional rents) on account of
maintenance, repairs, insurance, taxes and similar charges. Fixed rents under
any so-called "percentage leases" shall be computed solely on the basis of the
minimum rents, if any, required to be paid by the lessee regardless of sales
volume or gross revenues.
"REPLACEMENT NOTES" has the meaning set forth in SECTION 9.4.
"REPORTABLE EVENT" shall have the same meaning as in ERISA.
"REPRESENTATIVE AMOUNT" means, for the purposes of any LIBOR rate for
which a Representative Amount is relevant, an amount that is equal to the
aggregate principal amount of all of the Notes.
"RESET DATE" has the meaning set forth in the Remarketing Agreement.
"SBA" shall mean the United States Small Business Administration.
"SEC DISCLOSURE DOCUMENTS" shall mean the Company's Annual Report on Form
10-K for its fiscal year ended December 31, 1999, its Quarterly Reports on Form
10-Q for its fiscal quarters ended March 31, 2000 and June 30, 2000, and its
Current Reports on Form 8-K filed after the date of its Form 10-K for the fiscal
year ended December 31, 1999, in each case, as filed with the Commission to
fulfill the Company's reporting obligations under the Exchange Act.
"SECONDARY PURCHASE AGREEMENT" has the meaning set forth in the
Remarketing Agreement.
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"SECONDARY PURCHASER" has the meaning set forth in the Remarketing
Agreement.
"SECURITIES ACT" means the Securities Act of 1933, as amended from time
to time, or any successor legislation.
"SECURITY" shall have the same meaning as in Section 2(l) of the
Securities Act.
"SENIOR FINANCIAL OFFICER" means the chief financial officer, chief
operating officer, principal accounting officer, treasurer or controller of the
Company.
"SENIOR FUNDED DEBT" means any Debt of the Company which is classified as
long term debt in accordance with GAAP (including, without limitation, the Bank
Credit Agreement) other than Subordinated Debt.
"SOURCE" has the meaning set forth in SECTION 3.2(a).
"SUBORDINATED DEBT" means all unsecured Debt of the Company which shall
contain or have applicable thereto subordination provisions providing for the
subordination thereof to other Debt of the Company (including, without
limitation, the obligations of the Company under the Notes).
"SUBSIDIARY" with respect to any Person shall mean (i) any corporation,
partnership, association or other business entity at least 50% of the
outstanding shares of Voting Stock or similar interests of which are owned,
directly or indirectly, by such Person (including, without limitation, any
limited partnership in which such Person, directly or indirectly, shall have at
least a 50% vote on matters as to which limited partners may vote), (ii) any
general or limited partnership of which such Person shall be a general partner
or as to which such Person otherwise shall have unlimited liability, (iii) any
general or limited partnership a general partner of which can be changed or
removed by such Person (other than removals that could be accomplished by
voluntary withdrawal of such general partner only), or (iv) any general or
limited partnership in which (x) the amount represented by such Person's capital
account shall be equal to at least 50% of the aggregate amount represented by
the total of all partners' capital accounts or (y) such Person shall be
allocated at least 50% of the profit (or loss) or distributable cash of the
partnership; provided, however, that the term "SUBSIDIARY", when used in this
Agreement without reference to any particular Person, shall mean a Subsidiary of
the Company.
"SUBSIDIARY BANK GUARANTY" means any agreement pursuant to which a
Consolidated Subsidiary has guaranteed the Debt of the Company under the Bank
Credit Agreement.
"SUBSIDIARY EXISTING NOTE GUARANTY" means any agreement pursuant to which
a Consolidated Subsidiary has guaranteed the Debt of the Company under the
Existing Notes.
"SUBSIDIARY NOTE GUARANTY" means any agreement pursuant to which a
Consolidated Subsidiary has guaranteed the Debt of the Company under the Notes.
"SURVIVING CORPORATION" has the meaning set forth in SECTION 5.12(a)(2).
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<PAGE> 35
"TRANSACTION DOCUMENTS" means this Agreement, the Remarketing Agreement,
the Forward Issuance Agreement and the Notes.
"TRIGGER EVENT" has the meaning set forth in the Remarketing Agreement.
"VOTING STOCK" of any Person shall mean Securities of any class or
classes, the holders of which are ordinarily, in the absence of contingencies,
entitled to elect a majority of the corporate directors (or Persons performing
similar functions) of such Person.
"WHOLLY-OWNED" when used in connection with any Subsidiary shall mean a
Subsidiary of which all of the issued and outstanding shares of stock (except
shares required as directors' qualifying shares and Permitted Preferred Stock)
shall be owned by the Company and/or one or more of its Wholly-owned
Subsidiaries.
"WINNING BID RATE" has the meaning set forth in the Remarketing
Agreement.
Section 8.2. Accounting Principles. Where the character or amount of any
asset or liability or item of income or expense is required to be determined or
any consolidation or other accounting computation is required to be made for the
purposes of this Agreement, the same shall be done in accordance with GAAP, to
the extent applicable, except where such principles are inconsistent with the
requirements of this Agreement.
Section 8.3. Directly or Indirectly. Where any provision in this
Agreement refers to action to be taken by any Person, or which such Person is
prohibited from taking, such provision shall be applicable whether the action in
question is taken directly or indirectly by such Person.
SECTION 9. REMARKETING.
Section 9.1. Incorporation of Remarketing Agreement. The Purchaser and
any subsequent transferee of the Notes shall be deemed to have expressly agreed
to the terms of, and shall be bound by, the terms of Exhibit D hereto. Exhibit D
hereto is hereby incorporated in and expressly made a part of this Agreement.
Section 9.2. Remarketing. The Notes shall be subject to remarketing on
the terms and conditions set forth in the Remarketing Agreement.
Section 9.3. Reset of Interest Rate and Maturity Date. From and
including the Remarketing Settlement Date on which Replacement Notes are issued,
if the Notes are remarketed pursuant to the Remarketing Agreement, the Interest
Rate on the Notes shall be the Winning Bid Rate and the Maturity Date shall be
the Remarketed Maturity Date.
Section 9.4. Replacement Notes. If the Notes are remarketed pursuant to
the Remarketing Agreement, the Company shall cause replacement certificates
evidencing the remarketed Notes to be executed by the Company (the "REPLACEMENT
NOTES") and delivered to the purchaser or purchasers of the remarketed Notes in
accordance with the terms of the Secondary Purchase Agreement.
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<PAGE> 36
Section 9.5. Power of Attorney. Each Holder by acceptance of the Notes
hereby irrevocably constitutes and appoints the Remarketing Agent and each of
its officers as such person's true and lawful representative and
attorney-in-fact, with full power and authority in such person's name, place and
stead to make, execute, acknowledge, deliver, swear to, record and file with
respect to the Notes any and all instruments, documents and certificates that,
from time to time, may be required in connection with the remarketing of the
Notes and to take any other action that the Remarketing Agent may deem necessary
or appropriate, in its discretion, in connection with remarketing the Notes.
This power of attorney is coupled with an interest and shall continue in full
force and effect and shall not be affected by the subsequent death, disability,
insolvency, bankruptcy, termination or incapacity of a Holder and may be
exercised by an officer of the Remarketing Agent signing individually for any
Holder or for all Holders executing any particular instrument.
SECTION 10. MISCELLANEOUS.
Section 10.1. Registered Notes; Transfer. The Company shall cause to be
kept at the principal office of the Company a register for the registration and
transfer of the Notes (hereinafter called the "NOTE REGISTER") and the Company
will register or transfer or cause to be registered or transferred as
hereinafter provided any Note issued pursuant to this Agreement.
At any time and from time to time the Holder of any Note may transfer
such Note to another Institutional Holder, upon surrender thereof at the
principal office of the Company duly endorsed or accompanied by a written
instrument of transfer duly executed by the Holder of such Note or its attorney
duly authorized in writing. Notwithstanding the foregoing, prior to the
Remarketing Settlement Date on which Replacement Notes are issued, the Notes may
not be sold or otherwise transferred except in the form of one single Note
representing the aggregate outstanding principal amount of the Notes issued
hereunder to either (1) the Company or any Affiliate thereof, (2) Bank of
America, N.A., or any of its Affiliates or (3) any entity sponsored or organized
by, on behalf of, or for the primary use of Bank of America, N.A., or any of its
Affiliates.
The Person in whose name any registered Note shall be registered shall be
deemed and treated as the owner and Holder thereof for all purposes of this
Agreement. Payment of or on account of the principal, premium, if any, and
interest on any registered Note shall be made to or upon the written order of
such Holder.
Section 10.2. Exchange of Notes. At any time and from time to time, upon
not less than ten days' notice to that effect given by the Holder of any Note
initially delivered or of any Note substituted therefor pursuant to Section
10.1, this SECTION 10.2 or SECTION 10.3, and, upon surrender of such Note at its
office, the Company will deliver in exchange therefor, without expense to such
Holder, except as set forth below, a Note for the same aggregate principal
amount as the then unpaid principal amount of the Note so surrendered, or Notes
in the denomination of $500,000 or any amount in excess thereof as such Holder
shall specify, dated as of the date to which interest has been paid on the Note
so surrendered or, if such surrender is prior to the payment of any interest
thereon, then dated as of the date of issue, registered in the name of such one
or more Institutional Holders as may be designated by such Holder, and otherwise
of the same form and tenor as the
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<PAGE> 37
Notes so surrendered for exchange. The Company may require the payment of a sum
sufficient to cover any stamp tax or governmental charge imposed upon such
exchange or transfer.
Section 10.3. Loss, Theft, Etc. of Notes. Upon receipt of evidence
satisfactory to the Company of the loss, theft, mutilation or destruction of any
Note, and in the case of any such loss, theft or destruction upon delivery of a
bond of indemnity in such form and amount as shall be reasonably satisfactory to
the Company, or in the event of such mutilation upon surrender and cancellation
of the Note, the Company will make and deliver without expense to the Holder
thereof, a new Note, of like tenor, in lieu of such lost, stolen, destroyed or
mutilated Note. If the Purchaser or any subsequent Institutional Holder is the
owner of any such lost, stolen or destroyed Note, then the affidavit of an
authorized officer of such owner, setting forth the fact of loss, theft or
destruction and of its ownership of such Note at the time of such loss, theft or
destruction shall be accepted as satisfactory evidence thereof and no further
indemnity shall be required as a condition to the execution and delivery of a
new Note other than the written agreement of such owner to indemnify the
Company.
Section 10. 4. Expenses, Stamp Tax Indemnity. Whether or not the
transactions herein contemplated shall be consummated, the Company agrees to pay
duplicating and printing costs and charges for shipping the Notes, adequately
insured to the Purchaser's home office or at such other place as the Purchaser
may designate, the cost of obtaining a Private Placement Number for the Notes
from Standard & Poor's Corporation, all reasonable expenses relating to any
amendment, waivers or consents pursuant to the provisions of the Transaction
Documents, including, without limitation, any amendments, waivers, or consents
resulting from any workout, renegotiation or restructuring relating to the
performance by the Company of its obligations under the Transaction Documents,
and all other costs and expenses incidental to the performance of the Company's
obligations under the Transaction Documents that are not otherwise specifically
provided for in this SECTION 10.4. The Company also agrees that it will pay and
save the Purchaser harmless against any and all liability with respect to stamp
and other taxes, if any, which may be payable or which may be determined to be
payable in connection with the execution and delivery of the Transaction
Documents, (other than as specified in the last sentence of SECTION 10.2)
whether or not any Notes are then outstanding. The Company agrees to protect and
indemnify the Purchaser against any liability for any and all brokerage fees and
commissions payable or claimed to be payable to any Person in connection with
the transactions contemplated by the Transaction Documents. The parties hereto
agree that, except as otherwise provided herein, each of the Purchaser and the
Company will pay its own costs and expenses incurred in connection with the
preparation, execution and delivery of the Transaction Documents and the
consummation of the transactions contemplated thereby, including, without
limitation, the fees of its counsel; provided that if the transactions
contemplated by this Agreement are not consummated due to the failure of the
Company to fulfill any of the conditions set forth in SECTION 4.1, the Company
shall pay all of the Purchaser's reasonable out-of-pocket expenses (not to
exceed $100,000) in connection with the preparation, execution and delivery of
the Transaction Documents, including but not limited to the reasonable fees and
disbursements of Davis Polk & Wardwell, special counsel to the Purchaser.
Section 10.5. Powers and Rights Not Waived; Remedies Cumulative. No delay
or failure on the part of the Holder of any Note in the exercise of any power or
right shall operate as a
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<PAGE> 38
waiver thereof; nor shall any single or partial exercise of the same preclude
any other or further exercise thereof, or the exercise of any other power or
right, and the rights and remedies of the Holder of any Note are cumulative to,
and are not exclusive of, any rights or remedies any such Holder would otherwise
have.
Section 10.6. Notices. All communications provided for hereunder shall be
in writing and, if to a Holder, delivered or mailed prepaid by registered or
certified mail or overnight air courier, or by facsimile communication (with a
confirming copy of any such facsimile communication sent via overnight courier
service), in each case addressed to such Holder at its address appearing on
Schedule I to this Agreement or such other address as such Holder may designate
to the Company in writing, and if to the Company delivered or mailed by
registered or certified mail or overnight air courier, or by facsimile
communication, to the Company at 1919 Pennsylvania Avenue, N.W., 3rd Floor,
Washington, D.C. 20006, Attention: Joan M. Sweeney or to such other address as
the Company may in writing designate to the Holders; provided, however, that a
notice to a Holder by overnight air courier shall only be effective if delivered
to such Holder at a street address designated for such purpose in Schedule I,
and a notice to a Holder by facsimile communication shall only be effective if
made by confirmed transmission to such Holder at a telephone number designated
for such purpose in Schedule I, or, in either case, as such Holder may designate
to the Company in writing.
Section 10.7. Successors and Assigns. This Agreement shall be binding
upon the Company and its successors and assigns and shall inure to the benefit
of the Purchaser and to the benefit of its successors and assigns, including
each successive Holder.
Section 10.8. Survival of Covenants and Representations. All covenants,
representations and warranties made by the Company herein and in any
certificates delivered pursuant hereto, whether or not in connection with the
Closing Date, shall survive the closing and the delivery of this Agreement and
the Notes and shall terminate upon payment in full of all amounts due under the
Notes and this Agreement.
Section 10.9. Severability. Should any part of this Agreement for any
reason be declared invalid or unenforceable, such decision shall not affect the
validity or enforceability of any remaining portion, which remaining portion
shall remain in force and effect as if this Agreement had been executed with the
invalid or unenforceable portion thereof eliminated and it is hereby declared
the intention of the parties hereto that they would have executed the remaining
portion of this Agreement without including therein any such part, parts or
portion which may, for any reason, be hereafter declared invalid or
unenforceable.
Section 10.10. Governing Law. This Agreement and the Notes issued and
sold hereunder shall be governed by and construed in accordance with New York
law.
Section 10.11. Captions. The descriptive headings of the various Sections
or parts of this Agreement are for convenience only and shall not affect the
meaning or construction of any of the provisions hereof.
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<PAGE> 39
Section 10.12. Limitation of Liability of the Owner Trustee. It is
expressly understood and agreed by the parties hereto that (a) this Agreement is
executed and delivered by Wilmington Trust Company, not individually or
personally but solely as the owner trustee of the Purchaser, in the exercise of
the powers and authority conferred and vested in it, (b) each of the
representations, undertakings and agreements herein made on the part of the
Purchaser is made and intended not as personal representations, undertakings and
agreements by Wilmington Trust Company but made and intended for the purpose of
binding only the Purchaser, (c) nothing herein contained shall be construed as
creating any liability on Wilmington Trust Company, individually or personally,
to perform any covenant, either expressed or implied, contained herein, all
liability, if any, being expressly waived by the parties hereto and by any
person claiming by, through or under the parties hereto and (d) under no
circumstances shall Wilmington Trust Company be personally liable for the
payment of any indebtedness or expenses of the Purchaser or be liable for the
breach or failure of any obligation, representation, warranty or covenant made
or undertaken by the Purchaser under this Agreement or any other related
documents.
-36-
<PAGE> 40
The execution hereof by you shall constitute a contract between us for
the uses and purposes hereinabove set forth, and this Agreement may be executed
in any number of counterparts, each executed counterpart constituting an
original but all together only one agreement.
ALLIED CAPITAL CORPORATION
By: /s/ KELLY A. ANDERSON
---------------------------------------
Name: Kelly A. Anderson
Title: Treasurer and Executive
Vice President
Accepted as of the date hereof:
INTREPID FUNDING MASTER TRUST
By: Wilmington Trust Company, not in its
Individual capacity, but solely as Owner Trustee
By: /s/ MARY KAY PUPILLO
------------------------------------------
Name: Mary Kay Pupillo
Title: Financial Services Officer
-37-
<PAGE> 41
SCHEDULE I
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
OF NOTES
PURCHASER TO BE PURCHASED
--------- ---------------
<S> <C>
Intrepid Funding Master Trust
c/o Wilmington Trust Company, as Owner--Trustee
Rodney Square North
1100 North Market Square
Wilmington, DE 19890-001 ................................$75,000,000
</TABLE>
<PAGE> 42
[FORM OF NOTE]
ALLIED CAPITAL CORPORATION
Auction Rate Reset Senior Note Series A
No. 001 $75,000,000
August 31, 2000
ALLIED CAPITAL CORPORATION, a Maryland corporation (the "COMPANY"), for
value received, hereby promises to pay to or registered assigns on the 2nd day
of December, 2002 the principal amount of seventy five million dollars
($75,000,000) and to pay interest on the principal amount of this Note at such
rates and at such times as are specified in Note Agreement (as defined below).
Both the principal hereof and interest hereon are payable at the
principal office of the Company in Washington, D.C. in coin or currency of the
United States of America which at the time of payment shall be legal tender for
the payment of public and private debts.
This Note is one of the Auction Rate Reset Senior Notes Series A (the
"NOTES") of the Company in the aggregate principal amount of $75,000,000 issued
under and pursuant to the terms and provisions of the Note Agreement dated as of
August 31, 2000 (the "NOTE AGREEMENT"), entered into by the Company with the
Purchaser named therein and this Note and the holder hereof are entitled with
the holders of all other Notes outstanding under the Note Agreement to all the
benefits provided for thereby or referred to therein to the extent provided in
the Note Agreement. Reference is hereby made to the Note Agreement for a
statement of such rights and benefits.
This Note and the other Notes outstanding under the Note Agreement may be
declared due prior to their expressed maturity dates in the events, on the terms
and in the manner and amounts as provided in the Note Agreement.
The Notes are not subject to prepayment or redemption at the option of
the Company prior to their expressed maturity dates except on the terms and
conditions and in the amounts and with the premium, if any, set forth in the
Note Agreement.
This Note is registered on the books of the Company and is transferable
only by surrender thereof at the principal office of the Company duly endorsed
or accompanied by a written instrument of transfer duly executed by the
registered holder of this Note or its attorney duly authorized in writing.
Payment of or on account of principal, premium, if any, and interest on this
Note shall be made only to or upon the order in writing of the registered
holder.
EXHIBIT A-1
(to Note Agreement)
<PAGE> 43
ALLIED CAPITAL CORPORATION
By:
--------------------------------------
Name: Kelly A. Anderson
Title: Treasurer and Executive Vice
President
A-1-2
<PAGE> 44
[FORM OF REPLACEMENT NOTE]
ALLIED CAPITAL CORPORATION
Auction Rate Reset Senior Note Series A
No. R-
______________, _____
$
ALLIED CAPITAL CORPORATION, a Maryland corporation (the "COMPANY"), for
value received, hereby promises to pay to
or registered assigns
on the later of (1) the first anniversary of the date this Note is issued
and (2) December 2, 2002
the principal amount of
DOLLARS ($_____________)
and to pay interest on the principal amount of this Note at such rates
and at such times as are specified in the Note Agreement (as defined below).
Both the principal hereof and interest hereon are payable at the
principal office of the Company in Washington, D.C. in coin or currency of the
United States of America which at the time of payment shall be legal tender for
the payment of public and private debts.
This Note is one of the Auction Rate Reset Senior Notes Series A (the
"NOTES") of the Company in the aggregate principal amount of $75,000,000 issued
under and pursuant to the terms and provisions of the Note Agreement dated as of
August 31, 2000 (the "NOTE AGREEMENT"), entered into by the Company with the
Purchaser named therein and is a Replacement Note as defined in the Note
Agreement. This Note and the holder hereof are entitled with the holders of all
other such Replacement Notes outstanding under the Note Agreement to all the
benefits provided for thereby or referred to therein to the extent provided in
the Note Agreement. Reference is hereby made to the Note Agreement for a
statement of such rights and benefits.
This Note and the other Notes outstanding under the Note Agreement may be
declared due prior to their expressed maturity dates in the events, on the terms
and in the manner and amounts as provided in the Note Agreement.
The Notes are not subject to prepayment or redemption at the option of
the Company prior to their expressed maturity dates except on the terms and
conditions and in the amounts and with the premium, if any, set forth in the
Note Agreement.
EXHIBIT A-2
(to Note Agreement)
<PAGE> 45
This Note is registered on the books of the Company and is transferable
only by surrender thereof at the principal office of the Company duly endorsed
or accompanied by a written instrument of transfer duly executed by the
registered holder of this Note or its attorney duly authorized in writing.
Payment of or on account of principal, premium, if any, and interest on this
Note shall be made only to or upon the order in writing of the registered
holder.
ALLIED CAPITAL CORPORATION
By:
----------------------------------------
Name:
Title:
A-2-2
<PAGE> 46
REPRESENTATIONS AND WARRANTIES
The Company represents and warrants to the Purchaser as follows:
1. Subsidiaries. Annex A attached hereto states the name of each of
the Company's Subsidiaries, its jurisdiction of incorporation and the percentage
of its Voting Stock owned by the Company and/or its Subsidiaries. Those
Subsidiaries listed in Section 1 of said Annex A constitute Consolidated
Subsidiaries. The Company and each Subsidiary has good and marketable title to
all of the shares it purports to own of the stock of each Subsidiary, free and
clear in each case of any Lien. All such shares have been duly issued and are
fully paid and non-assessable.
2. Corporate Organization and Authority. Except where failure to be
qualified or authorized would not have a Material Adverse Effect, each of the
Company and its Consolidated Subsidiaries
(a) is a corporation duly organized, validly existing and in
good standing under the laws of its jurisdiction of incorporation;
(b) has all requisite power and authority and all necessary
licenses and permits to own and operate its properties and to carry on
its business as now conducted and as presently proposed to be conducted;
and
(c) is duly licensed or qualified and is in good standing as a
foreign corporation in each jurisdiction wherein the nature of the
business transacted by it or the nature of the property owned or leased
by it makes such licensing or qualification necessary.
3. Investment Company Status. The Company is a "business development
company" within the meaning of the Investment Company Act.
4. Financial Statements. (a) The consolidated balance sheet at
December 31, 1999 and 1998 and the consolidated statements of operations,
changes in net assets and cash flows of the Company for three years ended
December 31, 1999, each accompanied by a report thereon containing an opinion
unqualified as to scope limitations imposed by the Company and otherwise without
qualification except as therein noted, by Arthur Andersen LLP, have been
prepared in accordance with GAAP consistently applied except as therein noted,
are correct and complete and present fairly the financial position of the
Company and its Consolidated Subsidiaries as of such dates and the results of
their operations for such periods. The unaudited consolidated balance sheet of
the Company and its Consolidated Subsidiaries as of June 30, 2000, and the
unaudited statements of operations, changes in net assets and cash flows for the
six month period ended on said date prepared by the Company have been prepared
in accordance with GAAP consistently applied, are correct and complete and
present fairly the financial position of the Company and its Consolidated
Subsidiaries as of such date and the results of their operations and changes in
their financial position for such period.
EXHIBIT B
(to Note Agreement)
<PAGE> 47
(b) Since December 31, 1999, there has been no change in the
condition, financial or otherwise, of the Company and its Consolidated
Subsidiaries as shown on the consolidated balance sheet as of such date except
changes in the ordinary course of business, none of which individually or in the
aggregate has been materially adverse.
5. Debt. Annex B attached hereto correctly describes all Debt
(including, without limitation, Debt held by the SBA) and Capitalized Leases of
the Company and its Consolidated Subsidiaries outstanding on June 30, 2000 since
which date there has been no material change in the amounts, interest rates,
sinking funds, installment payments or maturities of the Indebtedness of the
Company or its Consolidated Subsidiaries.
6. Full Disclosure. The Company has made available to the Purchaser
copies of the Company's SEC Disclosure Documents. At the time each such document
was filed (or, if an amendment with respect to any such document was filed, at
the time such amendment was filed) with the Commission, it complied as to form
in all material respects with the requirements of the Exchange Act and the rules
and regulations of the Commission promulgated thereunder. The SEC Disclosure
Documents fairly describe, in all material respects, the general nature of the
business and principal properties of the Company and its Consolidated
Subsidiaries. The SEC Disclosure Documents, at the time they were filed (or, if
an amendment with respect to any such document was filed, at the time such
amendment was filed), did not contain any untrue statement of a material fact or
omit to state any material fact necessary to make the statements therein not
misleading in light of the circumstances under which they were made. Except as
disclosed in the SEC Disclosure Documents or in one of the documents,
certificates or other writings identified therein, or in the financial
statements described in paragraph 3 hereof, since December 31, 1999, there has
been no change in the financial condition, operations, business, properties or
prospects of the Company or any Consolidated Subsidiary except changes that
individually or in the aggregate could not reasonably be expected to materially
affect adversely the properties, business, prospects, profits or condition
(financial or otherwise) of the Company and its Consolidated Subsidiaries taken
as a whole. There is no fact known to the Company that could reasonably be
expected to materially affect adversely the properties, business, prospects,
profits or condition (financial or otherwise) of the Company and its
Consolidated Subsidiaries that has not been set forth herein or in the SEC
Disclosure Documents or in the other documents, certificates and other writings
delivered to the Purchaser by or on behalf of the Company specifically for use
in connection with the transactions contemplated hereby, except matters of an
economic or regulatory nature generally affecting businesses of the type engaged
in by the Company.
7. Pending Litigation. There are no actions, suits or proceedings
pending or, to the knowledge of the Company, threatened against or affecting the
Company or any Consolidated Subsidiary in any court or before any governmental
authority or arbitration board or tribunal which involve the possibility of
materially and adversely affecting (1) the properties, business, profits or
condition (financial or otherwise) of the Company and its Consolidated
Subsidiaries, taken as a whole or (2) the ability of the Company to perform its
obligations under the Transaction Documents.
B-2
<PAGE> 48
8. Title to Properties. The Company and each Consolidated Subsidiary
has good and marketable title in fee simple (or its equivalent under applicable
law) to all material parcels of real property and has good title to all the
other material items of property it purports to own, including that reflected in
the most recent balance sheet referred to in paragraph 3 hereof, except as sold
or otherwise disposed of in the ordinary course of business and except for Liens
permitted by the Agreement. The Company and each Consolidated Subsidiary has the
right to, and does, enjoy peaceful and undisturbed possession under all leases
to which it is a party or under which it is a party. All such leases are valid,
subsisting and in full force and effect, none of such leases is in default and
no event has occurred and is continuing, and no condition exists which, after
the passage of time or giving of notice or both could become an event of default
under any such lease.
9. Patents and Trademarks. The Company and each Consolidated
Subsidiary owns or possesses all the patents, trademarks, trade names, service
marks, copyrights, licenses, permits, registrations, consents (governmental or
other) and rights with respect to the foregoing necessary for the present and
planned future conduct of its business, without any known conflict with the
rights of others.
10. Sale is Legal and Authorized. The sale of the Notes to the
Purchaser, compliance by the Company with all of the provisions of the
Transaction Documents and compliance by the Company with all of the provisions
of the Transaction Documents--
(a) are within the corporate powers of the Company;
(b) will not violate any provisions of any law or any order of
any court or governmental authority or agency and will not conflict with
or result in any breach of any of the terms, conditions or provisions of,
or constitute a default under the Articles of Incorporation or By-laws of
the Company or any indenture or other agreement or instrument to which
the Company is a party or by which it may be bound or result in the
imposition of any Liens or encumbrances on any property of the Company;
and
(c) have been duly authorized by proper corporate action on the
part of the Company (no action by the stockholders of the Company being
required by law, by the Articles of Incorporation or By-laws of the
Company or otherwise), the Transaction Documents have been executed and
delivered by the Company and upon payment of the Purchase Price by the
Purchaser, the Transaction Documents constitute the legal, valid and
binding obligations, contracts and agreements of the Company enforceable
in accordance with their terms.
11. No Defaults. No Default or Event of Default has occurred and is
continuing. The Company is not in default in the payment of principal or
interest on any Debt and is not in default under any instrument or instruments
or agreements under and subject to which any Debt has been issued and no event
has occurred and is continuing under the provisions of any such instrument or
agreement which with the lapse of time or the giving of notice, or both, would
constitute an event of default thereunder.
B-3
<PAGE> 49
12. Governmental Consent. No approval, consent or authorization of, or
registration, filing or declaration with or withholding of objection on the part
of, any regulatory body, state, Federal or local, is necessary in connection
with the execution and delivery by the Company of the Transaction Documents or
compliance by the Company with any of the provisions of the Transaction
Documents.
13. Taxes. All tax returns required to be filed by the Company or any
Consolidated Subsidiary in any jurisdiction have, in fact, been filed, and all
taxes, assessments, fees and other governmental charges upon the Company or any
Consolidated Subsidiary or upon any of their respective properties, income or
franchises, which are shown to be due and payable in such returns have been
paid. For all taxable years ending on or before December 31, 1994, the Federal
income tax liability of the Company has been satisfied and either the period of
limitations on assessment of additional Federal income tax has expired or the
Company has entered into an agreement with the Internal Revenue Service closing
conclusively the total tax liability for the taxable year. The Company does not
know of any proposed additional tax assessment against it for which adequate
provision has not been made on its accounts, and no material controversy in
respect of additional Federal or state income taxes due since said date is
pending or to the knowledge of the Company threatened. The provisions for taxes
on the books of the Company and its Consolidated Subsidiaries are adequate for
all open years, and for its current fiscal period.
14. Use of Proceeds. The net proceeds from the sale of the Notes will
be used by the Company for general corporate purposes. None of the transactions
contemplated in the Agreement (including, without limitation thereof, the use of
proceeds from the issuance of the Notes) will violate or result in a violation
of Section 7 of the Exchange Act, or any regulation issued pursuant thereto,
including, without limitation, Regulations U, T and X of the Board of Governors
of the Federal Reserve System, 12 C.F.R., Chapter II. The Company is not engaged
principally, or as one of its important activities, in the business of extending
credit for the purpose of purchasing or carrying any "margin stock" within the
meaning of said Regulation U. None of the proceeds from the sale of the Notes
will be used to purchase, or refinance any borrowing the proceeds of which were
used to purchase, any such margin stock.
15. Private Offering. Neither the Company, directly or indirectly, nor
any agent on its behalf has offered or will offer the Notes or has solicited or
will solicit an offer to acquire the Notes from or has otherwise approached or
negotiated or will approach or negotiate in respect of the Notes with any Person
other than the Purchaser. Neither the Company, directly or indirectly, nor any
agent on its behalf has offered or will offer the Notes or any similar Security
or has solicited or will solicit an offer to acquire the Notes or any similar
Security from any Person so as to bring the issuance and sale of the Notes
within the provisions of Section 5 of the Securities Act. When issued the Notes
will not be of the same class as Securities listed on a national securities
exchange registered under Section 6 of the Exchange Act, or quoted in a U.S.
automated inter-dealer quotation system, and will not be convertible or
exchangeable into any such Securities.
16. ERISA. The consummation of the transactions provided for in the
Transaction Documents and compliance by the Company with the provisions thereof
will not involve any
B-4
<PAGE> 50
non-exempt prohibited transaction within the meaning of Section 406(a) of ERISA
or Sections 4975(c)(1)(A)-(D) of the Code. Neither the Company nor any ERISA
Affiliate has heretofore, is presently or presently intends to, contribute to,
maintain or establish, any Plan subject to the minimum funding requirements of
Section 302 of ERISA or Section 412 of the Code. Neither the Company nor any
ERISA Affiliate has any contingent liability with respect to any post-retirement
"welfare benefit plan" (as such term is defined in ERISA) except as has been
disclosed to the Purchaser. The representation by the Company in the first
sentence of this paragraph 15 is made in reliance upon and subject to the
accuracy of the representation in SECTION 3.2 as to the sources of the funds
used to pay the Purchase Price.
17. Compliance with Law. Neither the Company nor any Consolidated
Subsidiary (a) is in violation of any law, ordinance, franchise, governmental
rule or regulation to which it is subject; or (b) has failed to obtain any
license, permit, registration, consent, franchise or other governmental
authorization necessary to the ownership of its property or to the conduct of
its business, which violation or failure to obtain would materially adversely
affect the business, profits, properties or condition (financial or otherwise)
of the Company and its Consolidated Subsidiaries, taken as a whole, or impair
the ability of the Company to perform its obligations contained in the
Transaction Documents. Neither the Company nor any Consolidated Subsidiary is in
default with respect to any order of any court or governmental authority or
arbitration board or tribunal.
18. Compliance with Environmental Laws. The Company is not in
violation of any applicable Federal, state, or local laws, statutes, rules,
regulations or ordinances relating to public health, safety or the environment,
including, without limitation, relating to releases, discharges, emissions or
disposals to air, water, land or ground water, to the withdrawal or use of
ground water, to the use, handling or disposal of polychlorinated biphenyls
(PCB's), asbestos or urea formaldehyde, to the treatment, storage, disposal or
management or hazardous substances (including, without limitation, petroleum,
crude oil or any fraction thereof, or other hydrocarbons), pollutants or
contaminants, or to exposure to toxic, hazardous or other controlled, prohibited
or regulated substances, which violation could have a material adverse effect on
the business, profits, properties or condition (financial or otherwise) of the
Company and its Consolidated Subsidiaries, taken as a whole. The Company does
not know of any liability or class of liability of the Company or any Subsidiary
under the Comprehensive Environmental Response, Compensation and Liability Act
of 1980, as amended (42 U.S.C. Section 9601 et seq.), or the Resource
Conservation and Recovery Act of 1976, as amended (42 U.S.C. Section 6901 et
seq.).
19. Foreign Assets Control Regulations, etc. Neither the sale of the
Notes by the Company hereunder nor its use of the proceeds thereof will violate
the Trading with the Enemy Act, as amended, or any of the foreign assets control
regulations of the United States Treasury Department (31 CFR, Subtitle B,
Chapter V, as amended) or any enabling legislation or executive order relating
thereto.
B-5
<PAGE> 51
20. Issuance Sale and Delivery of the Notes. The issuance, sale and
delivery of the Notes to the Purchaser under the circumstances contemplated by
this Agreement do not, under existing law, require the registration of the Notes
under the Securities Act.
B-6
<PAGE> 52
ALLIED CAPITAL CORPORATION
SUBSIDIARIES OF THE COMPANY
1. CONSOLIDATED SUBSIDIARIES
<TABLE>
<CAPTION>
PERCENTAGE OF VOTING STOCK
JURISDICTION OF OWNED BY COMPANY AND
NAME OF SUBSIDIARY INCORPORATION EACH OTHER SUBSIDIARY
<S> <C> <C>
Allied Investment Corporation Maryland 100%
Allied Investment Holdings LLC Delaware 100%
Allied Capital SBLC Corporation Maryland 100%
Allied Capital SBLC Holdings LLC Delaware 100%
Allied Capital Holdings LLC Delaware 100%
Allied Capital REIT, Inc. Maryland 100%
Allied Capital Property LLC Delaware 100%
Allied Capital Equity LLC Delaware 100%
9586 I-25 East Frontage Road, Delaware 100%
Longmont, CO 80504 LLC
Allied Capital Beteiligungs Beratung Republic of Germany 100%
GmbH
</TABLE>
2. UNCONSOLIDATED SUBSIDIARIES
<TABLE>
<CAPTION>
PERCENTAGE OF VOTING STOCK
JURISDICTION OF OWNED BY COMPANY AND
NAME OF SUBSIDIARY INCORPORATION EACH OTHER SUBSIDIARY
<S> <C> <C>
Allied Capital CMT, Inc. Delaware 100%
Allied Capital Commercial Mortgage Delaware 100%
Trust 1998-1
Allied Capital Germany Fund LLC Delaware 100%
Allied Capital Syndication LLC Delaware 100%
Allied Capital Funding LLC Delaware 100%
</TABLE>
ANNEX A
(to Exhibit B)
<PAGE> 53
DESCRIPTION OF DEBT AND CAPITALIZED LEASES AS OF JUNE 30, 2000
<TABLE>
<CAPTION>
DEBT OF COMPANY
AND CONSOLIDATED OBLIGOR
SUBSIDIARIES BALANCE COMPANIES COLLATERAL
<S> <C> <C> <C>
Revolving line of credit $231,000,000 ACC None
Master loan and security 0 ACC Commercial Mortgage
agreement Loans
Unsecured long-term notes 419,000,000 ACC None
OPIC loan 5,700,000 ACC None
$655,700,000
============
DEBT OF
CONSOLIDATED SUBSIDIARIES
SBA debentures $70,650,000 AIC None
Mortgage loan 2,527,802 Allied Capital Office Building
--------- Equity LLC
$73,177,802
===========
</TABLE>
----------------------------------------------
ACC -- the Company
AIC -- Allied Investment Corporation
ANNEX B
(to Exhibit B)
<PAGE> 54
DESCRIPTION OF CLOSING OPINION
OF COUNSEL FOR THE COMPANY
The closing opinion of Sutherland Asbill & Brennan, LLP, counsel for the
Company, called for by SECTION 4.1 of this Agreement, shall be dated the Closing
Date and addressed to the Purchaser, shall be satisfactory in form and substance
to the Purchaser and shall be to the effect that:
1. The Company is a corporation, duly incorporated, validly
existing and in good standing under the laws of the State of Maryland and
has the full corporate power and the corporate authority to conduct the
activities in which it is now engaged and is duly licensed or qualified
and is in good standing as a foreign corporation in the States of
California and Illinois and the District of Columbia.
2. The Company has the corporate power and the corporate
authority to execute and perform each Transaction Document and to issue
the Notes.
3. Each of the Transaction Documents has been duly authorized
by all necessary corporate action on the part of the Company, has been
duly executed and delivered by the Company and constitutes the legal,
valid and binding obligation of the Company enforceable in accordance
with its terms, subject to bankruptcy, insolvency, fraudulent conveyance
or similar laws affecting creditors' rights generally, and general
principles of equity (regardless of whether the application of such
principles is considered in a proceeding in equity or at law).
4. No approval, consent or withholding of objection on the
part of, or filing, registration or qualification with, any governmental
body, Federal or state, is necessary in connection with the execution and
delivery of any Transaction Document.
5. The issuance and sale of the Notes and the execution,
delivery and performance by the Company of the Transaction Documents will
not violate any provisions of any law or any order of any court or
governmental authority or agency and do not conflict with or result in
any breach of any of the provisions of or constitute a default under the
provisions of the Articles of Incorporation or By-laws of the Company or
any agreement or other instrument identified on Schedule A attached
hereto to which the Company is a party or by which the Company may be
bound or result in the creation or imposition of any Lien upon any of the
property of the Company.
6. To the knowledge of such counsel, there are no actions,
suits or proceedings pending or threatened against or affecting the
Company or any Consolidated Subsidiary in any court or before any
governmental authority or arbitration board or tribunal as to which
disclosure is required to be made in any report required to be filed with
the Commission.
EXHIBIT C
(to Note Agreement)
<PAGE> 55
7. The issuance, sale and delivery of the Notes to the
Purchaser under the circumstances contemplated by this Agreement do not,
under existing law, require the registration of the Notes under the
Securities Act or the qualification of an indenture under the Trust
Indenture Act of 1939, as amended.
In rendering the opinion set forth in paragraph 1 above, Sutherland
Asbill & Brennan, LLP may rely solely upon an examination of the Charter of the
Company certified by, and a certificate of good standing of the Company from,
the State Department of Assessments and Taxation of the State of Maryland and
the By-laws of the Company.
The opinion of Sutherland Asbill & Brennan, LLP shall cover such other matters
relating to the sale of the Notes as the Purchaser may reasonably request. With
respect to matters of fact on which such opinion is based, such counsel shall be
entitled to rely on appropriate certificates of public officials and officers of
the Company.
C-2
<PAGE> 56
August 31, 2000
Banc of America Securities LLC
600 Montgomery Street
San Francisco, California 91444
Ladies and Gentlemen:
1. Introduction. This agreement (the "FORWARD ISSUANCE AGREEMENT") confirms
our agreement with you ("BAS") relating to the issuance and sale of debt, equity
or other securities (the "SECURITIES") of Allied Capital Corporation, a Maryland
corporation (the "Company"), in one or more public or private offerings and
certain related matters.
2. Issuance. (a) The Company shall designate by written notice to BAS one
or more target dates (each, a "TARGETED ISSUANCE DATE") during the 24-month
period following the date hereof and ending on August 31, 2002 (the "ISSUANCE
PERIOD") for the issuance and sale (an "ISSUANCE") by BAS, as principal or
agent, of a number or amount of Securities (the "OFFERED SECURITIES" with
respect to such Issuance) having an aggregate Proceeds Amount (as defined below)
with respect to such Issuance equal to or less than the Issuance Commitment (as
defined below), and the Company agrees that it shall designate one or more
Targeted Issuance Dates so that the aggregate Proceeds Amount for all Issuances
shall equal the Initial Issuance Commitment (as defined below).
"ISSUANCE COMMITMENT" means the excess, if any, of (i) $75,000,000
(the "INITIAL ISSUANCE COMMITMENT") over (ii) the aggregate Proceeds Amount
of all Offered Securities (including any Additional Securities purchased
pursuant to Section 2(c) below) sold in any Issuance that has been
completed prior to such date.
(b) Prior to each Targeted Issuance Date, each of the Company and BAS will
cooperate with the other party and use its reasonable best efforts to market the
Offered Securities in a manner appropriate for the type of Issuance at then-
prevailing market prices. Once marketing is complete, each of the Company and
<PAGE> 57
BAS will use its reasonable best efforts to agree to the terms, including
without limitation any pricing terms, of a firm commitment underwriting
agreement, placement agreement or other similar agreement, as appropriate (the
"ISSUANCE AGREEMENT") with respect to such Offered Securities, in a form
customary for issuances of the relevant type; provided that either the Company
or BAS may decline to enter into such Issuance Agreement if it believes that
doing so might result in any violation of applicable law or regulation; and
provided further that the parties hereto agree that if the relevant Issuance is
a public offering of common stock of the Company, the Issuance Agreement will be
in substantially the form of the Underwriting Agreement, dated as of March 15,
1999 between the Company and BAS (the "UNDERWRITING AGREEMENT"), with such
changes as the Company and BAS shall agree, and that if the relevant Issuance is
not a public offering of common stock of the Company, the parties hereto will
negotiate the form of the Issuance Agreement in good faith, using the relevant
provisions of the Underwriting Agreement as a starting point.
(c) If the Offered Securities to be sold in any Issuance are of a type for
which it is customary or appropriate, in the judgment of BAS, that the
underwriters, placement agents, initial purchasers or similar parties, as the
case may be, be granted an overallotment option, then in the Issuance Agreement
with respect to such Issuance, the Company will grant to BAS the right to
purchase as principal at the Purchase Price (as defined below) or sell as agent,
as appropriate, a number or amount of additional Offered Securities (the
"ADDITIONAL SECURITIES") not to exceed 15% of the Offered Securities to be sold
in such Issuance.
(d) Subject to Section 2(e) below, if the Issuance involves a purchase by
BAS as principal, the purchase price per Offered Security (the "PROCEEDS
AMOUNT") to be paid by BAS to the Company pursuant to any Issuance Agreement
shall be equal to a price representing a discount, negotiated in good faith by
the Company and BAS based on prevailing market rates for underwriting or
placement commissions for securities similar to such Offered Securities in
offerings similar to such Issuance, to the price at which each Offered Security
is initially to be offered to investors (the "OFFERING PRICE"). Subject to
Section 2(e) below, if the Issuance involves a sale by BAS as agent, the Company
shall pay a commission to BAS, negotiated in good faith by the Company and BAS
based on prevailing market rates for underwritings or placement commissions for
securities similar to the Offered Securities in offerings similar to such
Issuance (in which case the "Proceeds Amount" shall be the Offering Price less
the per-security amount of such commission).
(e) Any Issuances hereunder will be sole lead managed or sole book managed
by BAS; however the Company and BAS may mutually agree to include
2
<PAGE> 58
one or more other broker-dealers as co-managing underwriters or placement
agents for any Issuance.
3. Shelf Registration. The Company has prepared and filed with the
Securities and Exchange Commission a registration statement on Form N-2
("REGISTRATION STATEMENT") relating to the offer and sale of certain Securities,
with a proposed aggregate public offering price equal to at least $75,000,000,
on a continuous or delayed basis pursuant to Rule 415 under the Securities Act
of 1933, as amended (the "SECURITIES ACT"). The Company shall use its reasonable
best efforts to (i) if necessary, cause the Registration Statement to become
effective under the Securities Act, as amended as soon as practicable after such
filing and (ii) keep the Registration Statement, or another registration
statement relating to the offer and sale of Securities filed with the Securities
and Exchange Commission, effective with unused capacity at least equal to 115%
of the Issuance Commitment on and around each Target Issuance Date.
4. Termination. This Forward Issuance Agreement will terminate on the
earliest of (i) the date on which the Issuances contemplated hereby are
completed, (ii) the last day of the Issuance Period, (iii) any Remarketing
Settlement Date (as defined in the Note Agreement, dated the date hereof,
between the Company and Intrepid Funding Master Trust (the "NOTE AGREEMENT")) on
which Replacement Notes (as defined in the Note Agreement) are issued and (iv)
the date all Notes (as defined in the Note Agreement) have been prepaid pursuant
to Section 2.2 of the Note Agreement.
5. Fees upon Prepayment. Upon any prepayment of the Notes pursuant to
Section 2.2 of the Note Agreement, the Company shall pay to BAS a fee equal to
0.5% of the principal amount of the Notes prepaid.
6. Expenses. Except as otherwise provided in each Issuance Agreement, all
costs and expenses (including any fees, disbursements and expenses of counsel)
incurred in connection with this Forward Issuance Agreement and the Issuances
contemplated hereby shall be paid by the party incurring such expenses.
7. Governing Law. This Forward Issuance Agreement shall be governed by and
construed in accordance with the substantive law of the State of New York.
8. Binding Obligation; Reasonable Best Efforts. It is understood that this
Forward Issuance Agreement constitutes a legally binding obligation of the
parties hereto. The parties agree to use their reasonable best efforts to take,
or
3
<PAGE> 59
cause to be taken, all actions and to do, or cause to be done, all things
necessary to consummate the transactions contemplated by this Forward Issuance
Agreement.
9. Counterparts. This Forward Issuance Agreement may be signed in any
number of counterparts, each of which shall be an original, with the same effect
as if the signatures thereto and hereto were upon the same instrument.
4
<PAGE> 60
Please confirm your agreement with the foregoing by signing and returning a
copy of this Forward Issuance Agreement to the undersigned.
Very truly yours,
ALLIED CAPITAL CORPORATION
By: /s/ Kelly A. Anderson
--------------------------------------
Name: Kelly A. Anderson
Title: Treasurer and Executive Vice
President
Accepted and Agreed as of
the date first above written:
BANC OF AMERICA SECURITIES LLC
By: /s/ William C. Caccamise
-------------------------------
Name: William C. Caccamise
Title: Managing Director
<PAGE> 61
REMARKETING AND CONTINGENT PURCHASE
AGREEMENT
between
ALLIED CAPITAL CORPORATION
and
BANC OF AMERICA SECURITIES LLC
Dated as of August 31, 2000
<PAGE> 62
REMARKETING AND CONTINGENT PURCHASE AGREEMENT
REMARKETING AND CONTINGENT PURCHASE AGREEMENT dated as of August 31, 2000
by and between Allied Capital Corporation, a Maryland corporation (the
"COMPANY"), and Banc of America Securities LLC, as remarketing agent (the
"REMARKETING AGENT").
WITNESSETH:
WHEREAS, the Company shall issue $75,000,000 aggregate principal amount of
Auction Rate Reset Senior Notes Series A (the "NOTES");
WHEREAS, upon the occurrence of a Trigger Event (as defined herein), the
Notes may be remarketed in accordance with the terms hereof;
WHEREAS, the Company has requested that Banc of America Securities LLC
("BAS") act as the Remarketing Agent and, as such, perform the duties described
herein; and
WHEREAS, BAS is willing to act as Remarketing Agent and, as such, to
perform such duties on the terms and conditions expressly set forth herein;
NOW, THEREFORE, in consideration of the covenants herein made, and subject
to the conditions herein set forth, the parties hereto agree as follows:
SECTION 1. Definitions. Capitalized terms used and not defined in this
Agreement shall have the meanings assigned to them in the Note Agreement. In
addition, as used in this Agreement, the following terms shall have the
following definitions:
"AFFILIATED BIDDER" has the meaning set forth in Section 5(b).
"ASSOCIATED PERSON" has the meaning set forth in Article 1(ee) of the By-
Laws of the National Association of Securities Dealers, Inc.
"BAS" has the meaning set forth in the fourth recital hereto.
"BID" means an irrevocable offer to purchase at the Remarketing Price the
aggregate outstanding principal amount of Notes with an interest rate equal to
the Bid Rate specified in such Bid and with a maturity date on the Remarketed
Maturity Date.
"BID RATE" means the proposed interest rate on Notes specified in a Bid.
<PAGE> 63
"BUSINESS DAY" means any day other than a Saturday, Sunday or other day on
which banking institutions in The City of New York are authorized or required by
law, regulation or executive order to close.
"CHANGE OF CONTROL" shall be deemed to have occurred if (i) any Person or
group of Persons (within the meaning of Section 13 or 14 of the Exchange Act)
shall have acquired beneficial ownership (within the meaning of Rule 13d-3 of
the Exchange Act) of 30% or more of the Voting Stock of the Company or (ii)
during any twelve-month period (commencing on or after the date hereof), a
majority of the Board of Directors of the Company shall no longer be composed of
individuals (A) who were members of such Board of Directors on the first date of
such period, (B) whose election or nomination to such Board of Directors was
approved by individuals referred to in clause (A) above constituting at the time
of such election or nomination at least a majority of such Board of Directors or
(C) whose election or nomination to such Board of Directors was approved by
individuals referred to in clauses (A) and (B) above constituting at the time of
such election or nomination at least a majority of such Board of Directors.
"COMPANY" has the meaning set forth in the initial paragraph hereto.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"EXCHANGE ACT REGULATIONS" means the rules and regulations promulgated
under the Exchange Act.
"EXPECTED RESET DATE" has the meaning set forth in Section 5(a)(i).
"FAILED REMARKETING" means an event deemed to have occurred if, following
the giving of notice by the Requesting Holders to the Remarketing Agent as
contemplated by Section 5(a)(i), the settlement of a purchase and sale of the
Notes shall not have occurred within the applicable time limit specified in this
Agreement and in any event if such a settlement shall not have occurred by the
23rd Business Day following the delivery of the related Remarketing Notice,
giving effect, if applicable, to the provisions of Section 7.
"FINAL RESET DATE" has the meaning set forth in Section 5(a)(iii).
"FORMER HOLDERS" has the meaning set forth in Section 5(f).
"FORWARD ISSUANCE AGREEMENT" means the Forward Issuance Agreement dated as
of August 31, 2000 between the Company and BAS.
2
<PAGE> 64
"INVESTMENT COMPANY ACT" means the Investment Company Act of 1940, as
amended, and all rules and regulations promulgated thereunder.
"MATERIAL ADVERSE CHANGE" means any development that could be reasonably
expected to result in a material adverse change in the business, properties or
financial condition of the Company and its subsidiaries, taken as a whole.
"1934 ACT REPORTS" has the meaning set forth in Section 2(b)(iv).
"NOTE AGREEMENT" means the Note Agreement dated as of August 31, 2000
between the Company and Intrepid Funding Master Trust, a Delaware business trust
(as the same may be amended from time to time).
"NOTES" has the meaning set forth in the first recital hereto.
"OFFERING MEMORANDUM" has the meaning set forth in Section 13.
"REFERENCE CORPORATE DEALER" means a leading dealer of publicly traded
debt securities selected by the Company, which dealer shall be a Qualified
Institutional Buyer (as defined in Rule 144A under the Securities Act) and which
shall not include BAS, its Affiliates or its Associated Persons.
"REMARKETED MATURITY DATE" means the later of (i) the first anniversary of
the Remarketing Settlement Date on which Replacement Notes are issued and (ii)
December 2, 2002.
"REMARKETING" means a remarketing of Notes pursuant to Section 5.
"REMARKETING FEE" has the meaning set forth in Section 8.
"REMARKETING NOTICE" has the meaning set forth in Section 5(a)(i).
"REMARKETING PRICE" means a price equal to 100.25% of the aggregate
outstanding principal amount of such Notes.
"REMARKETING SETTLEMENT DATE" means the third Business Day immediately
following the Reset Date.
"RENEWED REMARKETING" has the meaning set forth in Section 7.
"REPLACEMENT NOTES" has the meaning set forth in Section 5(j).
3
<PAGE> 65
"REPRESENTATION DATE" has the meaning set forth in Section 2(a).
"REQUESTING HOLDERS" has the meaning set forth in Section 5(a)(i).
"RESET DATE" means any date established as a Reset Date pursuant to
Section 5.
"RESET RATE" means the Winning Bid Rate.
"SECONDARY PURCHASE AGREEMENT" means an agreement to be dated as of the
Reset Date (or such other date permitted by applicable law) among the Company,
the Remarketing Agent and the Secondary Purchaser providing for the purchase of
the Notes by the Secondary Purchaser, in a form customary for transactions of
this type and as otherwise agreed among the Company, the Remarketing Agent and
the Secondary Purchaser.
"SECONDARY PURCHASER" has the meaning set forth in Section 5(c).
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"TRANSACTION DOCUMENTS" means this Agreement, the Note Agreement, the
Forward Issuance Agreement, the Secondary Purchase Agreement and the Notes;
provided that for any representation made as of the date hereof pursuant to
Section 2(b), Transaction Documents means this Agreement, the Note Agreement,
the Forward Issuance Agreement and the Notes.
"TRIGGER EVENT" has the meaning set forth in Section 5(a)(i).
"WINNING BID RATE" has the meaning set forth in Section 5(b).
SECTION 2. Representations and Warranties. (a) Basic Warranties. Each
of the Company, on the one hand, and the Remarketing Agent, on the other hand,
represents and warrants to the other as of the date hereof, the Reset Date and
the Remarketing Settlement Date (each of the foregoing dates being hereinafter
referred to as a "REPRESENTATION DATE") that:
(i) Status. It is a duly and validly existing entity under the
laws of the jurisdiction of its creation, formation or incorporation and,
if relevant under such laws, in good standing.
(ii) Powers. It has the corporate power and authority to execute,
enter into and perform its obligations under, or contemplated under, this
Agreement and consummate the transactions contemplated hereby.
4
<PAGE> 66
(iii) No Violation or Conflict. The execution, delivery and
performance by such party of this Agreement, the consummation of the
transactions herein contemplated and compliance by such party with its
obligations hereunder (A) do not violate or conflict with (1) any
provision of its organizational documents, (2) any law applicable to it,
any order or judgment of any court or other agency of government
applicable to it or any of its assets that affects the legality, validity
or enforceability of this Agreement and (B) do not and will not conflict
with or constitute a breach of any contractual restriction binding on or
affecting it or any of its assets.
(iv) Consents. All governmental and other consents that are
required to have been obtained by it with respect to the performance by
such party of its obligations under this Agreement have been obtained and
are in full force and effect and all conditions of any such consents have
been complied with.
(v) Obligations Binding. Its obligations under this Agreement
constitute its legal, valid and binding obligations, enforceable against
it in accordance with the terms of this Agreement, except as of the
enforcement hereof may be limited by bankruptcy, insolvency,
reorganization, moratorium or other laws of general application relating
to or affecting the enforcement of creditors' rights or by general
equitable principles.
(vi) Absence of Litigation. There is not pending or, to the best of
its knowledge, threatened against or affecting it or any of its Affiliates
any action, suit or proceeding at law or in equity or before any court,
tribunal, governmental body, agency or official or any arbitrator that
could reasonably be expected to materially and adversely affect the
legality, validity or enforceability against it of this Agreement or its
ability to perform its obligations under this Agreement.
(vii) Non-Reliance. It is acting for its own account, and it has
made its own independent decision to enter into this Agreement and as to
whether this Agreement is appropriate or proper for it based upon its own
judgment and upon advice from such advisers as it has deemed necessary. It
is not relying on any communication (written or oral) of any other party
as investment advice or as a recommendation to enter into this Agreement,
it being understood that information and explanations related to the terms
and conditions of this Agreement shall not be considered investment advice
or a recommendation to enter into this Agreement. No communication
(written or oral) received from any other party shall be deemed to be an
assurance or guarantee as to the expected results of this
5
<PAGE> 67
Agreement. No other party is acting as a fiduciary for or an adviser to it
with respect to this Agreement.
(viii) Assessment and Understanding. It is capable of assessing the
merits of and understanding (on its own behalf or through independent
professional advice), and understands and accepts, the terms, conditions
and risks of this Agreement. It is also capable of assuming, and assumes,
the risks of this Agreement.
(b) Representations and Warranties of the Company. The Company further
represents and warrants to the Remarketing Agent as of each Representation Date
that:
(i) Notes Validly Issued. The Notes have been, and the Replacement
Notes will be, validly authorized and executed by the Company and issued
and delivered against payment of the purchase price therefor in the manner
provided for in the Note Agreement, and constitute, or will constitute,
legally binding obligations of the Company.
(ii) No Event of Default. No Event of Default under the Note
Agreement has occurred and is continuing and no such event or circumstance
would occur as a result of its entering into or performing its obligations
under this Agreement.
(iii) Compliance with Exchange Act Requirements. The Company has
made all the filings with the Commission that it is required to make under
the Exchange Act and the Exchange Act Regulations and each such filing
complies in all material respects with the requirements of the Exchange
Act or the Exchange Act Regulations, as the case may be.
(iv) Compliance with Investment Company Act Requirements. The
Company is in compliance in, all material respects, with the requirements
of the Investment Company Act as applicable to the Company.
(v) No Material Misstatements. The Company's most recent Annual
Report on Form 10-K, and its Quarterly Reports on Form 10-Q and Current
Reports on Form 8-K filed after the end of the fiscal year to which such
Annual Report relates (collectively, the "1934 ACT REPORTS"), as
supplemented by material press releases, at the time they were filed did
not, and, after giving effect to the transactions contemplated by the
Transaction Documents do not, contain any untrue statement of a material
fact or omit to state a material fact necessary in order to make the
6
<PAGE> 68
statements therein, in the light of the circumstances under which they
were made, not misleading.
(vi) No Material Adverse Change. Since the respective dates as of
which information is given in the 1934 Act Reports, except as otherwise
stated therein, there has been no Material Adverse Change.
SECTION 3. Covenants. (a) The Company hereby covenants with the
Remarketing Agent as follows:
(i) Maintain Authorizations. The Company shall use all its
reasonable efforts to maintain in full force and effect all consents of
any governmental or other authority that are required to be obtained by it
with respect to this Agreement and shall use all its reasonable efforts to
obtain any such consents that may become necessary in the future.
(ii) Comply with Laws. The Company shall comply in all material
respects with all applicable laws and orders to which it may be subject if
failure so to comply would materially impair its ability to perform its
obligations under this Agreement.
(iii) Furnish Documentation. The Company will furnish to the
Remarketing Agent: (i) unless available to the Remarketing Agent on EDGAR
or the Company's website, each document filed after the date hereof by the
Company pursuant to the periodic reporting requirements of the Exchange
Act and (ii) in connection with the remarketing of the Notes, such other
information as the Remarketing Agent may reasonably request from time to
time. Notwithstanding the foregoing sentence, the Company agrees to
provide the Remarketing Agent with as many copies of the foregoing written
materials and other Company-approved information as the Remarketing Agent
may reasonably request for use in connection with the remarketing of the
Notes, as the case may be, and consents to the use thereof for such
purpose.
(iv) Notification. If, at any time prior to the Remarketing
Settlement Date, any event or condition known to the Company relating to
or affecting the Company or the Notes shall occur that could reasonably be
expected to cause any of the reports, documents, materials or information
referred to in Section 3(a)(iii) or any document incorporated therein by
reference to contain an untrue statement of a material fact or omit to
state a material fact, the Company shall promptly notify the Remarketing
Agent in writing of the then-known circumstances and details of such event
or condition.
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(v) Comply with Securities Laws. The Company will comply with the
Securities Act and the rules and regulations of the Commission thereunder,
the Exchange Act and the Exchange Act Regulations and the Investment
Company Act as applicable to the Company so as to permit the completion of
the remarketing of the Notes, as contemplated in this Agreement.
(vi) No Purchase of Notes. The Company agrees that neither it nor
any of its subsidiaries or Affiliates shall purchase or otherwise acquire,
or enter into any agreement to purchase or otherwise acquire, any of the
Notes prior to the remarketing thereof by the Remarketing Agent, other
than pursuant to either this Agreement or the Note Agreement.
(vii) Notification of Rating Agency Action. The Company will
provide prompt notice by telephone, confirmed in writing (which may
include facsimile or other electronic transmission), to the Remarketing
Agent of any notification or announcement by a "nationally recognized
statistical rating organization" (as defined by the Commission for
purposes of Rule 436(g)(2) under the Securities Act) with regard to a
downgrade or withdrawal of the rating of any security of the Company or
the placement on what is currently called a "watch list" or a "credit
watch" with negative implications of any security of the Company.
(viii) Restriction on Debt Issuance. During the period commencing on
the date on which the Remarketing Agent delivers a Remarketing Notice in
accordance with Section 5(a)(i) and ending on the earlier of (A) the date
of the related Remarketing Settlement Date or (B) the date of the related
Failed Remarketing, the Company will not, without the consent of the
Remarketing Agent, offer, sell or contract to sell, or otherwise dispose
of, directly or indirectly, or announce the offering of, any debt
securities with a maturity of more than one year but fewer than 2 years.
(ix) Reasonable Efforts. The Company shall use all its reasonable
efforts to assist the Remarketing Agent in remarketing the Notes in the
manner contemplated by this Agreement.
(b) The Remarketing Agent hereby covenants with the Company as follows:
(i) Maintain Authorizations. The Remarketing Agent will use all
its reasonable efforts to maintain in full force and effect all consents
of any governmental or other authority that are required to be obtained by
it
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with respect to this Agreement and shall use all its reasonable efforts to
obtain any that may become necessary in the future.
(ii) Comply with Laws. The Remarketing Agent shall comply in all
material respects with all applicable laws and orders to which it may be
subject if failure so to comply would materially impair its ability to
perform its obligations under this Agreement.
SECTION 4. Appointment and Obligations of Remarketing Agent and
Calculation Agent; Secondary Purchaser. (a) The Company hereby appoints BAS as
Remarketing Agent and as Calculation Agent (i) to determine, in accordance with
the terms described in Section 5(b), the Reset Rate that, when applied to the
Notes, shall result in the resale of all outstanding Notes, at a sales price
equal to the Remarketing Price; provided that the Reset Rate shall in no event
exceed the rate permitted by applicable law, (ii) to conduct a private auction
of all outstanding Notes and (iii) to enter into a Secondary Purchase Agreement
with respect to the Notes. BAS hereby accepts its appointment as Remarketing
Agent and Calculation Agent.
(b) Pursuant to the Secondary Purchase Agreement, the Secondary
Purchaser, either as the sole purchaser or as the representative of a syndicate
of purchasers designated by the Secondary Purchaser, shall agree, subject to the
terms and conditions set forth therein, that the Secondary Purchaser and any
such other purchasers shall purchase such Notes from the Holders thereof at a
price equal to the Remarketing Price.
SECTION 5. Determination of Reset Date; Remarketing Procedures.
(a) (i) Subject to Section 7, if
A) Default shall occur in the observance or performance of any
covenant or agreement contained in Section 5.6, Section 5.7 or
Section 5.8 of the Note Agreement (as in effect on the date
hereof); or
B) the Company fails to maintain one or more committed bank
revolving credit facilities having an aggregate committed
amount (whether or not utilized) of at least $200,000,000,
(each, a "TRIGGER EVENT"), the Holders of a majority in principal amount
of the Notes, acting together as a single class (the "REQUESTING
HOLDERS"), will have the right to require remarketing of the Notes. The
Requesting Holders may exercise this right by delivering a written notice
to the
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Remarketing Agent at any time on or prior to the sixth Business Day
following the date on which such Trigger Event occurs. Upon the receipt of
such notice, the Remarketing Agent shall immediately deliver a written
notice to the Company on behalf of the Requesting Holders (the
"REMARKETING NOTICE"). If the Requesting Holders exercise their right to
require the remarketing of the Notes, the Reset Date shall be the sixth
Business Day after the date on which the Remarketing Notice is delivered
by the Remarketing Agent (the "EXPECTED RESET DATE").
(ii) If the Requesting Holders do not exercise their right to
require the remarketing of the Notes pursuant to Section 5(a)(i) above
with respect to any Trigger Event, the Requesting Holders shall continue
to have the right to require the remarketing of the Notes in accordance
with Section 5(a)(i) with respect to any subsequent Trigger Event.
(iii) Notwithstanding Section 5(a)(i):
(A) the Company may, by notice to the Remarketing Agent,
direct that the Reset Date be delayed if the Company believes it
will be unable to meet the conditions to Remarketing in the absence
of such a delay; and
(B) the Remarketing Agent may, by notice to the Company,
direct that the Reset Date be delayed if the Remarketing Agent
believes that a Remarketing will not be successful in the absence of
such a delay;
provided that the Company and the Remarketing Agent, in either such event,
will use their reasonable efforts to establish a delayed Reset Date that
is within five Business Days after the Expected Reset Date, but in no
event later than the 15th Business Day following the date on which the
related Remarketing Notice was delivered, or the 20th Business Day in the
case of a Renewed Remarketing to which the provisions of Section 7 apply
(as applicable, the "FINAL RESET DATE").
(iv) If the Company and the Remarketing Agent have not agreed, on
or prior to the sixth Business Day preceding the Final Reset Date, to a
Reset Date that is not later than the Final Reset Date, a Failed
Remarketing shall be deemed to have occurred.
(b) The Company shall, by notice to the Remarketing Agent no later than
five Business Days prior to the Reset Date, select and specify at least three
but no more than six Reference Corporate Dealers. By 3:00 p.m., New York City
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time, on the Reset Date, the Remarketing Agent shall request Bids from such
Reference Corporate Dealers. The Company or an Affiliate thereof or the
Remarketing Agent or an Affiliate or Associated Person thereof (any such person,
an "AFFILIATED BIDDER") may, at its option, enter a Bid. The Remarketing Agent
shall disclose to the Company the Bids obtained and determine the lowest Bid
Rate (the "WINNING BID RATE") from among the Bids obtained on the Reset Date. By
approximately 4:30 p.m., New York City time, on the Reset Date, the Remarketing
Agent shall notify the Company of the Winning Bid Rate. If on a Reset Date, Bids
are not submitted by at least one Reference Corporate Dealer, or if the lowest
Bid submitted would result in a Winning Bid Rate in excess of the rate permitted
by applicable law, the Remarketing shall be deemed to be a Failed Remarketing on
the corresponding Remarketing Settlement Date. The Winning Bid Rate determined
by the Remarketing Agent, absent manifest error, shall be binding and conclusive
upon the Holders of the Notes and the Company.
(c) On the Reset Date, the Remarketing Agent shall designate as the
Secondary Purchaser (the "SECONDARY PURCHASER") the Reference Corporate Dealer
providing the Bid containing the Winning Bid Rate. If the Winning Bid Rate is
specified in the Bids submitted by two or more bidders, the Remarketing Agent
shall, in consultation with the Company, designate one of such bidders as the
Secondary Purchaser.
(d) On the Reset Date, the Secondary Purchaser shall enter into a
Secondary Purchase Agreement for the purchase by such Secondary Purchaser at the
Remarketing Price of the aggregate principal amount of Notes with (i) an
interest rate equal to the Winning Bid Rate and (ii) a maturity date on the
Remarketed Maturity Date.
(e) If a Remarketing shall have occurred pursuant to this Section 5 but
settlement of the purchase and sale of the Notes does not occur on the
corresponding Remarketing Settlement Date, then, unless the provisions of
Section 7 with respect to a Renewed Remarketing shall apply, a Failed
Remarketing shall be deemed to have occurred on such Remarketing Settlement
Date.
(f) At the time and in the manner specified in the Secondary Purchase
Agreement, the Secondary Purchaser shall pay on the Remarketing Settlement Date
to the Remarketing Agent for the benefit of the holders of the remarketed Notes
(the "FORMER HOLDERS") an amount of cash equal to the Remarketing Price.
(g) Unless otherwise agreed between the Remarketing Agent and any Former
Holder, the Remarketing Agent shall promptly pay the Remarketing Price, less the
Remarketing Fee, to the Former Holders on the Remarketing Settlement Date in the
manner specified in the Note Agreement.
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(h) The obligation of the Remarketing Agent to make payment to the
Former Holders in connection with the Remarketing shall be limited to the extent
that the Secondary Purchaser has delivered the Remarketing Price therefor to the
Remarketing Agent.
(i) Any outstanding Notes purchased on the Remarketing Settlement Date
shall be deemed to be transferred to the Secondary Purchaser and shall be
replaced in the manner provided in Section 5(j). After the Remarketing
Settlement Date (except in the event of (i) a Failed Remarketing or (ii) failure
by the Company to pay on the Remarketing Settlement Date all accrued interest
(including any Additional Interest) on the Notes to such Remarketing Settlement
Date), (i) the Company shall make no further payments to, and the Company shall
have no further obligations under the Note Agreement in respect of the Former
Holders, (ii) the Company shall only be obligated to make payments to the
Holders of Replacement Notes and (iii) the Notes of the Former Holders shall no
longer represent an obligation of the Company but shall only represent a right
to receive the proceeds of the Remarketing from the Remarketing Agent under the
Note Agreement.
(j) (i) The Company shall cause replacement certificates evidencing the
Notes (the "REPLACEMENT NOTES") to be executed by an authorized signatory. If
the Notes are to be purchased on the Remarketing Settlement Date, the
Replacement Notes shall be delivered to the purchaser of the remarketed Notes in
accordance with the terms of the Secondary Purchase Agreement.
SECTION 6. Reset of Interest Rate and Maturity Date. From and including
the Remarketing Settlement Date on which Replacement Notes are issued, (a) the
interest rate on the Notes shall be the Winning Bid Rate and (b) the maturity
date of the Notes shall be the Remarketed Maturity Date.
SECTION 7. Renewed Remarketing. If a Remarketing has occurred pursuant to
Section 5 that would be a Failed Remarketing pursuant to Section 5(e), because
the purchase and sale of the Notes do not take place on the corresponding
Remarketing Settlement Date, and the reason for such failure shall, in the good
faith determination of the Remarketing Agent, result from facts or circumstances
that are not due to the action or inaction of the Company, then the provisions
of Section 5 shall apply to a second remarketing (a "RENEWED REMARKETING") of
the Notes, except that the Expected Reset Date shall be the sixth Business Day
following such corresponding Remarketing Settlement Date; provided that only one
Renewed Remarketing may occur pursuant to this Section 7, and no Renewed
Remarketing shall occur after the Final Reset Date.
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SECTION 8. Remarketing Fee. With respect to the Remarketing, the
Remarketing Agent shall retain as a remarketing fee (the "REMARKETING FEE") an
amount equal to 25 basis points (0.25%) of the aggregate principal amount of the
Notes from the purchase price received in connection with such Remarketing.
SECTION 9. Failed Remarketing; Contingent Purchase Obligation. The
Remarketing Agent shall give notice of any Failed Remarketing on the date such
Failed Remarketing occurs, or is deemed to have occurred, by 4:00 p.m., New York
City time, to the Company. In the case of (i) any Failed Remarketing or (ii) a
Change of Control, the Holders of a majority in principal amount of the Notes
may, by notice in writing to the Company, which notice, in the case of a Failed
Remarketing, shall be given not later than 15 days after the occurrence of such
Failed Remarketing, require the Company to purchase from the Holders thereof all
outstanding Notes for a purchase price equal to the aggregate principal amount
of such Notes plus accrued but unpaid interest thereon. For the avoidance of
doubt, in the event of a Renewed Remarketing pursuant to Section 7, Holders may
not require the Company to make such purchase unless and until such Renewed
Remarketing results in a Failed Remarketing. Payment of the purchase price shall
be made directly to each such Holder on the tenth Business Day following the
date of the notice to the Company pursuant to the preceding sentence. Such
purchase shall be without recourse of any kind to any such Holder. The parties
recognize that the occurrence of a Failed Remarketing indicates that it would
not be commercially reasonable under the circumstances to require Holders of the
Notes to attempt to resell such Notes otherwise than pursuant to this Section 9,
and that therefore in the event of any default by the Company in its obligations
under this Section 9, a Holder shall be entitled to recover the price of the
Notes specified herein.
SECTION 10. Senior Obligations. The obligations of the Company hereunder
constitute senior unsecured obligations, and shall rank pari passu with all
other senior unsecured obligations of the Company.
SECTION 11. Replacement and Resignation of Remarketing Agent. (a)
The Company shall not have the right to replace BAS as the Remarketing Agent,
except in the case of bad faith, gross negligence or willful misconduct by BAS.
(b) BAS may resign at any time for good reason (after consultation with
the Company) and, subject to the following sentence, shall be discharged from
its duties and obligations hereunder or as Calculation Agent by giving no less
than 10 days' notice. Any such resignation shall become effective upon the
Company's appointment of a successor to perform the services that would
otherwise be performed hereunder by the Remarketing Agent or the Calculation
Agent, and the agreement of any such successor so to serve. Upon receiving
notice from the
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Remarketing Agent that it wishes to resign hereunder or as Calculation Agent
stating the reasons for such resignation, the Company shall appoint, and enter
into a new remarketing agreement with, such a successor as soon as reasonably
practicable.
(c) This Agreement shall terminate as to any Remarketing Agent that is
replaced on the effective date of its replacement pursuant to Section 11(b).
Notwithstanding any such termination, the obligations of the Company set forth
in Section 15 shall survive and remain in full force and effect until all
amounts payable under said Section 15 shall have been paid in full.
SECTION 12. Dealing in the Notes. BAS, when acting as Remarketing Agent
hereunder or under the Secondary Purchase Agreement or when acting in its
individual or any other capacity, may, to the extent permitted by law, buy,
sell, hold or deal in any of the Notes. The Remarketing Agent may exercise any
vote or join in any action with respect to any Notes owned by it with like
effect as if it did not act in any capacity hereunder. BAS, in its individual
capacity, either as principal or agent, may also engage in or have an interest
in any financial or other transaction with the Company as freely as if it did
not act in any capacity hereunder.
SECTION 13. Offering Memorandum. Promptly following a Trigger Event, the
Company shall furnish an offering memorandum (the "OFFERING MEMORANDUM") to the
Remarketing Agent, in form and substance reasonably satisfactory to the
Remarketing Agent, to be used in the remarketing by the Secondary Purchaser or
purchasers under the Secondary Purchase Agreement, and shall pay all expenses
relating to the preparation and furnishing of such Offering Memorandum.
SECTION 14. Conditions to the Remarketing Agent's Obligations. (a) The
obligations of the Remarketing Agent, the Secondary Purchaser and any other
purchasers to perform their respective obligations hereunder and under the
Secondary Purchase Agreement shall be subject to the terms and conditions of the
Secondary Purchase Agreement.
(b) If at any time during the term of this Agreement, any Event of
Default under the Note Agreement, or event that with the passage of time or the
giving of notice or both would become an Event of Default under the Note
Agreement, has occurred and is continuing under the Note Agreement, then the
obligations and duties of the Remarketing Agent under this Agreement shall be
suspended until such default or event has been cured. The Company shall notify
the Remarketing Agent of all such defaults and events.
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SECTION 15. Indemnification. The Company shall indemnify and hold harmless
the Remarketing Agent and its officers and employees from and against all
actions, claims, damages, liabilities and losses, and costs and expenses related
thereto (including reasonable legal fees and costs) relating to or arising out
of actions or omissions in any capacity hereunder and in any capacity as
Calculation Agent, except actions, claims, damages, liabilities, losses, costs
and expenses to the extent caused by (a) the bad faith, gross negligence or
wilful misconduct of such indemnified party or (b) the breach by the Remarketing
Agent of its representations, warranties and covenants hereunder. This Section
15 shall survive the termination of this Agreement and the Note Agreement and
the payment in full of all obligations under the Notes and this Agreement,
whether by purchase, repurchase, redemption or otherwise.
SECTION 16. Remarketing Agent's Performance: Duty of Care; Power of
Attorney. The duties and obligations of the Remarketing Agent hereunder shall be
determined solely by the express provisions of this Agreement and the Secondary
Purchase Agreement.
The Remarketing Agent hereby accepts the obligation set forth in the Note
Agreement to act as attorney-in-fact for the Holders of the Notes.
SECTION 17. Expenses. The Company shall pay the reasonable fees and
disbursements of the Remarketing Agent and its counsel incurred in connection
with any remarketing, including any Renewed Remarketing and any Failed
Remarketing and the Company shall pay the reasonable fees, expenses and
disbursements of the Remarketing Agent and its counsel in connection with the
execution and delivery of the Secondary Purchase Agreement.
SECTION 18. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York without reference
to the choice of law rules thereof.
SECTION 19. Term of Agreement. Unless otherwise terminated in accordance
with the provisions hereof and except as otherwise provided herein, this
Agreement shall remain in full force and effect from the date hereof until 30
days after the earlier of (i) the date all Notes shall have been redeemed or
purchased pursuant to Section 9 hereof and (ii) the Reset Date in connection
with a Remarketing that is not a Failed Remarketing.
SECTION 20. Successors and Assigns. The rights and obligations of the
Company hereunder may not be assigned or delegated to any other person without
the prior written consent of the Remarketing Agent. Subject to the provisions of
Section 11, the rights and obligations of the Remarketing Agent hereunder may
not be assigned or delegated to any other person without the prior written
consent
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of the Company. This Agreement shall inure to the benefit of and be binding upon
the Company and the Remarketing Agent and their respective successors and
assigns. The terms "successors" and "assigns" shall not include any purchaser of
Notes merely as a result of such purchase. This Agreement shall inure to the
benefit of the Holders of the Notes.
SECTION 21. Headings. Section headings have been inserted in this
Agreement as a matter of convenience of reference only, and it is agreed that
such section headings are not a part of this Agreement and shall not be used in
the interpretation of any provision of this Agreement.
SECTION 22. Severability. If any provision of this Agreement shall be held
or deemed to be or shall, in fact, be invalid, inoperative or unenforceable as
applied in any particular case in any or all jurisdictions because it conflicts
with any provisions of any constitution, statute, rule or public policy or for
any other reason, such circumstances shall not have the effect of rendering the
provision in question invalid, inoperative or unenforceable in any other case,
circumstances or jurisdiction, or of rendering any other provision or provisions
of this Agreement invalid, inoperative or unenforceable to any extent
whatsoever.
SECTION 23. Counterparts. This Agreement may be executed in counterparts,
each of which shall be regarded as an original and all of which shall constitute
one and the same document.
SECTION 24. Amendments. This Agreement may be amended by any instrument in
writing signed by the parties hereto; provided that any amendment to Section 5
shall require the consent of all Holders of the Notes.
SECTION 25. Notices. Unless otherwise specified, any notices, requests,
consents or other communications given or made hereunder or pursuant hereto
shall be made in writing or transmitted by any standard form of
telecommunication, including telephone, telegraph or telecopy, and confirmed in
writing. All written notices and confirmations of notices by telecommunication
shall be deemed to have been validly given or made when delivered or mailed,
registered or certified mail, return receipt requested and postage prepaid. All
such notices, requests, consents or other communications shall be addressed as
follows:
if to the Company, to:
Allied Capital Corporation
1919 Pennsylvania Avenue, N. W.
3rd Floor
Washington, D.C. 20006
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Attention: Kelly A. Anderson, Treasurer
Facsimile: 202-973-6328
and if to the Remarketing Agent, to:
Banc of America Securities LLC
9 West 57th Street
New York, NY 10019
Facsimile: (212) 847-5124
Attention: William Caccamise
Facsimile: 212-847-5124
or to such other address as any of the above shall specify to the other in
writing.
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IN WITNESS WHEREOF, each of the Company and the Remarketing Agent has
caused this Remarketing Agreement to be executed in its name and on its behalf
by one of its duly authorized officers as of the date first above written.
ALLIED CAPITAL CORPORATION
By: /s/ Kelly A. Anderson
---------------------------------------
Name: Kelly A. Anderson
Title: Treasurer and Executive Vice
President
Confirmed and Accepted
as of the date hereof:
BANC OF AMERICA
SECURITIES LLC, not individually,
but solely as Remarketing Agent
By: /s/ William C. Caccamise
--------------------------------
Name: William C. Caccamise
Title: Managing Director
