UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
SCHEDULE 14A
(Rule 14a-101)
(Rule 14a-101)
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities
Exchange Act of 1934 (Amendment No. )
|
Filed by the Registranto
|
||
|
Filed by a Party other than the
Registranto
|
||
|
Check the appropriate box:
|
||
|
o Preliminary Proxy
Statement
|
||
|
o Confidential, for Use
of the Commission Only (as permitted by Rule 14a-6(e)(2))
|
||
|
þ Definitive Proxy
Statement
|
||
|
o Definitive Additional
Materials
|
||
| o 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):
þ No
fee required.
o 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:
| o | Fee paid previously with preliminary materials. | |
| o | 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:
Allied
Capital Corporation
Notice of Special Meeting of Stockholders
To the Stockholders:
You are cordially invited to a Special Meeting of Stockholders
of Allied Capital Corporation (the Company) to be held at the
Company’s offices, 1919 Pennsylvania Avenue, NW, Third
Floor, Washington, DC on November 18, 2009, at 10:00 a.m.
(Eastern Time) for the following purposes:
1. To consider and vote upon a proposal to
authorize flexibility for the Company, with the approval of its
Board of Directors, to sell or otherwise issue shares of its
common stock at a price below its then current net asset value
per share in one or more offerings subject to certain
limitations set forth herein (including, without limitation,
that the number of shares issued does not exceed 25% of its then
outstanding common stock);
2. To consider and vote upon a proposal to
authorize the Company to sell or otherwise issue warrants,
options or rights to subscribe for, convert into or purchase
shares of its common stock, in one or more offerings, at an
exercise or conversion price that, at the time such warrants,
rights or convertible securities are issued will not be less
than the fair market value per share but may be below NAV;
3. To transact such other business as may
properly come before the meeting and any adjournments or
postponements thereof.
You have the right to receive notice of and to vote at the
meeting if you were a stockholder of record at the close of
business on September 21, 2009. 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 Meeting, the Meeting
may be adjourned in order to permit further solicitation of the
proxies by the Company.
By order of the Board of Directors,
Miriam G. Krieger
Executive Vice President
and Corporate Secretary
Executive Vice President
and Corporate Secretary
Washington, DC
September 23, 2009
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.
GENERAL
INFORMATION ABOUT THE SPECIAL MEETING AND VOTING
| Q: | Why am I receiving this proxy statement? | |
| A: | You have received this proxy statement and the enclosed proxy card because the Board of Directors of Allied Capital Corporation is soliciting your proxy to vote at a Special Meeting of Stockholders. The meeting will be held at the Company’s offices, 1919 Pennsylvania Avenue, NW, Third Floor, Washington, DC on November 18, 2009, at 10:00 a.m. (Eastern Time). | |
| This proxy statement summarizes the information regarding the matters to be voted upon at the meeting. However, you do not need to attend the meeting to vote your shares. You may simply complete, sign, and return the enclosed proxy card or vote your shares by telephone or over the Internet, if eligible to do so, in accordance with the instructions contained on the proxy card. | ||
| Q: | What am I being asked to vote on? | |
| A: | The Board of Directors has approved two proposals, which it believes to be in the best interests of the Company and its stockholders, and recommends that you vote in favor of them. The proposals are: | |
|
1. To authorize flexibility for the Company,
with the approval of its Board of Directors, to sell or
otherwise issue shares of its common stock at a price below its
then current net asset value per share in one or more offerings.
The offerings would be subject to certain limitations set forth
herein, including, without limitation, that the number of shares
issued does not exceed 25% of its then outstanding common stock;
and
|
||
|
2. To authorize the Company to sell or
otherwise issue warrants, options or rights to subscribe for,
convert into or purchase shares of its common stock, in one or
more offerings. The exercise or conversion price at the time
such warrants, options, rights or convertible securities are
issued will not be less than the fair market value per share but
may be below NAV.
|
||
| Q: | Why are these proposals important? | |
| A: | The Company believes that issuing new equity capital, even if such capital is issued at share prices below the Company’s net asset value (NAV), is warranted in this economic environment since it could enable the Company to: | |
|
• reduce high-cost debt and related interest expense;
|
||
|
• strengthen its balance sheet; and
|
||
|
• position the Company for future growth.
|
||
| In addition, the Company believes that it is important to have the flexibility to raise additional capital by selling warrants, options or securities to subscribe for, or convert into, shares of its common stock to attract prospective new debt or equity capital investors. | ||
| More than ten other business development companies have sought and received permission from their shareholders to sell shares of common stock at prices below NAV or to issue warrants, options or rights to subscribe for, convert into or purchase shares of common stock for many of the same reasons that the Company is seeking shareholder approval. |
| Please see “Reasons to Offer Common Stock below NAV” on page 7 of the enclosed proxy statement. For a more complete discussion of the proposals, please see the discussion in the enclosed proxy statement. | ||
| Q: | Why do this now? | |
| A: | The Company recently completed a comprehensive restructuring of its private notes and its bank facility. The comprehensive restructuring provides the Company with increased financial covenant flexibility, but due to the state of the debt capital markets for financial services firms, the restructured debt required significant closing costs and additional interest expense. | |
| The Company believes that issuing new equity capital below net asset value in this economic environment is warranted since it could enable the Company to reduce high-cost debt and related interest expense. With lower interest expense, along with other cost savings, the Company believes it will be able to build its earnings so that the Company may be in a position to resume dividend payments and position itself for future growth. | ||
| Q: | What do I need to do now? | |
| A: | It is imperative that you vote your shares, no matter how many shares you own. Unlike many companies where the majority of the outstanding shares are held by institutional investors, Allied Capital has approximately 134,000 stockholders, approximately 74% of whom are retail investors who generally hold smaller numbers of shares than institutional investors. | |
| For this reason, we have engaged a proxy solicitor, who may call you and ask you to vote your shares if you have not already done so. The proxy solicitor will not attempt to influence how you vote your shares, but only ask that you take the time to cast a vote. You may also be asked if you would like to vote over the telephone and to have your vote transmitted to our proxy tabulation firm. | ||
| Whether you choose to vote on the telephone with our solicitor, over the Internet at www.proxyvote.com, via telephone at 1-800-690-6903, or through the proxy card you received with these materials, we simply ask that you vote your shares today. | ||
| Please vote your shares today to avoid the risk of adjournment of the meeting and the incurrence of additional solicitation expenses. | ||
| Q: | How do I vote by proxy and how many votes do I have? | |
| A: | If your shares are registered directly in your name, you should complete, sign and date the accompanying proxy card and return it in the pre-addressed, postage-paid envelope provided, or vote by telephone or via the internet, as described on the proxy card. If the Company receives your vote 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 sign and mail the proxy card, but do not make specific choices, the shares represented by such proxy will be voted as recommended by the Board. | |
| If your shares are held by a broker, bank or other nominee on your behalf, you should complete, sign and date the accompanying voter instruction form and return it in the pre-addressed, postage-paid envelope provided, or vote by telephone or via the internet, as described on the form. Using your instructions, the broker will vote your shares on your behalf as directed. If you sign and mail the voter |
| instruction form, but do not make specific choices, the shares represented by such form will be voted as recommended by the Board of Directors. | ||
| You have one vote for each share of common stock that you own on the Record Date. | ||
| Q: | May my broker vote for me without my instructions? | |
| A: | No. Under the rules of the New York Stock Exchange, for non-routine proposals, shares held in street name by a broker, bank or other nominee on behalf of a stockholder must receive voting instructions from the beneficial owner of the shares in order for the shares to be voted at the meeting. Broker non-votes, which represent those shares held in street name for which the beneficial stockholder has not provided voting instructions, will not be treated as present at the Meeting and will not be voted at the meeting with respect to either proposal. If the beneficial owner does not provide voting instructions, the broker or nominee cannot vote the shares with respect to either proposal. For this reason, it is imperative that you vote your shares or provide instructions to your broker as to how to vote. | |
| Q: | May I revoke my proxy or change my vote once I have voted? | |
| A: | Yes. You may change your mind after you send in your proxy card or authorize your shares by telephone, via the Internet or at the meeting by following these procedures. To revoke your proxy for shares registered directly in your name: | |
|
• Send in another signed proxy card with a later
date;
|
||
|
• Send a letter revoking your proxy to Allied
Capital Corporation
c/o Corporate
Secretary; 1919 Pennsylvania Avenue, NW; Washington, DC 20006; or
|
||
|
• Vote again by telephone or Internet, if
eligible to do so, by following the instructions included on the
enclosed proxy card; or
|
||
| If your shares are held by broker, bank or other nominee and you wish to change your vote or revoke your proxy, you should contact your broker. You may also vote in person at the meeting by obtaining a legal proxy from your broker, bank or other nominee. | ||
| Q: | What is the quorum requirement for the meeting? | |
| A: | A quorum must be present at the Meeting for any business to be conducted. The presence at the Meeting, in person or by proxy, of the holders of a majority of the shares of common stock outstanding on the Record Date will constitute a quorum. Abstentions will be treated as shares present for quorum purposes. | |
| If a quorum is not present at the Meeting, the stockholders who are represented may adjourn the Meeting until a quorum is present. 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 the further solicitation of proxies. | ||
| On the Record Date, there were 179,095,108 shares outstanding and entitled to vote. | ||
| Q: | Who is paying for the costs of soliciting these proxies? | |
| A: | The Company will pay all the costs of soliciting these proxies, including the preparation, assembly, printing and mailing of this proxy statement, the proxy card and any additional information furnished to stockholders. In addition to the |
| solicitation of proxies by mail, our officers and employees also may solicit proxies by telephone, fax or other electronic means of communication, or in person. The Company has also retained Georgeson Shareholder Communications, Inc. to assist in the solicitation of proxies for its customary fee estimated at $11,500 plus out-of-pocket expenses. | ||
| To the extent that the number of shares voted is insufficient to achieve a quorum for the meeting and the Company is required to adjourn to seek a quorum, the Company will incur additional mailing and solicitation expenses, which could be costly. Stockholders are encouraged to vote their shares or provide voting instructions to their broker at this time to avoid such additional expenses. | ||
| Q: | How do I find out the results of the voting at the annual meeting? | |
| A: | Preliminary voting results will be announced at the meeting. Final voting results will be published in our Annual Report on Form 10-K for the fiscal year ending December 31, 2009. | |
| Q: | Who should I call if I have any questions? | |
| A: | If you have any questions about the meeting, voting or your ownership of the Company’s common stock, please call Allied Capital Investor Relations toll-free at (888) 818-5298 or send an email to ir@alliedcapital.com. |
Allied
Capital Corporation
1919 Pennsylvania Avenue, NW
Washington, DC 20006
1919 Pennsylvania Avenue, NW
Washington, DC 20006
PROXY
STATEMENT
General
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 Special Meeting of Stockholders (the Meeting) to be
held on November 18, 2009, at 10:00 a.m. (Eastern Time) at the Company’s offices, 1919 Pennsylvania Avenue, NW, Third Floor, Washington, DC and at any adjournments or postponements thereof. This proxy statement and the accompanying Notice of Special Meeting and proxy card are first being sent to stockholders on or about September 23, 2009.
proxies by the Board of Directors of Allied Capital Corporation (the Company or Allied Capital) for use at Special Meeting of Stockholders (the Meeting) to be
held on November 18, 2009, at 10:00 a.m. (Eastern Time) at the Company’s offices, 1919 Pennsylvania Avenue, NW, Third Floor, Washington, DC and at any adjournments or postponements thereof. This proxy statement and the accompanying Notice of Special Meeting and proxy card are first being sent to stockholders on or about September 23, 2009.
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 submit a proxy card
with no instructions, the shares covered by the proxy card will
be voted FOR the matters listed in the accompanying Notice of
Special Meeting of Stockholders.
If you are a “stockholder of record” (i.e., you
hold shares directly in your name and not through a broker), you
may revoke a proxy at any time before it is exercised by
notifying the proxy tabulator, Broadridge Financial Solutions,
Inc., in writing. Please send your notification to Allied
Capital Corporation,
c/o Broadridge,
51 Mercedes Way, Edgewood, NY 11717, or submit a properly
executed, later-dated proxy or vote 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.
Stockholders of record may also vote either via the Internet or
by telephone. Specific instructions to be followed by
stockholders of record 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.
Availability of
Proxy and Special Meeting Materials
This proxy statement and the accompanying Notice of Special
Meeting and proxy card are also available at
www.alliedcapital.com. Among other things, the proxy contains:
| • | the date, time and location of the meeting; | |
| • | a description of the matters being submitted to stockholders for a vote; and | |
| • | information concerning attending the meeting and voting in person. |
Electronic
Delivery of Allied Capital Stockholder Communications
We are pleased to offer to our stockholders the benefits and
convenience of electronic delivery of special meeting materials,
including:
| • | Email delivery of the proxy statement and related materials instead of bulky hard copy delivery; | |
| • | Efficient stockholder voting on-line; and | |
| • | Reduction of printing and mailing costs associated with traditional delivery methods. |
If you would like to sign up for electronic delivery for future
stockholder mailings, please visit www.investordelivery.com to
enroll. Your electronic delivery enrollment will be effective
until you choose to cancel it. If you have questions about
electronic delivery, please call Allied Capital Investor
Relations toll-free at
(888) 818-5298
or send an email to ir@alliedcapital.com.
Special Meeting
Admission
If you plan to attend the Meeting, an admission ticket and photo
identification will be required for admission to the Meeting. If
you are a stockholder of record, your ticket is attached to your
proxy card. If your shares are held in the name of a broker or
other nominee and you do not have an admission ticket, please
bring with you a legal proxy or letter from the broker, trustee,
bank, or nominee confirming your beneficial ownership of the
shares as of the record date, September 21, 2009, along
with your photo identification.
Purpose of
Meeting
At the Meeting, you will be asked to vote on the following
proposals:
| 1. | To consider and vote upon a proposal to authorize flexibility for the Company, with the approval of its Board of Directors, to sell or otherwise issue shares of its common stock at a price below its then current net asset value per share in one or more offerings subject to certain limitations set forth herein (including, without limitation, that the number of shares issued does not exceed 25% of its then outstanding common stock); | |
| 2. | To consider and vote upon a proposal to authorize the Company to sell or otherwise issue warrants, options or rights to subscribe for, convert into or purchase shares of its common stock, in one or more offerings, at an exercise or conversion price that, at the time such warrants, rights or convertible securities are issued will not be less than the fair market value per share but may be below NAV; | |
| 3. | To transact such other business as may properly come before the Meeting and any adjournments or postponements thereof. |
Voting
Securities
You may vote your shares at the Meeting only if you were a
stockholder of record at the close of business on
September 21, 2009, the record date. On September 21,
2009, there were 179,095,108 shares of the Company’s
common stock outstanding. Each share of common stock is entitled
to one vote.
2
The Company’s 401(k) Plan owns a total of approximately
477,760 shares, representing less than 1% of the
Company’s total outstanding shares. The Administrator of
the 401(k) Plan will vote the shares on behalf of the
participants pursuant to their instructions.
Quorum
Required
A quorum must be present at the Meeting for any business to be
conducted. The presence at the Meeting, in person or by proxy,
of the holders of a majority of the shares of common stock
outstanding on the record date will constitute a quorum.
Abstentions will be treated as shares present for quorum
purposes.
If a quorum is not present at the Meeting, the stockholders who
are represented may adjourn the Meeting until a quorum is
present. 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 the
further solicitation of proxies.
Vote
Required
Approval of a proposal to authorize the Company to sell
shares of its common stock at prices below the Company’s
then current net asset value per share in one or more offerings
subject to certain limitations set forth herein (including,
without limitation, that the number of shares issued does not
exceed 25% of its then outstanding common
stock). The affirmative vote of (1) a
majority of the outstanding shares of common stock entitled to
vote at the meeting; and (2) a majority of the outstanding
shares of common stock entitled to vote at the meeting that are
not held by affiliated persons of the Company is required to
approve this proposal. For purposes of this proposal, the
Investment Company Act of 1940, or 1940 Act, defines “a
majority of the outstanding shares” as: (1) 67% or
more of the voting securities present at the Meeting if the
holders of more than 50% of the outstanding voting securities of
such company are present or represented by proxy; or
(2) more than 50% of the outstanding voting securities of
the Company, whichever is the less. Abstentions will have the
effect of a vote against this proposal. Because no routine
discretionary matters for which broker non-votes may be
submitted will be considered at the Meeting, broker non-votes,
if any, will not be treated as present at the Meeting or
entitled to vote with respect to this proposal.
Approval of a proposal to authorize the Company to sell or
otherwise issue warrants, options or rights to subscribe for,
convert into or purchase shares of its common stock, in one or
more offerings, at an exercise or conversion price that, at the
time such warrants, rights or convertible securities are issued
will not be less than the fair market value per share but may be
below NAV. The affirmative vote of at least a
majority of all of the votes cast at a meeting at which a quorum
is present is required to approve this proposal. For purposes of
the vote on this proposal, abstentions will not be counted as
votes cast and will have no effect on the result of the vote.
Abstentions will also not have any effect on the result of any
vote for adjournment. Because no routine discretionary matters
for which broker non-votes may be submitted will be considered
at the Meeting, broker non-votes, if any, will not be treated as
present at the Meeting or entitled to vote with respect to this
proposal.
Additional Solicitation. If there are
not enough votes to approve any proposals at the Meeting, the
stockholders who are represented may adjourn the Meeting to
permit the further solicitation of proxies. Any adjournment by
the stockholders will
3
require the affirmative vote of a majority of those shares that
are present in person at the Meeting or represented by proxy
whether or not a quorum is present. 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 the further solicitation of proxies. Those
proxies voted against any proposal for which an adjournment is
sought will be voted against such adjournment. Abstentions will
not be voted and thus will not have any effect on the result of
the vote for adjournment.
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 Special
Meeting of Stockholders, and the 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 mail, 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
$11,500, 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 and signed by the stockholder in the same
manner as the proxy being revoked and delivered to the
Company’s proxy tabulator.
4
Security
Ownership of Management and Certain Beneficial Owners
The following table sets forth, as of September 21, 2009, each
stockholder who owned more than 5% of the Company’s
outstanding shares of common stock, each director, each named
executive officer of the Company, and directors and executive
officers as a group. Based upon Schedule 13G and other filings
with the SEC, no stockholder owned more than 5% of the
Company’s outstanding shares of common stock as of
September 21, 2009. Unless otherwise indicated, the Company
believes that each beneficial owner set forth in the table has
sole voting and investment power. Certain shares beneficially
owned by the Company’s directors and executive officers may
be held in accounts with third-party brokerage firms, where such
shares may from time to time be subject to a security interest
for margin credit provided in accordance with such brokerage
firm’s policies.
The Company’s directors are divided into two
groups — interested directors and independent
directors. Interested directors are “interested
persons” as defined in Section 2(a)(19)of the 1940 Act.
|
Dollar Range |
||||||||||||
|
Number of |
of Equity |
|||||||||||
|
Name of |
Shares Owned |
Percentage |
Securities Beneficially |
|||||||||
|
Beneficial Owner
|
Beneficially(1) | of Class(2) | Owned(3) | |||||||||
|
Interested Directors
|
||||||||||||
|
William L.
Walton(4)
|
2,320,014 | 1.29 | % | over $100,000 | ||||||||
|
John M.
Scheurer(5)
|
1,300,190 | * | over $100,000 | |||||||||
|
Joan M.
Sweeney(6)
|
1,153,721 | * | over $100,000 | |||||||||
|
Robert E.
Long(7)
|
50,435 | * | over $100,000 | |||||||||
|
Independent Directors:
|
||||||||||||
|
Ann Torre
Bates(8)
|
50,044 | * | over $100,000 | |||||||||
|
Brooks H.
Browne(9)
|
104,236 | * | over $100,000 | |||||||||
|
John D.
Firestone(10)
|
87,231 | * | over $100,000 | |||||||||
|
Anthony T.
Garcia(11)
|
94,083 | * | over $100,000 | |||||||||
|
Lawrence I.
Hebert(12)
|
57,500 | * | over $100,000 | |||||||||
|
Edward J.
Mathias(13)
|
44,936 | * | over $100,000 | |||||||||
|
Alex J.
Pollock(14)
|
53,823 | * | over $100,000 | |||||||||
|
Marc F.
Racicot(15)
|
26,338 | * | $50,001-$100.000 | |||||||||
|
Laura W. van
Roijen(16)
|
93,289 | * | over $100,000 | |||||||||
|
Named Executive Officers:
|
||||||||||||
|
Penni F.
Roll(17)
|
1,138,123 | * | over $100,000 | |||||||||
|
Daniel L.
Russell(18)
|
1,028,605 | * | over $100,000 | |||||||||
|
Robert M.
Monk(19)
|
713,639 | * | over $100,000 | |||||||||
|
All directors and executive officers as a group (22 in
number)
|
10,523,347 | 5.66 | % | |||||||||
| * | Less than 1% | |
| (1) | Beneficial ownership has been determined in accordance with Rule 13d-3 of the Securities Exchange Act of 1934. | |
| (2) | Based on a total of 179,095,108 shares of the Company’s common stock issued and outstanding on September 21, 2009, and 6,788,339 shares of the Company’s common stock issuable upon the exercise of stock options exercisable within 60 days held by each executive officer and non-officer director. | |
| (3) | Beneficial ownership has been determined in accordance with Rule 16a-1(a)(2) of the Securities Exchange Act of 1934. | |
| (4) | Includes 1,209,596 shares owned directly and 1,077,667 options exercisable within 60 days of September 21, 2009. Also includes 14,273 shares allocated to 401(k) plan and 15,815 shares held in IRA or Keogh accounts. Of the shares listed, 2,150 are held in margin accounts or otherwise pledged. | |
| (5) | Includes 353,548 shares owned directly and options to purchase 722,834 shares exercisable within 60 days of September 21, 2009. Also includes 150,000 shares held in a trust and 73,808 shares allocated to 401(k) plan. Of the shares listed, 353,548 are held in margin accounts or otherwise pledged. |
5
| (6) | Includes 728,031 shares owned directly and options to purchase 394,896 shares exercisable within 60 days of September 21, 2009. Also includes 30,794 shares allocated to 401(k) plan. Of the shares listed, 158,659 are held in margin accounts or otherwise pledged. | |
| (7) | Includes exercisable options to purchase 30,000 shares. Of the shares listed, 20,005 are held in margin accounts or otherwise pledged. | |
| (8) | Includes 7,250 shares held in IRA or Keogh accounts, exercisable options to purchase 30,000 shares and 7,000 shares held by Ms. Bates’ spouse. Also includes 3,499 shares held in a revocable trust and 700 shares held in an IRA account by Ms. Bates’ father over which Ms. Bates has power-of-attorney. | |
| (9) | Includes 12,280 shares held in IRA or Keogh accounts, 2,000 shares held by Mr. Browne’s spouse and exercisable options to purchase 40,000 shares. Of the shares listed, 9,500 are held in margin accounts or otherwise pledged. | |
| (10) | Includes 9,415 shares held in IRA or Keogh accounts and includes exercisable options to purchase 35,000 shares. | |
| (11) | Includes exercisable options to purchase 20,000 shares. | |
| (12) | Includes 9,529 shares held in IRA or Keogh accounts, 9,000 shares held in a revocable trust and exercisable options to purchase 20,000 shares. | |
| (13) | Includes 33,000 shares held in IRA or Keogh accounts and includes exercisable options to purchase 10,000 shares. | |
| (14) | Includes 4,000 shares held in IRA or Keogh accounts, 200 shares held by Mr. Pollock’s son in a custodial account for which Mr. Pollock serves as custodian, and exercisable options to purchase 20,000 shares. | |
| (15) | Includes exercisable options to purchase 10,000 shares. | |
| (16) | Includes 16,224 shares held in IRA or Keogh accounts and includes exercisable options to purchase 50,000 shares. | |
| (17) | Includes 236,327 shares owned directly and options to purchase 878,845 shares exercisable within 60 days of September 21, 2009, and 22,951 shares allocated to 401(k) plan. Of the shares listed, 1,100 are held in margin accounts or otherwise pledged. | |
| (18) | Includes 83,873 shares owned directly and options to purchase 944,732 shares exercisable within 60 days of September 21, 2009. | |
| (19) | Includes 805 shares held in IRA or Keogh accounts, and options to purchase 712,834 shares exercisable within 60 days of September 21, 2009. |
6
Proposal 1.
Approval to
Authorize the Company to Sell or Otherwise
Issue
Shares of its Common Stock at a Price Below its
then
Current Net Asset
Value Per Share Subject to the Conditions
Set Forth in this
Proposal
The Company is a closed-end investment company that has elected
to be regulated as a business development company (BDC) under
the 1940 Act. As a BDC, the Company is generally prohibited from
selling shares of its common stock at a price below the current
net asset value per share of such stock, or NAV, unless its
stockholders approve such a sale and the Company’s Board of
Directors make certain determinations.
Pursuant to this provision, the Company is seeking the approval
of its common stockholders so that it may, in one or more public
or private offerings of its common stock, sell or otherwise
issue shares of its common stock at a price below its then
current NAV, not exceeding 25% of its then outstanding common
stock. If approved, the authorization would be effective for a
twelve month period expiring on the anniversary of the date of
the stockholder approval. Upon obtaining the requisite
stockholder approval, the Company will comply with the
conditions described below in connection with any financing
undertaken pursuant to this proposal. See below for a discussion
of the risks of dilution.
The Company’s Board of Directors has approved this proposal
as in the best interests of the Company and its stockholders and
recommends it to the stockholders for their approval.
Reasons to Offer Common Stock below
NAV. The Company believes that issuing new
equity capital, even if such capital is issued at share prices
below the Company’s net asset value, is warranted in this
economic environment since it could enable the Company to:
| • | reduce high-cost debt and related interest expense; | |
| • | strengthen its balance sheet; and | |
| • | position the Company for future growth. |
For over 50 years, the Company has provided capital to fund
the growth and acquisition of small and middle market business
throughout the United States. The Company has funded thousands
of businesses in the United States, which has had the effect of
creating and maintaining thousands of jobs. In addition, the
Company has provided a mechanism for public investors to invest
in small and middle market businesses and, until recently, has
provided consistent quarterly dividend payments to its
shareholders. For the past several quarters, however, the United
States and the global economies have been in a state of severe
economic recession, which has had a far-reaching negative impact
on the financial services industry and companies like Allied
Capital and other BDCs. More than ten other BDCs have sought and
received permission from their shareholders to sell shares of
common stock at prices below NAV for many of the same reasons
that the Company is seeking shareholder approval.
The U.S. debt capital markets have been experiencing
extreme volatility and a lack of liquidity. Like many other
financial firms, the Company’s current business focus has
changed from expanding its portfolio to selectively selling
portfolio assets in order to generate capital to repay its
indebtedness and de-lever its balance sheet
7
and, as a result, the Company’s investing activities have
been sharply reduced. This, along with an increased cost of debt
capital under our restructured debt, has negatively impacted the
Company’s profitability and ability to pay dividends. The
Company has not paid a dividend during 2009 and does not expect
to pay a cash dividend for an extended period of time.
As the values of financial assets and middle market businesses
have declined during this recession, the Company has experienced
a significant reduction in its net worth, primarily resulting
from net unrealized depreciation on its portfolio. As a result,
the Company’s asset coverage fell below the 200% required
by its revolving credit facility and its private notes, causing
certain events of default under these debt agreements. Asset
coverage generally refers to the percentage resulting from
assets less accounts payable and other liabilities, divided by
total debt. Under the 1940 Act, the Company is unable to incur
additional indebtedness if its asset coverage is below 200%. The
Company has focused significant efforts on addressing these
issues and recently completed a comprehensive restructuring of
its private notes and its bank facility. The comprehensive
restructuring provides the Company with increased financial
covenant flexibility, but due to the state of the debt capital
markets for financial services firms, the restructured debt
required significant closing costs and additional interest
expense.
The Company believes that issuing new equity capital below net
asset value in this economic environment is warranted since it
could enable the Company to reduce high-cost debt and related
interest expense. With lower interest expense, along with other
cost savings, the Company believes it will be able to build its
earnings so that the Company may be in a position to resume
dividend payments and position itself for future growth. In
addition, if the Company were able to repay the restructured
notes on or before January 31, 2010, the Company would be
able to apply the $50 million restructuring fee that it
paid at the closing of the debt restructuring to the repayment
of principal. While the Company intends to explore its
refinancing alternatives, there can be no assurance that the
Company would be able to repay the restructured notes by
January 31, 2010.
The Company believes that raising new equity capital will
strengthen the Company’s balance sheet, and combined with
debt repayment, position the Company to achieve its 200%
regulatory asset coverage threshold. In addition, the Company
requires additional equity capital for future growth. The
Company also intends to continue to take a variety of measures
to generate capital in order to repay debt and for investment in
yield-oriented investments. These activities include continuing
to selectively sell portfolio assets and reducing employee and
administrative expenses. In addition to making new investments,
having the ability to raise equity capital would also provide
the Company with additional capital to deploy as debt or equity
investments in its existing portfolio companies. The Company
believes that supporting existing investments, and having the
ability to hold investments as these businesses adapt and
improve their performance will allow the Company to realize the
potential of each investment and thus grow value for the
Company’s stockholders.
For the reasons stated above, the Board of Directors believes
that having the flexibility to issue its common stock below NAV
in order to repay debt and improve the Company’s balance
sheet is in the best interests of stockholders. The Company
believes that having the flexibility to issue common stock below
NAV would reduce the need to sell income producing assets and
provide additional time for potential
8
value creation in the existing portfolio. In addition, new
equity capital and an improved balance sheet would position the
Company to grow its business over time.
Conditions to Sales Below NAV. If
stockholders approve this proposal, the Company will only sell
shares of its common stock at a price below NAV per share if the
following conditions are met:
| • | a “required majority” of the Company’s directors have determined that any such sale would be in the best interest of the Company and its stockholders; and | |
| • | a “required majority” of the Company’s directors, in consultation with the underwriter or underwriters of the offering if it is to be underwritten, have determined in good faith, and as of a time immediately prior to the first solicitation by or on behalf of the Company of firm commitments to purchase such securities or immediately prior to the issuance of such securities, that the price at which such securities are to be sold is not less than a price which closely approximates the market value of those securities, less any underwriting commission or discount. |
A “required majority” of directors means both a
majority of the Company’s directors who have no
“financial interest” in the transaction and a majority
of the directors who are not “interested persons” of
the Company within the meaning of Section 2(a)(19) of the
1940 Act (the “Independent Directors”). For these
purposes, directors will not be deemed to have a financial
interest solely by their ownership of Company stock.
Prior to the time of issuance, the Board of Directors may
determine to issue shares of the Company’s common stock
below NAV in a registered public offering or in a private
placement either with or without an obligation to seek to
register their resale at the request of the holders. The Board
of Directors may also determine to use an underwriter or
placement agent to assist in selling such shares of common stock
if it concludes that doing so would assist in marketing such
securities on favorable terms.
Key Stockholder Considerations. Before
voting on this proposal or giving proxies with regard to this
matter, stockholders should consider the potentially dilutive
effect of the issuance of shares of the Company’s common
stock at a price that is less than the NAV per share and the
expenses associated with such issuance on the NAV per
outstanding share of the Company’s common stock, including
the following considerations:
| • | Any sale of common stock at a price below NAV would result in an immediate dilution to existing common stockholders. | |
| • | The sale of common stock at a price below NAV could negatively affect the Company’s stock price. | |
| • | Dilution would include reduction in the NAV per share as a result of the issuance of shares at a price below the NAV per share and a proportionately greater decrease in a stockholder’s interest in the earnings and assets of the Company and voting interest in the Company than the increase in the assets of the Company resulting from such issuance. |
The Board of Directors of the Company will consider the
potential dilutive effect of the issuance of shares at a price
below the NAV per share when considering whether to authorize
any such issuance.
9
The following table lists the high and low closing sales prices
for our common stock, and the closing sales price as a
percentage of NAV. On September 21, 2009, the last reported
closing sale price of our common stock was $3.22 per share.
|
Closing Sales |
High |
Low |
||||||||
| Price |
Sales Price as a |
Sales Price as a |
||||||||
| NAV(1) | High | Low | Percentage of NAV(2) | Percentage of NAV(2) | ||||||
|
Year ended December 31, 2007
|
||||||||||
|
First Quarter
|
$19.58 | $32.98 | $28.05 | 168% | 143% | |||||
|
Second Quarter
|
$19.59 | $32.96 | $28.90 | 168% | 148% | |||||
|
Third Quarter
|
$17.90 | $32.87 | $27.10 | 184% | 151% | |||||
|
Fourth Quarter
|
$17.54 | $30.90 | $21.15 | 176% | 121% | |||||
|
Year ended December 31, 2008
|
||||||||||
|
First Quarter
|
$16.99 | $23.26 | $18.38 | 137% | 108% | |||||
|
Second Quarter
|
$15.93 | $21.52 | $13.89 | 135% | 87% | |||||
|
Third Quarter
|
$13.51 | $15.97 | $10.80 | 118% | 80% | |||||
|
Fourth Quarter
|
$9.62 | $10.00 | $1.59 | 104% | 17% | |||||
|
Year ending December 31, 2009
|
||||||||||
|
First Quarter
|
$7.67 | $4.80 | $0.59 | 63% | 8% | |||||
|
Second Quarter
|
$7.49 | $4.02 | $1.48 | 54% | 20% | |||||
|
Third Quarter (through September 21, 2009)
|
* | $4.05 | $2.81 | * | * | |||||
| (1) | Net asset value per share is determined as of the last day in the relevant quarter and therefore may not reflect the net asset value per share on the date of the high and low sales prices. The net asset values shown are based on outstanding shares at the end of each period. | |
| (2) | Calculated as the respective high or low closing sales price divided by NAV. |
| * | Not determinable at the time of filing. |
Prior to the capital markets disruption described above,
historically the Company’s common stock generally traded at
prices above its NAV. However, for the past year its common
stock has traded below its NAV. It is not possible to predict
whether its common stock will trade at, above or below NAV in
the future.
The 1940 Act prohibits the sale of common stock below NAV absent
stockholder approval because, when stock is sold at a sale price
below NAV per share, the resulting increase in the number of
outstanding shares reduces net asset value per share.
Stockholders should also consider that they will have no
subscription, preferential or preemptive rights to additional
shares of the common stock proposed to be authorized for
issuance, and thus any future issuance of common stock will
dilute such stockholders’ holdings of common stock as a
percentage of shares outstanding to the extent stockholders do
not purchase sufficient shares in the offering or otherwise to
maintain their percentage interest. Further, if current
stockholders of the Company do not purchase any shares to
maintain their percentage interest, regardless of whether such
offering is above or below the then current NAV, their voting
power will be diluted. For an illustration on the potential
dilutive effect of an offering of our common stock at a price
below net asset value, please see the table below under the
heading “Examples of Dilutive Effect of the Issuance of
Shares Below Net Asset Value.”
As discussed above, it should be noted that the maximum number
of shares issuable below NAV that could result in such dilution
is limited to 25% of the Company’s then outstanding common
stock. Future issuances of common stock by the Company will
increase the number of shares that may be issued pursuant to
this Proposal 1.
If Proposal 1 is approved by the stockholders, the Company
will be permitted, but not required or otherwise obligated, to
sell shares of its common stock at a price
10
below the then current net asset value per share of such stock
until the one-year anniversary of the date of the stockholder
approval.
Examples of Dilutive Effect of the Issuance of
Shares Below NAV. The following table
illustrates the reduction to NAV and dilution that would be
experienced by a nonparticipating stockholder in three different
hypothetical offerings of different sizes and levels of discount
from NAV, although it is not possible to predict the level of
market price decline that may occur. Sales prices and discounts
are hypothetical in the presentation below.
The examples assume that Company XYZ has 1,000,000 common shares
outstanding, $10,000,000 in total assets and $2,000,000 in total
liabilities. The current net asset value and NAV are thus
$8,000,000 and $8.00. The table illustrates the dilutive effect
on nonparticipating Stockholder A of (1) an offering of
50,000 shares (5% of the outstanding shares) with proceeds
to the Company at $3.61 per share after offering expenses and
commission, (2) an offering of 100,000 shares (10% of
the outstanding shares) with proceeds to the Company at $3.24
per share after offering expenses and commissions and
(3) an offering of 200,000 shares (20% of the
outstanding shares) with proceeds to the Company at $2.56 per
share after offering expenses and commissions.
|
Example 1 |
Example 2 |
Example 3 |
||||||||||||||||||||||||||
|
5% Offering |
10% Offering |
20% Offering |
||||||||||||||||||||||||||
| at 5% Discount | at 10% Discount | at 20% Discount | ||||||||||||||||||||||||||
|
Prior to Sale |
Following |
% |
Following |
% |
Following |
% |
||||||||||||||||||||||
| Below NAV | Sale | Change | Sale | Change | Sale | Change | ||||||||||||||||||||||
|
Offering Price
|
||||||||||||||||||||||||||||
|
Price per Share to Public
|
— | $ | 3.80 | — | $ | 3.60 | — | $ | 3.20 | — | ||||||||||||||||||
|
Net Proceeds per Share to Issuer
|
— | $ | 3.61 | — | $ | 3.24 | — | $ | 2.56 | — | ||||||||||||||||||
|
Decrease to NAV Per Share
|
||||||||||||||||||||||||||||
|
Total Shares Outstanding
|
1,000,000 | 1,050,000 | 5.00 | % | 1,100,000 | 10.00 | % | 1,200,000 | 20.00 | % | ||||||||||||||||||
|
NAV per Share
|
$ | 8.00 | $ | 7.79 | (2.61 | )% | $ | 7.57 | (5.41 | )% | $ | 7.09 | (11.33 | )% | ||||||||||||||
|
Share Dilution to Stockholder
|
||||||||||||||||||||||||||||
|
Shares Held by Stockholder A
|
10,000 | 10,000 | — | 10,000 | — | 10,000 | — | |||||||||||||||||||||
|
Percentage of Shares Held by Stockholder A
|
1.00 | % | 0.95 | % | (4.76 | )% | 0.91 | % | (9.09 | )% | 0.83 | % | (16.67 | )% | ||||||||||||||
|
Total Asset Values
|
||||||||||||||||||||||||||||
|
Total NAV Held by Stockholder A
|
$ | 80,000 | $ | 77,910 | (2.61 | )% | $ | 75,673 | (5.41 | )% | $ | 70,933 | (11.33 | )% | ||||||||||||||
|
Total Investment by Stockholder A (Assumed to Be $8.00 per Share)
|
$ | 80,000 | $ | 80,000 | — | $ | 80,000 | — | $ | 80,000 | — | |||||||||||||||||
|
Total Dilution to Stockholder A (Change in Total NAV Held By
Stockholder)
|
$ | (2,090 | ) | — | $ | (4,327 | ) | — | $ | (9,067 | ) | — | ||||||||||||||||
|
Per Share Amounts
|
||||||||||||||||||||||||||||
|
NAV per Share Held by Stockholder A
|
$ | 8.00 | $ | 7.79 | — | $ | 7.57 | — | $ | 7.09 | — | |||||||||||||||||
|
Investment per Share Held by Stockholder A (Assumed to be $8.00
per Share on Shares Held Prior to Sale)
|
$ | 8.00 | $ | 8.00 | — | $ | 8.00 | — | $ | 8.00 | — | |||||||||||||||||
|
Dilution per Share Held by Stockholder A
|
— | $ | (0.21 | ) | — | $ | (0.43 | ) | — | $ | (0.91 | ) | — | |||||||||||||||
|
Percentage Dilution per Share Held by Stockholder A
|
— | — | (2.68 | )% | — | (5.72 | )% | — | (12.78 | )% | ||||||||||||||||||
Required Vote. Approval of this
proposal requires the affirmative vote of (1) a majority of
the outstanding shares of common stock entitled to vote at the
Meeting; and (2) a majority of the outstanding shares of
common stock entitled to vote at the Meeting that are not held
by affiliated persons of the Company, which includes directors,
officers, employees, and 5% stockholders. For purposes of this
proposal, the 1940 Act defines “a majority of the
outstanding shares” as: (1) 67% or more of the
11
voting securities present at the Meeting if the holders of more
than 50% of the outstanding voting securities of the Company are
present or represented by proxy; or (2) 50% of the
outstanding voting securities of the Company, whichever is the
less. Abstentions will have the effect of a vote against this
proposal. Because no routine discretionary matters for which
broker non-votes may be submitted will be considered at the
Meeting, broker non-votes, if any, will not be treated as
present at the Meeting or entitled to vote with respect to this
proposal.
The
Board of Directors recommends that you vote FOR the proposal to
authorize the Company to sell shares of its common stock during
the next year at a price below the Company’s then current
NAV per share.
Proposal 2:
Authorization of the Company to Sell or Otherwise Issue
Warrants, Options or Rights to Subscribe for, Convert into or
Purchase Shares of its Common Stock in One or More Offerings
Subject to the Limitations Set Forth in this Proposal
Authorization of the Company to Sell or Otherwise Issue
Warrants, Options or Rights to Subscribe for, Convert into or
Purchase Shares of its Common Stock in One or More Offerings
Subject to the Limitations Set Forth in this Proposal
The Board of Directors believes it would be in the
Company’s and its stockholders’ best interests to have
the ability to sell or otherwise issue warrants, options or
rights to subscribe for, convert into or purchase shares of its
common stock, in one or more offerings, at an exercise or
conversion price that, at the time such warrants, options or
rights are issued will not be less than the fair market value
per share but may be below NAV.
As a BDC, Section 61(a) (in conjunction with
Section 18(d)) of the 1940 Act generally prohibits the
Company from issuing a security that includes a warrant, options
or a right to subscribe to, convert into or purchase shares of
its common stock unless it meets certain conditions, including
obtaining stockholder approval. As a result, the Company is
generally precluded from issuing warrants, options or rights to
subscribe for, convert into or purchase shares of its common
stock, unless the Company obtains stockholder approval as to the
issuance of such securities and meets certain other conditions.
The number of shares of the Company’s common stock that
would result from the exercise or conversion of such warrants,
options or rights, exercisable or exchangeable into shares of
the Company’s common stock outstanding at the time of
issuance of such warrants, options or rights will not exceed 25%
of its outstanding common stock at such time. However, if the
number of shares of the Company’s common stock that would
result from the exercise of all outstanding securities
convertible, exercisable, or exchangeable into shares of its
common stock held by the Company’s directors, officers and
employees pursuant to equity compensation plans exceeds 15% of
the Company’s outstanding common stock, then the total
amount of common stock that will result from the exercise of all
outstanding warrants, options, rights, and all other securities
convertible, exercisable, or exchangeable into shares of common
stock will not exceed 20% of the Company’s outstanding
common stock at such time. These limits do not impact the
Company’s ability to issue warrants, options or rights at
an exercise or conversion price below NAV, and such issuances
could be in addition to issuances of common stock at a sales
price below NAV pursuant to Proposal 1.
12
As of September 21, 2009, the Company had 25,436,835 shares
that would result from the exercise or conversion of all
outstanding securities convertible, exercisable or exchangeable
into shares of the Company’s common stock.
Background and Reasons. For the reasons
discussed under Proposal 1 above, the Board of Directors
believes it to be in the best interests of the Company and its
stockholders to provide the Company with maximum flexibility to
raise new equity capital. The Company believes that new equity
capital could enable the Company to repay high-cost debt
capital, strengthen the Company’s equity capital base and
improve its balance sheet and 200% regulatory asset coverage,
and position the Company to resume its investing activities. In
addition, the Company may require added flexibility to secure
new debt capital to refinance existing debt. Given the state of
the current capital markets for financial services firms, the
Company believes that in order to secure new debt or equity
capital for the Company, the Company may determine that issuing
warrants or other convertible securities is necessary.
The Company believes that, in the current capital markets,
prospective new debt or equity capital investors may require
enhanced returns through warrants or other convertible
securities. Management and the Board of Directors have
determined that it may be advantageous to the Company to have
the ability to sell or otherwise issue warrants or securities to
subscribe for, convert into or purchase shares of its common
stock in connection with its financing and capital raising
activities. The issuance of such securities may give the Company
a less cash-intensive means to raise capital, including the
opportunity to refinance the Company’s existing debt
capital, and is a common practice by corporations that are not
BDCs. Such securities typically allow the purchasers thereof to
participate in any increase in value of the issuer’s common
stock.
The Company believes that having the flexibility to raise
additional capital by selling warrants or securities to
subscribe for or convert into shares of its common stock in this
economic environment is warranted particularly if it enables the
Company to reduce high-cost debt and related interest expense
and build its earnings so that the Company may strengthen its
balance sheet, resume dividend payments and position the Company
for the future.
While the Company has no immediate plans to issue any warrants
or securities to subscribe for or convert into shares of its
common stock, it is seeking stockholder approval now in order to
provide flexibility for future issuances, which typically must
be undertaken quickly. The final terms of any sale of such
securities, including price, dividend or interest rates,
exercise or conversion prices, voting rights, anti-dilution
protections, redemption prices, maturity dates and similar
matters will be determined by the Board of Directors at the time
of issuance. Also, because the Company has no immediate plans to
issue any such securities, it is impracticable to describe the
transaction or transactions in which the securities would be
issued. Instead, any transaction where the Company issues such
securities, including the nature and amount of consideration
that would be received by it at the time of issuance and the use
of any such consideration, will be reviewed and approved by the
Board of Directors at the time of issuance. If this proposal is
approved, no further authorization from the stockholders will be
solicited prior to any such issuance in accordance with the
terms of this proposal.
The Company’s Board of Directors, including a majority of
the non-interested directors, has approved this proposal,
authorizing the Company to sell or otherwise
13
issue warrants or securities to subscribe for or to convert into
shares of its common stock at an exercise or conversion price
that, at the time such warrants or convertible debt are issued
will not be less than the fair market value per share but may be
below NAV. Upon obtaining the requisite stockholder approval,
the Company will comply with the conditions described below in
connection with any financing undertaken pursuant to this
proposal. See below for a discussion of the risks of dilution.
The Board of Directors has approved this proposal as in the best
interests of the Company and its stockholders and recommends it
to the stockholders for their approval.
Conditions to Issuance. If the
Company’s stockholders approve this proposal, it will only
be able to issue warrants, options or securities to subscribe
for, convert into or purchase shares of its common stock
pursuant to such stockholder approval so long as the issuance of
such securities meets the following conditions:
| (i) | the exercise, conversion or subscription rights in such securities expire by their terms within 10 years; | |
| (ii) | with respect to any warrants, options or rights to subscribe or convert to the Company’s common stock that are issued along with other securities, such warrants, options or rights are not separately transferable; | |
| (iii) | the exercise or conversion price of such securities is not less than the fair market value per share of the Company’s common stock but may be below NAV at the date of issuance of such securities; | |
| (iv) | the issuance of such securities is approved by a majority of the Board of Directors who have no financial interest in the transaction and a majority of the non-interested directors on the basis that such issuance is in the best interests of the Company and its stockholders; and | |
| (v) | the number of shares of the Company’s common stock that would result from the exercise or conversion of such warrants, options or securities convertible, exercisable or exchangeable into shares of the Company’s common stock outstanding at the time of issuance of such warrants, options or debt will not exceed 25% of its outstanding common stock at such time. However, if the number of shares of the Company’s common stock that would result from the exercise of all outstanding securities convertible, exercisable, or exchangeable into shares of its common stock held by the Company’s directors, officers and employees pursuant to equity compensation plans exceeds 15% of the Company’s outstanding common stock, then the total amount of common stock that will result from the exercise of all outstanding warrants, options, rights, and all other securities convertible, exercisable, or exchangeable into shares of common stock will not exceed 20% of the Company’s outstanding common stock at such time. |
Prior to the time of issuance, the Board of Directors may
determine to issue warrants or securities to subscribe for or
convert into shares of the Company’s common stock in a
registered public offering or in a private placement either with
or without an obligation to seek to register their resale at the
request of the holders. The Board of Directors may also
determine to use an underwriter or placement agent to assist in
selling such securities if it concludes that doing so would
assist in marketing such
14
securities on favorable terms. Any such sale would be
anticipated to result in an increase in the number of
outstanding shares of the Company’s common stock.
Key Stockholder Considerations. Your
interest in the Company may be diluted if it issues warrants,
rights or options to subscribe for, convert into or purchase
shares of its common stock. The Company cannot state precisely
the amount of any such dilution because it does not know at this
time what number of shares of common stock would be issuable
upon exercise or conversion of any such securities that are
ultimately issued. Because the exercise or conversion price per
share could be less than NAV at the time of exercise or
conversion and because the Company would incur expenses in
connection with any issuance of such securities, such issuance
could result in a dilution of NAV at the time of exercise or
conversion. The amount of any decrease in NAV is not predictable
because it is not known at this time what the exercise or
conversion price and NAV will be at the time of exercise or
conversion or what number or amount (if any) of such securities
will be issued. Such dilution could be substantial.
Although the number of shares of the Company’s common stock
that would result from the exercise or conversion of all
outstanding warrants, options or securities convertible,
exercisable or exchangeable into shares of the Company’s
common stock may not exceed 25% of the company’s
outstanding common stock at any time, this proposal does not
limit the Company’s ability to issue such warrants, options
or rights to subscribe for, convert into or purchase shares of
its common stock at an exercise or conversion price below NAV at
the time of exercise or conversion (including through the
operation of anti-dilution protections). The only requirement
with respect to the exercise or conversion price is that it be
not less than the fair market value per share of the
Company’s common stock on the date of issuance.
Before voting on this proposal or giving proxies with regard to
this matter, stockholders should consider the potentially
dilutive effect of the issuance of shares of the Company’s
common stock at an exercise or conversion price that is less
than NAV at the time of exercise or conversion and the expenses
associated with such issuance. Any exercise of warrants, options
or rights to subscribe for, convert into or purchase shares of
the Company’s common stock at an exercise or conversion
price that is below NAV at the time of such exercise or
conversion, would result in an immediate dilution to existing
common stockholders. This dilution would include reduction in
NAV as a result of the proportionately greater decrease in a
stockholder’s interest in the earnings and assets of the
Company and voting interest in the Company than the increase in
the assets of the Company resulting from such issuance.
The 1940 Act establishes a connection between common stock sale
price and NAV because, when stock is issued at a price below
NAV, the resulting increase in the number of outstanding shares
is not accompanied by a proportionate increase in the net assets
of the issuer. The Board of Directors of the Company will
consider the potential dilutive effect of the issuance of
warrants, options or rights to subscribe for or convert into
shares of the Company’s common stock when considering
whether to authorize any such issuance.
Example of Dilutive Effect of the Issuance of Warrants,
Options or Rights to Subscribe for, Convert into or Purchase
Shares of Common Stock at a Price Below
NAV. For illustrative purposes, we have set
forth below a hypothetical example of a warrant offering by
Company XYZ. The assumptions underlying the example below,
including the warrants’ offering price, exercise price and
term, are hypothetical and not necessarily indicative of any
warrant offering that the Company may undertake.
15
Actual dilution can differ materially from the dilution
reflected in the hypothetical example below. Accordingly,
stockholders voting on this Proposal 2 should understand
that the following example is intended merely to illustrate a
hypothetical scenario based on certain market, economic and
other assumptions. Investors are cautioned to not place undue
reliance on this example as it is highly likely that actual
dilution will vary from the hypothetical dilution represented in
the hypothetical example below.
The example assumes that Company XYZ has 1,000,000 common shares
outstanding, $10,000,000 in total assets and $2,000,000 in total
liabilities. The current net asset value and NAV are thus
$8,000,000 and $8.00. The table illustrates the dilutive effect
on nonparticipating Stockholder A of the sale of 250,000
warrants at a price per warrant of $0.50, each warrant entitling
the holder to purchase one share of Company XYZ’s common
stock at an exercise price of $4.00, and the subsequent exercise
of such warrants immediately prior to the warrants’
expiration on their third anniversary. At the time of the sale
of the warrants, the warrants’ exercise price is above the
current market price of the shares of Company XYZ’s common
stock, and at the time of exercise of the warrants, their
exercise price is below the then current market price and NAV.
|
Prior to |
Following |
Following |
Total |
|||||||||||||
|
Warrant |
Warrant |
Warrant |
Percentage |
|||||||||||||
| Offering | Offering | Exercise | Change | |||||||||||||
|
Reduction to NAV
|
||||||||||||||||
|
Total Shares Outstanding
|
1,000,000 | 1,000,000 | 1,250,000 | 25.0 | % | |||||||||||
|
NAV per
share(1)
|
$ | 8.00 | $ | 8.13 | $ | 7.30 | (8.8 | )% | ||||||||
|
Dilution to Existing Stockholder A
|
||||||||||||||||
|
Shares held by Stockholder A
|
10,000 | 10,000 | (2) | 10,000 | 0.0 | % | ||||||||||
|
Percentage Interest in Company XYZ held by Stockholder A
|
1.00 | % | 1.00 | % | 0.80 | % | (20.0 | )% | ||||||||
|
Total Interest of Stockholder A in NAV
|
$ | 80,000 | $ | 81,250 | $ | 73,000 | (8.8 | )% | ||||||||
| (1) | Assumes no change in the assets and liabilities except for proceeds following the warrants offering and the exercise of the warrants. | |
| (2) | Assumes that Stockholder A does not purchase warrants in the offering. |
Required Vote. The Board of Directors
believes it is in the Company’s best interests and the best
interests of the stockholders to adopt this proposal. The
affirmative vote of at least a majority of all of the votes cast
at a meeting at which a quorum is present is required for
approval of this proposal. For purposes of the vote on this
proposal, abstentions will not be counted as votes cast and will
have no effect on the result of the vote.
The
Board of Directors recommends that you vote FOR the proposal to
authorize
the Company to sell or otherwise issue warrants, options or rights to subscribe for,
convert into or purchase shares of its common stock subject to the limitations
set forth in this proposal.
the Company to sell or otherwise issue warrants, options or rights to subscribe for,
convert into or purchase shares of its common stock subject to the limitations
set forth in this proposal.
Communication
with the Board of Directors
Stockholders and other interested parties with questions about
the Company are encouraged to contact Allied Capital’s
Investor Relations department. However, if stockholders or other
interested parties feel their questions have not been addressed,
16
they may communicate with the Company’s Board of Directors,
including the Presiding Director, by sending their
communications to:
Allied Capital Corporation Board of Directors
c/o Corporate
Secretary
1919 Pennsylvania Avenue, NW
Washington, DC 20006
All communications received by the Company’s Corporate
Secretary in this manner will be delivered to one or more
members of the Board of Directors as appropriate.
Proposals of
Stockholders
Any proposal intended to be presented for action at the 2010
Annual Meeting of Stockholders pursuant to
Rule 14a-8
under the Securities Exchange Act of 1934 must be received by
the Corporate Secretary within a reasonable time before the
solicitation of proxies for such meeting. Such proposals should
be submitted by certified mail, return receipt requested.
Nothing in the paragraph shall be deemed to require the Company
to include any stockholder proposal that does not meet all the
requirements for such inclusion established by the SEC in effect
at the time and there is no guarantee that any proposal
submitted by a stockholder will be included in the proxy
statement.
Financial
Statements Available
The Company incorporates by reference the financial statements
and notes thereto in Item 8 of its Annual Report on
Form 10-K
for the year ended December 31, 2008 (the “Annual
Report”) and the information included in Part I,
Item 1 of its Quarterly Report on
Form 10-Q
for the quarter ended June 30, 2009 (the “Quarterly
Report”).
Upon written or oral request, the Company will provide to each
stockholder, a copy (without exhibits, unless otherwise
requested) of its Annual Report on
Form 10-K
as filed with the SEC for the year ended December 31, 2008
and/or a
copy of its Quarterly Report on
Form 10-Q
for the quarter ended June 30, 2009. The Company will
provide these documents without charge, by first class mail or
other equally prompt means. Please direct your request to:
Allied Capital Corporation, Attention: Investor Relations, 1919
Pennsylvania Avenue, NW, Washington, DC 20006; telephone
(888) 818-5298;
electronic mail: ir@alliedcapital.com. Copies of these documents
may also be accessed electronically by means of the SEC’s
home page on the Internet at
http://www.sec.gov.
Other
Business
The Board of Directors has not authorized any other business to
be presented for action at this special meeting. Pursuant to the
Company’s Amended and Restated Bylaws, only such business
as is brought before the special meeting pursuant to the
Company’s notice of meeting shall be conducted at a special
meeting of stockholders. 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.
17
ALLIED CAPITAL CORPORATION
1919 PENNSYLVANIA AVE. NW
WASHINGTON, DC 20006
VOTE BY INTERNET — www.proxyvote.com
Use the Internet to transmit your voting instructions and for electronic delivery of information up
until 11:59 P.M. Eastern Time the day before the cut-off date or meeting date. Have your proxy card
in hand when you access the web site and follow the instructions to obtain your records and to
create an electronic voting instruction form.
VOTE BY PHONE — 1-800-690-6903
Use any touch-tone telephone to transmit your voting instructions up until 11:59 P.M. Eastern Time
the day before the cut-off date or meeting date. Have your proxy card in hand when you call and
then follow the instructions.
VOTE BY MAIL
Mark, sign, and date your proxy card and return it in the postage-paid envelope we have provided or
return it to Allied Capital Corporation, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717.
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: þ
| ALCAP1 | KEEP THIS PORTION FOR YOUR RECORDS | |||
| DETACH AND RETURN THIS PORTION ONLY | ||||
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
ALLIED CAPITAL CORPORATION
The
Board of Directors recommends you vote FOR the following proposal(s):
| Vote On Proposals | For | Against | Abstain | |||||
1. |
To consider and vote upon a proposal to authorize flexibility for the Company, with the approval of its Board of Directors, to sell or otherwise issue shares of its common stock at a price below its then current net asset value per share in one or more offerings subject to certain limitations set forth herein (including, without limitation, that the number of shares issued does not exceed 25% of its then outstanding common stock). | o | o | o | ||||
2.
|
To consider and vote upon a proposal to authorize the Company to sell or otherwise issue warrants, options or rights to subscribe for, convert into or purchase shares of its common stock, in one or more offerings, at an exercise or conversion price that, at the time such warrants, options, rights or convertible securities are issued will not be less than the fair market value per share but may be below NAV. | o | o | o | ||||
3.
|
To transact such other business as may properly come before the Meeting and any adjournments or postponements thereof. | |||||||
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.
For
address changes and/or comments, please check this box and write them
on the back where indicated.
|
o | |||
| Yes | No | |||
Please indicate if you plan to attend this meeting in person.
|
o | o | ||
Signature [PLEASE SIGN WITHIN BOX] Date
|
Signature (Joint Owners) Date | |||
ALLIED CAPITAL CORPORATION
Special Meeting of Stockholders
Special Meeting of Stockholders
Admission Ticket
November 18, 2009
| Allied Capital Corporation 1919 Pennsylvania Avenue, NW Third Floor Washington, DC |
If you plan to attend the Special Meeting of Stockholders on November 18, please detach
this card and bring it with you for presentation at the Meeting. Please be sure to bring this
ticket with you along with photo identification, as you will need both to gain access to the
Meeting.
Important Notice Regarding Internet Availability of Proxy Materials
for the Special Meeting: The Notice and Proxy Statement and Annual
Report are available at www.alliedcapital.com or www.proxyvote.com.
for the Special Meeting: The Notice and Proxy Statement and Annual
Report are available at www.alliedcapital.com or www.proxyvote.com.
ALLIED CAPITAL CORPORATION
Proxy for Special Meeting of Stockholders
This Proxy is Solicited on Behalf of the Board of Directors
Proxy for Special Meeting of Stockholders
This Proxy is Solicited on Behalf of the Board of Directors
The undersigned hereby appoints WILLIAM L. WALTON, JOHN M. SCHEURER and MIRIAM G. KRIEGER, 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 Special Meeting of Stockholders of the Company to be held at the Company’s offices,
1919 Pennsylvania Avenue, NW, Third Floor, Washington, DC on November 18, 2009 at 10:00 a.m. Eastern Time and at all adjournments thereof, as
indicated on this proxy.
This proxy is revocable and will be voted as directed, but if no instructions are specified, this
proxy will be voted “For” the proposal 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 Special Meeting of
Stockholders and a Proxy Statement.
Address Changes/Comments:
|
||
(if you noted any Address Changes/Comments above, please mark corresponding box on the reverse side.)
(CONTINUED ON REVERSE SIDE)