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EXHIBIT 2h.1
FORM OF UNDERWRITING AGREEMENT
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______________ SHARES
ALLIED CAPITAL CORPORATION
COMMON STOCK, $0.0001 PAR VALUE PER SHARE
UNDERWRITING AGREEMENT
dated ________, 1998
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___________ SHARES
ALLIED CAPITAL CORPORATION
COMMON STOCK, $0.0001 PAR VALUE PER SHARE
UNDERWRITING AGREEMENT
_______, 1998
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Ladies and Gentlemen:
Allied Capital Corporation, a Maryland corporation (the
"COMPANY"), proposes to issue and sell to __________________________ (the
"UNDERWRITER") an aggregate of _____________ shares of its common stock,
$0.0001 par value per share (the "FIRM SHARES").
The Company also proposes to issue and sell to the Underwriter
not more than an additional _____________ shares of its common stock, $0.0001
par value per share (the "ADDITIONAL SHARES"), if and to the extent that the
Underwriter shall have determined to exercise the right to purchase such shares
of common stock granted in Section 2 hereof. The Firm Shares and the Additional
Shares are hereinafter collectively referred to as the "SHARES." The shares of
common stock, $0.0001 par value per share, of the Company to be outstanding
after giving effect to the sales contemplated hereby, are hereinafter referred
to as the "COMMON STOCK."
The Company has filed with the Securities and Exchange
Commission (the "COMMISSION") a registration statement relating to the Shares.
The registration statement as amended at the time it becomes effective,
including the information (if any) deemed to be part of the registration
statement at the time of effectiveness pursuant to Rule 497 under the
Securities Act of 1933, as amended (the "SECURITIES ACT"), is hereinafter
referred to as the "REGISTRATION STATEMENT"; the prospectus (as described in
Rule 497 under the Securities Act) in the form first used to confirm sales of
Shares is hereinafter referred to as the "DISTRIBUTED PROSPECTUS"; the
prospectus included in the Registration Statement at the time of its
effectiveness (including the information, if any, deemed to be a part of the
Registration Statement at the time of effectiveness pursuant to Rule 497 under
the Securities Act) is hereinafter referred to as the "FILED PROSPECTUS"; and
the Distributed Prospectus and the Filed Prospectus, together with the
Statement of Additional Information incorporated by reference therein, are
hereinafter referred to collectively as the "PROSPECTUS."
1. REPRESENTATIONS AND WARRANTIES. The Company represents
and warrants to and agrees with the Underwriter that:
(a) The Registration Statement has become effective;
no stop order suspending the effectiveness of the Registration
Statement is in effect, and no proceedings for such purpose
are pending before or threatened by the Commission.
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(b) (i) The Registration Statement, when it became
effective, did not contain and, as amended or supplemented, if
applicable, will not contain any untrue statement of a
material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not
misleading, (ii) the Registration Statement and the Prospectus
and any amendment or supplement thereto will comply in all
material respects with the Securities Act and with the
provisions of the Investment Company Act of 1940, as amended
(the "Investment Company Act") applicable to business
development companies and with the applicable rules and
regulations of the Commission thereunder, respectively and
(iii) the Prospectus does not contain and, as amended or
supplemented, if applicable, will not contain any untrue
statement of a material fact or omit to state a material fact
necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading,
except that the representations and warranties set forth in
this paragraph do not apply to statements or omissions in the
Registration Statement or the Prospectus or any amendment or
supplement thereto based upon information relating to the
Underwriter furnished to the Company in writing by the
Underwriter expressly for use therein.
(c) The Company has been duly incorporated, is validly
existing as a corporation in good standing under the laws of
the jurisdiction of its incorporation, has the corporate power
and authority to own its property and to conduct its business
as described in the Prospectus and is duly qualified to
transact business and is in good standing in each jurisdiction
in which the conduct of its business or its ownership or
leasing of property requires such qualification, except to the
extent that the failure to be so qualified or be in good
standing would not have a material adverse effect on the
Company and its subsidiaries, taken as a whole.
(d) Each subsidiary of the Company has been duly
incorporated or formed, is validly existing as a corporation
or a limited liability company, as applicable, is in good
standing under the laws of the jurisdiction of its
incorporation or formation, as applicable, has the power and
authority to own its property and to conduct its business, in
each case as described in the Prospectus, and is duly
qualified to transact business and is in good standing in each
jurisdiction in which the conduct of its business or its
ownership or leasing of property requires such qualification,
except to the extent that the failure to be so qualified or be
in good standing would not have a material adverse effect on
the Company and its subsidiaries, taken as a whole; all of the
issued shares of capital stock of each subsidiary of the
Company have been duly and validly authorized and issued, are
fully paid and non-assessable and are owned directly by the
Company, free and clear of all liens, encumbrances, equities
or claims, except with respect to the employee-owned shares of
preferred stock of Allied Capital REIT, Inc. and the Preferred
Stock of Allied Investment Corporation owned by the U.S. Small
Business Administration (the "SBA");
(e) This Agreement has been duly authorized, executed
and delivered by the Company.
(f) The authorized capital stock of the Company
conforms as to legal matters to the description thereof
contained in the Prospectus.
(g) The shares of Common Stock outstanding prior to
the issuance of the Shares have been duly authorized and are
validly issued, fully paid and non-assessable.
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(h) The Shares have been duly authorized and, when
issued and delivered in accordance with the terms of this
Agreement, will be validly issued, fully paid and
non-assessable, and the issuance of such Shares will not be
subject to any preemptive or similar rights.
(i) The Common Stock is registered pursuant to
Section 12(g) of the Securities Exchange Act of 1934, as
amended (the "EXCHANGE ACT"), and is listed on the Nasdaq
National Market, and the Company has taken no action designed
to, or likely to have the effect of, terminating the
registration of the Common Stock under the Exchange Act or
delisting the Common Stock from the Nasdaq National Market,
nor has the Company received any notification that the
Commission or the National Association of Securities Dealers,
Inc. is contemplating terminating such registration or
listing.
(j) The execution and delivery by the Company of, and
the performance by the Company of its obligations under, this
Agreement will not contravene any provision of applicable law
or the certificate of incorporation or by-laws of the Company
or any agreement or other instrument binding upon the Company
or any of its subsidiaries that is material to the Company and
its subsidiaries, taken as a whole, or any judgment, order or
decree of any governmental body, agency or court having
jurisdiction over the Company or any subsidiary, and no
consent, approval, authorization or order of, or qualification
with, any governmental body or agency is required for the
performance by the Company of its obligations under this
Agreement, except such as may be required by the securities or
Blue Sky laws of the various states in connection with the
offer and sale of the Shares.
(k) There has not occurred any material adverse
change, or any development involving a prospective material
adverse change, in the condition, financial or otherwise, or
in the earnings, business or operations of the Company and its
subsidiaries, taken as a whole, from that set forth in the
Prospectus (exclusive of any amendments or supplements thereto
subsequent to the date of this Agreement).
(l) There are no legal or governmental proceedings
pending or threatened to which the Company or any of its
subsidiaries is a party or to which any of the properties of
the Company or any of its subsidiaries is subject that are
required to be described in the Registration Statement or the
Prospectus and are not so described or any statutes,
regulations, contracts or other documents that are required to
be described in the Registration Statement or the Prospectus
or to be filed as exhibits to the Registration Statement that
are not described or filed as required.
(m) Each preliminary prospectus filed as part of the
registration statement as originally filed or as part of any
amendment thereto, or filed pursuant to Rule 497 under the
Securities Act, complied when so filed in all material
respects with the Securities Act and the applicable rules and
regulations of the Commission thereunder.
(n) The operations of the Company and its
subsidiaries are in compliance in all material respects with
the provisions of the Investment Company Act applicable to
business development companies and the rules and regulations
of the Commission thereunder.
(o) To the best of its knowledge, the Company and its
subsidiaries (i) are in compliance with any and all applicable
foreign, federal, state and local laws and regulations
relating to the protection of human health and safety, the
environment or hazardous or toxic
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substances or wastes, pollutants or contaminants
("ENVIRONMENTAL LAWS"), (ii) have received all permits,
licenses or other approvals required of them under applicable
Environmental Laws to conduct their respective businesses and
(iii) are in compliance with all terms and conditions of any
such permit, license or approval, except where such
noncompliance with Environmental Laws, failure to receive
required permits, licenses or other approvals or failure to
comply with the terms and conditions of such permits, licenses
or approvals would not, singly or in the aggregate, have a
material adverse effect on the Company and its subsidiaries,
taken as a whole.
(p) There are no contracts, agreements or
understandings between the Company and any person granting
such person the right to require the Company to file a
registration statement under the Securities Act with respect
to any securities of the Company (except for sales of Common
Stock aggregating less than 100,000 shares) or to require the
Company to include such securities with the Shares registered
pursuant to the Registration Statement.
(q) The Company has elected to be regulated as a
business development company under the Investment Company Act
and has not withdrawn that election, and the Commission has
not ordered that such election be withdrawn. All required
action has or will have been taken by the Company under the
Securities Act, the Investment Company Act, and the rules and
regulations of the Commission thereunder, respectively, to
make the public offering and consummate the sale of the Shares
as provided in this Agreement.
(r) The Company owns or possesses or has obtained all
governmental licenses, permits, consents, orders, approvals
and other authorizations, whether international or domestic,
necessary to carry on its business as contemplated, except to
the extent that the failure to own or possess or have obtained
such authorizations would not have a material adverse effect
on the Company and its subsidiaries, taken as a whole.
(s) There are no material restrictions, limitations
or regulations with respect to the ability of the Company or
its subsidiaries to invest its assets as described in the
Prospectus, other than as described therein.
(t) The Company is organized and operated in
conformance with the requirements of the Investment Company
Act and the requirements to be taxed as a Regulated Investment
Company (Sections 851 et seq. of the Internal Revenue Code of
1986, as amended (the "CODE")). The Company's method of
operation will permit it to continue to meet the requirements
for qualification as a business development company under the
Investment Company Act and taxation as a Regulated Investment
Company under the Code.
(u) The only significant subsidiaries for purposes of
Rule 405 under the Securities Act are Allied Investment
Corporation and Allied Capital REIT, Inc.
2. AGREEMENTS TO SELL AND PURCHASE. The Company hereby agrees to sell
to the Underwriter, and the Underwriter, upon the basis of the representations
and warranties herein contained, but subject to the conditions hereinafter
stated, agrees to purchase from the Company the number of Firm Shares set forth
in Schedules I hereto opposite its name at $_____ a share ("PURCHASE PRICE").
On the basis of the representations and warranties contained in
this Agreement, and subject to its terms and conditions, the Company agrees to
sell to the Underwriter the Additional Shares, and the Underwriter shall have a
one-time right to purchase up to __________ Additional Shares at the Purchase
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Price. If the Underwriter elects to exercise such option, the Underwriter
shall so notify the Company in writing not later than 30 days after the date of
this Agreement, which notice shall specify the number of Additional Shares to
be purchased by the Underwriter and the date on which such shares are to be
purchased. Such date may be the same as the Closing Date (as defined below) but
not earlier than the Closing Date nor later than ten business days after the
date of such notice. Additional Shares may be purchased as provided in
Section 4 hereof solely for the purpose of covering over-allotments made in
connection with the offering of the Firm Shares.
The Company hereby agrees that, without the prior written
consent of the Underwriter, it will not, during the period ending 90 days after
the date of the Prospectus, (i) offer, pledge, sell, contract to sell, sell any
option or contract to purchase, purchase any option or contract to sell, grant
any option, right or warrant to purchase, lend or otherwise transfer or dispose
of, directly or indirectly, any shares of Common Stock or any securities
convertible into or exercisable or exchangeable for Common Stock or (ii) enter
into any swap or other arrangement that transfers to another, in whole or in
part, any of the economic consequences of ownership of the Common Stock,
whether any such transaction described in clause (i) or (ii) above is to be
settled by delivery of Common Stock or such other securities, in cash or
otherwise. The foregoing sentence shall not apply to (A) the sale by the
Underwriter of any share of Common Stock pursuant to the Underwriting
Agreement, (B) any issuance of shares of Common Stock, options, or other
securities or rights pursuant to any employee or director compensation, option,
savings, benefit or other plan of the Company existing as of the date of the
Underwriting Agreement, (C) any issuances upon exercise, conversion or exchange
of any securities or obligations outstanding on the date of the Underwriting
Agreement, and (D) an additional issuance of equity securities aggregating not
more than $__________.
3. TERMS OF PUBLIC OFFERING. The Company is advised by you
that the Underwriter proposes to make a public offering of Shares as soon after
the Registration Statement and this Agreement have become effective as in your
judgment is advisable. The Company is further advised by you that the Shares
are to be offered to the public initially at $_____ a share (the "PUBLIC
OFFERING PRICE") and to certain dealers selected by you at a price that
represents a concession not in excess of $____ a share under the Public
Offering Price, and that any Underwriter may allow, and such dealers may
reallow, a concession, not in excess of $____ a share, to certain brokers and
dealers.
4. PAYMENT AND DELIVERY. Payment for the Firm Shares shall
be made to the Company by the wire transfer of immediately available funds to
the order of the Company against delivery of such Firm Shares for the account
of the Underwriter at ____ a.m., _________ time, on ____________, 1998, or at
such other time on the same or such other date, not later than 10:30 a.m.,
____________ time, on _________, 1998, as shall be designated in writing by
you. The time and date of such payment are hereinafter referred to as the
"CLOSING DATE."
Payment for any Additional Shares shall be made to the
Company in by the wire transfer of immediately available funds to the order of
the Company against delivery of such Additional Shares for the account of the
Underwriter at _____ a.m., __________ time, on the date specified in the notice
described in Section 2 or at such other time on the same or on such other date,
in any event not later than 10:30 a.m., ___________ time, on _______, 1998, as
shall be designated in writing by the Underwriter. The time and date of such
payment are hereinafter referred to as the "OPTION CLOSING DATE."
Certificates for the Firm Shares and Additional Shares
shall be in definitive form and registered in such names and in such
denominations as you shall request in writing not later than one full business
day prior to the Closing Date or the Option Closing Date, as the case may be.
The certificates evidencing the Firm Shares and Additional Shares shall be
delivered to you on the Closing Date or the
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Option Closing Date, as the case may be, for the account of the Underwriter,
with any transfer taxes payable in connection with the transfer of the Shares
to the Underwriter duly paid, against payment of the Purchase Price therefor.
5. CONDITIONS TO THE UNDERWRITER'S OBLIGATIONS. The
obligations of the Company to sell the Shares to the Underwriter and the
obligation of the Underwriter to purchase and pay for the Shares on the Closing
Date are subject to the condition that the Registration Statement shall have
become effective not later than _______ (New York City time) on the date
hereof. The obligations of the Underwriter are subject to the following further
conditions:
(a) Subsequent to the execution and delivery of this
Agreement and prior to the Closing Date, there shall not have
occurred any change, or any development involving a
prospective change, in the condition, financial or otherwise,
or in the earnings, business or operations of the Company and
its subsidiaries, taken as a whole, from that set forth in the
Prospectus (exclusive of any amendments or supplements thereto
subsequent to the date of this Agreement) that, in your
judgment, is material and adverse and that makes it, in your
judgment, impracticable to market the Shares on the terms and
in the manner contemplated in the Prospectus.
(b) The Underwriter shall have received on the
Closing Date a certificate, dated the Closing Date and signed
by an executive officer of the Company, to the effect set
forth in Section 5(a) above and to the effect that the
representations and warranties of the Company contained in
this Agreement are true and correct as of the Closing Date and
that the Company has complied with all of the agreements and
satisfied all of the conditions on its part to be performed or
satisfied hereunder on or before the Closing Date.
The officer signing and delivering such certificate
may rely upon the best of his or her knowledge as to proceedings
threatened.
(c) The Underwriter shall have received on the
Closing Date an opinion of ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP,
outside counsel for the Company, dated the Closing Date, to
the effect that:
(i) the Company has been duly
incorporated, is validly existing as a corporation in good
standing under the laws of the jurisdiction of its
incorporation, has the corporate power and authority to own
its property and to conduct its business, in each case as
described in the Prospectus, and is duly qualified to transact
business and is in good standing in the District of Colombia
and the States of Illinois, Michigan and California;
(ii) each of Allied Investment
Corporation and Allied Capital REIT, Inc. (collectively, the
"SUBSIDIARIES") of the Company has been duly incorporated or
formed, is validly existing as a corporation or a limited
liability company, as applicable, is in good standing under
the laws of the jurisdiction of its incorporation or
formation, as applicable, has the corporate power and
authority to own its property and to conduct its business, in
each case as described in the Prospectus, and is duly
qualified to transact business and is in good standing in the
District of Columbia and the State of California, as
applicable;
(iii) the authorized capital stock of the
Company conforms as to legal matters to the description
thereof contained in the Prospectus;
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(iv) the shares of Common Stock
outstanding prior to the issuance of the Shares have been duly
authorized and are validly issued, fully paid and
non-assessable;
(v) all of the issued shares of capital
stock of each Subsidiary are owned directly by the Company,
and to such counsel's knowledge, are free and clear of all
liens, encumbrances, equities or claims, except with respect to
the employee-owned shares of preferred stock of Allied Capital
REIT, Inc. and the Preferred Stock of Allied Investment
Corporation owned by the SBA.
(vi) the Shares have been duly authorized
and, when issued and delivered in accordance with the terms of
this Agreement, will be validly issued, fully paid and
non-assessable, and the issuance of such Shares will not be
subject to any preemptive or similar rights;
(vii) this Agreement has been duly
authorized, executed and delivered by the Company;
(viii) the execution and delivery by the
Company of, and the performance by the Company of its
obligations under, this Agreement will not contravene any
provision of applicable law or the certificate of
incorporation or by-laws of the Company or, to the best of
such counsel's knowledge, any agreement or other instrument
binding upon the Company or any of its subsidiaries that is
material to the Company and its subsidiaries, taken as a
whole, or, to the best of such counsel's knowledge, any
judgment, order or decree of any governmental body, agency or
court having jurisdiction over the Company or any subsidiary,
and no consent, approval, authorization or order of, or
qualification with, any governmental body or agency is
required for the performance by the Company of its obligations
under this Agreement, except such as may be required by the
National Association of Securities Dealers, Inc. or the
securities or Blue Sky laws of the various states or of any
foreign jurisdiction in connection with the offer and sale of
the Shares by the Underwriter;
(ix) the statements (A) in the Prospectus
under the captions "Certain Government Regulations,"
"Description of Capital Stock," "Taxation" and "Underwriting,"
(B) in the Statement of Additional Information under the
caption "Tax Status" and (C) in the Registration Statement in
Item 29, in each case insofar as such statements constitute
summaries of the legal matters, documents or proceedings
referred to therein, fairly present the information called for
with respect to such legal matters, documents and proceedings
and fairly summarize the matters referred to therein;
(x) to such counsel's knowledge, there
are no legal or governmental proceedings pending or threatened
to which the Company or any of its subsidiaries is a party or
to which any of the properties of the Company or any of its
subsidiaries is subject that are required to be described in
the Registration Statement or the Prospectus and are not so
described or any statutes, regulations, contracts or other
documents that are required to be described in the
Registration Statement or the Prospectus or to be filed as
exhibits to the Registration Statement that are not described
or filed as required;
(xi) the Company has elected to be
regulated as a business development company under the
provisions of the Investment Company Act applicable to
business
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development companies and the Commission has not ordered that
such election be withdrawn, and all action under the
Securities Act necessary to make the public offering and
consummate the sale of the Shares as provided in this
Agreement has been taken by the Company; and
(xii) such counsel (A) is of the opinion
that the Registration Statement and the Prospectus (except for
financial statements and schedules and other financial and
statistical data included therein as to which such counsel
need not express any opinion) comply as to form in all
material respects with the Securities Act and the applicable
rules and regulations of the Commission thereunder, (B) has no
reason to believe that (except for financial statements and
schedules and other financial and statistical data as to which
such counsel need not express any belief) the Registration
Statement and the prospectus included therein at the time the
Registration Statement became effective contained any untrue
statement of a material fact or omitted to state a material
fact required to be stated therein or necessary to make the
statements therein not misleading, (C) has no reason to
believe that (except for financial statements and schedules
and other financial and statistical data as to which such
counsel need not express any belief) the Prospectus contains
any untrue statement of a material fact or omits to state a
material fact necessary in order to make the statements
therein, in the light of the circumstances under which they
were made, not misleading and (D) is of the opinion that the
Distributed Prospectus is not materially different from the
Filed Prospectus.
(d) The Underwriter shall have received on the
Closing Date an opinion of O'Melveny & ▇▇▇▇▇ LLP, counsel for
the Underwriter, dated the Closing Date, covering the matters
referred to in Sections 5(c)(vi), 5(c)(vii), 5(c)(ix) (but
only as to the statements in the Prospectus under "Description
of Capital Stock" and "Underwriters") and 5(c)(xii) above.
With respect to Section 5(c)(xii) above, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ &
▇▇▇▇▇▇▇ LLP and O'Melveny & ▇▇▇▇▇ LLP may state that their
opinion and belief are based upon their participation in the
preparation of the Registration Statement and Prospectus and
any amendments or supplements thereto and review and
discussion of the contents thereof, but are without
independent check or verification, except as specified. The
opinion of ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP described in
Section 5(c) above shall be rendered to the Underwriter at the
request of the Company and shall so state therein.
(e) The Underwriter shall have received, on each of
the date hereof and the Closing Date, a letter dated he date
hereof or the Closing Date, as the case may be, in form and
substance satisfactory to the Underwriter, from ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ LLP, independent public accountants, containing
statements and information of the type ordinarily included in
accountants' "comfort letters" to underwriters with respect to
the financial statements and certain financial information
contained in the Registration Statement and the Prospectus;
provided that the letter delivered on the Closing Date shall
use a "cut-off date" not earlier than the date hereof.
(f) The "lock-up" agreements, each substantially in
the form of Exhibit A hereto, between you and the Company and
certain of its executive officers relating to sales and
certain other dispositions of shares of Common Stock or
certain other securities, delivered to you on or before the
date hereof, shall be in full force and effect on the Closing
Date.
(g) The obligation of the Underwriter to purchase
Additional Shares hereunder is
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subject to the delivery to the Underwriter on the Option
Closing Date of such documents as it may reasonably request
with respect to the good standing of the Company, the due
authorization and issuance of the Additional Shares and other
matters related to the issuance of the Additional Shares.
6. COVENANTS OF THE COMPANY. In further consideration of the
agreements of the Underwriter herein contained, the Company covenants with the
Underwriter as follows:
(a) To furnish to you, without charge, three signed
copies of the Registration Statement (including exhibits
thereto) and to furnish to you in __________, without charge,
prior to 11:00 a.m. _____________ time on the business day
next succeeding the date of this Agreement, or as soon as
practicable, and during the period mentioned in Section 6(c)
below, as many copies of the Distributed Prospectus, the
Statement of Additional Information and any supplements and
amendments thereto or to the Registration Statement as you may
reasonably request.
(b) Before amending or supplementing the
Registration Statement or the Prospectus, to furnish to you a
copy of each such proposed amendment or supplement and not to
file any such proposed amendment or supplement to which you
reasonably object, and to file with the Commission within the
applicable period specified in Rule 497 under the Securities
Act any prospectus required to be filed pursuant to such Rule.
(c) If, during such period after the first date of
the public offering of the Shares as in the opinion of counsel
for the Underwriter the Prospectus is required by law to be
delivered in connection with sales by an Underwriter or
dealer, any event shall occur or condition exist as a result
of which it is necessary to amend or supplement the Prospectus
in order to make the statements therein, in the light of the
circumstances when the Prospectus is delivered to a purchaser,
not misleading, or if, in the opinion of counsel for the
Underwriter, it is necessary to amend or supplement the
Prospectus to comply with applicable law, forthwith to
prepare, file with the Commission and furnish, at its own
expense, to the Underwriter and to the dealers (whose names
and addresses you will furnish to the Company) to which Shares
may have been sold by you on behalf of the Underwriter and to
any other dealers upon request, either amendments or
supplements to the Prospectus so that the statements in the
Prospectus as so amended or supplemented will not, in the
light of the circumstances when the Prospectus is delivered to
a purchaser, be misleading or so that the Prospectus, as
amended or supplemented, will comply with law.
(d) To endeavor to qualify the Shares for offer and
sale under the securities or Blue Sky laws of such
jurisdictions as you shall reasonably request.
(e) To make generally available to the Company's
security holders and to you as soon as practicable an earning
statement covering the twelve-month period ending September
30, 1998 that satisfies the provisions of Section 11(a) of the
Securities Act and the rules and regulations of the Commission
thereunder.
(f) To use its best efforts to maintain its
qualification as a regulated investment company under
Subchapter M of the Code.
(g) Whether or not the transactions contemplated in
this Agreement are consummated or this Agreement is
terminated, to pay or cause to be paid all expenses
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incident to the performance of its obligations under this
Agreement, including: (i) the fees, disbursements and expenses
of the Company's counsel and the Company's accountants in
connection with the registration and delivery of the Shares
under the Securities Act and all other fees or expenses in
connection with the preparation and filing of the Registration
Statement, any preliminary prospectus, the Prospectus and
amendments and supplements to any of the foregoing, including
all printing costs associated therewith, and the mailing and
delivering of copies thereof to the Underwriter and dealers,
in the quantities hereinabove specified, (ii) all costs and
expenses related to the transfer and delivery of the Shares to
the Underwriter, including any transfer or other taxes payable
thereon, if applicable, (iii) the cost of printing or
producing any Blue Sky or Legal Investment memorandum in
connection with the offer and sale of the Shares under state
securities laws and all expenses in connection with the
qualification of the Shares for offer and sale under state
securities laws as provided in Section 6(d) hereof, including
filing fees and the reasonable fees and disbursements of
counsel for the Underwriter in connection with such
qualification and in connection with the Blue Sky or Legal
Investment memorandum, (iv) all filing fees and the reasonable
fees and disbursements of counsel to the Underwriter incurred
in connection with the review and qualification of the
offering of the Shares by the National Association of
Securities Dealers, Inc., (v) all costs and expenses incident
to listing the Shares on the Nasdaq National Market, (vi) the
cost of printing certificates representing the Shares, (vii)
the costs and charges of any transfer agent, registrar or
depository, (viii) the costs and expenses of the Company
relating to investor presentations on any "road show"
undertaken in connection with the marketing of the offering of
the Shares, including, without limitation, expenses associated
with the production of road show slides and graphics, fees and
expenses of any consultants engaged in connection with the
road show presentations with the prior approval of the
Company, travel and lodging expenses of the representatives
and officers of the Company and any such consultants, and the
cost of any aircraft chartered in connection with the road
show, and (ix) all other costs and expenses incident to the
performance of the obligations of the Company hereunder for
which provision is not otherwise made in this Section. It is
understood, however, that except as provided in this Section,
Section 7 entitled "Indemnity and Contribution", and the last
paragraph of Section 9 below, the Underwriter will pay all of
their costs and expenses, including fees and disbursements of
their counsel, stock transfer taxes payable on resale of any
of the Shares by them and any advertising expenses connected
with any offers they may make.
7. INDEMNIFICATION.
(a) Indemnification of the Underwriter. The Company
agrees to indemnify and hold harmless the Underwriter, its
officers and employees, and each person, if any, who controls
the Underwriter within the meaning of the Securities Act and
the Exchange Act against any loss, claim, damage, liability or
expense, as incurred, to which the Underwriter or such
controlling person may become subject, under the Securities
Act, the Exchange Act or other federal or state statutory law
or regulation, or at common law or otherwise (including in
settlement of any litigation, if such settlement is effected
with the written consent of the Company), insofar as such
loss, claim, damage, liability or expense (or actions in
respect thereof as contemplated below) arises out of or is
based (i) upon any untrue statement or alleged untrue
statement of a material fact contained in the Registration
Statement, or any amendment thereto, including any information
deemed to be a part thereof pursuant to Rule 430A or Rule 434
under the Securities Act, or the omission or alleged omission
therefrom
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of a material fact required to be stated therein or necessary
to make the statements therein not misleading; or (ii) upon
any untrue statement or alleged untrue statement of a material
fact contained in any preliminary prospectus or the Prospectus
(or any amendment or supplement thereto), or the omission or
alleged omission therefrom of a material fact necessary in
order to make the statements therein, in the light of the
circumstances under which they were made, not misleading; or
(iii) in whole or in part upon any inaccuracy in the
representations and warranties of the Company contained
herein; or (iv) in whole or in part upon any failure of the
Company to perform its obligations hereunder or under law; or
(v) any act or failure to act or any alleged act or failure to
act by the Underwriter in connection with, or relating in any
manner to, the Common Stock or the offering contemplated
hereby, and which is included as part of or referred to in any
loss, claim, damage, liability or action arising out of or
based upon any matter covered by clause (i) or (ii) above,
provided that the Company shall not be liable under this
clause (v) to the extent that a court of competent
jurisdiction shall have determined by a final judgment that
such loss, claim, damage, liability or action resulted
directly from any such acts or failures to act undertaken or
omitted to be taken by the Underwriter through its gross
negligence or willful misconduct; and to reimburse the
Underwriter and each such controlling person for any and all
expenses (including the fees and disbursements of counsel
chosen by the Underwriter) as such expenses are reasonably
incurred by the Underwriter or such controlling person in
connection with investigating, defending, settling,
compromising or paying any such loss, claim, damage,
liability, expense or action; provided, however, that the
foregoing indemnity agreement shall not apply to any loss,
claim, damage, liability or expense to the extent, but only to
the extent, arising out of or based upon any untrue statement
or alleged untrue statement or omission or alleged omission
made in reliance upon and in conformity with written
information furnished to the Company by the Underwriter
expressly for use in the Registration Statement, any
preliminary prospectus or the Prospectus (or any amendment or
supplement thereto); and provided, further, that with respect
to any preliminary prospectus, the foregoing indemnity
agreement shall not inure to the benefit of the Underwriter
from whom the person asserting any loss, claim, damage,
liability or expense purchased Common Shares, or any person
controlling the Underwriter, if copies of the Prospectus were
timely delivered to the Underwriter pursuant to Section 2 and
a copy of the Prospectus (as then amended or supplemented if
the Company shall have furnished any amendments or supplements
thereto) was not sent or given by or on behalf of the
Underwriter to such person, if required by law so to have been
delivered, at or prior to the written confirmation of the sale
of the Common Shares to such person, and if the Prospectus (as
so amended or supplemented) would have cured the defect giving
rise to such loss, claim, damage, liability or expense. The
indemnity agreement set forth in this Section 7(a) shall be in
addition to any liabilities that the Company may otherwise
have.
(b) Indemnification of the Company, its Directors and
Officers. The Underwriter agrees to indemnify and hold
harmless the Company, each of its directors, each of its
officers who signed the Registration Statement and each
person, if any, who controls the Company within the meaning of
the Securities Act or the Exchange Act, against any loss,
claim, damage, liability or expense, as incurred, to which the
Company, or any such director, officer or controlling person
may become subject, under the Securities Act, the Exchange
Act, or other federal or state statutory law or regulation, or
at common law or otherwise (including in settlement of any
litigation, if such settlement is effected with the written
consent of the Underwriter), insofar as such loss, claim,
damage, liability or expense (or actions in respect thereof as
contemplated below) arises out of or is based upon
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any untrue or alleged untrue statement of a material fact
contained in the Registration Statement, any preliminary
prospectus or the Prospectus (or any amendment or supplement
thereto), or arises out of or is based upon the omission or
alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein
not misleading, in each case to the extent, but only to the
extent, that such untrue statement or alleged untrue statement
or omission or alleged omission was made in the Registration
Statement, any preliminary prospectus, the Prospectus (or any
amendment or supplement thereto), in reliance upon and in
conformity with written information furnished to the Company
by the Underwriter expressly for use therein; and to reimburse
the Company, or any such director, officer or controlling
person for any legal and other expense reasonably incurred by
the Company, or any such director, officer or controlling
person in connection with investigating, defending, settling,
compromising or paying any such loss, claim, damage,
liability, expense or action. The Company hereby acknowledges
that the only information that the Underwriter has furnished
to the Company expressly for use in the Registration
Statement, any preliminary prospectus or the Prospectus (or
any amendment or supplement thereto) are the statements set
forth (A) as the last [two] paragraphs on the inside front
cover page of the Prospectus concerning stabilization [and
passive market making] by the Underwriter and (B) in the table
in the first paragraph and as the second paragraph [second and
[___] paragraphs] under the caption "Underwriting" in the
Prospectus; and the Underwriter confirms that such statements
are correct. The indemnity agreement set forth in this
Section 7(b) shall be in addition to any liabilities that the
Underwriter may otherwise have.
(c) Notifications and Other Indemnification
Procedures. Promptly after receipt by an indemnified party
under this Section 7 of notice of the commencement of any
action, such indemnified party will, if a claim in respect
thereof is to be made against an indemnifying party under this
Section 7, notify the indemnifying party in writing of the
commencement thereof, but the omission so to notify the
indemnifying party will not relieve it from any liability
which it may have to any indemnified party for contribution or
otherwise than under the indemnity agreement contained in this
Section 7 or to the extent it is not prejudiced as a proximate
result of such failure. In case any such action is brought
against any indemnified party and such indemnified party seeks
or intends to seek indemnity from an indemnifying party, the
indemnifying party will be entitled to participate in, and, to
the extent that it shall elect, jointly with all other
indemnifying parties similarly notified, by written notice
delivered to the indemnified party promptly after receiving
the aforesaid notice from such indemnified party, to assume
the defense thereof with counsel reasonably satisfactory to
such indemnified party; provided, however, if the defendants
in any such action include both the indemnified party and the
indemnifying party and the indemnified party shall have
reasonably concluded that a conflict may arise between the
positions of the indemnifying party and the indemnified party
in conducting the defense of any such action or that there may
be legal defenses available to it and/or other indemnified
parties which are different from or additional to those
available to the indemnifying party, the indemnified party or
parties shall have the right to select separate counsel to
assume such legal defenses and to otherwise participate in the
defense of such action on behalf of such indemnified party or
parties. Upon receipt of notice from the indemnifying party
to such indemnified party of such indemnifying party's
election so to assume the defense of such action and approval
by the indemnified party of counsel, the indemnifying party
will not be liable to such indemnified party under this
Section 7 for any legal or other expenses subsequently
incurred by such indemnified party in connection with the
defense thereof unless (i) the
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indemnified party shall have employed separate counsel in
accordance with the proviso to the next preceding sentence (it
being understood, however, that the indemnifying party shall
not be liable for the expenses of more than one separate
counsel (together with local counsel), approved by the
indemnifying party (the Underwriter in the case of Section
7(b) and Section 8), representing the indemnified parties who
are parties to such action) or (ii) the indemnifying party
shall not have employed counsel satisfactory to the
indemnified party to represent the indemnified party within a
reasonable time after notice of commencement of the action, in
each of which cases the fees and expenses of counsel shall be
at the expense of the indemnifying party.
(d) Settlements. The indemnifying party under this
Section 7 shall not be liable for any settlement of any
proceeding effected without its written consent, but if
settled with such consent or if there be a final judgment for
the plaintiff, the indemnifying party agrees to indemnify the
indemnified party against any loss, claim, damage, liability
or expense by reason of such settlement or judgment.
Notwithstanding the foregoing sentence, if at any time an
indemnified party shall have requested an indemnifying party
to reimburse the indemnified party for fees and expenses of
counsel as contemplated by Section 7(c) hereof, the
indemnifying party agrees that it shall be liable for any
settlement of any proceeding effected without its written
consent if (i) such settlement is entered into more than 30
days after receipt by such indemnifying party of the aforesaid
request and (ii) such indemnifying party shall not have
reimbursed the indemnified party in accordance with such
request prior to the date of such settlement. No indemnifying
party shall, without the prior written consent of the
indemnified party, effect any settlement, compromise or
consent to the entry of judgment in any pending or threatened
action, suit or proceeding in respect of which any indemnified
party is or could have been a party and indemnity was or could
have been sought hereunder by such indemnified party, unless
such settlement, compromise or consent includes an
unconditional release of such indemnified party from all
liability on claims that are the subject matter of such
action, suit or proceeding.
8. CONTRIBUTION.
If the indemnification provided for in Section 7 is for any
reason held to be unavailable to or otherwise insufficient to hold harmless an
indemnified party in respect of any losses, claims, damages, liabilities or
expenses referred to therein, then each indemnifying party shall contribute to
the aggregate amount paid or payable by such indemnified party, as incurred, as
a result of any losses, claims, damages, liabilities or expenses referred to
therein (i) in such proportion as is appropriate to reflect the relative
benefits received by the Company, on the one hand, and the Underwriter, on the
other hand, from the offering of the Common Shares pursuant to this Agreement
or (ii) if the allocation provided by clause (i) above is not permitted by
applicable law, in such proportion as is appropriate to reflect not only the
relative benefits referred to in clause (i) above but also the relative fault
of the Company, on the one hand, and the Underwriter, on the other hand, in
connection with the statements or omissions or inaccuracies in the
representations and warranties herein which resulted in such losses, claims,
damages, liabilities or expenses, as well as any other relevant equitable
considerations. The relative benefits received by the Company, on the one
hand, and the Underwriter, on the other hand, in connection with the offering
of the Common Shares pursuant to this Agreement shall be deemed to be in the
same respective proportions as the total net proceeds from the offering of the
Common Shares pursuant to this Agreement (before deducting expenses) received
by the Company, and the total underwriting discount received by the
Underwriter, in each case as set forth on the front cover page of the
Prospectus (or, if Rule 434 under the Securities Act is used, the corresponding
location on the Term Sheet) bear to the aggregate initial public offering price
of the Common Shares as set
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forth on such cover. The relative fault of the Company, on the one hand, and
the Underwriter, on the other hand, shall be determined by reference to, among
other things, whether any such untrue or alleged untrue statement of a material
fact or omission or alleged omission to state a material fact or any such
inaccurate or alleged inaccurate representation or warranty relates to
information supplied by the Company, on the one hand, or the Underwriter, on
the other hand, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The amount paid or payable by a party as a result of the
losses, claims, damages, liabilities and expenses referred to above shall be
deemed to include, subject to the limitations set forth in Section 7(c), any
legal or other fees or expenses reasonably incurred by such party in connection
with investigating or defending any action or claim. The provisions set forth
in Section 7(c) with respect to notice of commencement of any action shall
apply if a claim for contribution is to be made under this Section 8; provided,
however, that no additional notice shall be required with respect to any action
for which notice has been given under Section 7(c) for purposes of
indemnification.
The Company and the Underwriter agree that it would not be
just and equitable if contribution pursuant to this Section 8 were determined
by pro rata allocation or by any other method of allocation which does not take
account of the equitable considerations referred to in this Section 8.
Notwithstanding the provisions of this Section 8, the
Underwriter shall not be required to contribute any amount in excess of the
underwriting commissions received by the Underwriter in connection with the
Common Shares underwritten by it and distributed to the public. No person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any person who was
not guilty of such fraudulent misrepresentation. For purposes of this Section
8, each officer and employee of the Underwriter and each person, if any, who
controls the Underwriter within the meaning of the Securities Act and the
Exchange Act shall have the same rights to contribution as the Underwriter, and
each director of the Company, each officer of the Company who signed the
Registration Statement, and each person, if any, who controls the Company with
the meaning of the Securities Act and the Exchange Act shall have the same
rights to contribution as the Company.
9. TERMINATION. This Agreement shall be subject to
termination by notice given by you to the Company, if (a) after the execution
and delivery of this Agreement and prior to the Closing Date (i) trading
generally shall have been suspended or materially limited on or by, as the case
may be, any of the New York Stock Exchange, the American Stock Exchange, the
National Association of Securities Dealers, Inc., the Chicago Board of Options
Exchange, the Chicago Mercantile Exchange or the Chicago Board of Trade, (ii)
trading of any securities of the Company shall have been suspended on any
exchange or in any over-the-counter market, (iii) a general moratorium on
commercial banking activities in New York shall have been declared by either
Federal or New York State authorities or (iv) there shall have occurred any
outbreak or escalation of hostilities or any change in financial markets or any
calamity or crisis that, in your judgment, is material and adverse and (b) in
the case of any of the events specified in clauses 8(a)(i) through 8(a)(iv),
such event, singly or together with any other such event, makes it, in your
judgment, impracticable to market the Shares on the terms and in the manner
contemplated in the Prospectus.
10. EFFECTIVENESS. This Agreement shall become effective upon
the execution and delivery hereof by the parties hereto.
11. COUNTERPARTS. This Agreement may be signed in two or more
counterparts, each of which shall be an original, with the same effect as if
the signatures thereto and hereto were upon the same instrument.
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12. APPLICABLE LAW. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of New York.
13. HEADINGS. The headings of the sections of this Agreement
have been inserted for convenience of reference only and shall not be deemed a
part of this Agreement.
Very truly yours,
ALLIED CAPITAL CORPORATION
By:
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Name:
-----------------------------------
Title:
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Accepted as of the date hereof
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By:
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Name:
-----------------------------------
Title:
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SCHEDULE I
UNDERWRITER
Aggregate Principal
Underwriter Amount of Securities to be
Purchased
-------------------------------------------------- ---------------------------
----------------------------......................
Total Firm Shares........................
===========================
18
EXHIBIT A
_____________, 1998
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Ladies and Gentlemen:
The undersigned understands that______________________________
(the "UNDERWRITER") proposes to enter into an Underwriting Agreement (the
"UNDERWRITING AGREEMENT") with Allied Capital Corporation, a Maryland
corporation (the "COMPANY") providing for the public offering (the "PUBLIC
OFFERING") by the Underwriter of _____________ shares (the "SHARES") of the
common stock, $0.0001 par value per share, of the Company (the "COMMON STOCK").
To induce the Underwriter to continue its efforts in
connection with the Public Offering, the undersigned hereby agrees that,
without the prior written consent of the Underwriter, it will not, during the
period commencing on the date hereof and ending 90 days after the date of the
final prospectus relating to the Public Offering (the "PROSPECTUS"), (1) offer,
pledge, sell, contract to sell, sell any option or contract to purchase,
purchase any option or contract to sell, grant any option, right or warrant to
purchase, lend, or otherwise transfer or dispose of, directly or indirectly,
any shares of Common Stock or any securities convertible into or exercisable or
exchangeable for Common Stock, or (2) enter into any swap or other arrangement
that transfers to another, in whole or in part, any of the economic
consequences of ownership of the Common Stock, whether any such transaction
described in clause (1) or (2) above is to be settled by delivery of Common
Stock or such other securities, in cash or otherwise. The foregoing sentence
shall not apply to (a) the sale of any Shares to the Underwriter pursuant to
the Underwriting Agreement or (b) transactions relating to shares of Common
Stock or other securities acquired in open market transactions after the
completion of the Public Offering.
Whether or not the Public Offering actually occurs depends on
a number of factors, including market conditions. Any Public Offering will
only be made pursuant to an Underwriting Agreement, the terms of which are
subject to negotiation between the Company and the Underwriter.
Very truly yours,
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Name
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