1
EXHIBIT 10.4a
================================================================================
ALLIED CAPITAL CORPORATION
NOTE AGREEMENT
Dated as of November 15, 1999
Re: $102,000,000 8.51% Senior Notes due November 15, 2004
================================================================================
2
TABLE OF CONTENTS
(Not a part of the Agreement)
SECTION HEADING PAGE
SECTION 1. DESCRIPTION OF NOTES AND COMMITMENT.......................................................1
Section 1.1. Description of Notes......................................................................1
Section 1.2. Commitment, Closing Date..................................................................1
SECTION 2. PAYMENT OF NOTES..........................................................................2
Section 2.1. Required Payments.........................................................................2
Section 2.2. Optional Prepayment with Premium..........................................................2
Section 2.3. Notice of Optional Prepayments............................................................2
Section 2.4. Application of Prepayments................................................................2
Section 2.5. Direct Payment............................................................................2
SECTION 3. REPRESENTATIONS...........................................................................3
Section 3.1. Representations of the Company............................................................3
Section 3.2. Representations of the Purchasers.........................................................3
SECTION 4. CLOSING CONDITIONS........................................................................4
Section 4.1. Conditions................................................................................4
Section 4.2. Waiver of Conditions......................................................................6
SECTION 5. COVENANTS.................................................................................6
Section 5.1. Corporate Existence, Etc..................................................................6
Section 5.2. Insurance.................................................................................6
Section 5.3. Taxes, Claims for Labor and Materials, Compliance with
Laws...................................................................................6
Section 5.4. Maintenance, Etc..........................................................................7
Section 5.5. Nature of Business........................................................................7
Section 5.6. Capital Maintenance.......................................................................7
Section 5.7. Interest Charges Coverage Ratio...........................................................7
Section 5.8. Limitations on Debt; Interest Rate Swaps..................................................7
Section 5.9. Limitation on Liens.......................................................................8
Section 5.10. Restricted Payments......................................................................10
Section 5.11. Mergers, Consolidations and Sales of Assets..............................................10
Section 5.12. Repurchase of Notes......................................................................13
Section 5.13. Transactions with Affiliates.............................................................13
Section 5.14. Termination of Pension Plans.............................................................13
Section 5.15. Reports and Rights of Inspection.........................................................13
Section 5.16. Year 2000 Compliance.....................................................................16
-i-
3
SECTION 6. EVENTS OF DEFAULT AND REMEDIES THEREFOR..................................................16
Section 6.1. Events of Default........................................................................16
Section 6.2. Notice to Holders........................................................................17
Section 6.3. Acceleration of Maturities...............................................................17
Section 6.4. Rescission of Acceleration...............................................................18
SECTION 7. AMENDMENTS, WAIVERS AND CONSENTS.........................................................19
Section 7.1. Consent Required.........................................................................19
Section 7.2. Solicitation of Holders..................................................................19
Section 7.3. Effect of Amendment or Waiver............................................................19
SECTION 8. INTERPRETATION OF AGREEMENT; DEFINITIONS.................................................19
Section 8.1. Definitions..............................................................................19
Section 8.2. Accounting Principles....................................................................29
Section 8.3. Directly or Indirectly...................................................................29
SECTION 9. MISCELLANEOUS............................................................................29
Section 9.1. Registered Notes.........................................................................29
Section 9.2. Exchange of Notes........................................................................30
Section 9.3. Loss, Theft, Etc. of Notes...............................................................30
Section 9.4. Expenses, Stamp Tax Indemnity............................................................30
Section 9.5. Powers and Rights Not Waived; Remedies Cumulative........................................31
Section 9.6. Notices..................................................................................31
Section 9.7. Successors and Assigns...................................................................31
Section 9.8. Survival of Covenants and Representations................................................31
Section 9.9. Severability.............................................................................32
Section 9.10. Governing Law............................................................................32
Section 9.11. Captions.................................................................................32
Signature....................................................................................................33
Attachments to Note Agreement:
Schedule I - Names and Addresses of Purchasers
Exhibit A - Form of 8.51% Senior Note due November 15, 2004
Exhibit B - Representations and Warranties
Exhibit C - Form of Opinion of Special Counsel to the Purchaser
Exhibit D - Form of Opinion of Counsel to the Company
-ii-
4
ALLIED CAPITAL CORPORATION
NOTE AGREEMENT
Re:$102,000,000 8.51% Senior Notes due November 15, 2004
Dated as of
November 15, 1999
To the Purchasers named
on Schedule I to this Agreement
Ladies and Gentlemen:
The undersigned, ALLIED CAPITAL CORPORATION (the "Company"), a Maryland
corporation, hereby agrees with the Purchasers named on Schedule I to this
Agreement (the "Purchasers") as follows:
SECTION 1. DESCRIPTION OF NOTES AND COMMITMENT.
Section 1.1. Description of Notes. The Company will authorize the issue and
sale of $102,000,000 8.51% Senior Notes due November 15, 2004 (the "Notes" such
term to include any such notes issued in substitution therefor pursuant to
SECTION 9 of this Agreement). The Notes shall be substantially in the form set
out in Exhibit A, with such changes therefrom, if any, as may be approved by the
Purchasers and the Company. Interest on the Notes shall be computed on the basis
of a 360-day year of twelve 30-day months. The Notes are not subject to
prepayment or redemption at the option of the Company prior to their expressed
maturity dates except on the terms and conditions and in the amounts and with
the premium, if any, set forth in SECTION 2 of this Agreement.
Section 1.2. Commitment, Closing Date. Subject to the terms and conditions
hereof and on the basis of the representations and warranties hereinafter set
forth, the Company agrees to issue and sell to each Purchaser, and such
Purchaser agrees to purchase from the Company, Notes in the principal amount set
forth opposite such Purchaser's name on Schedule I hereto at a price equal to
the principal amount thereof on November 15, 1999 (the "Closing Date"); provided
that the Closing Date may be postponed to such other date (but not more than ten
days after the originally scheduled Closing Date) as shall mutually be agreed
upon by the Company and the Purchasers scheduled to purchase the Notes on the
Closing Date. Delivery of the Notes will be made at the offices of Xxxxxxx and
Xxxxxx, 000 Xxxx Xxxxxx Xxxxxx, Xxxxxxx, Xxxxxxxx 00000. On the Closing Date,
the Company will deliver to each Purchaser the Notes to be
5
Allied Capital Corporation Note Agreement
purchased by such Purchaser in the form of a single Note (or such greater number
of Notes in denominations of at least $500,000 as such Purchaser may request)
dated the Closing Date and registered in such Purchaser's name (or in the name
of such Purchaser's nominee), against delivery by such Purchaser to the Company
or its order of immediately available funds in the amount of the purchase price
therefor by wire transfer via Fedwire of immediately available funds for the
account of the Company to Account Number 3918973064 at Bank of America,
Bethesda, Maryland, (ABA #052-001-633).
SECTION 2. PAYMENT OF NOTES.
Section 2.1. Required Payments. The entire principal amount of the Notes
shall become due and payable on November 15, 2004.
Section 2.2. Optional Prepayment with Premium. In addition to the payments
required by SECTION 2.1, upon compliance with SECTION 2.3 the Company shall have
the privilege, at any time and from time to time, of prepaying the outstanding
Notes, either in whole or in part (but if in part then in a minimum principal
amount of $1,000,000) by payment of the principal amount of the Notes, or
portion thereof to be prepaid, and accrued interest thereon to the date of such
prepayment, together with a premium equal to the Make-Whole Amount, determined
as of two Business Days prior to the date of such prepayment pursuant to this
SECTION 2.2.
Section 2.3. Notice of Optional Prepayments. The Company will give notice
of any prepayment of the Notes pursuant to SECTION 2.2 to each holder thereof
not less than 30 days nor more than 60 days before the date fixed for such
optional prepayment specifying (i) such date, (ii) the principal amount of the
holder's Notes to be prepaid on such date, (iii) that a premium may be payable,
(iv) the date when such premium will be calculated, (v) the estimated premium
and (vi) the accrued interest applicable to the prepayment. Notice of prepayment
having been so given, the aggregate principal amount of the Notes specified in
such notice, together with accrued interest thereon and the premium, if any,
payable with respect thereto shall become due and payable on the prepayment date
specified in said notice. Not later than two Business Days prior to the
prepayment date specified in such notice, the Company shall provide each holder
of a Note written notice of the premium, if any, payable in connection with such
prepayment and, whether or not any premium is payable, a reasonably detailed
computation of the Make-Whole Amount (which calculation shall be reasonably
satisfactory to each Holder of the Notes to be prepaid).
Section 2.4. Application of Prepayments. All partial prepayments pursuant
to SECTION 2.2 shall be applied on all outstanding Notes ratably in accordance
with the unpaid principal amounts thereof.
Section 2.5. Direct Payment. Notwithstanding anything to the contrary
contained in this Agreement or the Notes, in the case of any Note owned by any
Holder that is a Purchaser or any other Institutional Holder which has given
written notice to the Company requesting that the provisions of this SECTION 2.5
shall apply, the Company will punctually pay when due the principal thereof,
interest thereon and premium, if any, due with respect to said principal,
without any presentment thereof, directly to such Holder at its address set
forth in Schedule I hereto or such
-2-
6
Allied Capital Corporation Note Agreement
other address as such Holder may from time to time designate in writing to the
Company or, if a bank account with a United States bank is so designated for
such Holder on Schedule I hereto the Company will make such payments in
immediately available funds to such bank account, marked for attention as
indicated, or in such other manner or to such other account in any United States
bank as such Holder may from time to time direct in writing.
SECTION 3. REPRESENTATIONS.
Section 3.1. Representations of the Company. The Company represents and
warrants that all representations and warranties set forth in Exhibit B are true
and correct as of the date hereof and are incorporated herein by reference with
the same force and effect as though herein set forth in full.
Section 3.2. Representations of the Purchasers. Each Purchaser represents,
and in entering into this Agreement the Company understands, that such Purchaser
is acquiring the Notes in a private placement for the purpose of investment and
not with a view to the distribution thereof, and that such Purchaser has no
present intention of selling, negotiating or otherwise disposing of the Notes;
it being understood, however, that the disposition of such Purchaser's property
shall at all times be and remain within its control. Each Purchaser represents
that it is an institutional "accredited investor" within the meaning of Rule 501
of Regulation D as promulgated under the Securities Act of 1933 and at least one
of the following statements is an accurate representation as to each source of
funds (a "Source") to be used by it to pay the purchase price of the Notes to be
purchased by it hereunder:
(a) the Source is an "insurance company general account" within the
meaning of Department of Labor Prohibited Transaction Exemption ("PTE")
95-60 (issued July 12, 1995) and there is no employee benefit plan,
treating as a single plan all plans maintained by the same employer (or
affiliate thereof as defined in Section V(a)(1) of PTE 95-60) or employee
organization, with respect to which the amount of the general account
reserves and liabilities for all contracts held by or on behalf of such
plan exceeds ten percent (10%) of the total reserves and liabilities of
such general account (exclusive of separate account liabilities) plus
surplus, as set forth in the NAIC Annual Statement filed with such
Purchaser's state of domicile; or
(b) the Source is either (i) an insurance company pooled separate
account, within the meaning of PTE 90-1 (issued January 29, 1990), or (ii)
a bank collective investment fund, within the meaning of the PTE 91-38
(issued July 12, 1991) and, except as such Purchaser has disclosed to the
Company in writing pursuant to this paragraph (b), no employee benefit plan
or group of plans maintained by the same employer or employee organization
beneficially owns more than 10% of all assets allocated to such pooled
separate account or collective investment fund; or
(c) the Source constitutes assets of an "investment fund" (within the
meaning of Part V of the QPAM Exemption) managed by a "qualified
professional asset manager" or "QPAM" (within the meaning of Part V of the
QPAM Exemption), no employee benefit plan's assets that are included in
such investment fund, when combined
-3-
7
Allied Capital Corporation Note Agreement
with the assets of all other employee benefit plans established or
maintained by the same employer or by an affiliate (within the meaning of
Section V(c)(1) of the QPAM Exemption) of such employer or by the same
employee organization and managed by such QPAM, exceed 20% of the total
client assets managed by such QPAM, the conditions of Part I(c) and (g) of
the QPAM Exemption are satisfied, neither the QPAM nor a person controlling
or controlled by the QPAM (applying the definition of "control" in Section
V(e) of the QPAM Exemption) owns a 5% or more interest in the Company and
(i) the identity of such QPAM and (ii) the names of all employee benefit
plans whose assets are included in such investment fund have been disclosed
to the Company in writing pursuant to this paragraph (c); or
(d) the Source is a governmental plan; or
(e) the Source is one or more employee benefit plans, or a separate
account or trust fund comprised of one or more employee benefit plans, each
of which has been identified to the Company in writing pursuant to this
paragraph (e); or
(f) the Source does not include assets of any employee benefit plan,
other than a plan exempt from the coverage of ERISA.
If any Purchaser or any subsequent transferee of the Notes indicates that such
Purchaser or such transferee is relying on any representation contained in
paragraphs (b), (c) or (e) above, the Company shall deliver on the date of
Closing and on the date of any applicable transfer a certificate, which shall
either state that (i) it is neither a party in interest nor a "disqualified
person" (as defined in Section 4975(e)(2) of the Code), with respect to any plan
identified pursuant to paragraphs (b) or (e) above, or (ii) with respect to any
plan, identified pursuant to paragraph (c) above, neither it nor any "affiliate"
(as defined in Section V(c) of the QPAM Exemption) has at such time, and during
the immediately preceding one year, exercised the authority to appoint or
terminate said QPAM as manager of any plan identified in writing pursuant to
paragraph (c) above or to negotiate the terms of said QPAM's management
agreement on behalf of any such identified plan.
As used in this SECTION 3.2, the terms "employee benefit plan," "governmental
plan," "party in interest" and "separate account" shall have the respective
meanings assigned to such terms in Section 3 of ERISA.
SECTION 4. CLOSING CONDITIONS.
Section 4.1. Conditions. The obligation of each Purchaser to purchase the
Notes on the Closing Date shall be subject to the performance by the Company of
its agreements hereunder which by the terms hereof are to be performed at or
prior to the time of delivery of the Notes and to the following further
conditions precedent:
(a) Closing Certificates. On the Closing Date such Purchaser shall
have received a certificate dated the Closing Date, signed by the President
or a Vice President or a Managing Director or a Principal of the Company,
the truth and accuracy of which
-4-
8
Allied Capital Corporation Note Agreement
shall be a condition to such Purchaser's obligation to purchase the Notes
proposed to be sold to such Purchaser on the Closing Date and to the effect
that (i) the representations and warranties of the Company set forth in
Exhibit B hereto are true and correct on and with respect to the Closing
Date, (ii) the Company has performed all of its obligations hereunder which
are to be performed on or prior to the Closing Date, and (iii) no Default
or Event of Default has occurred and is continuing.
(b) Legal Opinions. Such Purchaser shall have received from Xxxxxxx
and Xxxxxx, who are acting as special counsel to the Purchasers in this
transaction, and from Xxxxxxxxxx Xxxxxx & Xxxxxxx LLP, counsel for the
Company, their respective opinions dated the Closing Date, in form and
substance satisfactory to such Purchaser, and covering the matters set
forth in Exhibits C and D, respectively, hereto.
(c) Purchase Permitted By Applicable Law, Etc. On the Closing Date,
each purchase of Notes shall (a) be permitted by the laws and regulations
of each jurisdiction to which such Purchaser is subject, without recourse
to provisions (such as Section 1405(a)(8) of the New York Insurance Law)
permitting limited investments by insurance companies without restriction
as to the character of the particular investment, (b) not violate any
applicable law or regulation (including, without limitation, Regulation U,
T or X of the Board of Governors of the Federal Reserve System) and (c) not
subject any Purchaser to any tax, penalty or liability under or pursuant to
any applicable law or regulation, which law or regulation was not in effect
on the date hereof. If requested by any Purchaser, such Purchaser shall
have received an officer's certificate certifying as to such matters of
fact as such Purchaser may reasonably specify to enable such Purchaser to
determine whether such purchase is so permitted.
(d) Sale of Other Notes. The Company shall have consummated the sale
of the entire principal amount of the Notes scheduled to be sold on the
Closing Date as specified in Schedule I.
(e) Private Placement Number. A Private Placement Number issued by
S&P's CUSIP Service Bureau (in cooperation with the Securities Valuation
Office of the National Association of Insurance Commissioners) shall have
been obtained for the Notes.
(f) Satisfactory Proceedings. All proceedings taken in connection with
the transactions contemplated by this Agreement, and all documents
necessary to the consummation thereof, shall be satisfactory in form and
substance to such Purchaser and such Purchaser's special counsel, and such
Purchaser shall have received a copy (executed or certified as may be
appropriate) of all legal documents or proceedings taken in connection with
the consummation of said transactions.
Section 4.2. Waiver of Conditions. If on the Closing Date the Company fails
to tender to any Purchaser the Notes to be issued to such Purchaser on such date
or if the conditions specified in SECTION 4.1 have not been fulfilled, such
Purchaser may thereupon elect to be relieved of all further obligations under
this Agreement. Without limiting the foregoing, if the conditions specified in
-5-
9
Allied Capital Corporation Note Agreement
SECTION 4.1 have not been fulfilled, such Purchaser may waive compliance by the
Company with any such condition to such extent as such Purchaser may in its sole
discretion determine. Nothing in this SECTION 4.2 shall operate to relieve the
Company of any of its obligations hereunder or to waive any Purchaser's rights
against the Company.
SECTION 5. COVENANTS.
From and after the Closing Date and continuing so long as any amount
remains unpaid on any Note:
Section 5.1. Corporate Existence, Etc. The Company will preserve and keep
in full force and effect, and will cause each Consolidated Subsidiary to keep in
full force and effect, its corporate existence and all registrations, licenses,
permits and governmental approvals necessary to the proper conduct of its
business except, in the case of a Consolidated Subsidiary, where the failure to
do so would not have a Material Adverse Effect on the Company or its
Consolidated Subsidiaries; provided, however, that the foregoing shall not
prevent any transaction permitted by SECTION 5.11.
Section 5.2. Insurance. The Company will maintain, and will cause each
Consolidated Subsidiary to maintain, insurance coverage by financially sound and
reputable insurers in such forms and amounts and against such risks as are
customary for corporations of established reputation engaged in the same or a
similar business and owning and operating similar properties.
Section 5.3. Taxes, Claims for Labor and Materials, Compliance with Laws.
The Company will promptly pay and discharge, and will cause each Consolidated
Subsidiary to pay and discharge, all lawful taxes, assessments and governmental
charges or levies imposed upon the Company or such Consolidated Subsidiary,
respectively, or upon or in respect of all or any part of the property or
business of the Company or such Consolidated Subsidiary, all trade accounts
payable in accordance with usual and customary business terms, and all claims
for work, labor or materials, which if unpaid might become a Lien upon any
property of the Company or such Consolidated Subsidiary; provided, however, that
the Company or such Consolidated Subsidiary shall not be required to pay any
such tax, assessment, charge, levy, account payable or claim if (i) the
validity, applicability or amount thereof is being contested in good faith by
appropriate actions or proceedings which will prevent the forfeiture or sale of
any property of the Company or such Consolidated Subsidiary or any material
interference with the use thereof by the Company or such Consolidated
Subsidiary, and (ii) the Company or such Consolidated Subsidiary shall set aside
on its books, reserves deemed by it to be adequate with respect thereto. The
Company will promptly comply and will cause each Consolidated Subsidiary to
promptly comply with all laws, ordinances or governmental rules and regulations
to which it is subject including, without limitation, the Occupational Safety
and Health Act of 1970, as amended, ERISA and all laws, ordinances, governmental
rules and regulations relating to environmental protection in all applicable
jurisdictions, the violation of which could have a Material Adverse Effect on
the Company and its Consolidated Subsidiaries or would result in any Lien not
permitted under SECTION 5.9.
-6-
10
Allied Capital Corporation Note Agreement
Section 5.4. Maintenance, Etc. The Company will maintain, preserve and
keep, and will cause each Consolidated Subsidiary to maintain, preserve and
keep, its properties which are used in the conduct of its business (whether
owned in fee or a leasehold interest) in good repair and working order, ordinary
wear and tear excepted, and from time to time will make all necessary repairs,
replacements and renewals as the Company may determine to be appropriate to the
conduct of its business.
Section 5.5. Nature of Business. Neither the Company nor any Consolidated
Subsidiary will engage in any business if, as a result, the general nature of
the business, taken on a consolidated basis, which would then be engaged in by
the Company and its Consolidated Subsidiaries would be substantially changed
from the general nature of the business engaged in by the Company and its
Consolidated Subsidiaries on the date of this Agreement as described in the
Memorandum.
Section 5.6. Capital Maintenance. The Company shall at all times maintain
Consolidated Shareholders Equity in an amount not less than (i) $375,000,000
plus (ii) 75% of the Net Proceeds of all Equity Issuances effected by the
Company or any of its Consolidated Subsidiaries at any time after September 30,
1998 (excluding the Net Proceeds of any Equity Issuance by a Consolidated
Subsidiary to a Consolidated Subsidiary or to the Company).
Section 5.7. Interest Charges Coverage Ratio. The Company shall maintain
the ratio of Adjusted EBIT to Interest Expense of the Company and its
Consolidated Subsidiaries, determined on a consolidated basis as of the last day
of each fiscal quarter for the period of four consecutive fiscal quarters ending
on such day, at not less than 1.8 to 1.
Section 5.8. Limitations on Debt; Interest Rate Swaps. (a) The Company will
have on the last day of each quarterly fiscal period a ratio of Consolidated
Debt to Consolidated Shareholders' Equity not exceeding 1.5 to 1.
(b) The Company will not at any time permit the aggregate principal amount
of Priority Debt to exceed 25% of Consolidated Shareholders' Equity; provided
that in the case of any determination of Priority Debt made prior to April 30,
2001, outstanding Indebtedness secured by Real Estate Assets in an aggregate
principal amount of up to $100,000,000 shall be excluded from Priority Debt.
(c) The Company will not at any time permit the Asset Coverage Ratio to be
less than 2 to 1.
(d) The Company will not permit any Consolidated Subsidiary to enter into
any Subsidiary Bank Guaranty or Subsidiary Existing Note Guaranty, unless the
Company shall first furnish to each Holder of the Notes (i) an unconditional
Subsidiary Note Guaranty, (ii) an Intercreditor Agreement, and (iii) an opinion
of counsel to the effect that such Subsidiary Note Guaranty has been duly
authorized, executed and delivered by such Consolidated Subsidiary and
constitutes the legal, valid and binding obligation of such Consolidated
Subsidiary, enforceable against such Consolidated Subsidiary in accordance with
the terms thereof, and covering such
-7-
11
Allied Capital Corporation Note Agreement
other matters as the Holders of 51% or more of the principal amount of the Notes
at the time outstanding may reasonably request.
(e) The Company will not and will not permit any Consolidated Subsidiary to
enter into any Interest Rate Swap except in the ordinary course of business
pursuant to transactions that are entered into for bona fide purposes of
managing the Company's interest rate risk and not for speculation.
Section 5.9. Limitation on Liens. The Company will not, and will not permit
any Consolidated Subsidiary to, create or incur, or suffer to be incurred or to
exist, any Lien on its or their property or assets, whether now owned or
hereafter acquired, or upon any income or profits therefrom, or transfer any
property for the purpose of subjecting the same to the payment of obligations in
priority to the payment of its or their general creditors, or acquire or agree
to acquire any property or assets upon conditional sales agreements or other
title retention devices, except:
(a) Liens for property taxes and assessments or governmental charges
or levies and Liens securing claims or demands of mechanics and
materialmen, provided payment thereof is not at the time required by
SECTION 5.3;
(b) Liens of or resulting from any judgment or award, the time for the
appeal or petition for rehearing of which shall not have expired, or in
respect of which the Company or a Consolidated Subsidiary shall at any time
in good faith be prosecuting an appeal or proceeding for a review and in
respect of which a stay of execution pending such appeal or proceeding for
review shall have been secured;
(c) Liens incidental to the conduct of business or the ownership of
properties and assets (including Liens in connection with the making of
loans to customers, worker's compensation, unemployment insurance and other
like laws, warehousemen's and attorneys' liens and statutory landlords'
liens) and Liens to secure the performance of bids, tenders or trade
contracts, or to secure statutory obligations, surety or appeal bonds or
other Liens of like general nature incurred in the ordinary course of
business and not in connection with (i) the borrowing of money or (ii)
obligations pursuant to ERISA, provided in each case, the obligation
secured is not overdue or, if overdue, is being contested in good faith by
appropriate actions or proceedings;
(d) minor survey exceptions or minor encumbrances, easements or
reservations, or rights of others for rights-of-way, utilities and other
similar purposes, or zoning or other restrictions as to the use of real
properties, which are necessary for the conduct of the activities of the
Company and its Consolidated Subsidiaries or which customarily exist on
properties of corporations engaged in similar activities and similarly
situated and which do not in any event materially impair their use in the
operation of the business of the Company and its Consolidated Subsidiaries;
(e) Liens securing Indebtedness of a Consolidated Subsidiary to the
Company or to another Wholly-owned Consolidated Subsidiary;
-8-
12
Allied Capital Corporation Note Agreement
(f) Liens existing as of September 30, 1999 and reflected on Annex B
to Exhibit B hereto;
(g) Liens incurred after the Closing Date given to secure the payment
of the purchase price or cost of construction incurred in connection with
the acquisition of, or improvements to, fixed assets useful and intended to
be used in carrying on the business of the Company or a Consolidated
Subsidiary, including Liens existing on such assets at the time of
acquisition thereof or at the time of acquisition by the Company or a
Consolidated Subsidiary of any business entity then owning such assets,
whether or not such existing Liens were given to secure the payment of the
purchase price of the assets to which they attach so long as they were not
incurred, extended or renewed in contemplation of such acquisition,
provided that (i) the Lien shall attach solely to the assets acquired or
purchased, (ii) the Lien (other than Liens that are existing on such assets
at the time of acquisition thereof and that are permitted as aforesaid)
shall have been created or incurred within 180 days of the date of
acquisition of such fixed assets, except in the case of construction or
acquisition of improvements to real estate, the land on which such
improvements are located shall not be required to have been acquired within
such 180 period; (iii) at the time of acquisition of such assets, the
aggregate amount remaining unpaid on all Indebtedness secured by Liens on
such assets whether or not assumed by the Company or a Consolidated
Subsidiary shall not exceed an amount equal to 80% (or 100% in the case of
Capitalized Leases) of the lesser of the total purchase price or fair
market value at the time of acquisition of such assets (as determined in
good faith by the Board of Directors of the Company), and (iv) all
Indebtedness secured by such Liens shall be permitted hereunder;
(h) Liens on Real Estate Assets securing Non-Recourse Indebtedness;
provided that such Non-Recourse Indebtedness shall be permitted within the
limitations of SECTION 5.8; and
(i) Liens securing Indebtedness under Mortgage Repurchase Facilities
or Interest Rate Swaps; provided that (i) the Lien of any such Mortgage
Repurchase Facility shall extend only to the Commercial Mortgage Loans
which are financed or refinanced under such Mortgage Repurchase Facility
and the Related Collateral, (ii) the aggregate advances under such Mortgage
Repurchase Facility shall not exceed 80% of the aggregate unpaid principal
amount of the Commercial Mortgage Loans securing such Mortgage Repurchase
Facility, (iii) the Lien securing any Interest Rate Swap shall extend only
to Commercial Mortgage Loans and Related Collateral, and (iv) all such
Indebtedness shall be permitted within the limitations of SECTION 5.8.
The Company will not, and will not permit any Consolidated Subsidiary to,
directly or indirectly, create, incur, assume or permit to exist (upon the
happening of a contingency or otherwise) any Lien on or with respect to any
property which secures Debt outstanding under the Bank Credit Agreement or the
Existing Note Agreements, unless the Company makes, or causes to be made,
effective provision whereby the Notes will be equally and ratably secured with
any and all other obligations thereby secured; provided that such security is
granted pursuant to an
-9-
13
Allied Capital Corporation Note Agreement
agreement reasonably satisfactory to the Holders of 51% or more of the principal
amount of the Notes at the time outstanding.
Section 5.10. Restricted Payments. The Company will not except as
hereinafter provided:
(a) Declare or pay any dividends, either in cash or property, on any
shares of its capital stock of any class (except dividends or other
distributions payable solely in shares of capital stock of the Company);
(b) Directly or indirectly, or through any Subsidiary, purchase,
redeem or retire any shares of its capital stock of any class or any
warrants, rights or options to purchase or acquire any shares of its
capital stock (other than in exchange for or out of the net cash proceeds
to the Company from the substantially concurrent issue or sale of other
shares of capital stock of the Company or warrants, rights or options to
purchase or acquire any shares of its capital stock); or
(c) Make any other payment or distribution, either directly or
indirectly or through any Subsidiary, in respect of its capital stock;
(such declarations or payments of dividends, purchases, redemptions or
retirements of capital stock and warrants, rights or options and all such other
payments or distributions being herein collectively called "Restricted
Payments"), if after giving effect thereto (i) an Event of Default described in
paragraph (a) or (b) of SECTION 6.1 shall exist, (ii) as the result of an
occurrence of any other Event of Default described in SECTION 6.1 the Notes
shall have been accelerated under SECTION 6.3 or (iii) the Company would not be
in compliance with the limitations of SECTION 5.8.
The Company will not declare any regular quarterly dividend which
constitutes a Restricted Payment payable more than 60 days after the date of
declaration thereof; provided that any year-end extra dividend which constitutes
a Restricted Payment shall not be payable more than 120 days after the date of
declaration thereof.
For the purposes of this SECTION 5.10, the amount of any Restricted Payment
declared, paid or distributed in property shall be deemed to be the greater of
the book value or fair market value (as determined in good faith by the Board of
Directors of the Company) of such property at the time of the making of the
Restricted Payment in question.
Section 5.11. Mergers, Consolidations and Sales of Assets. (a) The Company
will not, and will not permit any Consolidated Subsidiary to, consolidate with
or be a party to a merger with any other Person or dispose of all or a
substantial part of the assets of the Company and its Consolidated Subsidiaries;
provided that:
(1) any Consolidated Subsidiary may merge or consolidate with or into,
sell, lease or otherwise dispose of all or a substantial part of its assets
to the Company or any Wholly-owned Subsidiary so long as (A) (i) in any
merger or consolidation involving the Company, the Company shall be the
surviving or continuing corporation and (ii) in any merger or consolidation
involving a Wholly-owned Subsidiary (and not the Company), a
-10-
14
Allied Capital Corporation Note Agreement
Wholly-owned Subsidiary shall be the surviving or continuing corporation,
and (B) at the time of such consolidation or merger and immediately after
giving effect thereto, no Default or Event of Default would exist;
(2) the Company may consolidate or merge with or into any other
corporation if (i) the corporation which results from such consolidation or
merger (the "surviving corporation") is organized under the laws of any
state of the United States or the District of Columbia, (ii) the due and
punctual payment of the principal of and premium, if any, and interest on
all of the Notes, according to their tenor, and the due and punctual
performance and observation of all of the covenants in the Notes and this
Agreement, to be performed or observed by the Company are expressly assumed
in writing by the surviving corporation and the surviving corporation shall
furnish to the holders of the Notes an opinion of counsel reasonably
satisfactory to the holder or holders of 51% or more of the principal
amount of the Notes at the time outstanding to the effect that the
instrument of assumption has been duly authorized, executed and delivered
and constitutes the legal, valid and binding contract and agreement of the
surviving corporation enforceable in accordance with its terms, except as
enforcement of such terms may be limited by bankruptcy, insolvency,
reorganization, moratorium and similar laws affecting the enforcement of
creditors' rights generally and by general equitable principles, and (iii)
at the time of such consolidation or merger and immediately after giving
effect thereto and to the incurrence of any Debt assumed or incurred in
connection therewith, (x) the aggregate amount of outstanding Consolidated
Debt and Priority Debt of the surviving corporation would be permitted by
the terms of SECTION 5.8 as of the last day of the fiscal quarter
immediately preceding the date of such consolidation or merger, and (y) no
Default or Event of Default would exist; and
(3) the Company and any Consolidated Subsidiary may, sell, transfer or
otherwise dispose of all or any part of its Investments in the ordinary
course of business including, without limitation, in securitization
transactions.
(b) The Company will not permit any Consolidated Subsidiary to issue any
Voting Stock of such Consolidated Subsidiary except to satisfy the rights of
minority shareholders to receive issuances of stock which are non-dilutive to
the Company and/or any Consolidated Subsidiary; provided that the foregoing
restrictions do not apply to issuances to the Company or to a Wholly-owned
Subsidiary or the issuance of directors' qualifying shares.
(c) The Company will not sell, transfer or otherwise dispose of stock or
Debt of any Consolidated Subsidiary (except issuance of directors' qualifying
shares and sales, transfers and dispositions of all the stock of a special
purpose Consolidated Subsidiary for consideration if (x) substantially all the
assets of such Consolidated Subsidiary constitute Investments and (y) the sale,
transfer or disposition of all such Investments for substantially the same
consideration would be permitted by SECTION 5.11(a)(3)) and will not permit any
Consolidated Subsidiary to sell, transfer or otherwise dispose of stock
(otherwise than by purchase or redemption of preferred stock) of a Consolidated
Subsidiary or Debt of any other Consolidated Subsidiary (except issuances to the
Company or to a Wholly-owned Subsidiary or issuance of directors' qualifying
shares); provided that the foregoing restrictions do not apply if the following
conditions are met:
-11-
15
Allied Capital Corporation Note Agreement
(1) all shares of stock and all Debt of such Consolidated Subsidiary
held by the Company and its Subsidiaries shall be sold simultaneously;
(2) in the opinion of the Company's Board of Directors:
(i) such sale of stock or Debt is in the best interests of the
Company; and
(ii) the consideration paid for such stock and Debt is deemed
adequate and satisfactory.
(3) the Consolidated Subsidiary being disposed of shall not have any
continuing investment in the Company or any Consolidated Subsidiary that is
not being disposed of simultaneously; and
(4) such sale or disposition does not involve a substantial part of
assets of the Company and its Consolidated Subsidiaries.
As used in this SECTION 5.11, a sale of assets will be deemed a
"substantial part" of the assets of the Company and its Consolidated
Subsidiaries if (i) the Book Value of such assets sold in a given fiscal year
(except those sold in the ordinary course of business) exceeds 15% of the
Consolidated Total Assets of the Company and its Consolidated Subsidiaries
determined at the close of the immediately preceding fiscal year, or (ii) the
operations of such assets sold (except those sold in the ordinary course of
business) generated 15% or more of the consolidated operating profit of the
Company and its Consolidated Subsidiaries during the immediately preceding
fiscal year; provided, however, that for purposes of the foregoing calculation,
there shall not be included any assets if a portion of the proceeds of such
assets equal to the aggregate Book Value thereof immediately prior to such sale
was or is applied within 365 days of the date of sale of such assets to either
(A) the acquisition of Investments useful and intended to be used in the
operation of the business of the Company and its Consolidated Subsidiaries and
having a fair market value (as determined in good faith by the Board of
Directors of the Company) at least equal to the Book Value of the assets so
disposed of, or (B) the prepayment at any applicable prepayment premium, on a
pro rata basis, of Senior Funded Debt of the Company. It is understood and
agreed by the Company that any such proceeds paid and applied to the prepayment
of the Notes as hereinabove provided shall be prepaid as and to the extent
provided in SECTION 2.2.
Section 5.12. Repurchase of Notes. Neither the Company nor any Consolidated
Subsidiary or Affiliate, directly or indirectly, may repurchase or make any
offer to repurchase any Notes unless an offer has been made to repurchase Notes,
pro rata, from all holders of the Notes at the same time and upon the same
terms. In case the Company repurchases or otherwise acquires any Notes, such
Notes shall immediately thereafter be canceled and no Notes shall be issued in
substitution therefor. Without limiting the foregoing, upon the repurchase or
other acquisition of any Notes by the Company, any Consolidated Subsidiary or
any Affiliate, such Notes shall no longer be outstanding for purposes of any
section of this Agreement relating to the
-12-
16
Allied Capital Corporation Note Agreement
taking by the holders of the Notes of any actions with respect hereto, including
without limitation, SECTION 6.3, SECTION 6.4 and SECTION 7.1.
Section 5.13. Transactions with Affiliates. The Company will not, and will
not permit any Consolidated Subsidiary to, enter into or be a party to any
transaction or arrangement with any Affiliate (including, without limitation,
the purchase from, sale to or exchange of property with, or the rendering of any
service by or for, any Affiliate), except transactions in the ordinary course of
and pursuant to the reasonable requirements of the Company's or such
Consolidated Subsidiary's business and upon fair and reasonable terms no less
favorable to the Company or such Consolidated Subsidiary than would be obtained
in a comparable arm's-length transaction with a Person other than an Affiliate.
Section 5.14. Termination of Pension Plans. The Company will not, and will
not permit any Consolidated Subsidiary to, withdraw from any Multiemployer Plan
to which it may hereafter contribute or permit any employee benefit plan
hereafter maintained by it to be terminated if such withdrawal or termination
could result in withdrawal liability (as described in Part 1 of Subtitle E of
Title IV of ERISA) or the imposition of a Lien on any property of the Company or
any Consolidated Subsidiary pursuant to Section 4068 of ERISA.
Section 5.15. Reports and Rights of Inspection. The Company will keep, and
will cause each Consolidated Subsidiary to keep, proper books of record and
account in which full and correct entries will be made of all dealings or
transactions of, or in relation to, the business and affairs of the Company or
such Consolidated Subsidiary, in accordance with GAAP consistently applied
(except for changes disclosed in the financial statements furnished to the
Holders pursuant to this SECTION 5.15 and concurred with by the independent
public accountants referred to in SECTION 5.15(b) hereof), and will furnish to
each Institutional Holder of the then outstanding Notes (in duplicate if so
specified below or otherwise requested):
(a) Quarterly Statements. As soon as available and in any event within
45 days after the end of each quarterly fiscal period (except the last) of
each fiscal year, copies of:
(1) consolidated balance sheets of the Company and its
Consolidated Subsidiaries as of the close of such quarterly fiscal
period, setting forth in comparative form the consolidated figures for
the fiscal year then most recently ended,
(2) consolidated statements of operations of the Company and its
Consolidated Subsidiaries for such quarterly fiscal period and for the
portion of the fiscal year ending with such quarterly fiscal period,
in each case setting forth in comparative form the consolidated
figures for the corresponding periods of the preceding fiscal year,
and
(3) consolidated statements of changes in net assets and cash
flows of the Company and its Consolidated Subsidiaries for the portion
of the fiscal year
-13-
17
Allied Capital Corporation Note Agreement
ending with such quarterly fiscal period, setting forth in comparative
form the consolidated figures for the corresponding period of the
preceding fiscal year,
all in reasonable detail and certified as complete and correct by a Senior
Financial Officer of the Company;
(b) Annual Statements. As soon as available and in any event within 90
days after the close of each fiscal year, copies of:
(1) consolidated and consolidating balance sheets of the Company
and its Consolidated Subsidiaries as of the close of such fiscal year,
(2) consolidated and consolidating statements of operations,
changes in net assets and cash flows, and
(3) consolidated statement of investments
setting forth in comparative form the consolidated figures for the
preceding fiscal year (except in the case of such statement of investments)
and in each case all in reasonable detail and accompanied by a report
thereon of a firm of independent public accountants of recognized national
standing selected by the Company to the effect that the consolidated
financial statements present fairly, in all material respects, the
consolidated financial position of the Company and its Consolidated
Subsidiaries as of the end of the fiscal year being reported on and the
consolidated results of their operations, changes in net assets and cash
flows for said year in conformity with GAAP and that the examination of
such accountants in connection with such financial statements has been
conducted in accordance with generally accepted auditing standards and
included such tests of the accounting records and such other auditing
procedures as said accountants deemed necessary in the circumstances;
(c) Audit Reports. Promptly upon receipt thereof, one copy of each
interim or special audit made by independent accountants of the books of
the Company or any Consolidated Subsidiary and any management letter
received from such accountants;
(d) SEC and Other Reports. Promptly upon their becoming available, one
copy of each financial statement, report, notice, press releases or proxy
statement sent by the Company to stockholders generally and of each regular
or periodic report, and any registration statement or prospectus filed by
the Company with any securities exchange or the Securities and Exchange
Commission or any successor agency, and copies of any orders in any
proceedings to which the Company or any Consolidated Subsidiary is a party,
issued by any governmental agency, Federal or state, having jurisdiction
over the Company or any of its Consolidated Subsidiaries;
(e) ERISA Reports. Promptly upon the occurrence thereof, written
notice of (i) a Reportable Event with respect to any Plan hereafter
maintained by the Company or any ERISA Affiliate; (ii) the institution of
any steps by the Company, any ERISA
-14-
18
Allied Capital Corporation Note Agreement
Affiliate, the PBGC or any other person to terminate any such Plan; (iii)
the institution of any steps by the Company or any ERISA Affiliate to
withdraw from any such Plan; (iv) a non-exempt "prohibited transaction"
within the meaning of Section 406 of ERISA in connection with any such
Plan; (v) any material contingent liability of the Company or any
Consolidated Subsidiary with respect to any post-retirement welfare
liability hereafter existing; or (vi) the taking of any action by, or the
threatening of the taking of any action by, the Internal Revenue Service,
the Department of Labor or the PBGC with respect to any of the foregoing;
(f) Officer's Certificates. Within the periods provided in paragraphs
(a) and (b) above, a certificate of a Senior Financial Officer of the
Company stating that such officer has reviewed the provisions of this
Agreement and setting forth: (i) the information and computations (in
sufficient detail) required in order to establish whether the Company was
in compliance with the requirements of SECTION 5.6 through SECTION 5.11 at
the end of the period covered by the financial statements then being
furnished and (ii) whether there existed as of the date of such financial
statements and whether, to the best of such officer's knowledge, there
exists on the date of the certificate or existed at any time during the
period covered by such financial statements any Default or Event of Default
and, if any such condition or event exists on the date of the certificate,
specifying the nature and period of existence thereof and the action the
Company is taking and proposes to take with respect thereto;
(g) Accountant's Certificates. Within the period provided in paragraph
(b) above, a certificate of the accountants who render an opinion with
respect to such financial statements acknowledging that the Company was in
compliance with the financial covenants of SECTION 5.6, SECTION 5.7 and
SECTION 5.8(a), (b) and (c), and setting forth the procedures used to make
such determination; and
(h) Requested Information. With reasonable promptness, such other data
and information as any Holder or any such Institutional Holder may
reasonably request.
Without limiting the foregoing, the Company will permit each Institutional
Holder of the then outstanding Notes (or such Persons as such Holder may
designate), to visit and inspect, under the Company's guidance, any of the
properties of the Company or any Consolidated Subsidiary, to examine all of
their books of account, records, reports and other papers, to make copies and
extracts therefrom and to discuss their respective affairs, finances and
accounts with their respective officers, employees, and independent public
accountants (and by this provision the Company authorizes said accountants to
discuss with such Holder the finances and affairs of the Company and its
Consolidated Subsidiaries) all at such reasonable times and as often as may be
reasonably requested. Any visitation shall be at the sole expense of such
Institutional Holder, unless a Default or Event of Default shall have occurred
and be continuing or the Holder of any Note or of any other evidence of
Indebtedness of the Company or any Consolidated Subsidiary gives any written
notice or takes any other action with respect to a claimed default, in which
case, any such visitation or inspection shall be at the sole expense of the
Company.
-15-
19
Allied Capital Corporation Note Agreement
Section 5.16. Year 2000 Compliance. The Company will promptly notify each
Institutional Holder in the event the Company discovers or determines that any
computer application (including those of its suppliers and vendors) that is
material to its or any of its Subsidiaries' business and operations will not be
Year 2000 Compliant on a timely basis, except to the extent that such failure
could not reasonably be expected to have a Material Adverse Effect.
SECTION 6. EVENTS OF DEFAULT AND REMEDIES THEREFOR.
Section 6.1. Events of Default. Any one or more of the following shall
constitute an "Event of Default" as such term is used herein:
(a) Default shall occur in the payment of interest on any Note when
the same shall have become due and such default shall continue for more
than five Business Days; or
(b) Default shall occur in the making of any payment of the principal
of any Note or premium, if any, thereon at the expressed or any accelerated
maturity date or at any date fixed for prepayment; or
(c) Default shall be made in the payment when due (whether by lapse of
time, by declaration, by call for redemption or otherwise) of the principal
of or interest on any Consolidated Debt (other than the Notes) of the
Company or any Consolidated Subsidiary having an aggregate unpaid principal
amount in excess of $5,000,000 and such default shall continue beyond the
period of grace, if any, allowed with respect thereto; or
(d) Default or the happening of any event shall occur under any
indenture, agreement or other instrument under which Consolidated Debt of
the Company or any Consolidated Subsidiary having an aggregate unpaid
principal amount in excess of $5,000,000 may be issued and such default or
event shall continue for a period of time sufficient to permit the
acceleration of the maturity of such Consolidated Debt or the Company or a
Consolidated Subsidiary has become obligated to purchase such Consolidated
Debt or one or more Persons have the right to require the Company or any
Consolidated Subsidiary to purchase such Consolidated Debt; or
(e) Default shall occur in the observance or performance of any
covenant or agreement contained in SECTION 5.6 through SECTION 5.11 and
such default shall continue for more than five Business Days; or
(f) Default shall occur in the observance or performance of any other
provision of this Agreement which is not remedied within 30 days after the
earlier of (i) the day on which a Senior Financial Officer first obtains
actual personal knowledge of such default, or (ii) the day on which written
notice thereof is given to the Company by the Holder of any Note; or
-16-
20
Allied Capital Corporation Note Agreement
(g) Any representation or warranty made by the Company herein, or made
by the Company in any statement or certificate furnished by the Company in
connection with the consummation of the issuance and delivery of the Notes
or furnished by the Company pursuant hereto, is untrue in any material
respect as of the date of the issuance or making thereof; or
(h) Final judgment or final judgments for the payment of money
aggregating in excess of $5,000,000 is or are outstanding against the
Company or any Material Subsidiary or against any property or assets of the
Company or any Material Subsidiary and any such final judgment or final
judgments have remained unpaid, unvacated, unbonded or unstayed by appeal
or otherwise for a period of 60 days from the date of its entry; or
(i) A custodian, liquidator, receiver or similar official is appointed
for the Company or any Material Subsidiary or for the major part of its
property and is not discharged within 60 days after such appointment; or
(j) The Company or any Material Subsidiary becomes insolvent or
bankrupt, is generally not paying its debts as they become due or makes an
assignment for the benefit of creditors, or the Company or any Material
Subsidiary applies for or consents to the appointment of a custodian,
liquidator, trustee or receiver for the Company or such Material Subsidiary
or for the major part of its property; or
(k) Bankruptcy, reorganization, arrangement or insolvency proceedings,
or other proceedings for relief under any bankruptcy or similar law or laws
for the relief of debtors, are instituted by or against the Company or any
Material Subsidiary and, if instituted against the Company or such Material
Subsidiary, are consented to or are not dismissed within 60 days after such
institution.
Section 6.2. Notice to Holders. When any Event of Default described in the
foregoing SECTION 6.1 has occurred, or if the holder of any Note or of any other
evidence of Debt of the Company gives any notice or takes any other action with
respect to a claimed default, the Company agrees to give notice within three
Business Days of such event to all holders of the Notes then outstanding.
Section 6.3. Acceleration of Maturities. When any Event of Default
described in paragraph (a) or (b) of SECTION 6.1 has happened and is continuing,
any Holder of any Note may declare the entire principal and all interest accrued
on such Holder's Notes to be and such Notes shall thereupon become, forthwith
due and payable, without any presentment, demand, protest or other notice of any
kind, all of which are hereby waived. When any Event of Default described in
paragraphs (a) through (i), inclusive, of SECTION 6.1 has happened and is
continuing, the Holder or Holders of 51% or more of the principal amount of
Notes at the time outstanding may, by notice to the Company, declare the entire
principal and all interest accrued on all Notes to be, and all Notes shall
thereupon become, forthwith due and payable, without any presentment, demand,
protest or other notice of any kind, all of which are hereby expressly waived.
When any Event of Default described in paragraph (j) or (k) of SECTION 6.1 has
occurred, then all outstanding Notes shall
-17-
21
Allied Capital Corporation Note Agreement
immediately become due and payable without presentment, demand or notice of any
kind. Upon any Note becoming due and payable as a result of any Event of Default
as aforesaid, the Company will forthwith pay to the Holder of such Note the
entire principal and interest accrued on such Note and (to the extent permitted
by applicable law) an amount as liquidated damages for the loss of the bargain
evidenced hereby (and not as a penalty) equal to the Make-Whole Amount,
determined as of the date on which such Note shall so become due and payable. No
course of dealing on the part of the Holder or Holders of any Notes nor any
delay or failure on the part of any Holder of Notes to exercise any right shall
operate as a waiver of such right or otherwise prejudice such Holder's rights,
powers and remedies. The Company further agrees, to the extent permitted by law,
to pay to the Holder or Holders of the Notes all costs and expenses incurred by
them in the collection of any Notes upon any default hereunder or thereon,
including reasonable compensation to such Holder's or Holders' attorneys for all
services rendered in connection therewith.
Section 6.4. Rescission of Acceleration. The provisions of SECTION 6.3 are
subject to the condition that if the principal of and accrued interest on all or
any outstanding Notes have been declared immediately due and payable by reason
of the occurrence of any Event of Default described in paragraphs (a) through
(i), inclusive, of SECTION 6.1, the holders of 66-2/3% in aggregate principal
amount of the Notes then outstanding may, by written instrument filed with the
Company, rescind and annul such declaration and the consequences thereof,
provided that at the time such declaration is annulled and rescinded:
(a) no judgment or decree has been entered for the payment of any
monies due pursuant to the Notes or this Agreement;
(b) all arrears of interest upon all the Notes and all other sums
payable under the Notes and under this Agreement (except any principal,
interest or premium on the Notes which has become due and payable solely by
reason of such declaration under SECTION 6.3) shall have been duly paid;
and
(c) each and every other Default and Event of Default shall have been
made good, cured or waived pursuant to SECTION 7.1;
and provided further, that no such rescission and annulment shall extend to or
affect any subsequent Default or Event of Default or impair any right consequent
thereto.
SECTION 7. AMENDMENTS, WAIVERS AND CONSENTS.
Section 7.1. Consent Required. Any term, covenant, agreement or condition
of this Agreement may, with the consent of the Company, be amended or compliance
therewith may be waived (either generally or in a particular instance and either
retroactively or prospectively), if the Company has obtained the consent in
writing of the Holders of at least 66-2/3% in aggregate principal amount of
outstanding Notes; provided that without the written consent of the Holders of
all of the Notes then outstanding, no such amendment or waiver shall be
effective (i) which will change the time of payment of the principal of or the
interest on any Note or change the principal amount thereof or change the rate
of interest thereon or the method of computation of
-18-
22
Allied Capital Corporation Note Agreement
the Make-Whole Amount, or (ii) which will change any of the provisions with
respect to optional prepayments or (iii) which will change the percentage of
holders of the Notes required to consent to any such amendment or waiver of any
of the provisions of this SECTION 7 or SECTION 6.
Section 7.2. Solicitation of Holders. So long as there are any Notes
outstanding, the Company will not solicit, request or negotiate for or with
respect to any proposed waiver or amendment of any of the provisions of this
Agreement or the Notes unless each Holder of Notes (irrespective of the amount
of Notes then owned by it) shall be informed thereof by the Company and shall be
afforded the opportunity of considering the same and shall be supplied by the
Company with sufficient information to enable it to make an informed decision
with respect thereto. The Company will not, directly or indirectly, pay or cause
to be paid any remuneration, whether by way of supplemental or additional
interest, fee or otherwise, to any Holder of Notes as consideration for or as an
inducement to entering into by any holder of Notes of any waiver or amendment of
any of the terms and provisions of this Agreement or the Notes unless such
remuneration is concurrently paid on the same terms, ratably to each Holder of
Notes then outstanding even if such Holder did not consent to such waiver or
amendment.
Section 7.3. Effect of Amendment or Waiver. Any such amendment or waiver
shall apply equally to all of the Holders of the Notes and shall be binding upon
them, upon each future holder of any Note and upon the Company, whether or not
such Note shall have been marked to indicate such amendment or waiver. No such
amendment or waiver shall extend to or affect any obligation not expressly
amended or waived or impair any right consequent thereon.
SECTION 8. INTERPRETATION OF AGREEMENT; DEFINITIONS.
Section 8.1. Definitions. Unless the context otherwise requires, the terms
hereinafter set forth when used herein shall have the following meanings and the
following definitions shall be equally applicable to both the singular and
plural forms of any of the terms herein defined:
"Adjusted EBIT" means, for any period with respect to the Company and its
Consolidated Subsidiaries on a consolidated basis, income after deduction of all
expenses and other proper charges other than taxes and Interest Expense, all as
determined in accordance with GAAP.
"Affiliate" shall mean any Person (other than a Consolidated Subsidiary)
which (i) directly or indirectly, or through one or more intermediaries
controls, or is controlled by, or is under common control with, the Company,
(ii) which beneficially owns or holds 5% or more of any class of the Voting
Stock of the Company or (iii) 5% or more of the Voting Stock (or in the case of
a Person which is not a corporation, 5% or more of the equity interest) of which
is beneficially owned by the Company or a Subsidiary. The term "control" means
the possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of a Person, whether through the
ownership of Voting Stock, by contract or otherwise, other than by investment
advisory contracts entered into in the ordinary course of business of the
Company or a Subsidiary of the Company.
-19-
23
Allied Capital Corporation Note Agreement
"Asset Coverage Ratio" shall mean on a consolidated basis for the Company
and its Consolidated Subsidiaries the ratio which the value of total assets,
less all liabilities and indebtedness not represented by senior securities (all
as determined pursuant to the Investment Company Act and any orders of the
Securities and Exchange Commission issued to the Company thereunder), bears to
the aggregate amount of senior securities representing indebtedness of the
Company and its Consolidated Subsidiaries
"Bank Credit Agreement" means the Credit Agreement between the Banks and
the Company dated as of March 9, 1999, as amended from time to time, pursuant to
which the Banks have extended credit to the Company, and any renewals,
extensions or replacements thereof.
"Banks" means the banks or financial institutions which are party to the
Bank Credit Agreement from time to time.
"Book Value" means, with respect to any asset at any time, the value
thereof as the same would be reflected on a consolidated balance sheet of the
Company and its Consolidated Subsidiaries as at such time prepared in accordance
with GAAP.
"Business Day" shall mean (a) for the purposes of computation of the
Make-Whole Amount only, any day of the week (excluding Saturday or Sunday) on
which banks in New York, New York are not obligated by law to close, and (b) for
the purposes of any other provision of this Agreement any day of the week
(excluding Saturday or Sunday) on which banks in Washington, D.C. and New York,
New York are not obligated by law to close.
"Capitalized Lease" shall mean any lease the obligation for Rentals with
respect to which is required to be capitalized on a consolidated balance sheet
of the lessee and its subsidiaries in accordance with GAAP.
"Capitalized Rentals" of any Person shall mean as of the date of any
determination thereof the amount at which the aggregate Rentals due and to
become due under all Capitalized Leases under which such Person is a lessee
would be reflected as a liability on a consolidated balance sheet of such
Person.
"Code" shall mean the Internal Revenue Code of 1986, as amended and the
rules and regulations promulgated thereunder.
"Commercial Mortgage Loan" means a loan secured by a Lien on improved real
estate used for commercial purposes.
"Consolidated Debt" shall mean as of the date of any determination thereof,
the aggregate unpaid amount of all Debt of the Company and its Consolidated
Subsidiaries determined on a consolidated basis in accordance with GAAP.
"Consolidated Shareholders' Equity" as of the date of determination
thereof, shall mean the total shareholders' equity of the Company and its
Consolidated Subsidiaries as the same would appear on a consolidated balance
sheet of the Company and its Consolidated Subsidiaries
-20-
24
Allied Capital Corporation Note Agreement
prepared as of such date in accordance with GAAP, including, in any case, common
stock of the Company (valued at cost) held in the Allied Capital Corporation
Deferred Compensation Trust and Permitted Preferred Stock of the Company and its
Consolidated Subsidiaries but excluding any stock, common or preferred, not both
issued and outstanding.
"Consolidated Subsidiary" shall mean any Subsidiary which is required to be
consolidated on financial statements of the Company prepared in accordance with
GAAP.
"Consolidated Total Assets" shall mean total assets of the Company and its
Consolidated Subsidiaries on a consolidated basis.
"Debt" means, with respect to any Person, without duplication,
(a) its liabilities for borrowed money;
(b) its liabilities for the deferred purchase price of property
acquired by such Person (excluding accounts payable arising in the ordinary
course of business but including, without limitation, all liabilities
created or arising under any conditional sale or other title retention
agreement with respect to any such property);
(c) its Capitalized Rentals;
(d) all liabilities for borrowed money secured by any Lien with
respect to any property owned by such Person (whether or not it has assumed
or otherwise become liable for such liabilities); and
(e) any Guaranty of such Person with respect to liabilities of a type
described in any of clauses (a) through (d) hereof.
Debt of any Person shall include all obligations of such Person of the character
described in clauses (a) through (e) to the extent such Person remains legally
liable in respect thereof notwithstanding that any such obligation is deemed to
be extinguished under GAAP.
"Default" shall mean any event or condition the occurrence of which would,
with the lapse of time or the giving of notice, or both, constitute an Event of
Default.
"Equity Issuance" means any issuance or sale by a Person of its capital
stock or other similar equity security, or any warrants, options or similar
rights to acquire, or securities convertible into or exchangeable for, such
capital stock or other similar equity security.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended, and any successor statute of similar import, together with the
regulations thereunder, in each case as in effect from time to time. References
to sections of ERISA shall be construed to also refer to any successor sections.
-21-
25
Allied Capital Corporation Note Agreement
"ERISA Affiliate" shall mean any corporation, trade or business that is,
along with the Company, a member of a controlled group of corporations or a
controlled group of trades or businesses, as described in section 414(b) and
414(c), respectively, of the Code or Section 4001 of ERISA.
"Event of Default" shall have the meaning set forth in SECTION 6.1.
"Existing Notes" means the notes issued by the Company pursuant to the
Existing Note Agreements.
"Existing Note Agreements" means (i) the Note Agreement dated as of April
30, 1998, among the Company and the Purchasers named therein, pursuant to which
the Company has issued its $140,000,000 7.055% Senior Notes, Series A, due May
30, 2003, its $30,000,000 7.168% Senior Notes, Series B, due May 30, 2005, and
its $10,000,000 9.530% Senior Notes, Series C, due May 30, 2005, and any
replacement or renewal thereof and (ii) the Note Agreement dated as of May 1,
1999 among the Company and the Purchasers named therein, pursuant to which the
Company has issued its $112,000,000 7.39% Senior Notes, Series A due May 1, 2004
and $25,000,000 7.49% Senior Notes, Series B due May 1, 2006 and any replacement
or renewal thereof.
"GAAP" shall mean generally accepted accounting principles at the time in
the United States.
"Guaranties" by any Person shall mean all obligations (other than
endorsements in the ordinary course of business of negotiable instruments for
deposit or collection) of such Person guaranteeing, or in effect guaranteeing,
any Indebtedness, dividend or other obligation of any other Person (the "primary
obligor") in any manner, whether directly or indirectly, including, without
limitation, all obligations incurred through an agreement, contingent or
otherwise, by such Person: (i) to purchase such Indebtedness or obligation or
any property or assets constituting security therefor, (ii) to advance or supply
funds (x) for the purchase or payment of such Indebtedness or obligation, (y) to
maintain working capital or other balance sheet condition or otherwise to
advance or make available funds for the purchase or payment of such Indebtedness
or obligation, (iii) to lease property or to purchase Securities or other
property or services primarily for the purpose of assuring the owner of such
Indebtedness or obligation of the ability of the primary obligor to make payment
of the Indebtedness or obligation, or (iv) otherwise to assure the owner of the
Indebtedness or obligation of the primary obligor against loss in respect
thereof. For the purposes of all computations made under this Agreement, a
Guaranty in respect of any Indebtedness for borrowed money shall be deemed to be
Indebtedness equal to the principal amount of such Indebtedness for borrowed
money which has been guaranteed, and a Guaranty in respect of any other
obligation or liability or any dividend shall be deemed to be Indebtedness equal
to the maximum aggregate amount of such obligation, liability or dividend.
"Holder" shall mean any Person which is, at the time of reference, the
registered Holder of any Note.
-22-
26
Allied Capital Corporation Note Agreement
"Indebtedness" with respect to any Person means, at any time, without
duplication,
(a) its liabilities for borrowed money and its redemption obligations
in respect of mandatorily redeemable preferred stock;
(b) its liabilities for the deferred purchase price of property
acquired by such Person (excluding accounts payable arising in the ordinary
course of business but including all liabilities created or arising under
any conditional sale or other title retention agreement with respect to any
such property);
(c) all liabilities appearing on its balance sheet in accordance with
GAAP in respect of Capitalized Leases;
(d) all liabilities for borrowed money secured by any Lien with
respect to any property owned by such Person (whether or not it has assumed
or otherwise become liable for such liabilities);
(e) all its liabilities in respect of unreimbursed drawings under
letters of credit or instruments serving a similar function issued or
accepted for its account by banks and other financial institutions (whether
or not representing obligations for borrowed money);
(f) Interest Rate Swaps of such Person; and
(g) any Guaranty of such Person with respect to liabilities of a type
described in any of clauses (a) through (f) hereof.
Indebtedness of any Person shall include all obligations of such Person of
the character described in clauses (a) through (g) to the extent such Person
remains legally liable in respect thereof notwithstanding that any such
obligation is deemed to be extinguished under GAAP.
"Institutional Holder" shall mean any insurance company, bank, savings and
loan association, trust company, investment company, charitable foundation,
employee benefit plan (as defined in ERISA) or other institutional investor or
financial institution which is not principally engaged, or as one of its
important activities, in the business of making small business investments of
the type made by the Company.
"Intercreditor Agreement" means an intercreditor agreement pursuant to
which the Banks, the Holders of the Existing Notes and the Holders of the Notes
have agreed to share payments made by any Consolidated Subsidiary under a
Subsidiary Existing Note Guaranty, a Subsidiary Note Guaranty or a Subsidiary
Bank Guaranty on an equal and ratable basis.
"Interest Expense" means, with respect to a Person and for any period, the
total consolidated interest expense (including, without limitation, capitalized
interest expense and interest expense attributable to Capitalized Leases) of
such Person and in any event shall include all interest expense with respect to
any Debt in respect of which such Person is wholly or partially liable.
-23-
27
Allied Capital Corporation Note Agreement
"Interest Rate Swap" means a currency swap, an interest rate swap or other
currency or interest rate hedge entered into by the Company or a Consolidated
Subsidiary. For the purposes of this Agreement, the amount of the obligation
under any Interest Rate Swap shall be the amount determined in respect thereof
as of the end of the then most recently ended fiscal quarter of such Person,
based on the assumption that such Interest Rate Swap had terminated at the end
of such fiscal quarter, and in making such determination, if any agreement
relating to such Interest Rate Swap provides for the netting of amounts payable
by and to such Person thereunder or if any such agreement provides for the
simultaneous payment of amounts by and to such Person, then in each such case,
the amount of such obligation shall be the net amount so determined.
"Investment Company Act" shall mean the Investment Company Act of 1940, as
amended, and all rules and regulations promulgated thereunder.
"Investments" shall mean all investments, in cash or by delivery of
property made, directly or indirectly in any Person, whether by acquisition of
shares of capital stock, Indebtedness or other obligations or Securities or by
loan, advance, capital contribution or otherwise.
"Lien" shall mean any interest in property securing an obligation owed to,
or a claim by, a Person other than the owner of the property, whether such
interest is based on the common law, statute or contract, and including but not
limited to the security interest lien arising from a mortgage, encumbrance,
pledge, conditional sale or trust receipt or a lease, consignment or bailment
for security purposes. The term "Lien" shall include reservations, exceptions,
encroachments, easements, rights-of-way, covenants, conditions, restrictions,
leases and other title exceptions and encumbrances (including, with respect to
stock, stockholder agreements, voting trust agreements, buy-back agreements and
all similar arrangements) affecting property. For the purposes of this
Agreement, the Company or any Consolidated Subsidiary shall be deemed to be the
owner of any property which it has acquired or holds subject to a conditional
sale agreement, Capitalized Lease or other arrangement pursuant to which title
to the property has been retained by or vested in some other Person for security
purposes and such retention or vesting shall constitute a Lien.
"Make-Whole Amount" means, with respect to a Note, an amount equal to the
excess, if any, of the Discounted Value of the Remaining Scheduled Payments with
respect to the Called Principal of the Note over the amount of such Called
Principal, provided that the Make-Whole Amount may in no event be less than
zero. For the purposes of determining the Make-Whole Amount, the following terms
have the following meanings:
"Called Principal" means the principal of any Note that is to be
prepaid pursuant to SECTION 2.2 or has become or is declared to be
immediately due and payable pursuant to SECTION 6.3, as the context
requires.
"Discounted Value" means, with respect to the Called Principal of a
Note, the amount obtained by discounting all Remaining Scheduled Payments
with respect to such Called Principal from their respective scheduled due
dates to the Settlement Date with
-24-
28
Allied Capital Corporation Note Agreement
respect to such Called Principal, in accordance with accepted financial
practice and at a discount factor (applied on the same periodic basis as
that on which interest on the Notes is payable) equal to the Reinvestment
Yield with respect to such Called Principal.
"Reinvestment Yield" means, with respect to the Called Principal of a
Note, 0.50% over the yield to maturity implied by (i) the yields reported,
as of 10:00 A.M. (New York City time) on the second Business Day preceding
the Settlement Date with respect to such Called Principal, on the display
designated as "PX-1" of the Bloomberg Financial Markets Services Screen (or
such other display as may replace PX-1 of the Bloomberg Financial Markets
Services Screen) for actively traded U.S. Treasury securities having a
maturity equal to the Remaining Average Life of such Called Principal as of
such Settlement Date, or (ii) if such yields are not reported as of such
time or the yields reported as of such time are not ascertainable
(including by way of interpolation), the Treasury Constant Maturity Series
Yields reported, for the latest day for which such yields have been so
reported as of the second Business Day preceding the Settlement Date with
respect to such Called Principal, in Federal Reserve Statistical Release
H.15 (519) (or any comparable successor publication) for actively traded
U.S. Treasury securities having a constant maturity equal to the Remaining
Average Life of such Called Principal as of such Settlement Date. Such
implied yield will be determined, if necessary, by (a) converting U.S.
Treasury xxxx quotations to bond-equivalent yields in accordance with
accepted financial practice and (b) interpolating linearly between (1) the
actively traded U.S. Treasury security with the maturity closest to and
greater than the Remaining Average Life and (2) the actively traded U.S.
Treasury security with the maturity closest to and less than the Remaining
Average Life.
"Remaining Average Life" means, with respect to any Called Principal,
the number of years (calculated to the nearest one-twelfth year) obtained
by dividing (i) such Called Principal into (ii) the sum of the products
obtained by multiplying (a) the principal component of each Remaining
Scheduled Payment with respect to such Called Principal by (b) the number
of years (calculated to the nearest one-twelfth year) that will elapse
between the Settlement Date with respect to such Called Principal and the
scheduled due date of such Remaining Scheduled Payment.
"Remaining Scheduled Payments" means, with respect to the Called
Principal of a Note, all payments of such Called Principal and interest
thereon that would be due after the Settlement Date with respect to such
Called Principal if no payment of such Called Principal were made prior to
its scheduled due date, provided that if such Settlement Date is not a date
on which interest payments are due to be made under the terms of the Notes,
then the amount of the next succeeding scheduled interest payment will be
reduced by the amount of interest accrued to such Settlement Date and
required to be paid on such Settlement Date pursuant to or SECTION 2.2 or
SECTION 6.3.
"Settlement Date" means, with respect to the Called Principal of a
Note, the date on which such Called Principal is to be prepaid pursuant to
SECTION 2.2 or has become or is declared to be immediately due and payable
pursuant to SECTION 6.3, as the context requires.
-25-
29
Allied Capital Corporation Note Agreement
"Material Adverse Effect" means a material adverse effect on (a) the
business, operations, affairs, financial condition, assets or properties of the
Company and its Consolidated Subsidiaries taken as a whole, or (b) the ability
of the Company to perform its obligations under this Agreement and the Notes, or
(c) the validity or enforceability of this Agreement or the Notes.
"Material Subsidiary" shall mean any Consolidated Subsidiary which has
total assets having a value (determined in accordance with the market valuation
method pursuant to GAAP) greater than or equal to $20,000,000.
"Memorandum" is described in paragraph 5 of Exhibit B hereto.
"Mortgage Repurchase Facility" means financing agreements providing for (i)
the pledge and assignment of Commercial Mortgage Loans owned by the Company and
its Consolidated Subsidiaries as security for loans to the Company and its
Consolidated Subsidiaries, or (ii) the sale of such Commercial Mortgage Loans to
a commercial lender pursuant to an agreement under which such loans shall be
repurchased by the Company or a Consolidated Subsidiary at a future date.
"Multiemployer Plan" shall have the same meaning as in ERISA.
"Net Proceeds" means, with respect to an Equity Issuance by a Person, the
aggregate amount of all cash received by such Person in respect of such Equity
Issuance net of investment banking fees, legal fees, accountants fees,
underwriting discounts and commissions and other customary fees and expenses
actually incurred by such Person in connection with such Equity Issuance.
"Non-Recourse Indebtedness" means Indebtedness secured by Real Estate
Assets if recourse for the payment of such Indebtedness is limited to such Real
Estate Assets.
"PBGC" means the Pension Benefit Guaranty Corporation and any entity
succeeding to any or all of its functions under ERISA.
"Permitted Preferred Stock" means (i) preferred stock that is issued from
time to time by a Subsidiary to the United States Small Business Administration
having an aggregate stated value not exceeding $7,000,000 at any one time
outstanding or (ii) preferred stock that is issued from time to time by a
Subsidiary for the purpose of qualifying such Subsidiary as a real estate
investment trust under Sections 856 through 860 of the Code and having an
aggregate stated value not exceeding $500,000 at any one time outstanding,
provided that in any event Permitted Preferred Stock shall not include any
Voting Stock.
"Person" shall mean an individual, partnership, limited liability company,
corporation, trust or unincorporated organization, and a government or agency or
political subdivision thereof.
-26-
30
Allied Capital Corporation Note Agreement
"Plan" means a "pension plan," as such term is defined in ERISA,
established or maintained by the Company or any ERISA Affiliate or as to which
the Company or any ERISA Affiliate contributed or is a member or otherwise may
have any liability.
"Priority Debt" means the sum of (i) all Debt of the Company and its
Consolidated Subsidiaries secured by a Lien, and (ii) all unsecured Debt of
Consolidated Subsidiaries (excluding in each case, Debt owing to the Company or
another Consolidated Subsidiary).
"Purchaser" shall have the meaning set forth in SECTION 1.1.
"QPAM Exemption" means Prohibited Transaction Class Exemption 84-14 issued
by the United States Department of Labor.
"Real Estate" means fee ownership or co-ownership of, or leaseholds of,
land or improvements thereon.
"Real Estate Assets" means (i) Real Estate securing Investments made in the
ordinary course of business, (ii) Commercial Mortgage Loans and (iii) Related
Collateral.
"Related Collateral" means, in respect of any Commercial Mortgage Loan: (i)
any and all documents, instruments, agreements, records or other collateral of
any kind evidencing, securing, guaranteeing or otherwise relating to such
Commercial Mortgage Loan, including without limitation all promissory notes or
other negotiable instruments, mortgages, deeds of trust or similar instruments,
assignments of leases or rents or other collateral assignments, financing
statements, guaranties, indemnities, servicing agreements, servicing records,
files, surveys, certificates, affidavits, title abstracts, title insurance
policies and commitments, correspondence, opinions, appraisals, closing
documents, computer programs, computer storage media, data bases, accounting
records and other books and records relating thereto, (ii) any and all mortgage
guaranties and insurance (issued by governmental agencies or otherwise) and
mortgage insurance certificates or other documents evidencing such mortgage
guaranties or insurance relating to any such Commercial Mortgage Loan and all
claims and payments thereunder, (iii) any and all other insurance policies and
insurance proceeds relating to such Commercial Mortgage Loan or the related real
property, (iv) all "general intangibles" as defined in the Uniform Commercial
Code relating to or constituting any and all of the foregoing, and (v) any and
all replacements, substitutions or distributions on or proceeds of any and all
of the foregoing.
"Rentals" shall mean and include as of the date of any determination
thereof all fixed payments (including as such all payments which the lessee is
obligated to make to the lessor on termination of the lease or surrender of the
property) payable by the Company or any Consolidated Subsidiary, as lessee or
sublessee under a lease of real or personal property, but shall be exclusive of
any amounts required to be paid by the Company or any Consolidated Subsidiary
(whether or not designated as rents or additional rents) on account of
maintenance, repairs, insurance, taxes and similar charges. Fixed rents under
any so-called "percentage leases" shall be computed solely on the basis of the
minimum rents, if any, required to be paid by the lessee regardless of sales
volume or gross revenues.
-27-
31
Allied Capital Corporation Note Agreement
"Reportable Event" shall have the same meaning as in ERISA.
"SBA" shall mean the United States Small Business Administration.
"Security" shall have the same meaning as in Section 2(1) of the Securities
Act of 1933, as amended.
"Senior Financial Officer" means the chief financial officer, chief
operating officer, principal accounting officer, treasurer or controller of the
Company.
"Senior Funded Debt" means any Debt of the Company which is classified as
long term debt in accordance with GAAP (including, without limitation, the Bank
Credit Agreement) other than Subordinated Debt.
"Subordinated Debt" means all unsecured Debt of the Company which shall
contain or have applicable thereto subordination provisions providing for the
subordination thereof to other Debt of the Company (including, without
limitation, the obligations of the Company under the Notes).
"Subsidiary" with respect to any Person shall mean (i) any corporation,
partnership, association or other business entity at least 50% of the
outstanding shares of Voting Stock or similar interests of which are owned,
directly or indirectly, by such Person (including, without limitation, any
limited partnership in which such Person, directly or indirectly, shall have at
least a 50% vote on matters as to which limited partners may vote), (ii) any
general or limited partnership of which such Person shall be a general partner
or as to which such Person otherwise shall have unlimited liability, (iii) any
general or limited partnership a general partner of which can be changed or
removed by such Person (other than removals that could be accomplished by
voluntary withdrawal of such general partner only), or (iv) any general or
limited partnership in which (x) the amount represented by such Person's capital
account shall be equal to at least 50% of the aggregate amount represented by
the total of all partners' capital accounts or (y) such Person shall be
allocated at least 50% of the profit (or loss) or distributable cash of the
partnership; provided, however, that the term "Subsidiary", when used in this
Agreement without reference to any particular Person, shall mean a Subsidiary of
the Company.
"Subsidiary Bank Guaranty" means any agreement pursuant to which a
Consolidated Subsidiary has guaranteed the Debt of the Company under the Bank
Credit Agreement.
"Subsidiary Existing Note Guaranty" means any agreement pursuant to which a
Consolidated Subsidiary has guaranteed the Debt of the Company under the
Existing Notes.
"Subsidiary Note Guaranty" means any agreement pursuant to which a
Consolidated Subsidiary has guaranteed the Debt of the Company under the Notes.
"Voting Stock" shall mean Securities of any class or classes, the holders
of which are ordinarily, in the absence of contingencies, entitled to elect a
majority of the corporate directors (or Persons performing similar functions).
-28-
32
Allied Capital Corporation Note Agreement
"Wholly-owned" when used in connection with any Subsidiary shall mean a
Subsidiary of which all of the issued and outstanding shares of stock (except
shares required as directors' qualifying shares and Permitted Preferred Stock)
shall be owned by the Company and/or one or more of its Wholly-owned
Subsidiaries.
"Year 2000 Compliant" shall have the meaning assigned to it in paragraph 19
of Exhibit B to this Agreement.
"Year 2000 Problem" shall have the meaning assigned to it in paragraph 19
of Exhibit B to this Agreement.
Section 8.2. Accounting Principles. Where the character or amount of any
asset or liability or item of income or expense is required to be determined or
any consolidation or other accounting computation is required to be made for the
purposes of this Agreement, the same shall be done in accordance with GAAP, to
the extent applicable, except where such principles are inconsistent with the
requirements of this Agreement.
Section 8.3. Directly or Indirectly. Where any provision in this Agreement
refers to action to be taken by any Person, or which such Person is prohibited
from taking, such provision shall be applicable whether the action in question
is taken directly or indirectly by such Person.
SECTION 9. MISCELLANEOUS.
Section 9.1. Registered Notes. The Company shall cause to be kept at the
principal office of the Company a register for the registration and transfer of
the Notes (hereinafter called the "Note Register") and the Company will register
or transfer or cause to be registered or transferred as hereinafter provided any
Note issued pursuant to this Agreement.
At any time and from time to time the registered holder of any Note which
has been duly registered as hereinabove provided may transfer such Note to
another Institutional Holder upon surrender thereof at the principal office of
the Company duly endorsed or accompanied by a written instrument of transfer
duly executed by the registered holder of such Note or its attorney duly
authorized in writing.
The Person in whose name any registered Note shall be registered shall be
deemed and treated as the owner and holder thereof for all purposes of this
Agreement. Payment of or on account of the principal, premium, if any, and
interest on any registered Note shall be made to or upon the written order of
such registered holder.
Section 9.2. Exchange of Notes. At any time and from time to time, upon not
less than ten days' notice to that effect given by the holder of any Note
initially delivered or of any Note substituted therefor pursuant to SECTION 9.1,
this SECTION 9.2 or SECTION 9.3, and, upon surrender of such Note at its office,
the Company will deliver in exchange therefor, without expense to such holder,
except as set forth below, a Note for the same aggregate principal amount as the
then unpaid principal amount of the Note so surrendered, or Notes in the
denomination of $500,000 or any amount in excess thereof as such holder shall
specify, dated as of the date to which interest has been paid on
-29-
33
Allied Capital Corporation Note Agreement
the Note so surrendered or, if such surrender is prior to the payment of any
interest thereon, then dated as of the date of issue, registered in the name of
such one or more Institutional Holders as may be designated by such holder, and
otherwise of the same form and tenor as the Notes so surrendered for exchange.
The Company may require the payment of a sum sufficient to cover any stamp tax
or governmental charge imposed upon such exchange or transfer.
Section 9.3. Loss, Theft, Etc. of Notes. Upon receipt of evidence
satisfactory to the Company of the loss, theft, mutilation or destruction of any
Note, and in the case of any such loss, theft or destruction upon delivery of a
bond of indemnity in such form and amount as shall be reasonably satisfactory to
the Company, or in the event of such mutilation upon surrender and cancellation
of the Note, the Company will make and deliver without expense to the holder
thereof, a new Note, of like tenor, in lieu of such lost, stolen, destroyed or
mutilated Note. If the Purchaser or any subsequent Institutional Holder is the
owner of any such lost, stolen or destroyed Note, then the affidavit of an
authorized officer of such owner, setting forth the fact of loss, theft or
destruction and of its ownership of such Note at the time of such loss, theft or
destruction shall be accepted as satisfactory evidence thereof and no further
indemnity shall be required as a condition to the execution and delivery of a
new Note other than the written agreement of such owner to indemnify the
Company.
Section 9.4. Expenses, Stamp Tax Indemnity. Whether or not the transactions
herein contemplated shall be consummated, the Company agrees to pay directly all
of the Purchasers' reasonable out-of-pocket expenses in connection with the
preparation, execution and delivery of this Agreement and the transactions
contemplated hereby, including but not limited to the reasonable charges and
disbursements of Xxxxxxx and Xxxxxx, special counsel to the Purchasers,
duplicating and printing costs and charges for shipping the Notes, adequately
insured to each Purchaser's home office or at such other place as such Purchaser
may designate, the cost of obtaining a Private Placement Number for the Notes
from Standard & Poor's Corporation, and all such reasonable expenses relating to
any amendment, waivers or consents pursuant to the provisions hereof, including,
without limitation, any amendments, waivers, or consents resulting from any
work-out, renegotiation or restructuring relating to the performance by the
Company of its obligations under this Agreement and the Notes. The Company also
agrees that it will pay and save each Purchaser harmless against any and all
liability with respect to stamp and other taxes, if any, which may be payable or
which may be determined to be payable in connection with the execution and
delivery of this Agreement or the Notes, (other than as specified in the last
sentence of SECTION 9.2) whether or not any Notes are then outstanding. The
Company agrees to protect and indemnify each Purchaser against any liability for
any and all brokerage fees and commissions payable or claimed to be payable to
any Person in connection with the transactions contemplated by this Agreement.
Section 9.5. Powers and Rights Not Waived; Remedies Cumulative. No delay or
failure on the part of the holder of any Note in the exercise of any power or
right shall operate as a waiver thereof; nor shall any single or partial
exercise of the same preclude any other or further exercise thereof, or the
exercise of any other power or right, and the rights and remedies of the holder
of any Note are cumulative to, and are not exclusive of, any rights or remedies
any such holder would otherwise have.
-30-
34
Allied Capital Corporation Note Agreement
Section 9.6. Notices. All communications provided for hereunder shall be in
writing and, if to a Holder, delivered or mailed prepaid by registered or
certified mail or overnight air courier, or by facsimile communication (with a
confirming copy of any such facsimile communication sent via overnight courier
service), in each case addressed to such Holder at its address appearing on
Schedule I to this Agreement or Allied Capital Corporation Note Agreement
such other address as such Holder may designate to the Company in writing, and
if to the Company delivered or mailed by registered or certified mail or
overnight air courier, or by facsimile communication, to the Company at 0000
Xxxxxxxxxxxx Xxxxxx, X.X., 0xx Xxxxx, Xxxxxxxxxx, X.X. 00000, Attention: Xxxx X.
Xxxxxxx or to such other address as the Company may in writing designate to the
Holders; provided, however, that a notice to a Holder by overnight air courier
shall only be effective if delivered to such Holder at a street address
designated for such purpose in Schedule I, and a notice to you by facsimile
communication shall only be effective if made by confirmed transmission to such
Holder at a telephone number designated for such purpose in Schedule I, or, in
either case, as such Holder may designate to the Company in writing.
Section 9.7. Successors and Assigns. This Agreement shall be binding upon
the Company and its successors and assigns and shall inure to the benefit of
each Purchaser and to the benefit of its successors and assigns, including each
successive Holder.
Section 9.8. Survival of Covenants and Representations. All covenants,
representations and warranties made by the Company herein and in any
certificates delivered pursuant hereto, whether or not in connection with the
Closing Date, shall survive the closing and the delivery of this Agreement and
the Notes and shall terminate upon payment in full of all amounts due under the
Notes and this Agreement.
Section 9.9. Severability. Should any part of this Agreement for any reason
be declared invalid or unenforceable, such decision shall not affect the
validity or enforceability of any remaining portion, which remaining portion
shall remain in force and effect as if this Agreement had been executed with the
invalid or unenforceable portion thereof eliminated and it is hereby declared
the intention of the parties hereto that they would have executed the remaining
portion of this Agreement without including therein any such part, parts or
portion which may, for any reason, be hereafter declared invalid or
unenforceable.
Section 9.10. Governing Law. This Agreement and the Notes issued and sold
hereunder shall be governed by and construed in accordance with New York law.
Section 9.11. Captions. The descriptive headings of the various Sections or
parts of this Agreement are for convenience only and shall not affect the
meaning or construction of any of the provisions hereof.
-31-
35
Allied Capital Corporation Note Agreement
The execution hereof by you shall constitute a contract between us for the
uses and purposes hereinabove set forth, and this Agreement may be executed in
any number of counterparts, each executed counterpart constituting an original
but all together only one agreement.
ALLIED CAPITAL CORPORATION
By
Name:
---------------------------
Title:
--------------------------
Accepted as of November 15, 1999.
[Variation]
By
Name:
---------------------------
Title:
--------------------------
-32-
36
ALLIED CAPITAL CORPORATION
8.51% Senior Note
Due November 15, 2004
No. R-
----------------, ------
$
ALLIED CAPITAL CORPORATION, a Maryland corporation (the "Company"), for
value received, hereby promises to pay to
or registered assigns
on the fifteenth day of November, 2004
the principal amount of
DOLLARS ($____________)
and to pay interest (computed on the basis of a 360-day year of twelve 30-day
months) on the principal amount from time to time remaining unpaid hereon at the
rate of 8.51% per annum from the date hereof until maturity, payable
semiannually on the fifteenth day of each May and November in each year
(commencing on the first of such dates after the date hereof) and at maturity.
The Company agrees to pay interest on overdue principal (including any overdue
required or optional prepayment of principal) and premium, if any, and (to the
extent legally enforceable) on any overdue installment of interest, at the rate
of 10.51% per annum after the due date, whether by acceleration or otherwise,
until paid. Both the principal hereof and interest hereon are payable at the
principal office of the Company in Washington, D.C. in coin or currency of the
United States of America which at the time of payment shall be legal tender for
the payment of public and private debts.
This Note is one of the 8.51% Senior Notes due November 15, 2004 (the
"Notes") of the Company in the aggregate principal amount of $102,000,000 issued
under and pursuant to the terms and provisions of the Note Agreement, dated as
of November 15, 1999 (the "Note Agreement"), entered into by the Company with
the Purchasers named therein and this Note and the holder hereof are entitled
with the holders of all other Notes outstanding under the Note Agreement to all
the benefits provided for thereby or referred to therein to the extent provided
in the Note Agreement. Reference is hereby made to the Note Agreement for a
statement of such rights and benefits.
This Note and the other Notes outstanding under the Note Agreement may be
declared due prior to their expressed maturity dates in the events, on the terms
and in the manner and amounts as provided in the Note Agreement.
EXHIBIT A-1
(to Note Agreement)
37
Allied Capital Corporation Note Agreement
The Notes are not subject to prepayment or redemption at the option of the
Company prior to their expressed maturity dates except on the terms and
conditions and in the amounts and with the premium, if any, set forth in the
Note Agreement.
This Note is registered on the books of the Company and is transferable
only by surrender thereof at the principal office of the Company duly endorsed
or accompanied by a written instrument of transfer duly executed by the
registered holder of this Note or its attorney duly authorized in writing.
Payment of or on account of principal, premium, if any, and interest on this
Note shall be made only to or upon the order in writing of the registered
holder.
ALLIED CAPITAL CORPORATION
By
Name:
------------------------------
Title:
-----------------------------
A-1-2
