<PAGE> 1
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [ x ]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[ x ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
Allied Capital Corporation
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[ x ] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its filing.
(1) Amount previously paid:
- --------------------------------------------------------------------------------
(2) Form, schedule or registration statement no.:
- --------------------------------------------------------------------------------
(3) Filing party:
- --------------------------------------------------------------------------------
(4) Date filed:
- --------------------------------------------------------------------------------
<PAGE> 2
[ALLIED CAPITAL LOGO]
ALLIED CAPITAL CORPORATION
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To the Stockholders:
The 2000 Annual Meeting of Stockholders of Allied Capital Corporation (the
"Company") will be held in the Crystal Ballroom at the St. Regis Hotel, 923
Sixteenth Street, NW, Washington, DC on May 9, 2000 at 10:00 a.m. (Eastern Time)
for the following purposes:
1. To elect four directors of the Company who will serve for three years,
or until their successors are elected and qualified;
2. To ratify the selection of Arthur Andersen LLP to serve as independent
public accountants for the Company for the year ending December 31,
2000;
3. To consider and act upon a proposal to amend the Company's Stock Option
Plan; and
4. To transact such other business as may properly come before the meeting.
You have the right to receive notice and to vote at the Meeting if you were
a stockholder of record at the close of business on March 22, 2000. Whether or
not you expect to be present in person at the meeting, please sign the enclosed
proxy and return it promptly in the envelope provided, or register your vote by
telephone or through the Internet. Instructions are shown on the proxy card. In
the event there are not sufficient votes for a quorum or to approve or ratify
any of the foregoing proposals at the time of the annual meeting, the annual
meeting may be adjourned in order to permit further solicitation of the proxies
by the Company.
By order of the Board of
Directors,
/s/ Suzanne Votaw Sparrow
Suzanne V. Sparrow
Secretary
March 29, 2000
===============================================================================
This is an important meeting. To ensure proper representation at the
meeting, please complete, sign, date and return the proxy card in the
enclosed, self-addressed envelope, vote your shares by telephone, or vote
via the Internet. Even if you vote your shares prior to the meeting, you
still may attend the meeting and vote your shares in person.
===============================================================================
<PAGE> 3
ALLIED CAPITAL CORPORATION
1919 Pennsylvania Avenue, NW
Washington, DC 20006
PROXY STATEMENT
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Allied Capital Corporation (the "Company"
or "Allied Capital") for use at the Company's 2000 Annual Meeting of
Stockholders (the "Meeting") to be held on May 9, 2000 at 10:00 a.m. (Eastern
Time) in the Crystal Ballroom at the St. Regis Hotel, 923 Sixteenth Street, NW,
Washington, DC and at any adjournments thereof. This Proxy Statement, the
accompanying proxy card and the Company's Annual Report to Stockholders for the
year ended December 31, 1999 are first being sent to stockholders on or about
March 29, 2000.
We encourage you to vote your shares, either by voting in person at the
Meeting or by granting a proxy (i.e., authorizing someone to vote your shares).
If you properly sign and date the accompanying proxy card or otherwise provide
voting instructions, either via the Internet or the telephone, and the Company
receives it in time for the Meeting, the persons named as proxies will vote the
shares registered directly in your name in the manner that you specified. IF YOU
GIVE NO INSTRUCTIONS ON THE PROXY CARD, THE SHARES COVERED BY THE PROXY CARD
WILL BE VOTED FOR THE ELECTION OF THE NOMINEES AS DIRECTORS AND FOR THE OTHER
MATTERS LISTED IN THE ACCOMPANYING NOTICE OF ANNUAL MEETING OF STOCKHOLDERS.
If you are a "stockholder of record" (i.e., you hold shares directly in
your name), you may revoke a proxy at any time before it is exercised by
notifying the proxy tabulator in writing, by submitting a properly executed,
later-dated proxy or by voting in person at the Meeting. Any stockholder of
record attending the Meeting may vote in person whether or not he or she has
previously voted his or her shares. If your shares are held for your account by
a broker, bank or other institution or nominee ("Broker Shares"), you may vote
such shares at the Meeting only if you obtain proper written authority from your
institution or nominee and present it at the Meeting.
Stockholders of record may vote either via the Internet or by telephone.
Specific instructions to be followed by registered stockholders interested in
voting via the Internet or the telephone are shown on the enclosed proxy card.
The Internet and telephone voting procedures are designed to authenticate the
stockholder's identity and to allow stockholders to vote their shares and
confirm that their instructions have been properly recorded.
If your shares are registered in the name of a bank or brokerage firm, you
may be eligible to vote your shares electronically via the Internet or by
telephone. A large number of banks and brokerage firms participate in the ADP
Investor Communications Services online program. This program provides eligible
stockholders who receive a copy of the annual report and proxy statement, either
by paper or electronically, the opportunity to vote via the Internet or by
telephone. If the entity holding your shares participates in ADP's program, your
voting form will provide instructions. If your voting form does not reference
Internet or telephone voting information, please complete and return the paper
proxy in the pre-addressed, postage-paid envelope provided.
<PAGE> 4
PURPOSE OF MEETING
At the Meeting, you will be asked to vote on the following proposals:
1. To elect four directors of the Company who will serve for three years,
or until their successors are elected and qualified;
2. To ratify the selection of Arthur Andersen LLP to serve as independent
public accountants for the Company for the year ending December 31,
2000;
3. To consider and act upon a proposal to amend the Company's Stock Option
Plan; and
4. To transact such other business as may properly come before the meeting.
VOTING SECURITIES
You may vote your shares at the Meeting only if you were a stockholder of
record at the close of business on March 22, 2000 (the "Record Date"). On March
22, 2000, there were 68,628,044 shares of the Company's common stock
outstanding. Each share of the common stock is entitled to one vote.
If a majority of the shares entitled to vote are present at the Meeting,
then a quorum has been reached and the Meeting can commence. A share is present
for quorum purposes if it is represented in person or by proxy for any purpose
at the Meeting. Abstentions and Broker Shares that are voted on any matter at
the Meeting are included in determining the presence of a quorum for the
transaction of business at the commencement of the Meeting and on those matters
for which the broker, nominee or fiduciary has authority to vote. If a quorum is
not present at the Meeting, or if a quorum is present but are not enough votes
to approve any of the proposals, the persons named as proxies may propose one or
more adjournments of the Meeting to permit further solicitation of proxies. Any
such adjournment will require the affirmative vote of a majority of the shares
represented at the Meeting in person or by proxy. The persons named as proxies
will vote those proxies for such adjournment, unless marked to be voted against
any proposal for which an adjournment is sought, to permit further solicitation
of proxies. A stockholder vote may be taken on one or more of the proposals in
this Proxy Statement prior to any such adjournment if there are sufficient votes
for approval on such proposal(s).
The Company's 401(K) plan owns a total of 265,304 shares, representing
approximately 0.4% of the Company's total outstanding shares. Participants in
the 401(K) Plan may direct the voting of these shares; however, if a participant
does not direct the voting, the co-trustees of the 401(K) Plan, who are
executive officers of the Company, will vote the shares on behalf of that
participant.
Each of the four nominees for election as directors who receives a majority
of the affirmative votes cast at the Meeting in person or by proxy in the
election of directors will be elected as directors. Stockholders may not
cumulate their votes. Votes that are withheld, abstentions and Broker Shares
that are not voted in the election of directors will not be included in
determining the number of votes cast, and will have no effect on the election of
directors. With respect to the proposed amendment to the Stock Option Plan,
shares that are voted as abstentions will have the effect of a vote against this
proposal, and Broker non-votes will have no effect on the voting for this
proposal.
2
<PAGE> 5
INFORMATION REGARDING THIS SOLICITATION
The Company will bear the expense of the solicitation of proxies for the
Meeting, including the cost of preparing, printing and mailing this Proxy
Statement, the accompanying Notice of Annual Meeting of Stockholders, and proxy
card. The Company has requested that brokers, nominees, fiduciaries and other
persons holding shares in their names, or in the name of their nominees, which
are beneficially owned by others, forward the proxy materials to, and obtain
proxies from, such beneficial owners. The Company will reimburse such persons
for their reasonable expenses in so doing.
In addition to the solicitation of proxies by the use of the mails, proxies
may be solicited in person and by telephone, facsimile transmission or telegram
by directors, officers or regular employees of the Company, (without special
compensation therefor). The Company has also retained Georgeson Shareholder
Communications, Inc. to assist in the solicitation of proxies for a fee of
approximately $10,000, plus out-of-pocket expenses. Any proxy given pursuant to
this solicitation may be revoked by notice from the person giving the proxy at
any time before it is exercised. Any such notice of revocation should be
provided in writing signed by the shareholder in the same manner as the proxy
being revoked and delivered to the Company's proxy tabulator, American Stock
Transfer & Trust Company.
SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL OWNERS
The following table sets forth, as of March 22, 2000, each current
director, each nominee for director, the Chief Executive Officer, the Company's
executive officers, and the executive officers and directors as a group. Unless
otherwise indicated, the Company believes that each beneficial owner set forth
in the table has sole voting and investment power. The Company is not aware of
any shareholder that beneficially owns more than 5% of the Company's outstanding
shares.
<TABLE>
<CAPTION>
NUMBER OF
SHARES
NAME OF OWNED PERCENTAGE
BENEFICIAL OWNER BENEFICIALLY OF CLASS(1)
- ---------------- ------------ -----------
<S> <C> <C>
DIRECTORS:
William L. Walton....................................... 975,483(2,4) 1.4%
Brooks H. Browne........................................ 53,214(3) *
John D. Firestone....................................... 36,329(3) *
Anthony T. Garcia....................................... 68,112(3) *
Lawrence I. Hebert...................................... 26,800(3) *
John I. Leahy (8)....................................... 26,818(3) *
Robert E. Long.......................................... 19,796(3) *
Warren K. Montouri (8).................................. 236,182(3) *
Guy T. Steuart II (8)................................... 328,180(3,5) *
T. Murray Toomey, Esq. (8).............................. 42,666(3,6) *
Laura W. van Roijen..................................... 38,412(3) *
George C. Williams, Jr.................................. 432,475(2) *
EXECUTIVE OFFICERS:
Philip A. McNeill....................................... 269,186(2) *
Penni F. Roll........................................... 88,115(2) *
John M. Scheurer........................................ 460,494(2) *
Joan M. Sweeney......................................... 436,347(2) *
G. Cabell Williams III.................................. 781,560(2,4) 1.1%
All directors and executive officers as a group (17 in
number)............................................... 4,010,460(7) 5.7%
</TABLE>
3
<PAGE> 6
- ---------------
* Less than 1%
(1) Based on a total of 68,628,044 shares of the Company's common stock issued
and outstanding on March 22, 2000 and shares of the Company's common stock
issuable upon the exercise of immediately exercisable stock options held by
each individual executive officer and non-officer director. The beneficial
ownership of each non-officer director includes exercisable options to
purchase 10,000 shares.
(2) Share ownership for the following directors and executive officers includes:
<TABLE>
<CAPTION>
OPTIONS ALLOCATED
EXERCISABLE TO 401(K)
OWNED WITHIN 60 DAYS PLAN
DIRECTLY OF MARCH 22, 2000 ACCOUNT
-------- ----------------- ---------
<S> <C> <C> <C>
William L. Walton........................... 348,657 361,522 957
George C. Williams, Jr...................... 287,746 144,729 0
Philip A. McNeill........................... 182,022 78,297 8,867
Penni F. Roll............................... 51,576 32,984 3,555
John M. Scheurer............................ 251,917 186,200 22,377
Joan M. Sweeney............................. 236,183 190,558 9,606
G. Cabell Williams, III..................... 382,666 133,590 70,208
</TABLE>
(3) Beneficial ownership includes exercisable options to purchase 10,000 shares.
(4) Includes 265,304 shares held by the 401(K) Plan, of which Messrs. Walton and
Williams III are co-trustees. Messrs. Walton and Williams III disclaim
beneficial ownership of such shares.
(5) Includes 276,691 shares held by a corporation for which Mr. Steuart II
serves as an executive officer.
(6) Shares are held by a trust for the benefit of Mr. Toomey and his wife.
(7) Includes a total of 1,127,880 shares underlying stock options exercisable
within 60 days of March 22, 2000, which are assumed to be outstanding for
the purpose of calculating the group's percentage ownership, and 265,304
shares held by the 401(K) Plan.
(8) Director is a nominee standing for election at this Meeting.
ELECTION OF DIRECTORS
Pursuant to the Company's bylaws, the number of directors is set at twelve
unless otherwise designated by the Board of Directors. Directors are elected for
a staggered term of three years each, with a term of office of only one of the
three classes of directors expiring each year. Directors serve until their
successors are elected and qualified.
The Class II Directors, Messrs. Leahy, Montouri, Steuart, and Toomey, have
been nominated for election for a three-year term expiring in 2003. No person
being nominated as a director is being proposed for election pursuant to any
agreement or understanding between any such person and the Company.
A stockholder can vote for or withhold his or her vote from any or all of
the nominees. IN THE ABSENCE OF INSTRUCTIONS TO THE CONTRARY, IT IS THE
INTENTION OF THE PERSONS NAMED AS PROXIES TO VOTE SUCH PROXY FOR THE ELECTION OF
ALL THE NOMINEES NAMED BELOW. IF ANY OF THE NOMINEES SHOULD DECLINE OR BE UNABLE
TO SERVE AS A DIRECTOR, IT IS INTENDED THAT THE PROXY WILL BE VOTED FOR THE
ELECTION OF SUCH PERSON OR PERSONS AS ARE NOMINATED AS REPLACEMENTS. The Board
of Directors has no reason to believe that any of the persons named will be
unable or unwilling to serve.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE ELECTION OF THE
NOMINEES NAMED IN THIS PROXY STATEMENT.
4
<PAGE> 7
INFORMATION ABOUT THE NOMINEES
Certain information, as of March 22, 2000, with respect to each of the four
nominees for election at the Meeting, as well as each of the Class I and Class
III Directors, are set forth below, including their names, ages, a brief
description of their recent business experience, including present occupations
and employment, certain directorships that each nominee holds, and the year in
which each nominee became a director of the Company or any of its predecessor
companies prior to the 1997 merger of the five affiliated companies.
All the Directors and nominees currently serve as directors of the Company's
subsidiaries, including Allied Investment Corporation and Allied Capital SBLC
Corporation. The Board of Directors of each subsidiary will be composed of some
or all of the Company's directors. The business address of each nominee and
director listed below is 1919 Pennsylvania Avenue, NW, Washington, DC 20006.
NOMINEES FOR CLASS II DIRECTORS
JOHN I. LEAHY
Age 69. President of Management and Marketing Associates (a management
consulting firm) since 1986; Mr. Leahy was President and Group Executive
Officer, Western Hemisphere of Black & Decker Corporation from 1982 to 1985;
Director of Kar Kraft Systems, Inc., The Wills Group, and Chairman of Gallagher
Fluid Seals, Inc.; Trustee of St. Mary's Seminary & University, and Trustee
Emeritus of Loyola College Sellinger School of Business. He has served as a
director of the Company or one of its predecessor companies since 1994.
WARREN K. MONTOURI
Age 70. Partner, Montouri & Roberson, (real estate investment firm) since 1980;
Director of C&S/Sovran Bank from 1970 to 1990; Director of Sovran Financial
Corporation from 1989 to 1990; Director of NationsBank, N.A. from 1990 to 1996;
Director of BB&T Bank (formerly Franklin National Bank) since 1996; Trustee of
Suburban Hospital from 1991 to 1994; Trustee of Audubon Naturalist Society from
1979 to 1985. He has served as a director of the Company or one of its
predecessor companies since 1986.
GUY T. STEUART II
Age 68. Director and President of Steuart Investment Company (manages, operates,
and leases real and personal property and holds stock in operating subsidiaries
engaged in various businesses) since 1960; Trustee Emeritus of Washington and
Lee University. He has served as a director of the Company or one of its
predecessor companies since 1984.
T. MURRAY TOOMEY, ESQ.
Age 76. Attorney at law since 1949; Director of The National Capital Bank of
Washington, Federal Center Plaza Corporation, and a Trustee of The Catholic
University of America. He has served as a director of the Company or one of its
predecessor companies since 1959.
5
<PAGE> 8
CLASS I DIRECTORS -- TERM EXPIRING 2002
JOHN D. FIRESTONE
Age 56. Partner of Secor Group since 1978; Director of Business Mortgage
Investors, Inc., Security Storage Company of Washington, DC, Bryn Mawr Bank
Corporation and the National Organization on Disability; Advisory Board Member
of GeoPortals.com. He has served as a director of the Company or one of its
predecessor companies since 1993.
ANTHONY T. GARCIA
Age 43. General Manager of Breen Capital Group (investor in tax liens) since
1997; Senior Vice President of Lehman Brothers Inc. from 1985 to 1996. He has
served as a director of the Company or one of its predecessor companies since
1991.
LAWRENCE I. HEBERT
Age 53. Director of Riggs National Corporation (since 1988); Director, Riggs
Investment Management Corporation (an indirect subsidiary of the Corporation);
Director, Riggs Bank Europe Limited (an indirect subsidiary of the Corporation);
President and Director, Perpetual Corporation (owner of Allbritton
Communications Company and Allnewsco, Inc.); Chairman and Chief Executive
Officer, Allbritton Communications Company (owner of television stations);
Director, Allnewsco, Inc. (news programing service); President, Westfield News
Advertiser, Inc. (owner of a television station and newspapers); Vice President,
University Bancshares, Inc. (a Texas bank holding company) (1975-1997); Trustee,
The Allbritton Foundation. He has served as a director of the Company or one of
its predecessor companies since 1989.
LAURA W. VAN ROIJEN
Age 47. Private real estate investor since 1992. Chairman of CWV & Associates
(RTC qualified contracting firm) from 1991 to 1994; Director and Treasurer of
Black Possum Inc. (retail concern) from 1994 to 1996; President of Volta Place,
Inc. (real estate advisory firm) from 1991 to 1994; Vice President (from 1986 to
1991) and Market Director (from 1989 to 1991) of Citicorp Real Estate, Inc. She
has served as a director of the Company or one of its predecessor companies
since 1992.
6
<PAGE> 9
CLASS III DIRECTORS -- TERM EXPIRING 2001
WILLIAM L. WALTON*
Age 50. Chairman, Chief Executive Officer and President of the Company since
1997; President of Allied Capital Corporation II from 1996 to 1997; Co-Founder
and CEO of Success Lab, Inc. (children's educational services) from 1993 to
1996; Founder and CEO of Language Odyssey (educational publishing and services)
from 1992 to 1996; Managing Director of Butler Capital Corporation from 1987 to
1991; Director of Riggs National Corporation and Nobel Learning Communities. He
has served as a director of the Company or one of its predecessor companies
since 1986.
GEORGE C. WILLIAMS, JR.*
Age 73. Chairman Emeritus of the Company; Officer of the predecessor companies
from the later of 1959 or the inception of the relevant entity; President or
Chairman and Chief Executive Officer of the predecessor companies from the later
of 1964 or each entities' inception until 1991. He has served as a director of
the Company and its predecessor companies since the later of 1964 or each
entity's inception. Mr. Williams is the father of G. Cabell Williams III, an
executive officer of the Company.
BROOKS H. BROWNE
Age 50. President of Environmental Enterprises Assistance Fund since 1993;
Director of SEAF, Corporation Financiers Ambiental (Panama), Empresas
Ambientales de Centro America (Costa Rica) and Yayasan Bina Usaha Lingkungan
(Indonesia) (environmental non-profit or investment funds). He has served as a
director of the Company or one of its predecessor companies since 1990.
ROBERT E. LONG
Age 68. Managing Director of Goodwyn, Long & Black Investment Management, Inc.;
Chairman and Chief Executive Officer of Emerald City Radio Partners, LLC since
1997; President and Chief Executive Officer of Business News Network, Inc. from
1995 to 1998. Chairman and Chief Executive Officer of Southern Starr
Broadcasting Group, Inc. from 1991 to 1995; Director and President of Potomac
Asset Management, Inc. from 1983 to 1991; Director of Ambase Inc., AHL Shipping
Company, Inc., CSC Scientific, Inc., and Global Travel, Inc. He has served as a
director of the Company or one of its predecessor companies since 1972.
- ---------------
* Messrs. Walton and Williams are "interested persons" of the Company, as
defined in the Investment Company Act of 1940, as amended, due to their
positions as officers of the Company.
7
<PAGE> 10
MEETINGS OF THE BOARD OF DIRECTORS AND COMMITTEES
The Board of Directors of the Company has established an Executive
Committee, an Audit Committee, a Compensation Committee and a Nominating
Committee. During 1999, the Board of Directors of the Company held seven board
meetings and 35 committee meetings. All directors attended at least 75% of the
aggregate number of meetings of the respective boards and of the respective
committees on which they served.
The Executive Committee has and may exercise those rights, powers and
authority that the Board of Directors from time to time grants to it, except
where action by the full Board is required by statute, an order of the
Securities and Exchange Commission (the "Commission") or the Company's charter
or bylaws. The Executive Committee also reviews and approves all investments of
$10 million or more. The Executive Committee consists of Messrs. Walton, Leahy,
Long, Montouri, and Williams. The Executive Committee met 27 times during 1999.
The Audit Committee recommends the selection of independent public
accountants for the Company, reviews with such independent public accountants
the planning, scope and results of their audit of the Company's financial
statements and the fees for services performed, reviews with the independent
public accountants the adequacy of internal control systems, reviews the
Company's annual financial statements and receives the Company's audit reports
and financial statements. The Audit Committee consists of Messrs. Browne, Leahy
and Steuart. The Audit Committee met twice during 1999.
The Compensation Committee determines the compensation for the Company's
executive officers and the amount of salary and bonus to be included in the
compensation package for each of the Company's officers and employees. In
addition, the Compensation Committee approves stock option grants for the
Company's officers under the Company's Stock Option Plan. The Compensation
Committee consists of Messrs. Browne, Long, Firestone, and Garcia. The
Compensation Committee met six times during 1999.
The Nominating Committee recommends candidates for election as directors to
the Board of Directors. The Nominating Committee consists of Messrs. Walton,
Hebert, Toomey and Steuart, and Ms. van Roijen. The Nominating Committee did not
meet during 1999. The full Board of Directors nominated directors for election
in 1999.
8
<PAGE> 11
COMPENSATION OF EXECUTIVE OFFICERS AND DIRECTORS
The following table sets forth compensation that the Company paid during
the year ended December 31, 1999 to all the directors and the three highest paid
executive officers of the Company (collectively, the "Compensated Persons") in
each capacity in which each Compensated Person served. Certain of the
Compensated Persons served as both officers and directors.
COMPENSATION TABLE
<TABLE>
<CAPTION>
PENSION OR
RETIREMENT
BENEFITS
AGGREGATE SECURITIES ACCRUED AS DIRECTORS
COMPENSATION UNDERLYING PART OF FEES PAID
FROM THE OPTIONS/ COMPANY BY THE
NAME AND POSITION COMPANY (1) SARS(4) EXPENSES COMPANY
----------------- ------------ ---------- ---------- ----------
<S> <C> <C> <C> <C>
William L. Walton, Chairman and CEO(2)..... $2,326,190 96,555 -- --
Joan M. Sweeney, Managing Director(2)...... 1,282,793 75,511 -- --
G. Cabell Williams III, Managing
Director(2).............................. 931,890 21,324 -- --
Brooks H. Browne, Director................. 15,000 10,000 -- $15,000
John D. Firestone, Director................ 10,000 10,000 -- 10,000
Anthony T. Garcia, Director................ 13,000 10,000 -- 13,000
Lawrence I. Hebert, Director............... 6,000 10,000 -- 6,000
John I. Leahy, Director.................... 19,000 10,000 -- 19,000
Robert E. Long, Director................... 23,000 10,000 -- 23,000
Warren K. Montouri, Director............... 17,000 10,000 -- 17,000
Guy T. Steuart II, Director................ 7,000 10,000 -- 7,000
T. Murray Toomey, Director................. 7,000 10,000 -- 7,000
Laura W. van Roijen, Director.............. 7,000 10,000 -- 7,000
George C. Williams, Jr., Director, Chairman
Emeritus(3).............................. 609,544 -- -- 17,000
</TABLE>
- -------------------------
(1) There were no perquisites paid by the Company in excess of the lesser of
$50,000 or 10% of the Compensated Person's total salary and bonus for the
year.
(2) The following table provides detail as to aggregate compensation for 1999 as
to the three highest paid executive officers of the Company:
<TABLE>
<CAPTION>
VESTED DEFERRED
FORMULA CUT-OFF ESOP COMPENSATION
SALARY BONUS AWARD AWARD CONTRIBUTION CONTRIBUTION
-------- -------- ---------- -------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Mr. Walton........... $410,014 $577,500 $1,121,769 $170,156 $8,000 $38,751
Ms. Sweeney.......... 258,651 302,500 657,291 37,679 8,000 18,672
Mr. Williams III..... 251,102 302,500 305,233 46,802 8,000 18,253
</TABLE>
The Formula Award, which was granted in connection with the merger, totaled
approximately $19 million in the aggregate at the time of grant, vests in
three equal installments on December 31, 1998, 1999, and 2000, and will be
expensed for financial reporting purposes similarly. The amount of the
Formula Award expensed in 1999 for financial reporting purposes for Mr.
Walton, Ms. Sweeney and Mr. Williams III was $1,472,451, $862,761 and
$400,664, respectively. The amount expensed was based on the value of the
Formula Award contribution to the deferred compensation plan in January
1998. On January 4, 2000, the second vested installment of the Formula Award
was generally distributed to participants in the form of shares at the
market value of the Company's common stock on that day. The value of the
distribution for Mr. Walton, Ms. Sweeney and Mr. Williams III was
$1,121,769, $657,291, and $305,233, respectively. The deferred compensation
plan trust distributed the vested shares to brokerage accounts for the
participants that restrict the sale of the vested shares.
The Cut-Off Award, which totaled $2.9 million in the aggregate, is paid to
individuals on the respective vesting date of any options granted under the
predecessor company option plans that were canceled in connection with the
merger. See "Formula Award and Cut-Off Award."
9
<PAGE> 12
(3) In addition to director's fees, Mr. Williams received $144,000 in consulting
fees, $4,688 in Cut-Off Award and $443,856 in vested Formula Award. The
amount of the Formula Award expensed in 1999 with respect to Mr. Williams'
award was $601,068.
(4) See "Stock Option Awards" for terms of options granted in 1999. The Company
does not maintain a restricted stock plan or a long-term incentive plan.
COMPENSATION OF DIRECTORS
During 1999, each director received $1,000 for each Board of Directors or
committee meeting attended, except with respect to the members of the Executive
Committee, who each received an annual retainer of $10,000 in lieu of fees paid
for each Executive Committee meeting attended.
Non-officer directors are eligible for stock option awards under the
Company's Stock Option Plan pursuant to an exemptive order from the Commission.
The terms of the order, which was granted in September 1999, provided for a
one-time grant of 10,000 options to each non-officer director on the date that
the order was issued, or on the date that any new director is elected to the
Board. Thereafter, each non-officer director will receive 5,000 options each
year on the date of the annual meeting of stockholders at the fair market value
on the date of grant. See "Stock Option Plan."
STOCK OPTION AWARDS
The following table sets forth the details relating to option grants in
1999 to Compensated Persons under the Company's Stock Option Plan, and the
potential realizable value of each grant, as prescribed to be calculated by the
Commission. See "Stock Option Plan."
OPTIONS GRANTS DURING 1999
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
NUMBER OF ANNUAL RATES
SECURITIES PERCENT OF OF STOCK APPRECIATION
UNDERLYING TOTAL OPTIONS EXERCISE OVER 10-YEAR TERM(3)
OPTIONS GRANTED PRICE PER EXPIRATION -----------------------
NAME GRANTED(1) IN 1999(2) SHARE DATE 5% 10%
- ---- ---------- ------------- --------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
William L. Walton.......... 96,555 7.50% $17.75 12/30/09 $1,077,832 $2,731,438
Joan M. Sweeney............ 75,511 5.90% 17.75 12/30/09 842,920 2,136,125
G. Cabell Williams III..... 21,324 1.70% 17.75 12/30/09 238,037 603,233
Brooks H. Browne........... 10,000 0.78% 22.06 09/08/09 138,753 351,627
John D. Firestone.......... 10,000 0.78% 22.06 09/08/09 138,753 351,627
Anthony T. Garcia.......... 10,000 0.78% 22.06 09/08/09 138,753 351,627
Lawrence I. Hebert......... 10,000 0.78% 22.06 09/08/09 138,753 351,627
John I. Leahy.............. 10,000 0.78% 22.06 09/08/09 138,753 351,627
Robert E. Long............. 10,000 0.78% 22.06 09/08/09 138,753 351,627
Warren K. Montouri......... 10,000 0.78% 22.06 09/08/09 138,753 351,627
Guy T. Steuart II.......... 10,000 0.78% 22.06 09/08/09 138,753 351,627
T. Murray Toomey........... 10,000 0.78% 22.06 09/08/09 138,753 351,627
Laura W. van Roijen........ 10,000 0.78% 22.06 09/08/09 138,753 351,627
</TABLE>
- ---------------
(1) Options granted to officers in 1999 generally vest in six equal installments
beginning on the date of grant, with full vesting occurring on the fifth
anniversary of the grant date or change of control of the Company. Options
granted to non-officer directors vest immediately.
(2) In 1999, the Company granted options to purchase a total of 1,287,736
shares.
(3) Potential realizable value is calculated on 1999 options granted, and is net
of the option exercise price but before any tax liabilities that may be
incurred. These amounts represent certain assumed rates of appreciation, as
mandated by the Commission. Actual gains, if any, or stock option exercises
are dependent on the future performance of the shares, overall market
conditions, and the continued employment by the Company of the option
holder. The potential realizable value will not necessarily be realized.
10
<PAGE> 13
The following table sets forth the details of option exercises by
Compensated Persons during 1999 and the values of those unexercised options at
December 31, 1999.
OPTION EXERCISES AND YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED IN-
UNDERLYING UNEXERCISED THE-MONEY OPTIONS
SHARES OPTIONS AS OF 12/31/99 AS OF 12/31/99(2)
ACQUIRED ON VALUE --------------------------- ---------------------------
NAME EXERCISE REALIZED(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
William L. Walton......... 15,834 $55,419 251,657 583,252 $15,996 $73,040
Joan M. Sweeney........... 0 0 137,345 312,441 15,116 51,486
G. Cabell Williams III.... 0 0 96,356 203,371 10,031 26,064
George C. Williams,
Jr. .................... 0 0 97,598 53,797 1,460 2,920
Brooks H. Browne.......... 0 0 10,000 0 0 0
John D. Firestone......... 0 0 10,000 0 0 0
Anthony T. Garcia......... 0 0 10,000 0 0 0
Lawrence I. Hebert........ 0 0 10,000 0 0 0
John I. Leahy............. 0 0 10,000 0 0 0
Robert E. Long............ 0 0 10,000 0 0 0
Warren K. Montouri........ 0 0 10,000 0 0 0
Guy T. Steuart II......... 0 0 10,000 0 0 0
T. Murray Toomey.......... 0 0 10,000 0 0 0
Laura W. van Roijen....... 0 0 10,000 0 0 0
</TABLE>
- -------------------------
(1) Value realized is calculated as the closing market price on the date of
exercise, net of option exercise price, but before any tax liabilities or
transaction costs. This is the deemed market value, which may actually be
realized only if the shares are sold at that price.
(2) Value of unexercised options is calculated as the closing market price on
December 31, 1999 ($18.31), net of the option exercise price, but before any
tax liabilities or transaction costs. "In-the-Money Options" are options
with an exercise price that is less than the market price as of December 31,
1999.
FORMULA AWARD AND CUT-OFF AWARD
Formula Award. The Formula Award was designed as an incentive compensation
program that would replace stock options of the predecessor companies that were
cancelled as a result of the Company's 1997 merger, and would balance share
ownership among key officers. Assuming all officers meet the vesting
requirement, the Company will accrue the Formula Award in equal amounts of
approximately $6.4 million, over the three-year period on the anniversary of the
merger date (December 31) in 1998, 1999 and 2000, and will vest automatically in
the event of a change of control of the Company. The Formula Award expense for
1999 totaled $6.2 million for 1999. If an officer terminates employment with the
Company prior to the vesting of any part of the Formula Award, that amount is
forfeited to the Company. The terms of the Formula Award require that the award
be contributed to the Company's deferred compensation plan, and used to purchase
shares of the Company in the open market. See "Deferred Compensation Plan."
Cut-Off Award. The Cut-Off Award was designed to cap the appreciated value
in unvested options at the merger announcement date in order to set the
foundation to balance option awards upon the merger on December 31, 1997. The
Cut-Off Award is payable for each canceled option as the canceled options would
have vested and vests automatically in the event of a change of control. The
Cut-Off Award is
11
<PAGE> 14
payable if the award recipient is employed by the Company on the future vesting
date. The Cut-Off Award expense for 1999 totaled $0.6 million.
STOCK OPTION PLAN
The Company has a Stock Option Plan, which is intended to encourage stock
ownership in the Company by officers, thus giving them a proprietary interest in
the Company's performance. The Stock Option Plan was approved by stockholders at
the Special Meeting of Stockholders on November 26, 1997. The Company now seeks
stockholder approval to amend the Stock Option Plan to increase the number of
shares available under the Stock Option Plan, as well as to make other changes
discussed below to the Stock Option Plan and its operations. See "Proposal to
Amend the Stock Option Plan" below.
EMPLOYEE STOCK OWNERSHIP PLAN AND THE 401(K) PLAN
Until December 31, 1999, the Company maintained an Employee Stock Ownership
Plan (the "ESOP"). All eligible employees (i.e., employees with one (1) year of
service who were at least 21 years of age) of the Company were eligible
participants in the ESOP. Pursuant to this qualified plan, during 1999 the
Company contributed 5% of each eligible participant's total cash compensation
for the year (up to $160,000) to a plan account on the participant's behalf,
which fully vested over a two-year period. The contribution with respect to
compensation in excess of $160,000 was made to the Deferred Compensation Plan.
The ESOP used substantially all of these cash contributions to purchase shares
of the Company. At December 31, 1999, the ESOP held 0.4% of the outstanding
shares of the Company, and all of these shares had been allocated to
participants' plan accounts. On December 31, 1999 the ESOP was terminated.
In October 1999, the Company established a 401(K) plan (the "401(K) Plan")
to replace the terminating ESOP. All employees who are at least 21 years of age
have the opportunity to contribute pre-tax salary deferrals into the 401(K) Plan
up to $10,500 annually, and to direct the investment of these contributions. The
401(K) Plan allows eligible participants to invest in shares of the Company's
common stock among other investment options. In addition, beginning in 2000, the
Company expects to contribute to each eligible participant (i.e. employees with
one year of service), 5% of each participant's total cash compensation for the
year, up to $170,000, to each participant's plan account on the participant's
behalf, which fully vests at the time of the contribution.
Generally, participants, including each Compensated Person, transferred the
balance of their ESOP account, including shares of the Company, into the 401(K)
Plan on March 16, 2000. On March 22, 2000, the 401(K) Plan held 0.4% of the
outstanding shares of the Company. See "Voting Securities."
DEFERRED COMPENSATION PLAN
The Company maintains a deferred compensation plan (the "Deferred
Compensation Plan"). The Deferred Compensation Plan is a funded plan that
provides for the deferral of compensation by employees and consultants of the
Company. Any employee or consultant of the Company is eligible to participate in
the plan at such time and for such period as designated by the Board of
Directors. The Deferred Compensation Plan is administered through a trust, and
the Company funds this
12
<PAGE> 15
plan through cash contributions. The Deferred Compensation Plan holds the
unvested shares of the Company's common stock purchased in connection with the
Formula Award. See "Formula Award" above.
CERTAIN TRANSACTIONS
Indebtedness of Management. The following table sets forth certain
information regarding indebtedness to the Company in excess of $60,000 of any
person serving as a director or executive officer of the Company and of any
nominee for election as a director at any time since January 1, 1999. All of
such indebtedness results from loans made by the Company to enable the exercise
of stock options. The interest rates charged generally reflect the applicable
federal rate on the date of the loan.
<TABLE>
<CAPTION>
HIGHEST AMOUNT AMOUNT
OUTSTANDING RANGE OF OUTSTANDING AT
NAME AND POSITION WITH COMPANY DURING 1999 INTEREST RATES MARCH 22, 2000
------------------------------ -------------- -------------- --------------
<S> <C> <C> <C>
William L. Walton, Chairman and CEO....... $2,697,250 5.83% - 6.24% $2,697,250
Philip A. McNeill, Managing Director...... 2,186,365 5.79 - 6.24 2,186,365
Penni F. Roll, Principal and CFO.......... 741,500 5.83 - 6.24 741,500
John M. Scheurer, Managing Director....... 2,369,806 5.25 - 7.45 2,369,806
Joan M. Sweeney, Managing Director........ 1,832,719 5.79 - 6.63 1,832,719
G. Cabell Williams III, Managing
Director................................ 3,322,977 4.92 - 6.24 3,322,977
George C. Williams, Jr., Director,
Chairman Emeritus....................... 1,850,446 5.89 - 6.24 1,850,385
</TABLE>
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Pursuant to Section 16(a) of the Securities Exchange Act of 1934, the
Company's directors and executive officers, and any persons holding 10% or more
of its common stock, are required to report their beneficial ownership and any
changes therein to the Commission, the National Association of Securities
Dealers, Inc. and the Company. Specific due dates for those reports have been
established, and the Company is required to report herein any failure to file
such reports by those due dates. Based on the Company's review of Forms 3, 4 and
5 filed by such persons, the Company believes that during 1999 all Section 16(a)
filing requirements applicable to such persons were met in a timely manner,
except with respect to one filing by G. Cabell Williams, III. A sale of 1,467
shares of one of the predecessor companies completed in 1995 was reported on a
Form 5 in 1999 rather than at the time of the transaction. However, the balances
of shares owned by Mr. Williams were correct in all filings between the time the
sale was made through the filing in 1999 and thereafter.
13
<PAGE> 16
RATIFICATION OF SELECTION OF INDEPENDENT PUBLIC ACCOUNTANTS
The disinterested members of the Board of Directors have selected Arthur
Andersen LLP as independent public accountants for the Company for the year
ending December 31, 2000. This selection is subject to ratification or rejection
by the stockholders of the Company. If the stockholders ratify the selection of
Arthur Andersen LLP as the Company's accountants, Arthur Andersen LLP also will
be the independent public accountants for all subsidiaries of the Company.
Arthur Andersen LLP has advised the Company that neither the firm nor any
present member or associate of it has any material financial interest, direct or
indirect, in the Company or its subsidiaries. It is not expected that a
representative of Arthur Andersen LLP will be present, or available to answer
questions, at the Meeting, but a representative would have an opportunity to
make a statement if he or she chose to attend.
UNLESS MARKED TO THE CONTRARY, THE SHARES REPRESENTED BY THE ENCLOSED PROXY
CARD WILL BE VOTED FOR RATIFICATION OF THE APPOINTMENT OF ARTHUR ANDERSEN LLP AS
THE INDEPENDENT PUBLIC ACCOUNTANTS OF THE COMPANY.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE TO RATIFY THE SELECTION OF
ARTHUR ANDERSEN LLP AS INDEPENDENT PUBLIC ACCOUNTANTS FOR THE COMPANY.
PROPOSAL TO AMEND THE STOCK OPTION PLAN
The shareholders are being asked to vote on a proposal to amend the Allied
Capital Corporation Stock Option Plan to permit the Company to increase the
number of shares of Common Stock subject to options under the Option Plan from
6,250,000 to 12,350,000, subject to adjustments by reason of stock splits or
similar capital adjustments, and to make certain other administrative changes.
The Stock Option Plan was initially approved by the stockholders at the Annual
Meeting of Stockholders on November 26, 1997. The Stock Option Plan, as proposed
to be amended, is hereinafter referred to as the "Option Plan".
The Company's Board of Directors and its Compensation Committee (the
"Committee"), which consists entirely of directors who are not employees of the
Company, believe that stock-based incentive compensation, particularly the award
of stock options, is a key element of officer and director compensation.
Stock-based compensation advances the interests of the Company by providing
substantial motivation for superior performance and more fully aligning the
interests of officers and directors with the interests of the stockholders. The
Company believes that its compensation practices must be effective in
attracting, retaining and motivating experienced professionals who have
significant career mobility, and that these programs must always be consistent
with the interests of our stockholders.
During 1999, the Company made modest increases in annual base salary and
bonus compensation for its executive officers, consistent with its compensation
philosophy to place greater emphasis on the value of the compensation derived
from stock-based incentives over annual cash compensation in the total
compensation plan. Of particular concern to the Company is its ability to retain
its exceptional talent in a highly competitive employment market that places a
high value on the stock-based element of compensation. Because of the changing
dynamics of the capital markets and the relatively high value placed on
technology stocks, as
14
<PAGE> 17
compared to our Company's stock, management and the Company's Board of Directors
believe that the proposed increase in the number of shares reserved for issuance
is imperative in order to attract and retain high caliber talent.
The Company engaged an independent compensation consulting firm to assist
in comparing the compensation programs of Allied Capital with those of other
companies that compete with Allied Capital for talent. Market data presented by
the compensation consulting firm identified that shares available for option as
a percentage of total shares outstanding ranged from an average of 8.5% for
commercial finance companies, to 22% for investment banking and asset management
companies. Furthermore, private equity and buyout firms typically have from 20%
to 30% of the firm's equity available for management compensation. The Company
competes for talent primarily with private equity and buyout firms. Currently,
the Company's Stock Option Plan has shares representing approximately 9% of
total shares outstanding under option.
In addition, during 1999, approximately 66% of the total return generated
from an investment in the Company's common stock was derived from the dividends
paid during the year. Unexercised options do not accrue dividends, and as a
result, participants in the Option Plan are unable to receive a significant
portion of the total return attributed to a share of the Company's common stock
on unexercised options. Therefore, the Company believes that the number of
options available for grant under the Option Plan needs to be increased to
offset the missing return component attributable to the dividends not paid on
unexercised options.
Furthermore, the Company believes that increasing the number of shares of
common stock available under the Option Plan is reasonable and appropriate and
achieves the competitive objective without compromising shareholder value
through less favorable alternatives, such as the issuance of dividend equivalent
units on unexercised options, or option repricing. The Committee and the Board
of Directors recommend the adoption of the proposal to increase the number of
shares reserved for issuance from 6,250,000 to 12,350,000, which represents
17.9% of the Company's total shares outstanding as of the date of this proxy
statement. The option grants made to Compensated Persons during 1999 are
disclosed in a table under the caption "Stock Option Awards."
Other than the increase in the number of shares available under then Option
Plan, and certain administrative changes discussed below, including a provision
for transferability in certain circumstances, the terms of the amended Option
Plan are materially the same as the existing Stock Option Plan, and are
summarized below. This summary, however, does not purport to be a complete
description of the Option Plan and this description is qualified in its entirety
by the terms of the Option Plan, attached as Exhibit A.
DESCRIPTION OF THE OPTION PLAN
PURPOSE. The purpose of the Option Plan is to advance the interests of the
Company by providing officers and non-officer directors of the Company who have
substantial responsibility for the direction and management of the Company with
additional incentives to exert their best efforts to increase their proprietary
interest in the success of the Company, to reward outstanding performance, and
to attract and retain persons of outstanding ability.
15
<PAGE> 18
AUTHORIZATION. Under the existing Stock Option Plan, options may be granted
from time to time on up to 6,250,000 share. The Company has options outstanding
on 5,410,938 shares under the existing Stock Option Plan. The Board of Directors
proposes to amend the existing Option Plan to increase the number of shares
authorized for issuance by 6,100,000 shares. The increase in the number of
issuable shares would provide 6,533,807 shares for issuance to officers and
non-officer directors. The maximum number of shares that may be covered by
options granted under the Option Plan, as proposed to be amended, would be
12,350,000.
ADMINISTRATION. The Option Plan is administered by the Company's
compensation committee (the "Committee") comprised of at least two (2) members
of the Company's Board of Directors, who each shall (a) be a non-employee
director, as defined in Rule 16b-3 promulgated under the Securities Exchange Act
of 1934, (b) have no financial interest in grants of stock options to officers
of the Company under the Option Plan and not be an "interested person," as
defined in Section 2(a)(19) of the Investment Company Act of 1940, as amended
(the "1940 Act"), of the Company, and (c) be an "outside director" as the term
is defined under Section 162(m) of the Internal Revenue Service Code (the
"Code").
The Committee interprets the Option Plan and, to the extent and in the
manner contemplated in the Option Plan, exercises the discretion reserved to it
in the Option Plan. The Committee may prescribe, amend and rescind rules and
regulations relating to the Option Plan and make all other determinations
necessary for its administration. The decision of the Committee on any
interpretation of the Option Plan or administration thereof, if in compliance
with the provisions of the 1940 Act and regulations promulgated thereunder,
shall be final and binding with respect to the Company, any optionee or any
person claiming to have rights as, or on behalf of, any optionee.
TERMS OF OPTIONS. The Committee's principal objective in awarding stock
options to the eligible officers of the Company is to align each optionee's
interests with the success of the Company and the financial interests of its
stockholders by linking a portion of such optionee's compensation with the
performance of the Company's stock and the value delivered to stockholders.
Stock options are granted under the Option Plan at a price not less than the
prevailing market value and will have value only if the Company's stock price
increases. The Committee determines the amount and features of the stock
options, if any, to be awarded to optionees. The Committee evaluates a number of
criteria, including the past service of each such optionee to the Company, the
present and potential contributions of such optionee to the success of the
Company and such other factors as the Committee shall deem relevant in
connection with accomplishing the purposes of the Option Plan, including the
recipient's current stock holdings, years of service, position with the Company
and other factors. The Committee does not apply a formula assigning specific
weights to any of these factors when making its determination. The Committee
awards stock options on a subjective basis and such awards depend in each case
on the performance of the officer under consideration.
PARTICIPANTS -- OFFICERS. The Committee determines and designates those
officers of the Company who are eligible to participate in the Option Plan. The
Committee also determines the number of options to be awarded to each optionee.
In making these determinations, the Committee takes into account the past
service of the optionee and potential contributions to the success of the
Company, and such other
16
<PAGE> 19
factors, as the Committee deems relevant to accomplish the purposes of the
Option Plan.
PARTICIPANTS -- NON-OFFICER DIRECTORS. Pursuant to an order of the
Commission granted on September 8, 1999, the Company's non-officer directors
became eligible to receive option grants. On that date, each incumbent director
received options to purchase 10,000 shares, and pursuant to the Commission
order, each will receive options to purchase 5,000 shares each year thereafter.
New directors will receive options to purchase 10,000 shares upon election to
the board and options to purchase 5,000 shares each year thereafter. The amended
Option Plan reflects the terms of these automatic grants provided for in the
Commission order.
As of the date of this proxy statement, approximately 78 persons were
eligible to participate in the Option Plan. Options are not transferable other
than by the laws of descent and distribution, a qualified domestic relations
order, or with the permission of the Committee, which may allow options to be
transferred to family members, or entities established for the benefit of family
members, for estate planning purposes.
EXERCISE OF OPTIONS. Options are exercisable at a price equal to the fair
market value of the shares at the time the option is granted, except with
respect to options that are intended to be incentive stock options (within the
meaning of the Code) and that are granted to any holder of 10% or more of the
Company's outstanding shares, in which case the exercise price will be not less
than 110% of the then-current fair market value. The day on which the Company
approves the granting of an option or the date specified in the Plan is
considered the date on which the option is granted. For purposes of the Option
Plan, the fair market value of the shares is the closing price of the shares as
quoted on the Nasdaq National Market on the date on which the option is awarded.
Options may contain such other terms and conditions as the Committee deems
advisable, including, but not limited to, being exercisable only in
installments. Options granted to different optionees or at different times need
not contain similar provisions. Each option will state the period or periods of
time within which the option may be exercised by the optionee, which may not
exceed ten years from the date the option is granted. The option period may not
exceed five years if the option is intended to be an incentive stock option
(within the meaning of the Code) and the option is awarded to a holder of 10% or
more of the Company's outstanding shares.
All rights to exercise options terminate 60 days after an optionee ceases
to be (i) a non-officer director, (ii) both an officer and a director, if such
optionee serves in both capacities, or (iii) an officer (if such officer is not
also a director) of the Company for any cause other than death or total and
permanent disability. If an optionee's employment is terminated for any reason
other than death or total and permanent disability before expiration of his
option and before he has fully exercised it, the optionee has the right to
exercise the option during the balance of a 60-day period from the date of
termination. If an optionee dies or becomes totally and permanently disabled
before expiration of the option without fully exercising it, he or she or the
executors or administrators or legatees or distributees of the estate shall, as
may be provided at the time of the grant, have the right, within one year after
the optionee's death or total and permanent disability, to exercise the option
in whole or in part before the expiration of its term.
17
<PAGE> 20
PAYMENT FOR SHARES. Full payment for shares purchased must be made at the
time of exercising the option in whole or in part. However, at the request of an
officer-optionee, the Board of Directors or the Committee may authorize the
Company to lend to such officer-optionee, in whole or in part as of the date of
exercise, an amount equal to the exercise price of the option. The loan will:
(a) have a term of not more than ten years; (b) become due within 60 days after
the recipient ceases to be an officer of the Company; (c) bear interest at a
rate not less than the applicable federal rate under the Code at the time the
loan is made; and (d) be fully collateralized at all times, which collateral may
include securities issued by the Company. Loan terms and conditions may be
changed by the Committee to comply with applicable IRS and Commission
regulations or other relevant pronouncements.
EFFECT OF CHANGE IN SHARES SUBJECT TO THE AMENDED PLAN. If there is a
change in the outstanding shares through the declaration of stock dividends,
stock splits, or combinations or exchanges of shares, or otherwise, the number
of shares available for option and the shares subject to an option and the
option prices shall be appropriately adjusted by the Committee.
CHANGE OF CONTROL. In the event of a Change of Control (as hereinafter
defined), all outstanding options will become fully vested and exercisable as of
the Change of Control. For purposes of the Option Plan, "Change of Control"
means (i) the sale of substantially all of the Company's assets, (ii) the
acquisition, whether directly, indirectly, beneficially (within the meaning of
Rule 13d-3 of the 1934 Act), or of record, of securities of the Company
representing twenty-five percent (25%) or more in the aggregate voting power of
the Company's outstanding common stock by any "person" (within the meaning of
Sections 13(d) and 14(d) of the 1934 Act), including any corporation or group of
associated persons acting in concert, other than (A) the Company or its
subsidiaries and/or (B) any employee pension benefit plan (within the meaning of
Section 3(2) of the Employee Retirement Income Security Act of 1974) of the
Company or its subsidiaries, including a trust established pursuant to any such
plan, or (iii) a merger or consolidation of the Company with another entity
unless the Company is the surviving company in such merger or consolidation.
AMENDMENT AND TERMINATION. The Committee may modify, revise or terminate
the Option Plan at any time. While the Board of Directors may seek stockholder
approval of an action modifying a provision of the Option Plan when deemed
advisable, the Board of Directors may make certain modifications without
stockholder approval (except with respect to the number of options authorized
for issuance under the Option Plan). The Option Plan will terminate when all
shares reserved for issuance have been issued upon the exercise of options, or
by action of the Board of Directors whichever shall first occur.
If the Committee determines that the listing, registration or qualification
of the shares subject to an option upon a securities exchange or under any state
or federal law, or the consent or approval of any government regulatory body, is
necessary or desirable as a condition of, or in connection with, the granting of
such option or the issue or purchase of shares thereunder, the option may not be
exercised unless such listing, registration, qualification, consent or approval
has been effected or obtained free of any conditions not acceptable to the
Committee. No option will expire during any period when the right to exercise an
option is so suspended by the Committee. The Committee will extend its term for
a further period so as to afford the optionee a
18
<PAGE> 21
reasonable opportunity to exercise the option, except that no option may be
exercised more than ten years after it was granted.
RESALE OF SHARES ACQUIRED PURSUANT TO OPTIONS. Optionees purchasing shares
pursuant to options may resell the shares in the over-the-counter market through
brokers or dealers at prevailing market prices. Any sales by optionees who may
be deemed affiliates of the Company must be made pursuant to registration under
the Securities Act or pursuant to an exemption therefrom.
FEDERAL TAX CONSEQUENCES OF THE OPTION PLAN
The following is a summary of certain federal income tax consequences of
transactions under the Option Plan based on current federal income tax laws.
This summary is not intended to be exhaustive and does not describe state, local
or other tax consequences.
INCENTIVE STOCK OPTIONS. In general, no income will be recognized by an
optionee and no deduction will be allowed to the Company with respect to the
grant or exercise of an incentive stock option granted under the Option Plan.
The difference between the exercise price and the fair market value of the
shares of common stock on the date the option is exercised is, however, an
adjustment item for the participant for purposes of the alternative minimum tax.
When the stock received upon exercise of the option is sold, provided that the
stock is held for more than two years from the date of grant of the option and
more than one year from the date of exercise, the participant will recognize a
long-term capital gain or loss equal to the difference between the amount
realized and the exercise price of the option related to such stock. If the
above mentioned holding period requirements of the Code are not satisfied, the
subsequent sale of stock received upon exercise of an incentive stock option is
treated as a "disqualifying disposition."
In general, the participant will recognize taxable income at the time of
such disqualifying disposition as follows: (i) ordinary income in an amount
equal to the excess of (A) the lesser of the fair market value of the shares of
common stock on the date the incentive stock option is exercised or the amount
realized on such disqualifying disposition over (B) the exercise price and (ii)
capital gain to the extent of any excess of the amount realized on such
disqualifying disposition over the fair market value of the shares of common
stock on the date the incentive stock option is exercised (or capital loss to
the extent of any excess of the exercise price over the amount realized on
disposition). Any capital gain or loss recognized by the participant will be
long-term or short-term depending upon the holding period for the stock sold.
The Company may claim a deduction at the time of the disqualifying disposition
equal to the amount of ordinary income the participant recognizes. Note that the
tax treatment generally applies only to the extent that the optionee is an
employee of the Company at the time of the grant of the option and at all times
during the period ending three months before the date of exercise.
NON-QUALIFIED STOCK OPTIONS. The grant of a non-qualified stock option
under the Option Plan will not result in the recognition of taxable income to
the participant or in a deduction to the Company. In general, upon exercise, a
participant will recognize ordinary income in an amount equal to the excess of
the fair market value of the shares of common stock purchased over the exercise
price. The Company is required to withhold tax on the amount of income so
recognized, and is entitled to a tax deduction equal to the amount of such
income. Gain or loss upon a subsequent
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sale of any shares of common stock received upon the exercise of a non-qualified
stock option is taxed as capital gain or loss (long-term or short-term,
depending upon the holding period of the stock sold).
VOTE REQUIRED
The affirmative vote of the holders of a majority of the Company's
outstanding shares present or represented at the Meeting, or any adjournment
thereof, is required to approve the amended Option Plan. In the event such
approval is not obtained, the Option Plan shall not be amended and shall
continue in operation as it existed prior to its proposed amendment and
restatement.
THE BOARD OF DIRECTORS OF THE COMPANY UNANIMOUSLY RECOMMENDS THAT
STOCKHOLDERS VOTE "FOR" THE PROPOSAL TO AMEND THE OPTION PLAN.
OTHER BUSINESS
The Board of Directors knows of no other business to be presented for
action at the Meeting. If any matters do come before the Meeting on which action
can properly be taken, it is intended that the proxies shall vote in accordance
with the judgment of the person or persons exercising the authority conferred by
the proxy at the Meeting. The submission of a proposal does not guarantee its
inclusion in the Company's proxy statement or presentation at the Meeting unless
certain securities law requirements are met.
2001 ANNUAL MEETING OF STOCKHOLDERS
The Company expects that the 2001 Annual Meeting of Stockholders will be
held in May 2001, but the exact date, time, and location of such meeting have
yet to be determined. A stockholder who intends to present a proposal at that
annual meeting must submit the proposal in writing to the Company at its address
in Washington, DC, and the Company must receive the proposal no later than
November 29, 2000, in order for the proposal to be considered for inclusion in
the Company's proxy statement for that meeting. The submission of a proposal
does not guarantee its inclusion in the Company's proxy statement or
presentation at the meeting.
Rule 14a-4 of the Commission's proxy rules allows a company to use
discretionary voting authority to vote on matters coming before an annual
meeting of stockholders, if the company does not have notice of the matter at
least 45 days before the date corresponding to the date on which the company
first mailed its proxy materials for the prior year's annual meeting of
stockholders or the date specified by an overriding advance notice provision in
the company's bylaws. The Corporation's bylaws do not contain such an advance
notice provision. Accordingly, for the Corporation's 2001 Annual Meeting of
Stockholders, stockholders must submit written notice to the Secretary on or
before February 13, 2001.
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EXHIBIT A
ALLIED CAPITAL CORPORATION
AMENDED STOCK OPTION PLAN
1. PURPOSE OF THE PLAN
The purpose of this Amended Stock Option Plan (this "Plan") is to advance
the interests of Allied Capital Corporation (the "Company") by providing to
directors of the Company and to officers of the Company who have substantial
responsibility for the direction and management of the Company additional
incentives to exert their best efforts on behalf of the Company, to increase
their proprietary interest in the success of the Company, to reward outstanding
performance and to provide a means to attract and retain persons of outstanding
ability to the service of the Company. It is recognized that the Company cannot
attract or retain these officers and directors without this compensation.
Options granted under this Plan may qualify as incentive stock options ("ISOs"),
as defined in Section 422 of the Internal Revenue Code of 1986, as amended (the
"Code").
2. ADMINISTRATION
This Plan shall be administered by a committee (the "Committee") comprised
of at least two (2) members of the Company's Board of Directors who each shall
(a) be a "non-employee director," as defined in Rule 16b-3 promulgated under the
Securities Exchange Act of 1934, as amended, unless administration of the Plan
by "non-employee directors" is not then required for exemptions under Rule 16b-3
to apply to transactions under the Plan, (b) not be an "interested person," as
defined in Section 2(a)(19) of the investment Company Act of 1940, as amended
(the "Act"), and (c) be an "outside director" as defined under Section 162(m) of
the Code, unless the action taken pursuant to the Plan is not required to be
taken by "outside directors" to qualify for tax deductibility under Section
162(m) of the Code. The Committee shall interpret this Plan and, to the extent
and in the manner contemplated herein, shall exercise the discretion reserved to
it hereunder. The Committee may prescribe, amend and rescind rules and
regulations relating to this Plan and to make all other determinations necessary
for its administration. The decision of the Committee on any interpretation of
this Plan or administration hereof, if in compliance with the provisions of the
Act and regulations promulgated thereunder, shall be final and binding with
respect to the Company, any optionee or any person claiming to have rights as,
or on behalf of, any optionee.
3. SHARES SUBJECT TO THE PLAN
The shares subject to option and the other provisions of this Plan shall be
shares of the Company's common stock, par value $.0001 per share ("shares").
Subject to the provisions hereof concerning adjustment, the total number of
shares which may be purchased upon the exercise or surrender of stock options
granted under this Plan shall not exceed 12,350,000 shares, which includes all
shares with respect to which options have been granted or surrendered for
payment in cash or other consideration pursuant to this Plan or predecessor
forms of this Plan. In the event any option shall cease to be exercisable in
whole or in part for any reason, the shares which were covered by such option,
but as to which the option had not been exercised, shall
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again be available under this Plan. Shares may be made available from
authorized, unissued or reacquired stock or partly from each.
4. PARTICIPANTS
(A) Officers. The Committee shall determine and designate from time to time
those key officers of the Company who shall be eligible to participate in this
Plan. The Committee shall also determine the number of shares to be offered from
time to time to each optionee. In making these determinations, the Committee
shall take into account the past service of each such officer to the Company,
the present and potential contributions of such officer to the success of the
Company and such other factors as the Committee shall deem relevant in
connection with accomplishing the purposes of this Plan; provided that the
Committee shall determine that each grant of options to an optionee, the number
of shares offered thereby and the terms of such option are in the best interests
of the Company and its shareholders. The date on which the Committee approves
the grant of any option to an officer of the Company shall be the date of
issuance of such option; provided, however, that if (1) any such action by the
Committee does not constitute approval thereof by both (A) a majority of the
Company's directors who have no financial interest in such action and (B) a
majority of the Company's directors who are not "interested persons" (as defined
in Section 2(a)(19) of the Act) of the Company and (2) such approval is at such
time required by Section 61(a)(3)(B)(i)(I) or other applicable provision of the
Act, then the grant of any option by such action shall not be effective, and
there shall be no issuance of such option, until there has been approval of such
action by (A) a majority of the Company's directors who have no financial
interest in such action and (B) a majority of the Company's directors who are
not "interested persons" of the Company, on the basis that such action is in the
best interests of the Company and its shareholders, and the last date on which
such required approval is obtained shall be the date of issuance of such option.
The agreement documenting the award of any option granted pursuant to this
paragraph 4(a) shall contain such terms and conditions as the Committee shall
deem advisable, including but not limited to being exercisable only in such
installments as the Committee may determine.
(B) Non-Officer Directors. In accordance with the Securities and Exchange
Commission (the "Commission") order issued September 8, 1999, the following
provisions provide the terms of the grants that may be made to directors who are
not officers of the Company:
(1) A one time grant of options in accordance with the provisions of
this paragraph (b)(1) shall be made to each director of the Company
who is not an officer of the Company who is serving on the date on
which the issuance of options pursuant to this Plan to non-officer
directors is approved by order of the Securities and Exchange
Commission pursuant to Section 61(a)(3)(B)(i)(II) of the Act. After
such date, a one time grant of options in accordance with the
provisions of this paragraph (b)(1) shall be made to each new
non-officer director other than any non-officer director who
received a grant pursuant to the first sentence of this paragraph
(b)(1) upon his or her initial election as a director of the
Company. Each grant pursuant to this paragraph (b)(1) shall award
the non-officer director an option to purchase 10,000 shares at a
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price equal to the current fair market value of the shares at the
date of issuance of such shares, and the options shall vest
immediately.
(2) A grant of options in accordance with the provisions of this
paragraph (b)(2) shall be made to each director of the Company who
is not an officer of the Company who is serving as a director on the
date of the annual meeting of stockholders each year. Each grant
pursuant to this paragraph (b)(2) shall award the non-officer
directors an option to purchase 5,000 shares at a price equal to the
current fair market value of the shares at the date of issuance of
such option, and the options shall vest immediately.
(3) The agreement documenting the award of any option pursuant to this
paragraph (b) shall contain the terms and conditions, as the
Committee shall deem advisable.
(C) Option Agreements. Agreements evidencing options granted to different
optionees or at different times need not contain similar provisions. Options
that are intended to be ISOs will be designated as such; any option not so
designated will be treated as a nonqualified stock option.
5. OPTION PRICE
Each option agreement shall state the price at which the subject option may
be exercised, which shall not be less than the current fair market value of the
shares at the date of issuance of an option; provided, that the exercise price
of any option that is intended to be an ISO and that is granted to a holder of
10% or more of the Company's shares shall not be less than 110% of such current
fair market value.
6. OPTION PERIOD
Each option agreement shall state the period or periods of time within
which the subject option may be exercised, in whole or in part, by the optionee
which shall be such period or periods of time as may be determined by the
Committee; provided, that the option period shall not exceed ten years from the
date of issuance of the option and, in the case of an option that is intended to
be an ISO and that is granted to a holder of 10% or more of the Company's
shares, shall not exceed five years.
7. PAYMENT FOR SHARES
Full payment for shares purchased shall be made at the time of exercising
the option in whole or in part. Payment of the purchase price shall be made in
cash (including check, bank draft or money order) or, if authorized pursuant to
paragraph 9 hereof, by a loan from the Company in accordance with paragraph 9.
8. TRANSFERABILITY OF OPTIONS
Options shall not be transferable other than by will or the laws of descent
and distribution and pursuant to a qualified domestic relations order.
Notwithstanding the foregoing, the Committee shall have the authority to permit
transfer of options to family members or entities established for the benefit of
family members in accordance with federal income tax laws.
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9. LOANS BY THE COMPANY
Upon the exercise of any option, the Company, at the request of an officer-
optionee, and subject to the approval of both (a) a majority of the Company's
directors who each has no financial interest in such loan and (b) a majority of
the Company's directors who each is not an "interested person," as defined in
Section 2(a)(19) of the Act, of the Company on the basis that such loan is in
the best interests of the Company and its stockholders (whether such approval is
by the Committee or otherwise), may lend to such officer-optionee, as of the
date of exercise, an amount equal to the exercise price of such option;
provided, that such loan (a) shall have a term of not more than ten years, (b)
shall become due within sixty days after the recipient of the loan ceases to be
an officer of the Company, (c) shall bear interest at a rate no less than the
prevailing rate applicable to 90-day United States Treasury bills at the time
the loan is made, and (d) shall be fully collateralized at all times, which
collateral may include securities issued by the Company. Loan terms and
conditions may be changed by the Committee to comply with applicable IRS and
Commission regulations.
10. TERMINATION OF OPTIONS
All rights to exercise options shall terminate sixty days after any
optionee ceases to be a director or an officer of the Company, and no options
will vest after an optionee's termination date. Notwithstanding the foregoing,
however, where an optionee's service as a director or officer of the Company
terminates as a result of the optionee's death or his total and permanent
disability, the optionee or the executors or administrators or legatees or
distributees of the estate, as the case may be, shall have the right, from time
to time within one year after the optionee's total and permanent disability or
death and prior to the expiration of the term of the option, to exercise any
portion of the option not previously exercised, in whole or in part, as provided
in the respective option agreement.
11. EFFECT OF CHANGE IN STOCK SUBJECT TO THE PLAN
Subject to any required action by the shareholders of the Company and the
provisions of applicable corporate law, the number of shares of represented by
the unexercised portion of an option, the number of shares which has been
authorized or reserved for issuance hereunder, and the number of shares covered
by any applicable vesting schedule hereunder, as well as the exercise price of a
share represented by the unexercised portion of an option, shall be
proportionately adjusted for (a) a division, combination or reclassification of
any of the shares of common stock of the Company or (b) a dividend payable in
shares of common stock of the Company.
12. GENERAL RESTRICTION
Each option shall be subject to the requirement that, if at any time the
Board of Directors shall determine, at its discretion, that the listing,
registration or qualification of the shares subject to such option upon any
securities exchange or under any state or federal law, or the consent or
approval of any government regulatory body, is necessary or desirable as a
condition of, or in connection with, the granting of such option or the issue or
purchase of the shares thereunder, such option may not be exercised in whole or
in part unless such listing, registration, qualification, consent or approval
shall have been effected or obtained free of any conditions not acceptable to
the Company. Subject to the limitations of paragraph 6, no option shall expire
A-4
<PAGE> 27
during any period when exercise of such option has been prohibited by the Board
of Directors, but shall be extended for such further period so as to afford the
optionee a reasonable opportunity to exercise his option.
13. MISCELLANEOUS PROVISIONS
(a) No optionee shall have rights as a shareholder with respect to shares
covered by his option until the date of exercise of his option.
(b) The granting of any option shall not impose upon the Company any
obligation to appoint or to continue to appoint as a director or
officer any optionee, and the right of the Company to terminate the
employment of any officer or other employee, or service of any
director, shall not be diminished or affected by reason of the fact
that an option has been granted to such optionee.
(c) Options shall be evidenced by stock option agreements in such form and
subject to the terms and conditions of this Plan as the Committee shall
approve from time to time, consistent with the provisions of this Plan.
Such stock option agreements may contain such other provisions, as the
Committee in its discretion may deem advisable. In the case of any
discrepancy between the terms of the Plan and the terms of any option
agreement, the Plan provisions shall control.
(d) For purposes of this Plan, the fair market value of the shares shall be
the closing sales price of the stock as quoted on the Nasdaq National
Market for the date of issuance of such option, as provided herein. If
the Company's shares are traded on an exchange, the price shall be the
price of the Company's stock as reported in The Wall Street Journal for
such date of issuance of an option. If no closing price is reported,
the fair market value shall be the average of high and low sales price
on the date of grant.
(e) The aggregate fair market value (determined as of the date of issuance
of an option) of the shares with respect to which an option, or portion
thereof, intended to be an ISO is exercisable for the first time by any
optionee during any calendar year (under all incentive stock option
plans of the Company and subsidiary corporations) shall not exceed
$100,000.
(f) All options issued pursuant to this Plan shall be granted within ten
years from the earlier of the date of adoption of this Plan (or any
amendment thereto requiring shareholder approval pursuant to the Code)
or the date this Plan (or any amendment thereto requiring shareholder
approval pursuant to the Code) is approved by the shareholders of the
Company.
(g) No option may be issued if exercise of all warrants, options and rights
of the Company outstanding immediately after issuance of such option
would result in the issuance of voting securities in excess of 20% of
the Company's outstanding voting securities.
(h) A leave of absence granted to an employee does not constitute an
interruption in continuous employment for purposes of this Plan as long
as the leave of absence does not extend beyond one year.
(i) Any notices given in writing shall be deemed given if delivered in
person or by certified mail; if given to the Company at Allied Capital
Corporation,
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<PAGE> 28
1919 Pennsylvania Avenue, N.W., 3rd Floor, Washington, D.C. 20006; and,
if to an optionee, in care of the optionee at his or her last known
address.
(j) This Plan and all actions taken by those acting under this Plan shall
be governed by the substantive laws of Maryland without regard to any
rules regarding conflict-of-law or choice-of-law.
(k) All costs and expenses incurred in the operation and administration of
this Plan shall be borne by the Company.
14. CHANGE OF CONTROL
In the event of a Change of Control (as hereinafter defined), all then-
outstanding options will become fully vested and exercisable as of the Change of
Control. For purposes of the Plan, "Change of Control" means (i) the sale of
substantially all of the Company's assets, (ii) the acquisition, whether
directly, indirectly, beneficially (within the meaning of Rule 13d-3 of the 1934
Act), or of record, of securities of the Company representing twenty-five
percent (25%) or more in the aggregate voting power of the Company's
then-outstanding Common Stock by any "person" (within the meaning of Sections
13(d) and 14(d) of the 1934 Act), including any corporation or group of
associated persons acting in concert, other than (A) the Company or its
subsidiaries and/or (B) any employee pension benefit plan (within the meaning of
Section 3(2) of the Employee Retirement Income Security Act of 1974) of the
Company or its subsidiaries, including a trust established pursuant to any such
plan, or (iii) a merger or consolidation of the Company with another entity
unless the Company is the surviving company in such merger or consolidation.
15. AMENDMENT AND TERMINATION
The Board of Directors may modify, revise or terminate this Plan at any
time and from time to time. While the Board of Directors may seek shareholder
approval of an action modifying a provision of the Plan where it is determined
that such shareholder approval is advisable under the provisions of applicable
law, the Board of Directors shall be permitted to make any modification or
revision to any provision of this Plan without shareholder approval. This Plan
shall terminate when all shares reserved for issuance hereunder have been issued
upon the exercise of options, or by action of the Board of Directors pursuant to
this paragraph, whichever shall first occur.
16. EFFECTIVE DATE OF THE PLAN
The amended Plan shall become effective upon the latest to occur of (1)
adoption by the Board of Directors, and (2) approval of this Plan by the
shareholders of the Company. The Plan was initially approved by shareholders on
November 26, 1997.
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<PAGE> 29
ANNUAL MEETING OF STOCKHOLDERS of
ALLIED CAPITAL CORPORATION
May 9, 2000
-------------------------
PROXY VOTING INSTRUCTIONS
-------------------------
TO VOTE BY MAIL
Please date, sign and mail your proxy card in the envelope provided as soon as
possible.
TO VOTE BY TELEPHONE (TOUCH-TONE PHONE ONLY)
Please call toll-free 1-800-PROXIES and follow the instructions. Have your
control number and the proxy card available when you call.
TO VOTE BY INTERNET
Please access the web page at "www.voteproxy.com" and follow the on-screen
instructions. Have your control number available when you access the web page.
----------------------------
YOUR CONTROL NUMBER IS [ARROW GRAPHIC]
----------------------------
- --------------------------------------------------------------------------------
ALLIED CAPITAL CORPORATION
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints WILLIAM L. WALTON, GEORGE C. WILLIAMS, JR.
and SUZANNE V. SPARROW, or any one of them, and each with full power of
substitution, to act as attorneys and proxies for the undersigned to vote all
the shares of common stock of the Company which the undersigned is entitled to
vote at the Annual Meeting of Stockholders of the Company to be held in the
Crystal Ballroom of the St. Regis Hotel, 923 Sixteenth Street, NW, Washington,
DC on May 9, 2000 at 10:00 A.M. and at all adjournments thereof, as indicated on
this proxy.
(CONTINUED ON REVERSE SIDE)
<PAGE> 30
PLEASE DATE, SIGN AND MAIL YOUR
PROXY CARD BACK AS SOON AS POSSIBLE!
ANNUAL MEETING OF STOCKHOLDERS
ALLIED CAPITAL CORPORATION
MAY 9, 2000
<TABLE>
<CAPTION>
-Please Detach and Mail in the Envelope Provided-
- ------------------------------------------------------------------------------------------------------------------------------------
PLEASE MARK YOUR
A [ X ] VOTES AS IN THIS
EXAMPLE.
<S> <C> <C> <C> <C>
WITHHOLD
FOR AUTHORITY FOR AGAINST ABSTAIN
1. The election of the [ ] [ ] NOMINEES: CLASS II DIRECTORS 2. The ratification of the [ ] [ ] [ ]
following four persons John I. Leahy selection of Arthur Anderson
(except as marked to Warren K. Montouri LLP as independent public
the contrary) as Class Guy T. Steuart II accountants for Allied Capital
II Directors who will T. Murray Toomey, Esq. Corporation for the year ending
serve as directors of Allied December 31, 2000.
Capital Corporation until 2003,
or until their successors are 3. The approval of the Allied [ ] [ ] [ ]
elected and qualified. Capital Corporation Amended
Stock Option Plan.
INSTRUCTIONS: To withhold authority
to vote for any individual, strike 4. To transact such other business as may properly come
a line through his name on the list at right. before the Meeting.
THIS PROXY IS REVOCABLE AND WILL BE VOTED AS DIRECTED,
BUT IF NO INSTRUCTIONS ARE SPECIFIED, THIS PROXY WILL
BE VOTED "FOR" THE NOMINEES AND FOR THE PROPOSALS
LISTED. If any other business is presented at the
meeting, this proxy will be voted by the proxies in
their best judgment, including a motion to adjourn or
postpone the meeting to another time and/or place for
the purpose of soliciting additional proxies. At the
present time, the Board of Directors knows of no other
business to be presented at the meeting.
PLEASE MARK, SIGN AND RETURN THIS PROXY IN THE ENCLOSED
ENVELOPE. THE UNDERSIGNED ACKNOWLEDGES RECEIPT FROM THE
COMPANY PRIOR TO THE EXECUTION OF THIS PROXY OF A NOTICE
OF ANNUAL MEETING OF STOCKHOLDERS AND A PROXY STATEMENT.
SIGNATURE DATE SIGNATURE DATE
------------------------------- ----------- ------------------------------------- --------------
IF HELD JOINTLY
</TABLE>
IMPORTANT: Please sign your name(s) exactly as shown hereon and date your proxy
in the blank provided. For joint accounts, each joint owner should
sign. When signing as attorney, executor, administrator, trustee or
guardian, please give your full title as such. If the signer is a
corporation or partnership, please sign in full corporate or
partnership name by a duly authorized officer or partner.
