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EXHIBIT 10.4b
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ALLIED CAPITAL CORPORATION
NOTE AGREEMENT
Dated as of October 15, 2000
Re: $115,000,000 8.54% Senior Notes, Series A due October 15, 2005
and
$10,000,000 Floating Rate Senior Notes, Series B due October 15, 2005
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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...............................................................2
SECTION 2. PAYMENT OF NOTES.......................................................................3
Section 2.1. Required Payments......................................................................3
Section 2.2. Optional Prepayment with Premium.......................................................3
Section 2.3. Notice of Optional Prepayments.........................................................3
Section 2.4. Application of Prepayments.............................................................3
Section 2.5. Direct Payment.........................................................................4
SECTION 3. REPRESENTATIONS........................................................................4
Section 3.1. Representations of the Company.........................................................4
Section 3.2. Representations of the Purchasers......................................................4
SECTION 4. CLOSING CONDITIONS.....................................................................6
Section 4.1. Conditions.............................................................................6
Section 4.2. Waiver of Conditions...................................................................7
SECTION 5. COVENANTS..............................................................................7
Section 5.1. Corporate Existence, Etc...............................................................7
Section 5.2. Insurance..............................................................................7
Section 5.3. Taxes, Claims for Labor and Materials, Compliance with Laws............................7
Section 5.4. Maintenance, Etc.......................................................................8
Section 5.5. Nature of Business.....................................................................8
Section 5.6. Capital Maintenance....................................................................8
Section 5.7. Interest Charges Coverage Ratio........................................................8
Section 5.8. Limitations on Debt; Interest Rate Swaps...............................................8
Section 5.9. Limitation on Liens....................................................................9
Section 5.10. Restricted Payments...................................................................11
Section 5.11. Mergers, Consolidations and Sales of Assets...........................................12
Section 5.12. Repurchase of Notes...................................................................14
Section 5.13. Transactions with Affiliates..........................................................14
Section 5.14. Termination of Pension Plans..........................................................14
Section 5.15. Reports and Rights of Inspection......................................................14
</TABLE>
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<TABLE>
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SECTION 6. EVENTS OF DEFAULT AND REMEDIES THEREFOR...............................................17
Section 6.1. Events of Default.....................................................................17
Section 6.2. Notice to Holders.....................................................................18
Section 6.3. Acceleration of Maturities............................................................18
Section 6.4. Rescission of Acceleration............................................................19
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.........................................................20
SECTION 8. INTERPRETATION OF AGREEMENT; DEFINITIONS..............................................20
Section 8.1. Definitions...........................................................................20
Section 8.2. Accounting Principles.................................................................32
Section 8.3. Directly or Indirectly................................................................32
SECTION 9. MISCELLANEOUS.........................................................................32
Section 9.1. Registered Notes......................................................................32
Section 9.2. Exchange of Notes.....................................................................32
Section 9.3. Loss, Theft, Etc. of Notes............................................................33
Section 9.4. Expenses, Stamp Tax Indemnity.........................................................33
Section 9.5. Powers and Rights Not Waived; Remedies Cumulative.....................................33
Section 9.6. Notices...............................................................................33
Section 9.7. Successors and Assigns................................................................34
Section 9.8. Survival of Covenants and Representations.............................................34
Section 9.9. Severability..........................................................................34
Section 9.10. Governing Law.........................................................................34
Section 9.11. Captions..............................................................................34
Signature........................................................................................................35
</TABLE>
Attachments to Note Agreement:
Schedule I - Names and Addresses of Purchasers
Exhibit A-1 - Form of Series A Note
Exhibit A-2 - Form of Series B Note
Exhibit B - Representations and Warranties
Exhibit C - Form of Opinion of Special Counsel to the Purchaser
Exhibit D - Form of Opinion of Counsel to the Company
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ALLIED CAPITAL CORPORATION
NOTE AGREEMENT
Re: $115,000,000 8.54% Senior Notes, Series A due October 15, 2005
and
$10,000,000 Floating Rate Senior Notes, Series B due October 15, 2005
Dated as of
October 15, 2000
To the Purchasers named
on Schedule I to this Agreement
Ladies and Gentlemen:
The undersigned, ALLIED CAPITAL CORPORATION (the "Company"), a
Maryland corporation, hereby agrees with the Purchasers named on Schedule I to
this Agreement (the "Purchasers") as follows:
SECTION 1. DESCRIPTION OF NOTES AND COMMITMENT.
Section 1.1. Description of Notes. The Company will authorize the
issue and sale of (a) $115,000,000 8.54% Senior Notes, Series A due October
15, 2005 (the "Series A Notes") and (b) $10,000,000 Floating Rate Senior
Notes, Series B due October 15, 2005 (the "Series B Notes" and together with
the Series A Notes, the "Notes" such term to include any such notes issued in
substitution therefor pursuant to SECTION 9 of this Agreement). The Series A
Notes and the Series B Notes shall be substantially in the forms set out in
Exhibits A-1 and A-2, respectively, with such changes therefrom, if any, as
may be approved by the Purchasers and the Company. 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 SECTION 2 of this Agreement.
Section 1.2. Applicable Interest Rates. (a) The Series A Notes
shall bear interest (computed on the basis of a 360-day year of twelve 30-day
months) on the unpaid principal balance thereof from the date of issuance at
the rate of 8.54% per annum, payable semiannually on April 15 and October 15
in each year, commencing April 15, 2001, until such principal sum shall have
become due and payable (whether at maturity, upon notice of prepayment or
otherwise) and to pay on demand interest (so computed) on any overdue
principal and premium (as provided herein) and, to the extent permitted by
applicable law, on any overdue interest, from
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the due date thereof at a rate of 10.54% per annum (whether by acceleration or
otherwise) until paid.
(b) (i) The Series B Notes shall bear interest (computed for the
actual number of days elapsed on the basis of a year consisting of 360 days)
on the unpaid principal thereof from the date of issuance at a floating rate
equal to the Series B Rate from time to time, payable quarterly on the last
day of each Interest Period other than the initial Interest Period, until such
principal sum shall have become due and payable (whether at maturity, upon
notice of prepayment or otherwise) and to pay on demand interest (so computed)
on any overdue principal and premium (as provided herein) and, to the extent
permitted by applicable law, on any overdue interest, from the due date
thereof at a rate equal to the Series B Overdue Rate, until paid.
(ii) The Company shall give notice to each holder of the Series B
Notes within five (5) Business Days after the beginning of each Interest
Period confirming the Series B Rate and the Series B Overdue Rate. Such notice
shall contain a certificate signed by a Senior Financial Officer of the
Company attaching a copy of the source of the market data by reference to
which the applicable interest rate was determined. Any holder of a Series B
Note may within 15 days after receipt of the notice furnished by the Company
pursuant to this subsection (ii) object to the Company's determination of the
applicable interest rate by delivering a certificate to the Company stating
such objection and specifying the details of such holder's calculation of the
applicable interest rate. The Company shall provide a copy of such certificate
to each holder of a Series B Note. If any such certificate shall not have been
delivered by the Company, the holders of a majority of the unpaid principal
amount of the Series B Notes shall calculate the applicable interest rate and
such calculation shall be binding in the absence of manifest error.
Section 1.3. 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 each Purchaser,
and such Purchaser agrees to purchase from the Company, Notes in the principal
amount set forth opposite such Purchaser's name on Schedule I hereto at a
price equal to the principal amount thereof on October 24, 2000 (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 Purchasers scheduled to
purchase the Notes on the Closing Date. Delivery of the Notes will be made at
the offices of Chapman and Cutler, 111 West Monroe Street, Chicago, Illinois
60603. On the Closing Date, the Company will deliver to each Purchaser the
Notes to be purchased by such Purchaser in the form of a single Note (or such
greater number of Notes in denominations of at least $500,000 as such
Purchaser may request) dated the Closing Date and registered in such
Purchaser's name (or in the name of such Purchaser's nominee), against
delivery by such Purchaser to the Company or its order of immediately
available funds in the amount of the purchase price therefor 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).
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SECTION 2. PAYMENT OF NOTES.
Section 2.1. Required Payments. (a) The entire principal amount of
the Series A Notes shall become due and payable on October 15, 2005.
(b) The entire principal amount of the Series B Notes shall
become due and payable on October 15, 2005.
Section 2.2. Optional Prepayment with Premium. (a) 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 Series A Notes, either in whole or in part (but if
in part then in a minimum principal amount of $1,000,000) by payment of the
principal amount of the Series A Notes, or portion thereof to be prepaid, and
accrued interest thereon to the date of such prepayment, together with a
premium equal to the Series A Make-Whole Amount, determined as of two Business
Days prior to the date of such prepayment pursuant to this SECTION 2.2.
(b) In addition to the payments required by SECTION 2.1, upon
compliance with SECTION 2.3 the Company shall have the privilege, on any
interest payment date after October 15, 2002, of prepaying the outstanding
Series B Notes, either in whole or in part (but if in part then in a minimum
principal amount of $1,000,000), by payment of the principal amount of the
Series B Notes, or portion thereof to be prepaid, and accrued interest thereon
to the date of such prepayment, together with a premium equal to the Series B
Premium Amount.
Section 2.3. Notice of Optional Prepayments. 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 before the date fixed for
such optional prepayment specifying (i) such date, (ii) the principal amount
and the Series of the Holder's Notes to be prepaid on such date, (iii) that a
premium may be payable, (iv) the date when such premium will be calculated,
(v) the estimated premium and (vi) 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 and the premium, if any, payable with respect thereto shall become due
and payable on the prepayment date specified in said notice. Not later than
two Business Days prior to the prepayment date specified in such notice, the
Company shall provide each Holder of a Note written notice of the premium, if
any, payable in connection with such prepayment and, whether or not any
premium is payable, a reasonably detailed computation of the Series A
Make-Whole Amount in the case of the prepayment of Series A Notes or the
Series B Premium Amount in the case of the prepayment of Series B Notes (which
calculation shall be reasonably satisfactory to each Holder of the Notes to be
prepaid).
Section 2.4. Application of Prepayments. All partial prepayments
pursuant to SECTION 2.2 shall be applied on all outstanding Notes of the
Series to be prepaid ratably in accordance with the unpaid principal amounts
thereof.
Section 2.5. Direct Payment. Notwithstanding anything to the
contrary contained in this Agreement or the Notes, in the case of any Note
owned by any Holder that is a Purchaser or any other Institutional Holder
which has given written notice to the Company requesting that the
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provisions of this SECTION 2.5 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 Purchasers. Each Purchaser
represents, and in entering into this Agreement the Company understands, that
such 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 such
Purchaser has no present intention of selling, negotiating or otherwise
disposing of the Notes; it being understood, however, that the disposition of
such Purchaser's property shall at all times be and remain within its control.
Each 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 of the Notes to be purchased by it hereunder:
(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 such 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 such 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 any Purchaser or any subsequent transferee of the Notes indicates that such
Purchaser or such transferee is relying on any representation contained in
paragraphs (b), (c) or (e) above, the Company shall deliver on the date of
Closing and on the date of any applicable transfer 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 each Purchaser to
purchase the Notes on the Closing Date shall be subject to the performance by
the Company of its agreements hereunder 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:
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(a) Closing Certificates. On the Closing Date such
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 such Purchaser's obligation to purchase the Notes
proposed to be sold to such 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 which 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. Such Purchaser shall have received
from Chapman and Cutler, who are acting as special counsel to the
Purchasers in this transaction, and from Sutherland Asbill & Brennan
LLP, counsel for the Company, their respective opinions dated the
Closing Date, in form and substance satisfactory to such Purchaser,
and covering the matters set forth in Exhibits C and D, respectively,
hereto.
(c) Purchase Permitted By Applicable Law, Etc. On the
Closing Date, each purchase of Notes shall (a) be permitted by the
laws and regulations of each jurisdiction to which such Purchaser is
subject, without recourse to provisions (such as Section 1405(a)(8)
of the New York Insurance Law) permitting limited investments by
insurance companies without restriction as to the character of the
particular investment, (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 any 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 any Purchaser,
such Purchaser shall have received an officer's certificate
certifying as to such matters of fact as such Purchaser may
reasonably specify to enable such Purchaser to determine whether such
purchase is so permitted.
(d) Sale of Other Notes. The Company shall have
consummated the sale of the entire principal amount of the Notes
scheduled to be sold on the Closing Date as specified in Schedule I.
(e) Private Placement Number. A Private Placement Number
issued by S&P's CUSIP Service Bureau (in cooperation with the
Securities Valuation Office of the National Association of Insurance
Commissioners) shall have been obtained for the Notes.
(f) 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 such Purchaser and such
Purchaser's special counsel, and such 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.
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Section 4.2. Waiver of Conditions. If on the Closing Date the
Company fails to tender to any Purchaser the Notes to be issued to such
Purchaser on such date or if the conditions specified in SECTION 4.1 have not
been fulfilled, such 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, such
Purchaser may waive compliance by the Company with any such condition to such
extent as such 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 any Purchaser's rights against the Company.
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 5.11.
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
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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 5.9.
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.
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 Memorandum.
Section 5.6. 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 5.7. 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 5.8. 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
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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.
(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 5.9. 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;
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(e) Liens securing Indebtedness of a Consolidated
Subsidiary to the Company or to another Wholly-owned Consolidated
Subsidiary;
(f) Liens existing as of September 30, 2000 and reflected
on Annex B to Exhibit B hereto;
(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 5.8; 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 5.8.
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
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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.
Section 5.10. 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 5.8.
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 5.10, 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 5.11. 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
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<PAGE> 15
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
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 Notes and this Agreement, 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 5.8 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 5.11(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 Subsidiary or Debt of any other Consolidated Subsidiary (except
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<PAGE> 16
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 5.11, 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 5.12. Repurchase of Notes. Neither the Company nor any
Consolidated Subsidiary or Affiliate, 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 substitution therefor. Without limiting the foregoing, upon the
repurchase or other
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<PAGE> 17
acquisition of any Notes by the Company, any Consolidated Subsidiary or any
Affiliate, 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 5.13. Transactions with Affiliates. 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 (including, without
limitation, the purchase from, sale to or exchange of property with, or the
rendering of any service by or for, any Affiliate), 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.
Section 5.14. 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 5.15. 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 5.15 and concurred with by
the independent public accountants referred to in SECTION 5.15(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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<PAGE> 18
(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 statements of operations, changes
in net assets and cash flows, 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, 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> 19
(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 5.11 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 5.6, SECTION 5.7 and SECTION 5.8(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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<PAGE> 20
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
(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 $15,000,000
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 $15,000,000
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 5.6 through SECTION
5.11 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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<PAGE> 21
(h) Final judgment or final judgments for the payment of
money aggregating in excess of $15,000,000 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 and (to the extent
permitted by applicable law) an amount as liquidated damages for the loss of
the bargain evidenced hereby (and not as a penalty) equal to the applicable
Series A Make-Whole Amount or Series B Premium Amount which the Company would
be
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<PAGE> 22
obligated to pay if the Notes were being prepaid pursuant to SECTION 2.2,
determined as of the date on which such Note shall so become due and payable.
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 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 51% 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 (i) which will change the time of payment of the
principal of or the interest on any Note, change the principal amount thereof,
reduce the rate of interest thereon or change the method of computation of the
Series A Make-Whole Amount or the Series B Premium Amount, or (ii) which will
change any of the provisions with respect to optional prepayments or (iii)
which will 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.
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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 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:
"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" shall mean any Person (other than a Consolidated
Subsidiary) which (i) directly or indirectly, or through one or more
intermediaries controls, or is controlled by, or is under common control with,
the Company, (ii) which beneficially owns or holds 5% or more of any class of
the Voting Stock of the Company or (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 beneficially owned by the Company or a Subsidiary. 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 the Company or a Subsidiary of the Company.
"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 Securities and Exchange Commission issued to the
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<PAGE> 24
Company thereunder), bears to the aggregate amount of senior securities
representing indebtedness of the Company and its Consolidated Subsidiaries
"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.
"Banks" means the banks or financial institutions which are party to
the Bank Credit Agreement from time to time.
"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" shall mean (a) for the purposes of computation of the
Series A Make-Whole Amount only, any day of the week (excluding Saturday or
Sunday) on which banks in New York, New York are not obligated by law to
close, (b) for the purpose of computation of the Series B Rate only, any day
of the week (excluding Saturday or Sunday) on which banks in London, England
are not obligated by law to close, and (c) for the purposes of any other
provision of this Agreement any day of the week (excluding Saturday or Sunday)
on which banks in Washington, D.C., New York, New York are not obligated by
law to close.
"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.
"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 Subsidiaries prepared as of such
date in accordance with GAAP, including, in any case, common stock of the
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<PAGE> 25
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.
"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.
"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
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<PAGE> 26
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.
"Existing Notes" means the notes issued by the Company pursuant to
the Existing Note Agreements.
"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, (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 (iv) the Note Agreement dated as of August 31, 2000
between the Company and Intrepid Funding Master Trust, a Delaware statutory
business trust, pursuant to which the Company has issued its $75,000,000
Auction Rate Reset Senior Notes, Series A, due December 2, 2002.
"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 (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.
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<PAGE> 27
"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.
"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 Expense" means, with respect to a Person and for any
period, the total consolidated interest expense (including, without
limitation, capitalized interest expense and
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<PAGE> 28
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 Period" shall mean, initially, the period commencing on the
Closing Date and ending on January 15, 2001, and, thereafter, each three-month
period commencing on the last day of the prior Interest Period and ending on
the numerically corresponding day of the third month following the month in
which such Interest Period commences, provided that:
(a) if any Interest Period would otherwise end on a day
which is not a Business Day, that Interest Period shall be extended
to the next succeeding Business Day unless the result of such
extension would be to carry such Interest Period into another
calendar month in which event such Interest Period shall end on the
immediately preceding Business Day;
(b) no Interest Period shall extend beyond the final
maturity of the Series B Notes; and
(c) the interest rate applicable to such Interest Period
shall accrue from and including the first day of such Interest Period
to, but excluding, the last day thereof.
For purposes of determining an Interest Period other than initial
Interest Period, each three-month period shall start on a day in a calendar
month and end on a numerically corresponding day in the third calendar month
following thereafter, provided that if an Interest Period begins on the last
day of a calendar month and/or if there is no numerically corresponding day in
such third calendar month in which an Interest Period is to end, then such
Interest Period shall end on the last Business Day of such third calendar
month.
"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.
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<PAGE> 29
"LIBOR" means, for each Interest Period, (a) the LIBOR Index Rate for
such Interest Period, if such rate is available, and (b) if the LIBOR Index
Rate cannot be determined, with respect to any Interest Period, an interest
rate per annum equal to the London Interbank Offered Rate for such Interest
Period, as published or announced two (2) Business Days prior to the
commencement of such Interest Period in the Money Rates Section of The Wall
Street Journal (Eastern Edition), or (if the London Interbank Offered Rate for
such Interest Period is not so published or announced at such time)
interpolated from publications or announcements in The Wall Street Journal
(Eastern Edition) for the London Interbank Offered Rates for the periods of
time closest to such Interest Period or, in the event that The Wall Street
Journal (Eastern Edition) ceases for any reason to publish or announce such
rate of interest, any other source selected by the holders of a majority in
principal amount of the Series B Notes. "LIBOR Index Rate" means, for any
Interest Period, the rate per annum (rounded upwards, if necessary, to the
next higher one hundred-thousandth of a percentage point) for deposits in U.S.
Dollars for a period equal to such Interest Period which appears on the
Bloomberg Financial Markets Service Page BBAM-1 (or if such page is not
available, the Reuters Screen LIBO Page) as of 11:00 a.m. (London, England
time) on the date 2 Business Days before the commencement of such Interest
Period. "Reuters Screen LIBO Page" means the display designated as the "LIBO"
page on the Reuters Monitory Money Rates Service (or such other page as may
replace the LIBO page on that service or such other service as may be
nominated by the British Bankers' Association as the information vendor for
the purpose of displaying British Banker's Association Interest Settlement
Rates for U.S. Dollar deposits).
"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.
"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, or (b) the
ability of the Company to perform its obligations under this Agreement and the
Notes, or (c) the validity or enforceability of this Agreement or the Notes.
"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.
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<PAGE> 30
"Memorandum" is described in paragraph 5 of Exhibit B hereto.
"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 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.
"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.
"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).
"Purchaser" shall have the meaning set forth in SECTION 1.1.
"QPAM Exemption" means Prohibited Transaction Class Exemption 84-14
issued by the United States Department of Labor.
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<PAGE> 31
"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.
"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 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.
"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.
"Reportable Event" shall have the same meaning as in ERISA.
"SBA" shall mean the United States Small Business Administration.
"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(1) of the
Securities Act.
"Senior Financial Officer" means the chief financial officer, chief
operating officer, principal accounting officer, treasurer or controller of
the Company.
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<PAGE> 32
"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.
"Series A Make-Whole Amount" means, with respect to a Series A Note,
an amount equal to the excess, if any, of the Discounted Value of the
Remaining Scheduled Payments with respect to the Called Principal of the
Series A Note over the amount of such Called Principal, provided that the
Series A Make-Whole Amount may in no event be less than zero. For the purposes
of determining the Series A Make-Whole Amount, the following terms have the
following meanings:
"Called Principal" means the principal of any Series A Note
that is to be prepaid pursuant to SECTION 2.2 or has become or is
declared to be immediately due and payable pursuant to SECTION 6.3,
as the context requires.
"Discounted Value" means, with respect to the Called
Principal of a Series A Note, the amount obtained by discounting all
Remaining Scheduled Payments with respect to such Called Principal
from their respective scheduled due dates to the Settlement Date with
respect to such Called Principal, in accordance with accepted
financial practice and at a discount factor (applied on the same
periodic basis as that on which interest on the Series A Notes is
payable) equal to the Reinvestment Yield with respect to such Called
Principal.
"Reinvestment Yield" means, with respect to the Called
Principal of a Series A Note, 0.50% over the yield to maturity
implied by (i) the yields reported, as of 10:00 A.M. (New York City
time) on the second Business Day preceding the Settlement Date with
respect to such Called Principal, on the display designated as "PX-1"
of the Bloomberg Financial Markets Services Screen (or such other
display as may replace PX-1 of the Bloomberg Financial Markets
Services Screen) for actively traded on-the-run U.S. Treasury
securities having a maturity equal to the Remaining Average Life of
such Called Principal as of such Settlement Date, or (ii) if such
yields are not reported as of such time or the yields reported as of
such time are not ascertainable (including by way of interpolation),
the Treasury Constant Maturity Series Yields reported, for the latest
day for which such yields have been so reported as of the second
Business Day preceding the Settlement Date with respect to such
Called Principal, in Federal Reserve Statistical Release H.15 (519)
(or any comparable successor publication) for actively traded
on-the-run U.S. Treasury securities having a constant maturity equal
to the Remaining Average Life of such Called Principal as of such
Settlement Date. Such implied yield will be determined, if necessary,
by (a) converting U.S. Treasury bill quotations to bond-equivalent
yields in accordance with accepted financial practice and (b)
interpolating linearly between (1) the actively traded U.S. Treasury
security with the maturity closest to and greater than the Remaining
Average Life and (2) the actively traded on-the-run U.S. Treasury
security with the maturity closest to and less than the Remaining
Average Life.
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<PAGE> 33
"Remaining Average Life" means, with respect to any Called
Principal, the number of years (calculated to the nearest one-twelfth
year) obtained by dividing (i) such Called Principal into (ii) the
sum of the products obtained by multiplying (a) the principal
component of each Remaining Scheduled Payment with respect to such
Called Principal by (b) the number of years (calculated to the
nearest one-twelfth year) that will elapse between the Settlement
Date with respect to such Called Principal and the scheduled due date
of such Remaining Scheduled Payment.
"Remaining Scheduled Payments" means, with respect to the
Called Principal of a Series A Note, all payments of such Called
Principal and interest thereon that would be due after the Settlement
Date with respect to such Called Principal if no payment of such
Called Principal were made prior to its scheduled due date, provided
that if such Settlement Date is not a date on which interest payments
are due to be made under the terms of the Series A Notes, then the
amount of the next succeeding scheduled interest payment will be
reduced by the amount of interest accrued to such Settlement Date and
required to be paid on such Settlement Date pursuant to or SECTION
2.2 or SECTION 6.3.
"Settlement Date" means, with respect to the Called
Principal of a Series A Note, the date on which such Called Principal
is to be prepaid pursuant to SECTION 2.2 or has become or is declared
to be immediately due and payable pursuant to SECTION 6.3, as the
context requires.
"Series A Notes" shall have the meaning set forth in SECTION 1.1.
"Series B Notes" shall have the meaning set forth in SECTION 1.1.
"Series B Overdue Rate" as of any date means the Series B Rate plus
2.0% per annum.
"Series B Premium Amount" shall mean, in connection with any
prepayment of the Series B Notes pursuant to SECTION 2.1, an amount equal to
the applicable percentage of the principal amount of the Series B Notes or
portion thereof to be prepaid as follows:
<TABLE>
<CAPTION>
IF PREPAID DURING THE 12-MONTH PERIOD APPLICABLE PREMIUM
ENDING OCTOBER 15
<S> <C>
2003 2.0%
2004 1.0%
2005 0.0%
</TABLE>
"Series B Rate" for each Interest Period shall be a rate per annum
equal to 1.75% plus LIBOR for such Interest Period.
"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).
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<PAGE> 34
"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.
"Voting Stock" 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).
"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.
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.
-31-
<PAGE> 35
SECTION 9. MISCELLANEOUS.
Section 9.1. Registered Notes. 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.
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 registered Holder.
Section 9.2. 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 9.1, this SECTION 9.2 or SECTION 9.3, 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
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 9.3. 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 9.4. Expenses, Stamp Tax Indemnity. Whether or not the
transactions herein contemplated shall be consummated, the Company agrees to
pay directly all of the Purchasers' reasonable out-of-pocket expenses in
connection with the preparation, execution and delivery of
-32-
<PAGE> 36
this Agreement and the transactions contemplated hereby, including but not
limited to the reasonable charges and disbursements of Chapman and Cutler,
special counsel to the Purchasers, duplicating and printing costs and charges
for shipping the Notes, adequately insured to each Purchaser's home office or
at such other place as such Purchaser may designate, the cost of obtaining a
Private Placement Number for the Notes from Standard & Poor's Corporation, and
all such reasonable expenses relating to any amendment, waivers or consents
pursuant to the provisions hereof, including, without limitation, any
amendments, waivers, or consents resulting from any work-out, renegotiation or
restructuring relating to the performance by the Company of its obligations
under this Agreement and the Notes. The Company also agrees that it will pay
and save each 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 this Agreement
or the Notes, (other than as specified in the last sentence of SECTION 9.2)
whether or not any Notes are then outstanding. The Company agrees to protect
and indemnify each 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 this Agreement.
Section 9.5. 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 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 9.6. 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 9.7. Successors and Assigns. This Agreement shall be
binding upon the Company and its successors and assigns and shall inure to the
benefit of each Purchaser and to the benefit of its successors and assigns,
including each successive Holder.
Section 9.8. 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
-33-
<PAGE> 37
this Agreement and the Notes and shall terminate upon payment in full of all
amounts due under the Notes and this Agreement.
Section 9.9. 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 9.10. Governing Law. This Agreement and the Notes issued
and sold hereunder shall be governed by and construed in accordance with New
York law.
Section 9.11. 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.
-34-
<PAGE> 38
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
Name:________________________________
Title:_______________________________
Accepted as of October 15, 2000.
[Variation]
By
Name:________________________________
Title:_______________________________
-35-
<PAGE> 39
ALLIED CAPITAL CORPORATION
8.54% Senior Note, Series A
Due October 15, 2005
No. R-
----------------, ------
$
ALLIED CAPITAL CORPORATION, a Maryland corporation (the "Company"), for
value received, hereby promises to pay to
or registered assigns
on the fifteenth day of October, 2005
the principal amount of
DOLLARS ($____________)
and to pay interest (computed on the basis of a 360-day year of twelve 30-day
months) on the principal amount from time to time remaining unpaid hereon at the
rate of 8.54% per annum from the date hereof until maturity, payable
semiannually on the fifteenth day of each April and October in each year
(commencing on the first of such dates after the date hereof) and at maturity.
The Company agrees to pay interest on overdue principal (including any overdue
required or optional prepayment of principal) and premium, if any, and (to the
extent legally enforceable) on any overdue installment of interest, at the rate
of 10.54% per annum after the due date, whether by acceleration or otherwise,
until paid. 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 8.54% Senior Notes, Series A due October 15, 2005
(the "Series A Notes") of the Company in the aggregate principal amount of
$115,000,000 issued together with the Floating Rate Senior Notes, Series B due
October 15, 2005 of the Company in the aggregate principal amount of $10,000,000
(the "Series B Notes" and together with the Series A Notes, the "Notes") under
and pursuant to the terms and provisions of the Note Agreement, dated as of
October 15, 2000 (the "Note Agreement"), entered into by the Company with the
Purchasers named therein and this Series A 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.
EXHIBIT A-1
(to Note Agreement)
<PAGE> 40
This Series A 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 Series A 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 Series A 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 Series A Note or its attorney duly authorized
in writing. Payment of or on account of principal, premium, if any, and interest
on this Series A Note shall be made only to or upon the order in writing of the
registered holder.
ALLIED CAPITAL CORPORATION
By
Name:
--------------------------
Title:
-------------------------
A-1-2
<PAGE> 41
ALLIED CAPITAL CORPORATION
Floating Rate Senior Note, Series B
Due October 15, 2005
No. R-
----------------, ------
$
ALLIED CAPITAL CORPORATION, a Maryland corporation (the "Company"), for
value received, hereby promises to pay to
or registered assigns
on the fifteenth day of October, 2005
the principal amount of
DOLLARS ($____________)
and to pay interest on the principal amount from time to time remaining unpaid
hereon at a floating rate equal to the Series B Rate (as defined in the Note
Agreement hereinafter referred to) from the date hereof until maturity, payable
quarterly on the last day of each Interest Period (as defined in the Note
Agreement hereinafter referred to) in each year (commencing on January 15, 2001)
and at maturity. The Company agrees to pay interest on overdue principal
(including any overdue required or optional prepayment of principal) and
premium, if any, and (to the extent legally enforceable) on any overdue
installment of interest, at the rate equal to the Series B Overdue Rate (as
defined in the Note Agreement hereinafter referred to) after the due date,
whether by acceleration or otherwise, until paid. 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 Floating Rate Senior Notes, Series B due October
15, 2005 (the "Series B Notes") of the Company in the aggregate principal amount
of $10,000,000 issued together with the 8.54% Senior Notes, Series A due October
15, 2005 of the Company in the aggregate principal amount of $115,000,000 (the
"Series A Notes" and together with the Series B Notes, the "Notes") under and
pursuant to the terms and provisions of the Note Agreement, dated as of October
15, 2000 (the "Note Agreement"), entered into by the Company with the Purchasers
named therein and this Series B 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.
EXHIBIT A-2
(to Note Agreement)
<PAGE> 42
This Series B 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 Series B 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 Series B 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 Series B Note or its attorney duly authorized
in writing. Payment of or on account of principal, premium, if any, and interest
on this Series B 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> 43
REPRESENTATIONS AND WARRANTIES
The Company represents and warrants to each 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. The Company is a Business Development Company
under the Investment Company Act.
2. Corporate Organization and Authority. Except where failure to be
qualified or authorized would not have a Material Adverse Effect, the Company
and each Consolidated Subsidiary,
(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. 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 nine 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.
(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
EXHIBIT B
(to Note Agreement)
<PAGE> 44
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.
4. 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 September 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.
5. Full Disclosure. The Company, through its agent, Merrill Lynch,
Pierce, Fenner & Smith Incorporated, has delivered to each of the Purchasers a
copy of a Private Placement Memorandum, dated September, 2000 (the
"Memorandum"), relating to the transactions contemplated hereby. The Memorandum
fairly describes, in all material respects, the general nature of the business
and principal properties of the Company and its Consolidated Subsidiaries.
Except as disclosed in this Agreement, the Memorandum, the documents,
certificates or other writings delivered to the Purchasers by or on behalf of
the Company in connection with the transactions contemplated hereby and the
financial statements described in paragraph 3 hereof, taken as a whole, do 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 Memorandum
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 Memorandum or in the other documents, certificates and other
writings delivered to the Purchasers 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.
6. 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 the properties, business, profits or condition (financial or
otherwise) of the Company and its Consolidated Subsidiaries, taken as a whole.
7. 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
B-2
<PAGE> 45
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.
8. 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.
9. Sale is Legal and Authorized. The sale of the Notes to the Purchasers,
compliance by the Company with all of the provisions of the Notes and compliance
by the Company with all of the provisions of the Agreement --
(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 Agreement and the Notes have been executed and
delivered by the Company and upon payment of the purchase price of the
Notes by the Purchaser, the Notes and the Agreement constitute the legal,
valid and binding obligations, contracts and agreements of the Company
enforceable in accordance with their terms.
10. 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.
11. 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 Notes and the Agreement or
compliance by the Company with any of the provisions of the Agreement or the
Notes.
B-3
<PAGE> 46
12. 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, 1995, 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.
13. 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 Securities Exchange Act of 1934, as amended (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.
14. 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 such Purchaser and not more than ___ other institutional investors,
each of whom was offered a portion of the Notes at private sale for investment.
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 Securities Exchange Act of 1934, as amended, or quoted in a U.S.
automated inter-dealer quotation system, and will not be convertible or
exchangeable into any such Securities.
15. ERISA. The consummation of the transactions provided for in the
Agreement and compliance by the Company with the provisions thereof and of the
Notes issued thereunder will not involve any 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
B-4
<PAGE> 47
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 of the Notes
to be purchased by each Purchaser.
16. 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
Agreements or the Notes. 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.
17. 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.).
18. 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> 48
ALLIED CAPITAL CORPORATION
SUBSIDIARIES OF THE COMPANY
1. CONSOLIDATED SUBSIDIARIES
<TABLE>
<CAPTION>
PERCENTAGE OF VOTING
JURISDICTION OF STOCK OWNED BY COMPANY
INCORPORATION AND EACH OTHER SUBSIDIARY
NAME OF 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 BeteiligungsBeratung Republic of Germany 100%
GmbH
</TABLE>
2. UNCONSOLIDATED SUBSIDIARIES
<TABLE>
<CAPTION>
PERCENTAGE OF VOTING
JURISDICTION OF STOCK OWNED BY COMPANY
INCORPORATION AND EACH OTHER SUBSIDIARY
NAME OF 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> 49
DESCRIPTION OF DEBT AND CAPITALIZED LEASES
<TABLE>
<CAPTION>
DEBT OF COMPANY
AND CONSOLIDATED
SUBSIDIARIES OBLIGOR
BALANCE COMPANIES COLLATERAL
<S> <C> <C> <C>
Revolving line of credit $185,000,000 ACC None
Master loan and security agreement 0 ACC Commercial Mortgage
--------- Loans
Unsecured long-term notes 419,000,000 ACC None
Auction Rate Reset Senior Note 75,000,000 ACC None
OPIC loan 5,700,000 ACC None
</TABLE>
<TABLE>
<CAPTION>
DEBT OF
CONSOLIDATED
SUBSIDIARIES
<S> <C> <C> <C>
SBA debentures $77,450,000 AIC None
Mortgage loan 2,498,.375 Allied Capital Office Building
Equity LLC
764,648,375
===========
</TABLE>
---------------------------------------
ACC -- the Company
AIC -- Allied Investment Corporation
<PAGE> 50
DESCRIPTION OF SPECIAL COUNSEL'S CLOSING OPINION
The closing opinion of Chapman and Cutler, special counsel to the
Purchasers, called for by SECTION 4.1 of the Agreement, shall be dated the
Closing Date and addressed to the Purchasers, shall be satisfactory in form and
substance to the Purchasers and shall be to the effect that:
1. The Company is a corporation, validly existing and in good
standing under the laws of the State of Maryland and has the corporate
power and the corporate authority to execute and deliver the Agreement;
and the Company has the corporate power and the corporate authority to
issue the Notes.
2. The Agreement 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).
3. The Notes have been duly authorized by all necessary corporate
action on the part of the Company, have been duly executed and delivered
by the Company and constitute the legal, valid and binding obligations of
the Company enforceable in accordance with their 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. The issuance, sale and delivery of the Notes under the
circumstances contemplated by the Agreement do not, under existing law,
require the registration of the Notes under the Securities Act of 1933,
as amended, or the qualification of an indenture under the Trust
Indenture Act of 1939, as amended.
The opinion of Chapman and Cutler shall also state that the opinion of
Sutherland Asbill & Brennan, LLP is satisfactory in scope and form to Chapman
and Cutler and that, in their opinion, the Purchaser is justified in relying
thereon.
In rendering the opinion set forth in paragraph 1 above, Chapman and
Cutler may rely solely upon an examination of the Articles of Incorporation
certified by, and a certificate of good standing of the Company from, the
Secretary of State of the State of Maryland and the By-laws of the Company.
With respect to matters of fact upon which such opinion is based, Chapman
and Cutler may rely on appropriate certificates of public officials and officers
of the Company.
EXHIBIT C
(to Note Agreement)
<PAGE> 51
DESCRIPTION OF CLOSING OPINION
OF COUNSEL FOR THE COMPANY
The closing opinion of Sutherland Asbill & Brennan, LLP, counsel for the
Company, which is called for by SECTION 4.1 of the Agreement, shall be dated the
Closing Date and addressed to the Purchasers purchasing Notes on the Closing
Date, shall be satisfactory in scope and form to the Purchasers 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.
2. The Company has the corporate power and the corporate authority
to execute and perform the Agreement and to issue the Notes.
3. The Agreement 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. The Notes have been duly authorized by all necessary corporate
action on the part of the Company, have been duly executed and delivered
by the Company and constitute the legal, valid and binding obligations of
the Company enforceable in accordance with their 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).
5. No other 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 the Agreement or the Notes.
6. The issuance and sale of the Notes and the execution, delivery
and performance by the Company of the Agreement do not conflict with or
result in any breach of any of the provisions of or constitute a default
under or result in the creation or imposition of any Lien upon any of the
property of the Company pursuant to the provisions of the Articles of
Incorporation or By-laws of the Company or any agreement or other
instrument known to such counsel to which the Company is a party or by
which the Company may be bound.
7. The issuance, sale and delivery of the Notes under the
circumstances contemplated by the Agreement do not, under existing law,
require the registration of the
EXHIBIT D
(to Note Agreement)
4
<PAGE> 52
Notes under the Securities Act of 1933, as amended, 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.
D-2
<PAGE> 53
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
Its: EVP & Treasurer
Accepted as of October 15, 2000.
JOHN HANCOCK LIFE INSURANCE COMPANY
By /s/ Anthony J. Della Piana
Its: Managing Director
JOHN HANCOCK VARIABLE LIFE INSURANCE
COMPANY
By /s/ Anthony J. Della Piana
Its: Authorized Signatory
INVESTORS PARTNER LIFE INSURANCE
COMPANY
By /s/ Anthony J. Della Piana
Its: Authorized Signatory
MELLON BANK, N.A., solely in its
capacity as Trustee for the
Long-Term Investment Trust
(as directed by John Hancock Life
Insurance Company), and not in its
individual capacity
By /s/ Bernadette Rist
Its: Authorized Signatory
<PAGE> 54
SUN LIFE ASSURANCE COMPANY OF CANADA
By /s/ John N. Whelihan
Its: Vice President, U.S. Private
Placements-for President
By /s/ Richard Gordon
Its: Vice President, U.S. Public
Bonds - for Secretary
SUN LIFE ASSURANCE COMPANY OF CANADA
(U.S.)
By /s/ John N. Whelihan
Its: Vice President, U.S. Private
Placements-for President
By /s/ Richard Gordon
Its: Vice President, U.S. Public
Bonds - for Secretary
SUN LIFE INSURANCE AND ANNUITY COMPANY
OF NEW YORK
By /s/ John N. Whelihan
Its: Vice President, U.S. Private
Placements-for President
By /s/ Richard Gordon
Its: Vice President, U.S. Public
Bonds - for Secretary
THE GUARDIAN LIFE INSURANCE COMPANY
OF AMERICA
By /s/ Brian Keating
Its: Director - Fixed Income
<PAGE> 55
TEACHERS INSURANCE AND ANNUITY
ASSOCIATION OF AMERICA
By /s/ Loren S. Archibald
Its: Managing Director - Private
Placements
TIAA-CREF LIFE INSURANCE COMPANY
By /s/ Loren S. Archibald
Its: Managing Director - Private
Placements
NATIONWIDE LIFE INSURANCE COMPANY
By /s/ Mark W. Poeppelman
Its: Associate Vice President
MINNESOTA LIFE INSURANCE COMPANY
By: Advantus Capital Management, Inc.
By /s/ Steven S. Nelson
Its: Vice President
AMERICAN FIDELITY ASSURANCE COMPANY
By: Advantus Capital Management, Inc.
By /s/ Thomas A. Gunderson
Its: Vice President
GREAT WESTERN INSURANCE COMPANY
By: Advantus Capital Management, Inc.
By /s/ Allen Steinkopf
Its: Vice President
<PAGE> 56
NATIONAL TRAVELERS LIFE COMPANY
By: Advantus Capital Management,
Inc.
By /s/ Marilyn Froelich
Its: Vice President
AMERICAN REPUBLIC INSURANCE COMPANY
By: Advantus Capital Management,
Inc.
By /s/ Rose A. Lambros
Its: Vice President
ALLSTATE LIFE INSURANCE COMPANY
By /s/ David Walsh
By /s/ Daniel C. Leimbach
Authorized Signatories
PACIFIC LIFE INSURANCE COMPANY
By /s/ Cathy L. Schwartz
Its: Assistant Vice President
By /s/ Audrey L. Milfs
Its: Corporate Secretary
THE OHIO NATIONAL LIFE INSURANCE
COMPANY
By /s/ Michael A. Boedeker
Its: Vice President, Senior
Investment Officer
<PAGE> 57
U.S. BRANCH OF CLARICA LIFE INSURANCE
COMPANY
By /s/ Constance L. Keller
Its: Executive Director, Private
Placements
By /s/ Michael J. Steppe
Its: Senior Vice President
GE EDISON LIFE INSURANCE COMPANY
By /s/ William R. Wright
Its: Chief Investment Officer
GE LIFE AND ANNUITY ASSURANCE COMPANY
By /s/ Jon Lucia
Its: Assistant Vice President and
Investment Officer
