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SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [ x ]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[ x ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
Allied Capital Corporation
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(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[ x ] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its filing.
(1) Amount previously paid:
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(2) Form, schedule or registration statement no.:
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(3) Filing party:
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(4) Date filed:
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Allied Capital Logo
ALLIED CAPITAL CORPORATION
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To the Stockholders:
The 2001 Annual Meeting of Stockholders of Allied Capital Corporation (the
"Company") will be held at the St. Regis Hotel, 923 Sixteenth Street, NW,
Washington, DC on May 8, 2001 at 10:00 a.m. (Eastern Time) for the following
purposes:
1. To elect four directors of the Company who will serve for three years,
or until their successors are elected and qualified;
2. To ratify the selection of Arthur Andersen LLP to serve as independent
public accountants for the Company for the year ending December 31, 2001;
and
3. To transact such other business as may properly come before the meeting.
You have the right to receive notice and to vote at the meeting if you were
a stockholder of record at the close of business on March 21, 2001. Whether or
not you expect to be present in person at the meeting, please sign the enclosed
proxy and return it promptly in the envelope provided, or register your vote by
telephone or through the Internet. Instructions are shown on the proxy card. In
the event there are not sufficient votes for a quorum or to approve or ratify
any of the foregoing proposals at the time of the annual meeting, the annual
meeting may be adjourned in order to permit further solicitation of the proxies
by the Company.
By order of the Board of
Directors,
[/s/ Suzanne Votaw Sparrow]
Suzanne V. Sparrow
Secretary
March 28, 2001
This is an important meeting. To ensure proper representation at the
meeting, please complete, sign, date and return the proxy card in the
enclosed, self-addressed envelope, vote your shares by telephone, or vote
via the Internet. Even if you vote your shares prior to the meeting, you
still may attend the meeting and vote your shares in person.
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ALLIED CAPITAL CORPORATION
1919 Pennsylvania Avenue, NW
Washington, DC 20006
PROXY STATEMENT
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Allied Capital Corporation (the "Company"
or "Allied Capital") for use at the Company's 2001 Annual Meeting of
Stockholders (the "Meeting") to be held on May 8, 2001 at 10:00 a.m. (Eastern
Time) at the St. Regis Hotel, 923 Sixteenth Street, NW, Washington, DC and at
any adjournments thereof. This Proxy Statement, the accompanying proxy card and
the Company's Annual Report to Stockholders for the year ended December 31, 2000
are first being sent to stockholders on or about March 28, 2001.
We encourage you to vote your shares, either by voting in person at the
Meeting or by granting a proxy (i.e., authorizing someone to vote your shares).
If you properly sign and date the accompanying proxy card or otherwise provide
voting instructions, either via the Internet or the telephone, and the Company
receives it in time for the Meeting, the persons named as proxies will vote the
shares registered directly in your name in the manner that you specified. IF YOU
GIVE NO INSTRUCTIONS ON THE PROXY CARD, THE SHARES COVERED BY THE PROXY CARD
WILL BE VOTED FOR THE ELECTION OF THE NOMINEES AS DIRECTORS AND FOR THE OTHER
MATTERS LISTED IN THE ACCOMPANYING NOTICE OF ANNUAL MEETING OF STOCKHOLDERS.
If you are a "stockholder of record" (i.e., you hold shares directly in
your name), you may revoke a proxy at any time before it is exercised by
notifying the proxy tabulator in writing, by submitting a properly executed,
later-dated proxy or by voting in person at the Meeting. Any stockholder of
record attending the Meeting may vote in person whether or not he or she has
previously voted his or her shares. If your shares are held for your account by
a broker, bank or other institution or nominee ("Broker Shares"), you may vote
such shares at the Meeting only if you obtain proper written authority from your
institution or nominee and present it at the Meeting.
Stockholders of record may vote either via the Internet or by telephone.
Specific instructions to be followed by registered stockholders interested in
voting via the Internet or the telephone are shown on the enclosed proxy card.
The Internet and telephone voting procedures are designed to authenticate the
stockholder's identity and to allow stockholders to vote their shares and
confirm that their instructions have been properly recorded.
If your shares are registered in the name of a bank or brokerage firm, you
may be eligible to vote your shares electronically via the Internet or by
telephone. A large number of banks and brokerage firms participate in the ADP
Investor Communications Services online program. This program provides eligible
stockholders who receive a copy of the annual report and proxy statement, either
by paper or electronically, the opportunity to vote via the Internet or by
telephone. If the entity holding your shares participates in ADP's program, your
voting form will provide instructions. If your voting form does not reference
Internet or telephone voting information, please complete and return the paper
proxy card in the pre-addressed, postage-paid envelope provided.
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PURPOSE OF MEETING
At the Meeting, you will be asked to vote on the following proposals:
1. To elect four directors of the Company who will serve for three years,
or until their successors are elected and qualified;
2. To ratify the selection of Arthur Andersen LLP to serve as independent
public accountants for the Company for the year ending December 31, 2001;
and
3. To transact such other business as may properly come before the meeting.
VOTING SECURITIES
You may vote your shares at the Meeting only if you were a stockholder of
record at the close of business on March 21, 2001 (the "Record Date"). On March
21, 2001, there were 85,877,875 shares of the Company's common stock
outstanding. Each share of the common stock is entitled to one vote.
If a majority of the shares entitled to vote are present at the Meeting,
then a quorum has been reached and the Meeting can commence. A share is present
for quorum purposes if it is represented in person or by proxy for any purpose
at the Meeting. Abstentions and Broker Shares that are voted on any matter at
the Meeting are included in determining the presence of a quorum for the
transaction of business at the commencement of the Meeting and on those matters
for which the broker, nominee or fiduciary has authority to vote. If a quorum is
not present at the Meeting, or if a quorum is present but are not enough votes
to approve any of the proposals, the persons named as proxies may propose one or
more adjournments of the Meeting to permit further solicitation of proxies. Any
such adjournment will require the affirmative vote of a majority of the shares
represented at the Meeting in person or by proxy. The persons named as proxies
will vote those proxies for such adjournment, unless marked to be voted against
any proposal for which an adjournment is sought, to permit further solicitation
of proxies. A stockholder vote may be taken on one or more of the proposals in
this Proxy Statement prior to any such adjournment if there are sufficient votes
for approval on such proposal(s).
The Company's 401(k) plan owns a total of 279,739 shares, representing less
than 1% of the Company's total outstanding shares. Participants in the 401(k)
Plan may direct the voting of these shares; however, if a participant does not
direct the voting, the co-trustees of the 401(k) Plan, who are executive
officers of the Company, will vote the shares on behalf of that participant.
Each of the four nominees for election as directors who receives a majority
of the affirmative votes cast at the Meeting in person or by proxy in the
election of directors will be elected as directors. Stockholders may not
cumulate their votes. Votes that are withheld, abstentions and Broker Shares
that are not voted in the election of directors or the ratification of the
accountants will not be included in determining the number of votes cast, and
will have no effect on these matters.
INFORMATION REGARDING THIS SOLICITATION
The Company will bear the expense of the solicitation of proxies for the
Meeting, including the cost of preparing, printing and mailing this Proxy
Statement, the accompanying Notice of Annual Meeting of Stockholders, and proxy
card. The
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Company has requested that brokers, nominees, fiduciaries and other persons
holding shares in their names, or in the name of their nominees, which are
beneficially owned by others, forward the proxy materials to, and obtain proxies
from, such beneficial owners. The Company will reimburse such persons for their
reasonable expenses in so doing.
In addition to the solicitation of proxies by the use of the mails, proxies
may be solicited in person and by telephone, facsimile transmission or telegram
by directors, officers or regular employees of the Company, (without special
compensation therefor). The Company has also retained Georgeson Shareholder
Communications, Inc. to assist in the solicitation of proxies for a fee of
approximately $7,000, plus out-of-pocket expenses. Any proxy given pursuant to
this solicitation may be revoked by notice from the person giving the proxy at
any time before it is exercised. Any such notice of revocation should be
provided in writing signed by the shareholder in the same manner as the proxy
being revoked and delivered to the Company's proxy tabulator, American Stock
Transfer & Trust Company.
SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL OWNERS
The following table sets forth, as of March 21, 2001, each current
director, each nominee for director, the Chief Executive Officer, the Company's
executive officers, and the executive officers and directors as a group. Unless
otherwise indicated, the Company believes that each beneficial owner set forth
in the table has sole voting and investment power. The Company is not aware of
any shareholder that beneficially owns more than 5% of the Company's outstanding
shares.
NUMBER OF
NAME OF SHARES OWNED PERCENTAGE
BENEFICIAL OWNER BENEFICIALLY OF CLASS(1)
---------------- ------------ -----------
DIRECTORS:
William L. Walton....................................... 1,196,158(2,4,8) 1.4%
Brooks H. Browne........................................ 58,412(3) *
John D. Firestone....................................... 45,203(3,8) *
Anthony T. Garcia....................................... 73,112(3) *
Lawrence I. Hebert...................................... 31,800(3) *
John I. Leahy........................................... 31,818(3) *
Robert E. Long.......................................... 24,796(3) *
Warren K. Montouri...................................... 241,182(3) *
Guy T. Steuart II....................................... 333,180(3,5) *
T. Murray Toomey, Esq................................... 47,666(3,6) *
Laura W. van Roijen..................................... 47,122(3,8) *
George C. Williams, Jr.................................. 432,583(2) *
EXECUTIVE OFFICERS:
Scott S. Binder......................................... 189,564(2,8) *
Samuel B. Guren......................................... 102,500(2) *
Philip A. McNeill....................................... 341,683(2) *
Penni F. Roll........................................... 111,461(2) *
John M. Scheurer........................................ 550,857(2) *
Joan M. Sweeney......................................... 584,458(2) *
Thomas H. Westbrook..................................... 237,410(2,8) *
G. Cabell Williams III.................................. 862,619(2,4) 1.0%
All directors and executive officers as a group (20 in
number)............................................... 5,176,553(7) 5.9%
---------------
* Less than 1%
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(1) Based on a total of 85,877,875 shares of the Company's common stock issued
and outstanding on March 21, 2001 and shares of the Company's common stock
issuable upon the exercise of immediately exercisable stock options held by
each individual executive officer and non-officer director.
(2) Share ownership for the following directors and executive officers
includes:
OPTIONS ALLOCATED
EXERCISABLE TO 401(K)
OWNED WITHIN 60 DAYS PLAN
DIRECTLY OF MARCH 21, 2001 ACCOUNT
-------- ----------------- ---------
William L. Walton.......................... 413,106 503,313 1,441
Scott S. Binder............................ 52,148 136,087 1,329
Samuel B. Guren............................ 2,500 100,000 0
Philip A. McNeill.......................... 191,706 139,915 10,062
Penni F. Roll.............................. 53,269 53,916 4,276
John M. Scheurer........................... 268,568 257,524 24,765
Joan M. Sweeney............................ 272,075 265,523 10,860
Thomas H. Westbrook........................ 190,041 47,369 0
George C. Williams, Jr. ................... 286,187 146,396 0
G. Cabell Williams, III.................... 399,335 183,545 76,864
(3) Beneficial ownership includes exercisable options to purchase 15,000
shares, except Mr. Toomey who has 11,000 shares.
(4) Includes 279,739 shares held by the 401(k) Plan, of which Messrs. Walton
and Williams III are co-trustees. Messrs. Walton and Williams III disclaim
beneficial ownership of such shares.
(5) Includes 276,691 shares held by a corporation for which Mr. Steuart II
serves as an executive officer.
(6) Shares are held by a trust for the benefit of Mr. Toomey and his wife.
(7) Includes a total of 1,979,588 shares underlying stock options exercisable
within 60 days of March 21, 2001, which are assumed to be outstanding for
the purpose of calculating the group's percentage ownership, and 279,739
shares held by the 401(k) Plan.
(8) Includes certain shares held in IRA or Keogh accounts: Walton -- 9,799
shares; Firestone -- 1,742 shares; van Roijen -- 3,820 shares;
Binder -- 273 shares; Westbrook -- 15,865 shares.
ELECTION OF DIRECTORS
Pursuant to the Company's bylaws, the number of directors is set at twelve
unless otherwise designated by the Board of Directors. Directors are elected for
a staggered term of three years each, with a term of office of only one of the
three classes of directors expiring each year. Directors serve until their
successors are elected and qualified.
The Class III Directors, Messrs. Walton, Williams, Browne and Long, have
been nominated for election for a three-year term expiring in 2004. No person
being nominated as a director is being proposed for election pursuant to any
agreement or understanding between any such person and the Company.
A stockholder can vote for or withhold his or her vote from any or all of
the nominees. IN THE ABSENCE OF INSTRUCTIONS TO THE CONTRARY, IT IS THE
INTENTION OF THE PERSONS NAMED AS PROXIES TO VOTE SUCH PROXY FOR THE ELECTION OF
ALL THE NOMINEES NAMED BELOW. IF ANY OF THE NOMINEES SHOULD DECLINE OR BE UNABLE
TO
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SERVE AS A DIRECTOR, IT IS INTENDED THAT THE PROXY WILL BE VOTED FOR THE
ELECTION OF SUCH PERSON OR PERSONS AS ARE NOMINATED AS REPLACEMENTS. The Board
of Directors has no reason to believe that any of the persons named will be
unable or unwilling to serve.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE ELECTION OF THE
NOMINEES NAMED IN THIS PROXY STATEMENT.
INFORMATION ABOUT THE NOMINEES
Certain information, as of March 21, 2001, with respect to each of the four
nominees for election at the Meeting, as well as each of the current directors,
are set forth below, including their names, ages, a brief description of their
recent business experience, including present occupations and employment,
certain directorships that each nominee holds, and the year in which each
nominee became a director of the Company or any of its predecessor companies
prior to the 1997 merger of the five affiliated companies.
All the directors and nominees currently serve as directors of the Company's
subsidiaries, including Allied Investment Corporation. The Board of Directors of
each subsidiary will be composed of some or all of the Company's directors. The
business address of each nominee and director listed below is 1919 Pennsylvania
Avenue, NW, Washington, DC 20006.
NOMINEES FOR CLASS III DIRECTORS - TERM EXPIRING 2004
WILLIAM L. WALTON*
Age 51. Chairman, Chief Executive Officer and President of the Company since
1997. Mr. Walton has served on the Allied Capital Board of Directors since 1986,
and was named Chairman and CEO in February 1997. Mr. Walton has an extensive
background in general management, marketing, strategic planning, mergers and
acquisitions and financial analysis. Mr. Walton previously served as Managing
Director of New York-based Butler Capital Corporation (1987-1991) and was the
personal venture capital advisor for William S. Paley, founder and Chairman of
CBS. In addition, he was a Senior Vice President in Lehman Brothers Kuhn Loeb's
Investment Banking Group. Mr. Walton also founded and managed two start-up
businesses in the emerging education industry (1992-1996). Mr. Walton is a
director of Nobel Learning Communities, Inc. and Riggs National Corporation. He
received both a B.A. and a M.B.A. from Indiana University.
GEORGE C. WILLIAMS, JR.*
Age 74. Chairman Emeritus of the Company; Officer of the predecessor companies
from the later of 1959 or the inception of the relevant entity; President or
Chairman and Chief Executive Officer of the predecessor companies from the later
of 1964 or each entity's inception until 1991. He has served as a director of
the Company and its predecessor companies since the later of 1964 or each
entity's inception. Mr. Williams is the father of G. Cabell Williams III, an
executive officer of the Company.
BROOKS H. BROWNE
Age 51. President of Environmental Enterprises Assistance Fund since 1993;
President, Executive Vice President or Senior Vice President of Allied Capital
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Advisers, Inc. from 1984 to 1993; Director of SEAF, Corporation Financiera
Ambiental (Panama), Empresas Ambientales de Centro America (Costa Rica),
Renewable Energy and Energy Efficiency Fund, Terra Capital Investors Limited,
the Solar Development Foundation and Yayasan Bina Usaha Lingkungan (Indonesia)
(environmental non-profit or investment funds). He has served as a director of
the Company or one of its predecessor companies since 1990.
ROBERT E. LONG
Age 69. CEO and Director of Goodwyn, Long & Black Investment Management, Inc.;
Chairman and Chief Executive Officer of Emerald City Radio Partners, LLC since
1997; President of Business News Network, Inc. from 1995 to 1998; Chairman and
Chief Executive Officer of Southern Starr Broadcasting Group, Inc. from 1991 to
1995; Director and President of Potomac Asset Management, Inc. from 1983 to
1991; Director of AmBase Corporation, CSC Scientific, Inc., and Advanced
Solutions International, Inc. He has served as a director of the Company or one
of its predecessor companies since 1972.
CLASS I DIRECTORS - TERM EXPIRING 2002
JOHN D. FIRESTONE
Age 57. Partner of Secor Group since 1978; Director of Security Storage Company
of Washington, DC, Bryn Mawr Bank Corporation and the National Organization on
Disability; Senior Advisor to GeoPortals.com, and a Trustee of The Washington
Ballet. He has served as a director of the Company or one of its predecessors
since 1993.
ANTHONY T. GARCIA
Age 44. Private investor since 2000. General Manager of Breen Capital Group
(investor in tax liens) from 1997 to 2000; Senior Vice President of Lehman
Brothers Inc. from 1985 to 1996. He has served as a director of the Company or
one of its predecessors since 1991.
LAWRENCE I. HEBERT
Age 54. Director and President and Chief Executive Officer of Riggs Bank N.A. (a
subsidiary of Riggs National Corporation) since February 2001; Director of Riggs
National Corporation since 1988. He also serves as director of Riggs Investment
Management Corporation and Riggs Bank Europe Limited (both indirect subsidiaries
of Riggs National Corporation). Mr. Hebert is the President and a director of
Perpetual Corporation (owner of Allbritton Communications Company and
ALLSNEWSCO, Inc.). Mr. Hebert is a director of ALLSNEWSCO, Inc. (news
programming service), the President of Westfield News Advertiser, Inc. (owner of
a television station and newspapers), Trustee of The Allbritton Foundation and
Vice Chairman of Allbritton Communications Company. Mr. Hebert previously served
as Vice Chairman (1983 to 1998), President (1984 to 1998) and Chairman and Chief
Executive Officer (1998 to 2001) of Allbritton Communications Company. He has
served as director of the Company or one of its predecessor since 1989.
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LAURA W. VAN ROIJEN
Age 48. Private real estate investor since 1992. Chairman of CWV & Associates
(RTC qualified contracting firm) from 1991 to 1994; Director and Treasurer of
Black Possum Inc. (retail concern) from 1994 to 1996; President of Volta Place,
Inc. (real estate advisory firm) from 1991 to 1994; Vice President (from 1986 to
1991) and Market Director (from 1989 to 1991) of Citicorp Real Estate, Inc. She
has served as a director of the Company or one of its predecessors since 1992.
CLASS II DIRECTORS - TERM EXPIRING 2003
JOHN I. LEAHY
Age 70. President of Management and Marketing Associates (a management
consulting firm) since 1986; Mr. Leahy was the President and Group Executive
Officer, Western Hemisphere of Black & Decker Corporation from 1982 to 1985;
Director of Kar Kraft Systems, Inc., Cavanaugh Capital, Inc., Acorn Products,
Inc., The Wills Group, Thulman-Eastern Company and Gallagher Fluid Seals, Inc.
He has served as a director of the Company or one of its predecessors since
1994.
WARREN K. MONTOURI
Age 71. Partner, Montouri & Roberson, Investment Real Estate since 1980;
Director of C&S/Sovran Bank from 1970 to 1990; Director of Sovran Financial
Corporation from 1989 to 1990; Director of NationsBank, N.A. from 1990 to 1996;
Director of BB&T Bank (formerly Franklin National Bank) from 1996 to 2000;
Trustee of Suburban Hospital from 1991 to 1994; Trustee of Audubon Naturalist
Society from 1979 to 1985. He has served as a director of the Company or one of
its predecessors since 1986.
GUY T. STEUART II
Age 69. Director and President of Steuart Investment Company (manages, operates,
and leases real and personal property and holds stock in operating subsidiaries
engaged in various businesses) since 1960; Trustee Emeritus of Washington and
Lee University. He has served as a director of the Company or one of its
predecessors since 1984.
T. MURRAY TOOMEY, ESQ.
Age 77. Attorney at law since 1949; Director of The National Capital Bank of
Washington, Federal Center Plaza Corporation, and a Trustee of The Catholic
University of America. He has served as a director of the Company or one of its
predecessors since 1959.
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* Messrs. Walton and Williams are interested persons of the Company, as defined
in the Investment Company Act of 1940, as amended, due to their positions as
officers of the Company.
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MEETINGS OF THE BOARD OF DIRECTORS AND COMMITTEES
The Board of Directors of the Company has established an Executive
Committee, an Audit Committee, a Compensation Committee and a Nominating
Committee. During 2000, the Board of Directors of the Company held seven board
meetings and 46 committee meetings. All directors attended at least 75% of the
aggregate number of meetings of the respective boards and of the respective
committees on which they served.
The Executive Committee has and may exercise those rights, powers and
authority that the Board of Directors from time to time grants to it, except
where action by the full Board is required by statute, an order of the
Securities and Exchange Commission (the "Commission") or the Company's charter
or bylaws. The Executive Committee also reviews and approves all investments of
$10 million or more. The Executive Committee consists of Messrs. Walton, Leahy,
Long, Montouri, and Williams. The Executive Committee met 34 times during 2000.
The Audit Committee operates pursuant to a charter approved by the Board of
Directors, a copy of which is attached as Exhibit A. The charter sets forth the
responsibilities of the Audit Committee. Generally, the Audit Committee
recommends the selection of independent public accountants for the Company,
reviews with such independent public accountants the planning, scope and results
of their audit of the Company's financial statements and the fees for services
performed, reviews with the independent public accountants the adequacy of
internal control systems, reviews the Company's annual financial statements and
receives the Company's audit reports and financial statements. The Audit
Committee consists of Messrs. Browne, Leahy and Steuart, all of whom are
considered independent under the rules promulgated by the Nasdaq Stock Market.
The Audit Committee met six times during 2000.
The Compensation Committee determines the compensation for the Company's
executive officers and the amount of salary and bonus to be included in the
compensation package for each of the Company's officers and employees. In
addition, the Compensation Committee approves stock option grants for the
Company's officers under the Company's Stock Option Plan. The Compensation
Committee consists of Messrs. Browne, Long, Firestone, and Garcia. The
Compensation Committee met five times during 2000.
The Nominating Committee recommends candidates for election as directors to
the Board of Directors. The Nominating Committee consists of Messrs. Walton,
Hebert, Toomey and Steuart, and Ms. van Roijen. The Nominating Committee met
once during 2000.
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COMPENSATION OF EXECUTIVE OFFICERS AND DIRECTORS
The following table sets forth compensation that the Company paid during
the year ended December 31, 2000 to all the directors and the three highest paid
executive officers of the Company (collectively, the "Compensated Persons") in
each capacity in which each Compensated Person served. Certain of the
Compensated Persons served as both officers and directors.
COMPENSATION TABLE
AGGREGATE SECURITIES DIRECTORS
COMPENSATION UNDERLYING PENSION OR FEES PAID
FROM THE OPTIONS/ RETIREMENT BY THE
NAME AND POSITION COMPANY(1) SARs(4) BENEFITS COMPANY(5)
----------------- ------------ ---------- ---------- ------------
William L. Walton, Chairman and CEO(2).... $2,582,916 755,500 -- $ 0
Joan M. Sweeney, Managing Director(2)..... 1,438,699 285,000 -- 0
John M. Scheurer, Managing Director(2).... 1,002,463 125,000 -- 0
Brooks H. Browne, Director................ 14,000 5,000 -- 14,000
John D. Firestone, Director............... 19,500 5,000 -- 19,500
Anthony T. Garcia, Director............... 12,000 5,000 -- 12,000
Lawrence I. Hebert, Director.............. 7,000 5,000 -- 7,000
John I. Leahy, Director................... 23,000 5,000 -- 23,000
Robert E. Long, Director.................. 22,000 5,000 -- 22,000
Warren K. Montouri, Director.............. 16,000 5,000 -- 16,000
Guy T. Steuart II, Director............... 14,000 5,000 -- 14,000
T. Murray Toomey, Director................ 8,000 5,000 -- 8,000
Laura W. van Roijen, Director............. 8,000 5,000 -- 8,000
George C. Williams, Jr., Director and
Chairman Emeritus(3).................... 735,352 -- -- 17,000
---------------
(1) There were no perquisites paid by the Company in excess of the lesser of
$50,000 or 10% of the Compensated Person's total salary and bonus for the
year.
(2) The following table provides detail as to aggregate compensation paid during
2000 as to the three highest paid executive officers of the Company:
VESTED
FORMULA CUT-OFF OTHER
SALARY BONUS AWARD AWARD BENEFITS
-------- -------- ---------- -------- --------
Mr. Walton.......................... $430,979 $650,000 $1,278,740 $170,156 $53,041
Ms. Sweeney......................... 271,612 350,000 749,246 36,603 31,239
Mr. Scheurer........................ 262,727 335,000 347,590 29,248 27,898
Included for each executive officer in "Other Benefits" is a contribution to
the 401(k) Plan, life insurance premiums, and a contribution to the Deferred
Compensation Plan. See also "Employment Agreements" and "Formula Award and
Cut-Off Award."
(3) In addition to director's fees, Mr. Williams received $144,000 in consulting
fees, $52,373 in Cut-Off Award and $521,979 in vested Formula Award.
(4) See "Stock Option Awards" for terms of options granted in 2000. The Company
does not maintain a restricted stock plan or a long-term incentive plan.
(5) Consists only of directors' fees paid by the Company during 2000. Such fees
are also included in the column titled "Aggregate Compensation from the
Company."
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COMPENSATION OF DIRECTORS
During 2000, each director received $1,000 for each Board of Directors or
committee meeting attended, except with respect to the members of the Executive
Committee, who each received an annual retainer of $10,000 in lieu of fees paid
for each Executive Committee meeting attended.
Non-officer directors are eligible for stock option awards under the
Company's Stock Option Plan pursuant to an exemptive order from the Commission.
The terms of the order, which was granted in September 1999, provided for a
one-time grant of 10,000 options to each non-officer director on the date that
the order was issued, or on the date that any new director is elected to the
Board. Thereafter, each non-officer director receives 5,000 options each year on
the date of the annual meeting of stockholders at the fair market value on the
date of grant. See "Stock Option Plan."
STOCK OPTION AWARDS
The following table sets forth the details relating to option grants in
2000 to Compensated Persons under the Company's Stock Option Plan, and the
potential realizable value of each grant, as prescribed to be calculated by the
Commission. See "Stock Option Plan."
OPTIONS GRANTS DURING 2000
POTENTIAL REALIZABLE
VALUE AT ASSUMED
NUMBER OF ANNUAL RATES
SECURITIES PERCENT OF OF STOCK APPRECIATION
UNDERLYING TOTAL OPTIONS EXERCISE OVER 10-YEAR TERM(3)
OPTIONS GRANTED PRICE PER EXPIRATION ------------------------
NAME GRANTED(1) IN 2000(2) SHARE DATE 5% 10%
---- ---------- ------------- --------- ---------- ---------- -----------
William L. Walton......... 755,500 18.15% $16.81 05/26/10 $7,988,359 $20,244,070
Joan M. Sweeney........... 285,000 6.85% 16.81 05/26/10 3,013,477 7,636,744
John M. Scheurer.......... 125,000 3.00% 16.81 05/26/10 1,321,701 3,349,449
Brooks H. Browne.......... 5,000 0.12% 17.50 05/09/10 55,028 139,452
John D. Firestone......... 5,000 0.12% 17.50 05/09/10 55,028 139,452
Anthony T. Garcia......... 5,000 0.12% 17.50 05/09/10 55,028 139,452
Lawrence I. Hebert........ 5,000 0.12% 17.50 05/09/10 55,028 139,452
John I. Leahy............. 5,000 0.12% 17.50 05/09/10 55,028 139,452
Robert E. Long............ 5,000 0.12% 17.50 05/09/10 55,028 139,452
Warren K. Montouri........ 5,000 0.12% 17.50 05/09/10 55,028 139,452
Guy T. Steuart II......... 5,000 0.12% 17.50 05/09/10 55,028 139,452
T. Murray Toomey.......... 5,000 0.12% 17.50 05/09/10 55,028 139,452
Laura W. van Roijen....... 5,000 0.12% 17.50 05/09/10 55,028 139,452
---------------
(1) Options granted to officers in 2000 generally vest in three equal
installments beginning on the first anniversary date of the grant, with full
vesting occurring on the third anniversary of the grant date or change of
control of the Company. Options granted to non-officer directors vest
immediately.
(2) In 2000, the Company granted options to purchase a total of 4,162,112
shares.
(3) Potential realizable value is calculated on 2000 options granted, and is net
of the option exercise price but before any tax liabilities that may be
incurred. These amounts represent certain assumed rates of appreciation, as
mandated by the Commission. Actual gains, if any, or stock option exercises
are dependent on the future performance of the shares, overall market
conditions, and the continued employment by the Company of the option
holder. The potential realizable value will not necessarily be realized.
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The following table sets forth the details of option exercises by
Compensated Persons during 2000 and the values of those unexercised options at
December 31, 2000.
OPTION EXERCISES AND YEAR-END OPTION VALUES
NUMBER OF SECURITIES VALUE OF UNEXERCISED IN-
UNDERLYING UNEXERCISED THE-MONEY OPTIONS
SHARES OPTIONS AS OF 12/31/00 AS OF 12/31/00(2)
ACQUIRED ON VALUE --------------------------- ---------------------------
NAME EXERCISE REALIZED(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ----------- ----------- ------------- ----------- -------------
William L. Walton......... 0 0 393,448 1,196,961 $195,582 $3,412,491
Joan M. Sweeney........... 0 0 212,310 522,476 161,162 1,397,480
John M. Scheurer.......... 0 0 204,669 348,270 140,641 706,522
George C. Williams, Jr.... 0 0 146,396 4,999 15,003 14,997
Brooks H. Browne.......... 0 0 15,000 0 16,875 0
John D. Firestone......... 0 0 15,000 0 16,875 0
Anthony D. Garcia......... 0 0 15,000 0 16,875 0
Lawrence I. Hebert........ 0 0 15,000 0 16,875 0
John I. Leahy............. 0 0 15,000 0 16,875 0
Robert E. Long............ 0 0 15,000 0 16,875 0
Warren K. Montouri........ 0 0 15,000 0 16,875 0
Guy T. Steuart II......... 0 0 15,000 0 16,875 0
T. Murray Toomey.......... 0 0 15,000 0 16,875 0
Laura W. van Roijen....... 0 0 15,000 0 16,875 0
---------------
(1) Value realized is calculated as the closing market price on the date of
exercise, net of option exercise price, but before any tax liabilities or
transaction costs. This is the deemed market value, which may actually be
realized only if the shares are sold at that price.
(2) Value of unexercised options is calculated as the closing market price on
December 31, 2000 ($20.88), net of the option exercise price, but before any
tax liabilities or transaction costs. "In-the-Money Options" are options
with an exercise price that is less than the market price as of December 31,
2000.
FORMULA AWARD AND CUT-OFF AWARD
Formula Award. The Formula Award was designed as an incentive compensation
program that would replace stock options of the predecessor companies that were
cancelled as a result of the Company's 1997 merger, and would balance share
ownership among key officers. The Company accrued the Formula Award in
approximately equal amounts of $6.4 million, over the three-year period on the
anniversary of the merger date (December 31) in 1998, 1999 and 2000. The Formula
Award expense for 2000 totaled $5.6 million. The terms of the Formula Award
required that the award be contributed to the Company's Deferred Compensation
Plan, and used to purchase shares of the Company in the open market. See
"Deferred Compensation Plan."
Cut-Off Award. The Cut-Off Award was designed to cap the appreciated value
in unvested options at the merger announcement date in order to set the
foundation to balance option awards upon the merger on December 31, 1997. The
Cut-Off Award is payable for each canceled option as the canceled options would
have vested and vests automatically in the event of a change of control. The
Cut-Off Award is payable if the award recipient is employed by the Company on
the future vesting date. The Cut-Off Award expense for 2000 totaled $0.5
million.
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STOCK OPTION PLAN
The Company's stock option plan (the "Stock Option Plan") is intended to
encourage stock ownership in the Company by officers and directors, thus giving
them a proprietary interest in the Company's performance. The Stock Option Plan
was approved by stockholders at the Special Meeting of Stockholders on November
26, 1997. On May 9, 2000, the Company's stockholders amended the Stock Option
Plan to increase the authorized shares under the plan to 12,350,000 shares, as
well as make certain other administrative changes.
The Committee's principal objective in awarding stock options to the
eligible officers of the Company is to align each optionee's interests with the
success of the Company and the financial interests of its stockholders by
linking a portion of such optionee's compensation with the performance of the
Company's stock and the value delivered to stockholders.
Stock options are granted under the Stock Option Plan at a price not less
than the prevailing market value and will have value only if the Company's stock
price increases. The Committee determines the amount and features of the stock
options, if any, to be awarded to optionees. The Committee evaluates a number of
criteria, including the past service of each such optionee to the Company, the
present and potential contributions of such optionee to the success of the
Company and such other factors as the Committee shall deem relevant in
connection with accomplishing the purposes of the Stock Option Plan, including
the recipient's current stock holdings, years of service, position with the
Company and other factors. The Committee does not apply a formula assigning
specific weights to any of these factors when making its determination. The
Committee awards stock options on a subjective basis and such awards depend in
each case on the performance of the officer under consideration.
On September 8, 1999, the Company received approval from the Commission to
grant options under the Stock Option Plan to non-officer directors. On that
date, each incumbent non-officer director received options to purchase 10,000
shares, and pursuant to the Commission order, each will receive options to
purchase 5,000 shares each year thereafter on the date of the annual meeting of
stockholders. New directors will receive options to purchase 10,000 shares upon
election to the board, and options to purchase 5,000 shares each year thereafter
on the date of the annual meeting.
The Stock Option Plan is designed to satisfy the conditions of Section 422
of the Code so that options granted under the Stock Option Plan may qualify as
"incentive stock options." To qualify as "incentive stock options," options may
not become exercisable for the first time in any year if the number of incentive
options first exercisable in that year multiplied by the exercise price exceeds
$100,000.
401(k) PLAN
The Company maintains a 401(k) plan (the "401(k) Plan"). All employees who
are at least 21 years of age have the opportunity to contribute pre-tax salary
deferrals into the 401(k) Plan up to $10,500 annually, and to direct the
investment of these contributions. The 401(k) Plan allows eligible participants
to invest in shares of the Company's common stock among other investment
options. In addition, the Company expects to contribute to each eligible
participant (i.e. employees with one year of service), 5% of each participant's
total cash compensation for the year, up to
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$170,000, to each participant's plan account on the participant's behalf, which
fully vests at the time of the contribution. The contribution with respect to
compensation in excess of $170,000 is made to the Deferred Compensation Plan. On
March 21, 2001, the 401(k) Plan held less than 1% of the outstanding shares of
the Company. See "Voting Securities."
DEFERRED COMPENSATION PLAN
The Company maintains a deferred compensation plan (the "Deferred
Compensation Plan"). The Deferred Compensation Plan is a funded plan that
provides for the deferral of compensation by employees and consultants of the
Company. Any employee or consultant of the Company is eligible to participate in
the plan at such time and for such period as designated by the Board of
Directors. The Deferred Compensation Plan is administered through a trust, and
the Company funds this plan through cash contributions. The Deferred
Compensation Plan held the unvested shares of the Company's common stock
purchased in connection with the Formula Award until it was distributed. See
"Formula Award" above.
EMPLOYMENT AGREEMENTS
During the first half of 2000, the Company engaged independent compensation
consulting firms to assist in comparing the compensation programs of Allied
Capital with those of companies that compete with Allied Capital for talent. The
consultants specifically studied the private equity industry, the commercial
finance industry, and other market participants. The market data indicated that
the compensation packages for the Company's most senior executives needed to be
more competitive, in order for the Company to ensure the retention of its key
executives.
The Company's status as a BDC specifically limits the types of compensation
that may be paid to employees in the form of cash and at-the-market stock
options. The BDC rules prohibit, among other things, the use of restricted stock
as compensation. In addition, while the Company provides at-the-market stock
options as a significant portion of compensation, unexercised options do not
accrue dividends, and as a result, participants in the Company's stock option
plan are unable to receive a significant portion of the total return attributed
to a share of the Company's common stock on unexercised options. During 2000,
approximately 55% of the total return generated from an investment in the
Company's common stock was derived from dividends paid during the year.
As a result, the Company has entered into employment agreements with eight
senior executives of the Company, including William L. Walton, the Company's
Chairman and CEO, Joan M. Sweeney, Managing Director and Chief Operating
Officer, and John M. Scheurer, Managing Director. Each of the agreements
provides for a three-year term, with annual renewals thereafter, and specifies
each executive's compensation during the term of the agreement, in accordance
with the achievement of certain performance standards.
The annual base salary on the effective date of the employment agreements
of Mr. Walton, Ms. Sweeney, and Mr. Scheurer was $405,000, $256,500, and
$256,500, respectively. The Board of Directors has the right to increase the
base salary during the term of the employment agreement. In addition, each
employment agreement states that the Board of Directors may provide, at their
sole discretion, an annual cash bonus. This bonus is to be determined with
reference to each executive's
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performance in accordance with performance criteria to be determined by the
Board in its sole discretion. Under each agreement, each executive also is
entitled to participate in the Company's stock option plan, and to receive all
other awards and benefits previously granted to each executive including life
insurance.
In addition, each employment agreement provides for a long-term cash
retention award for the performance period from 2001 through 2003. The long-term
cash retention award will vest and be payable in six equal installments on June
30th and December 31st of each year from 2001 through 2003. Mr. Walton will be
eligible for a long-term cash retention award of $3,375,000, or $1,125,000 per
year, over the performance period; Ms. Sweeney will be eligible for $2,550,000,
or $850,000 per year; Mr. Scheurer will be eligible for $2,115,000, or $705,000
per year.
Employment will terminate if the term of the agreement expires without
written agreement of both parties. The executive has the right to voluntarily
terminate employment at any time with 30 days' notice, and in such case, the
employee will not receive any severance pay. Among other things, the employment
agreements prohibit the solicitation of employees from the Company in the event
of an executive's departure for a period of two years.
If employment is terminated with cause, the employee will not receive any
severance pay. If employment is terminated without cause during the term of the
agreement, the executive shall be entitled to severance pay for a period not to
exceed 36 months for Mr. Walton; 30 months for Ms. Sweeney; and 24 months for
Mr. Scheurer. Severance pay shall include the continuation of the employee's
base salary, and the greater of (a) the average of the annual bonuses paid
during the preceding three years, or (b) the amount of the last annual bonus
paid to the employee. In addition, the executive shall be entitled to receive
any payments under the long-term cash retention award that would have vested and
been payable during the severance period. However, stock options would cease to
vest during the severance period.
If, within 12 months after a change of control (as defined in the
employment agreements) termination of employment occurs either by the executive
officer or the Company, the executive officer shall not be entitled to severance
pay, but will instead be entitled to lump sum compensation as well as certain
other benefits. For Mr. Walton, this lump sum is equal to three years of base
salary and bonus (as calculated for severance pay), plus an amount equal to
$5,565,000. For Ms. Sweeney, this lump sum is equal to two and a half years of
base salary and bonus, plus an amount equal to $2,600,000. For Mr. Scheurer,
this lump sum is equal to two years of base salary and bonus, plus an amount
equal to $2,350,000. Under the terms of the agreement, the Company would also
provide compensation to offset any applicable excise tax penalties imposed on
the executive under section 4999 of the IRC code.
CERTAIN TRANSACTIONS
Indebtedness of Management. The following table sets forth certain
information regarding indebtedness to the Company in excess of $60,000 of any
person serving as a director or executive officer of the Company and of any
nominee for election as a director at any time since January 1, 2000. All of
such indebtedness results from loans
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made by the Company to enable the exercise of stock options. The interest rates
charged generally reflect the applicable federal rate on the date of the loan.
HIGHEST AMOUNT AMOUNT
OUTSTANDING RANGE OF OUTSTANDING AT
NAME AND POSITION WITH COMPANY DURING 2000 INTEREST RATES MARCH 21, 2001
------------------------------ -------------- -------------- --------------
William L. Walton, Chairman and CEO....... $2,697,250 5.83% - 6.24% $2,697,250
Scott S. Binder, Managing Director........ 581,577 5.85 - 5.89 581,577
Philip A. McNeill, Managing Director...... 2,186,365 5.79 - 6.24 2,186,365
Penni F. Roll, Principal and CFO.......... 741,500 5.83 - 6.24 741,500
John M. Scheurer, Managing Director....... 2,369,806 5.25 - 6.63 2,369,806
Joan M. Sweeney, Managing Director........ 1,832,719 5.79 - 6.63 1,832,719
Thomas H. Westbrook, Managing Director.... 2,035,004 4.90 - 6.24 2,405,138
G. Cabell Williams III, Managing
Director................................ 3,322,977 4.92 - 6.24 3,322,977
George C. Williams, Jr., Director,
Chairman Emeritus....................... 1,850,386 5.89 - 6.24 1,850,386
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Pursuant to Section 16(a) of the Securities Exchange Act of 1934, the
Company's directors and executive officers, and any persons holding 10% or more
of its common stock, are required to report their beneficial ownership and any
changes therein to the Commission, the Nasdaq Stock Market and the Company.
Specific due dates for those reports have been established, and the Company is
required to report herein any failure to file such reports by those due dates.
Based on the Company's review of Forms 3, 4 and 5 filed by such persons, the
Company believes that during 2000 all Section 16(a) filing requirements
applicable to such persons were met in a timely manner, except with respect to
certain shares acquired through dividend reinvestment by Ms. Laura van Roijen.
Ms. van Roijen acquired a total of 710 shares from 1998 through 2000 through
quarterly dividend reinvestment in her IRA account, but inadvertently failed to
report such additional holdings in a timely manner. The holding of these shares
was reported on a Form 5 in February 2001.
AUDIT COMMITTEE REPORT
The Audit Committee reviewed and discussed with management the Company's
audited financial statements as of and for the year ended December 31, 2000. The
Audit Committee also discussed with the independent accountants the matters
required to be discussed by Statement on Auditing Standards No. 61,
Communication with Audit Committees, as amended, by the Auditing Standards Board
of the American Institute of Certified Public Accountants.
The Audit Committee received and reviewed the written disclosures and the
letter from the independent accountants required by Independence Standard No. 1,
Independence Discussions with Audit Committees, as amended, by the Independence
Standards Board, and have discussed with the accountants the accountants'
independence. The Audit Committee considered whether the provisions of non-
financial audit services were compatible with Arthur Andersen LLP's independence
in performing financial audit services.
Based on the reviews and discussions referred to above, the Audit Committee
recommends to the Board of Directors that the financial statements referred to
above be included in the Company's Annual Report on Form 10-K for the year ended
December 31, 2000 for filing with the Commission. The Audit Committee also
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recommends the selection of Arthur Andersen LLP to serve as independent
accountants for the year ending December 31, 2001.
Audit Committee
Brooks H. Browne, Chairman
John I. Leahy, Member
Guy T. Steuart II, Member
RATIFICATION OF SELECTION OF INDEPENDENT PUBLIC ACCOUNTANTS
The disinterested members of the Board of Directors have selected Arthur
Andersen LLP as independent public accountants for the Company for the year
ending December 31, 2001. This selection is subject to ratification or rejection
by the stockholders of the Company. If the stockholders ratify the selection of
Arthur Andersen LLP as the Company's accountants, Arthur Andersen LLP also will
be the independent public accountants for all subsidiaries of the Company.
Arthur Andersen LLP has advised the Company that neither the firm nor any
present member or associate of it has any material financial interest, direct or
indirect, in the Company or its subsidiaries. It is not expected that a
representative of Arthur Andersen LLP will be present, or available to answer
questions, at the Meeting, but a representative would have an opportunity to
make a statement if he or she chose to attend.
Audit Fees. The aggregate fees billed for professional services rendered
by Arthur Andersen LLP for 2000 for the audit of the Company's annual financial
statements for 2000 and for the review of the financial statements included in
the Company's Forms 10-Q for 2000 were $219,800.
Financial Information Systems Design and Implementation Fees. The
aggregate fees billed for 2000 for professional services rendered by Arthur
Andersen LLP for financial information systems design and implementation,
including the implementation of the Company's new loan accounting software and
specialized reporting for the Company's loan portfolio, were $314,200.
All Other Fees. The aggregate fees billed for professional services
rendered by Arthur Andersen LLP for 2000 for services other than audit services,
which included tax planning and consultation, regulatory filings, other reports
and due diligence related to an acquisition, were $328,100.
UNLESS MARKED TO THE CONTRARY, THE SHARES REPRESENTED BY THE ENCLOSED PROXY
CARD WILL BE VOTED FOR RATIFICATION OF THE APPOINTMENT OF ARTHUR ANDERSEN LLP AS
THE INDEPENDENT PUBLIC ACCOUNTANTS OF THE COMPANY.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE TO RATIFY THE SELECTION OF
ARTHUR ANDERSEN LLP AS INDEPENDENT PUBLIC ACCOUNTANTS FOR THE COMPANY.
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OTHER BUSINESS
The Board of Directors knows of no other business to be presented for
action at the Meeting. If any matters do come before the Meeting on which action
can properly be taken, it is intended that the proxies shall vote in accordance
with the judgment of the person or persons exercising the authority conferred by
the proxy at the Meeting. The submission of a proposal does not guarantee its
inclusion in the Company's proxy statement or presentation at the Meeting unless
certain securities law requirements are met.
2002 ANNUAL MEETING OF STOCKHOLDERS
The Company expects that the 2002 Annual Meeting of Stockholders will be
held in May 2002, but the exact date, time, and location of such meeting have
yet to be determined. A stockholder who intends to present a proposal at that
annual meeting must submit the proposal in writing to the Company at its address
in Washington, DC, and the Company must receive the proposal no later than
November 28, 2001, in order for the proposal to be considered for inclusion in
the Company's proxy statement for that meeting. The submission of a proposal
does not guarantee its inclusion in the Company's proxy statement or
presentation at the meeting.
Rule 14a-4 of the Commission's proxy rules allows a company to use
discretionary voting authority to vote on matters coming before an annual
meeting of stockholders, if the company does not have notice of the matter at
least 45 days before the date corresponding to the date on which the company
first mailed its proxy materials for the prior year's annual meeting of
stockholders or the date specified by an overriding advance notice provision in
the company's bylaws. The Company's bylaws do not contain such an advance notice
provision. Accordingly, for the Company's 2002 Annual Meeting of Stockholders,
stockholders must submit written notice to the Secretary on or before February
12, 2002.
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EXHIBIT A
CHARTER OF THE AUDIT COMMITTEE
OF THE BOARD OF DIRECTORS
OF ALLIED CAPITAL CORPORATION
Adopted by the Board of Directors on May 30, 2000, as amended on February
1, 2001
The Board of Directors ("Board") of Allied Capital Corporation ("Company")
has determined that the Audit Committee of the Board shall assist the Board in
fulfilling certain of the Board's oversight responsibilities. The Board hereby
adopts this charter to establish the governing principles of the Audit Committee
("Committee").
I. PURPOSE
The primary function of the Committee is to serve as an independent and
objective party to assist the Board of Directors in fulfilling its oversight
responsibilities, except those that are specifically related to the
responsibilities of another committee of the Board, by overseeing and
monitoring:
1. The quality and objectivity of financial reports and other financial
information provided by the Company to any governmental body or the
public and the independent audit thereof.
2. The Company's system of internal controls regarding finance, accounting
and regulatory compliance.
3. The material aspects of the Company's accounting and financial reporting
process generally.
4. The independence and performance of the Company's independent
accountants.
The Committee will primarily fulfill these responsibilities by carrying out
the activities enumerated in Section III of this Charter.
II. SCOPE
While the Committee has the responsibilities and powers set forth in this
Charter, it is not the duty of the Committee to plan or conduct audits or to
determine that the Company's financial statements are complete and accurate or
are in accordance with generally accepted accounting principles ("GAAP"). The
responsibility to plan and conduct audits is that of the Company's independent
accountants. In fulfilling this responsibility, the independent accountants are
ultimately accountable to the Board of Directors of the Company and its
Committee. The Company's management has the responsibility to determine that the
Company's financial statements are complete and accurate and in accordance with
GAAP. It is also not the duty of the Committee to assure the Company's
compliance with laws and regulations or compliance with the Company's code of
ethics. The primary responsibility for these matters also rests with the
Company's management.
In order to fulfill its oversight responsibility to shareholders and the
investment community, the Committee must be capable of conducting free and open
discussions
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with management, independent accountants, employees and others regarding the
quality of the financial statements and the system of internal controls.
III. RESPONSIBILITIES AND DUTIES
General Responsibilities
To carry out its purposes, the responsibilities of the Committee shall be
as follows:
1. Maintain open communications with the independent accountants, executive
management and the Board of Directors.
2. Review the financial results presented in all reports filed with the
Securities and Exchange Commission.
3. Review all reports issued by regulatory examinations and consider the
results of those reviews to determine if any findings could have a
material effect on the Company's financial statements, operations,
compliance policies and programs.
4. Review and reassess the adequacy of the Committee's Charter at least
annually and recommend any changes to the full Board of Directors.
5. Take any other actions required of the Committee by law, applicable
regulations, or as requested by the Board of Directors.
Responsibilities Regarding the Engagement of the Independent Accountants
1. Annually recommend to the Board of Directors the selection of the
independent accountants to be engaged to audit the annual financial
statements and review the quarterly financial statements of the Company.
The Committee will also review fees paid to the independent accountants
and review and approve dismissal of the independent accountants.
2. Ensure the independence of the outside accountants by:
a. Having the independent accountant deliver to the Committee annually a
formal written statement delineating all relationships between the
independent accountants and the Company and addressing at least the
matters set forth in Independence Standards Board Standard No. 1,
actively engaging in dialogue with the independent accountants about
any relationships or services disclosed in such statement that may
impact the objectivity and independence of the Company's independent
accountants.
b. Taking or recommending that the Board of Directors take appropriate
action in response to the above requirement to satisfy itself of the
independent accountants' independence.
Responsibilities for Reviewing the Annual External Audit and the Review of
Financial Statements
The Committee will:
1. Request the independent accountants to confirm that they are accountable
to the Board of Directors and the Committee and that they will provide
the
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Committee with timely analyses of significant financial reporting and
internal control issues.
2. Review with management significant risks and exposures identified by
management and management's steps to minimize them.
3. Review the scope of the external audit with the independent accountants.
4. Review with management and the independent accountants:
a. The Company's internal controls, including computerized information
system controls and security.
b. The Company's significant accounting policies.
c. The audited annual financial results and, when appropriate, the
Company's interim financial results before they are made public.
5. After the completion of the annual audit examination, or as needed
throughout the year, discuss with management and the independent
accountants:
a. The Company's annual financial statements and related footnotes,
including any adjustments to such statements recommended by the
independent accountants.
b. Any significant findings and recommendations made by the independent
accountants with respect to the Company's financial policies,
procedures and internal accounting controls together with
management's responses thereto.
c. The qualitative judgments about the appropriateness and acceptability
of accounting principles, financial disclosures and underlying
estimates.
d. Any significant difficulties or disputes with management encountered
during the course of the audit.
e. Any other matters about the audit procedures or findings that
Generally Accepted Accounting Standards ("GAAS") require the auditors
to discuss with the Committee.
f. The form of opinion the independent accountants propose to render to
the Board and shareholders.
6. Recommend to the Board of Directors that the audited financial
statements be included in the Company's Annual Report on Form 10-K.
7. Issue for public disclosure by the Company the report required by the
rules of the Securities and Exchange Commission.
Reporting Responsibilities
The Committee shall report its conclusions and all actions to the full
Board of Directors and make appropriate recommendations as necessary.
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IV. COMMITTEE MEMBERSHIP
The Committee shall be comprised of three or more directors as determined
by the Board, each of whom:
1. Shall be independent directors, and free from any relationship that, in
the opinion of the Board, would interfere with the exercise of his or
her independent judgment as a member of the Committee.
2. Shall be or shall become (within a reasonable period of time after his
or her appointment) "financially literate," as such qualification is
interpreted by the Board of Directors.
3. Shall have a basic understanding of finance and accounting practices and
shall be able to read and understand financial statements. Committee
members may enhance their familiarity with finance and accounting by
participating in educational programs conducted by the Company or an
outside consultant.
The members of the Committee shall meet the requirements of the rules of
the principal market or transaction reporting system on which the Company's
securities are traded or quoted (i.e., the Nasdaq Stock Market). In addition, at
least one member of the Committee shall have accounting or related financial
management experience.
The members of the Committee shall be elected by the Board annually or
until their successors shall be duly elected and qualified. Unless a Chairman is
elected by the full Board, the members of the Committee may designate a Chairman
by majority vote of the full Committee membership.
V. MEETINGS
The Committee shall meet at least four times each year, or more frequently
as circumstances require. The Chairman of the Committee may call a Committee
meeting whenever deemed necessary and shall be responsible for meeting with the
independent accountants at their request to discuss the interim financial
results.
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ANNUAL MEETING OF STOCKHOLDERS of
ALLIED CAPITAL CORPORATION
May 8, 2001
-------------------------
PROXY VOTING INSTRUCTIONS
-------------------------
TO VOTE BY MAIL
Please date, sign and mail your proxy card in the envelope provided as soon as
possible.
TO VOTE BY TELEPHONE (TOUCH-TONE PHONE ONLY)
Please call toll-free 1-800-PROXIES and follow the instructions. Have your
control number and the proxy card available when you call.
TO VOTE BY INTERNET
Please access the web page at "www.voteproxy.com" and follow the on-screen
instructions. Have your control number available when you access the web page.
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YOUR CONTROL NUMBER IS [ARROW GRAPHIC]
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ALLIED CAPITAL CORPORATION
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints WILLIAM L. WALTON, GEORGE C. WILLIAMS, JR.
and SUZANNE V. SPARROW, or any one of them, and each with full power of
substitution, to act as attorneys and proxies for the undersigned to vote all
the shares of common stock of the Company which the undersigned is entitled to
vote at the Annual Meeting of Stockholders of the Company to be held at the St.
Regis Hotel, 923 16th Street, NW, Washington, DC on May 8, 2001 at 10:00 A.M.
[Eastern] and at all adjournments thereof, as indicated on this proxy.
(CONTINUED ON REVERSE SIDE)
25
PLEASE DATE, SIGN AND MAIL YOUR
PROXY CARD BACK AS SOON AS POSSIBLE!
ANNUAL MEETING OF STOCKHOLDERS
ALLIED CAPITAL CORPORATION
MAY 8, 2001
-Please Detach and Mail in the Envelope Provided-
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PLEASE MARK YOUR
A [ X ] VOTES AS IN THIS
EXAMPLE.
WITHHOLD
FOR AUTHORITY FOR AGAINST ABSTAIN
1. The election of the [ ] [ ] NOMINEES: CLASS III DIRECTORS 2. The ratification of the [ ] [ ] [ ]
following four persons William L. Walton selection of Arthur Anderson
(except as marked to George C. Williams Jr. LLP as independent public
the contrary) as Class Brooks H. Browne accountants for Allied Capital
III Directors who will Robert E. Long Corporation for the year ending
serve as directors of Allied December 31, 2001.
Capital Corporation until 2004,
or until their successors are 3. To transact such other business as may properly come
elected and qualified. before the Meeting.
INSTRUCTIONS: To withhold authority THIS PROXY IS REVOCABLE AND WILL BE VOTED AS DIRECTED,
to vote for any individual, strike BUT IF NO INSTRUCTIONS ARE SPECIFIED, THIS PROXY WILL
a line through his name on the list at right. BE VOTED "FOR" THE NOMINEES AND FOR THE PROPOSALS
LISTED. If any other business is presented at the
meeting, this proxy will be voted by the proxies in
their best judgment, including a motion to adjourn or
postpone the meeting to another time and/or place for
the purpose of soliciting additional proxies. At the
present time, the Board of Directors knows of no other
business to be presented at the meeting.
PLEASE MARK, SIGN AND RETURN THIS PROXY IN THE ENCLOSED
ENVELOPE. THE UNDERSIGNED ACKNOWLEDGES RECEIPT FROM THE
COMPANY PRIOR TO THE EXECUTION OF THIS PROXY OF A NOTICE
OF ANNUAL MEETING OF STOCKHOLDERS AND A PROXY STATEMENT.
SIGNATURE DATE SIGNATURE DATE
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IF HELD JOINTLY
IMPORTANT: Please sign your name(s) exactly as shown hereon and date your proxy
in the blank provided. For joint accounts, each joint owner should
sign. When signing as attorney, executor, administrator, trustee or
guardian, please give your full title as such. If the signer is a
corporation or partnership, please sign in full corporate or
partnership name by a duly authorized officer or partner.