statement.htm
PRELIMINARY
PROXY STATEMENT – SUBJECT TO COMPLETION, DATED JANUARY 29, 2010
UNITED
STATES SECURITIES AND EXCHANGE COMMISSION
Washington,
DC 20549
SCHEDULE
14A INFORMATION
PROXY
STATEMENT PURSUANT TO SECTION 14(a)
OF
THE SECURITIES EXCHANGE ACT OF 1934
Filed
by the Registrant o
Filed
by a Party other than the Registrant þ
Check
the appropriate box: o
|
þ
|
Preliminary
Proxy Statement
|
|
o
|
Confidential,
For Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
|
|
o
|
Definitive
Proxy Statement
|
|
o
|
Definitive
Additional Materials
|
|
o
|
Soliciting
Materials Pursuant to Section
240.14a-12
|
ALLIED
CAPITAL CORPORATION
(Name
of Registrant as Specified in its Charter)
PROSPECT
CAPITAL CORPORATION
(Name
of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment
of Filing Fee (Check the appropriate box):
|
þ
|
No
fee required.
|
|
|
|
|
o
|
Fee
computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11
|
|
|
|
|
|
1.)
|
Title
of each class of securities to which the transaction
applies:
|
|
|
|
|
|
|
2.)
|
Aggregate
number of securities to which transaction applies:
|
|
|
|
|
|
|
3.)
|
Per
unit price or other underlying value of transaction computed pursuant to
Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was determined):
|
|
|
|
|
|
|
4.)
|
Proposed
maximum aggregate value of transaction:
|
|
|
|
|
|
|
5.)
|
Total
fee paid:
|
|
|
|
|
|
o
|
Fee
paid previously with preliminary materials
|
|
|
|
|
o
|
Check
box if any part of the fee is offset as provided by Exchange Act Rule 0-1
1(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
|
|
|
|
|
|
1)
|
Amount
Previously Paid:
|
|
|
|
|
|
|
2.)
|
Form,
Schedule or Registration Statement No.:
|
|
|
|
|
|
|
3.)
|
Filing
Party:
|
|
|
|
|
|
|
4.)
|
Date
Filed:
|
TABLE
OF CONTENTS
|
REASONS
TO VOTE "AGAINST" THE PROPOSED ARES CAPITAL MERGER
|
2
|
|
BACKGROUND
OF THE SOLICITATION
|
6
|
|
CERTAIN
INFORMATION CONCERNING THE PROPOSED ARES CAPITAL MERGER
|
11
|
|
CERTAIN
INFORMATION CONCERNING PROSPECT CAPITAL
|
14
|
|
OTHER
PROPOSALS TO BE PRESENTED AT THE SPECIAL MEETING
|
15
|
|
VOTING
PROCEDURES
|
15
|
|
DISSENTERS'
RIGHTS
|
17
|
|
SOLICITATION
OF PROXIES
|
17
|
|
STOCKHOLDER
NOMINATIONS AND PROPOSALS FOR THE 2010 ANNUAL MEETING
|
18
|
|
FORWARD-LOOKING
STATEMENTS
|
18
|
|
OTHER
INFORMATION
|
19
|
|
IMPORTANT
VOTING INFORMATION
|
21
|
|
SCHEDULE
I INFORMATION CONCERNING DIRECTORS AND EXECUTIVE OFFICERS OF PROSPECT
CAPITAL WHO ARE PARTICIPANTS
|
I-1
|
|
PARTICIPANT
EXECUTIVE OFFICERS
|
I-3
|
|
SCHEDULE
II CONTROL
PERSONS AND PRINCIPAL STOCKHOLDERS OF ALLIED
CAPITAL
|
II-1
|
PRELIMINARY
PROXY STATEMENT – SUBJECT TO COMPLETION, DATED JANUARY 29, 2010
SPECIAL
MEETING OF THE STOCKHOLDERS
OF
ALLIED
CAPITAL CORPORATION
TO
BE HELD ON MARCH 26, 2010
PROXY
STATEMENT
OF
PROSPECT
CAPITAL CORPORATION
SOLICITATION
OF PROXIES IN OPPOSITION TO THE PROPOSED MERGER OF ALLIED CAPITAL CORPORATION
AND ARES CAPITAL CORPORATION
This
Proxy Statement (the "Proxy Statement") and the enclosed [COLOR] proxy card are
furnished by Prospect Capital Corporation, a Maryland corporation ("Prospect
Capital"), in connection with Prospect Capital's solicitation of proxies to be
used at the special meeting (the "Special Meeting") of stockholders of Allied
Capital Corporation, a Maryland corporation ("Allied Capital"), to be held on
March 26, 2010, at [ • ], Washington,
District of Columbia, at 10:00 a.m., Eastern Time, and at any adjournments,
postponements or reschedulings thereof. Pursuant to this Proxy Statement,
Prospect Capital is soliciting proxies from holders of common stock, par value
$0.0001 per share (the "Allied Capital Shares"), of Allied Capital, to vote
"AGAINST" the proposal (1) to approve the Agreement and Plan of Merger, dated as
of October 26, 2009, among Ares Capital Corporation ("Ares Capital"), Allied
Capital and ARCC Odyssey Corp. (as the same may be amended, the "Ares Capital
Merger Agreement") and to approve the merger of ARCC Odyssey Corp., a
wholly owned subsidiary of Ares Capital that was formed for the purpose of the
merger, with and into Allied Capital which, immediately thereafter, would merge
with and into Ares Capital (the "Proposed Ares Capital Merger") and (2) to
approve the adjournment of the Special Meeting. The specific proposals we are
soliciting proxies to vote "AGAINST" are the proposals in the Joint Proxy
Statement/Prospectus included in the Registration Statement on Form N-14 filed
by Ares Capital with the Securities and Exchange Commission ("SEC") on December
16, 2009, as amended by Amendment No. 1 to the Registration Statement on Form
N-14 filed on January 26, 2010 (the "Allied Capital/Ares Capital N-14"). Allied
Capital has set February 2, 2010 as the record date for determining those
stockholders who will be entitled to vote at the Special Meeting (the "Record
Date"). The principal executive offices of Allied Capital are located at 1919
Pennsylvania Avenue, N.W., Washington, District of Columbia 20006.
This
Proxy Statement and the enclosed [COLOR] proxy card are first being mailed to
Allied Capital's stockholders on or about [ • ],
2010.
WE
ARE SOLICITING PROXIES FROM ALLIED CAPITAL STOCKHOLDERS TO VOTE "AGAINST" THE
ARES CAPITAL MERGER AGREEMENT AND THE PROPOSED ARES CAPITAL MERGER AND "AGAINST"
THE ADJOURNMENT OF THE SPECIAL MEETING. WE BELIEVE THE PROPOSED ARES CAPITAL
MERGER IS AN UNATTRACTIVE AND INFERIOR DEAL FOR HOLDERS OF ALLIED CAPITAL SHARES
AND DOES NOT REPRESENT THE BEST ALTERNATIVE FOR ALLIED CAPITAL. WE BELIEVE OUR
OFFER IS AN ATTRACTIVE AND SUPERIOR ALTERNATIVE FOR ALLIED CAPITAL
STOCKHOLDERS.
On
January 26, 2010, Prospect Capital publicly announced that it had delivered a
letter to the board of directors of Allied Capital (the "Allied Capital Board")
raising its previous offer of January 14, 2010 to Allied Capital and proposing
an offer (the "Prospect Capital Merger Offer") to acquire each outstanding
Allied Capital Share in exchange for 0.40 of a share of Prospect Capital common
stock, par value $0.001 per share (the "Prospect Capital Shares"). Ares Capital,
by comparison, is
proposing
to exchange only 0.325 of a share of Ares Capital common stock, par value $0.001
per share (the "Ares Capital Shares") for each outstanding Allied Capital
Share. Based on closing share prices of Prospect Capital Shares and
Ares Capital Shares, as of January 28, 2010, the value of the Prospect Capital
Merger Offer is 16%
greater than the Proposed Ares Capital Merger.
Prospect
Capital believes that the Prospect Capital Merger Offer represents a compelling
strategic combination that will generate superior value for Allied Capital's
stockholders in comparison to the Proposed Ares Capital Merger.
A
vote "AGAINST" the Proposed Ares Capital Merger will send a clear message to the
Allied Capital Board that Allied Capital stockholders reject the Proposed Ares
Capital Merger and that the Allied Capital Board should accept the Prospect
Capital Merger Offer.
Even
if you have already sent a proxy card to Allied Capital, you have every right to
change your vote. Only your latest-dated proxy counts. Vote "AGAINST" the
Proposed Ares Capital Merger by voting "AGAINST" each proposal to be considered
at the Special Meeting and signing, dating and returning the enclosed [COLOR]
proxy card in the postage-paid envelope provided by us. No postage is necessary
if your proxy card is mailed in the United States. We urge you to promptly sign,
date and return the enclosed [COLOR] proxy card to us.
We
are not asking you to vote on or approve the Prospect Capital Merger Offer at
this time.
REASONS
TO VOTE "AGAINST" THE PROPOSED ARES CAPITAL MERGER
Prospect
Capital urges all of Allied Capital's stockholders to vote "AGAINST" the Ares
Capital Merger Agreement and the Proposed Ares Capital Merger for the following
reasons:
|
·
|
A
vote "AGAINST" the Ares Capital Merger Agreement and the Proposed Ares
Capital Merger preserves your opportunity to receive the premium for your
Allied Capital Shares contemplated by the Prospect Capital Merger Offer,
which, if consummated, should provide significantly greater financial
value to you than the Proposed Ares Capital
Merger.
|
The
Prospect Capital Merger Offer, if consummated, should provide the Allied Capital
stockholders with an opportunity to realize a significant premium for their
shares upon consummation of the transaction contemplated by the Prospect Capital
Merger Offer. Based on closing share prices of Prospect Capital Shares and Ares
Capital Shares, as of January 28, 2010, the value of the Prospect Capital Merger
Offer is 16% greater
than the Proposed Ares Capital Merger. Based upon the closing prices
on [ • ],
2010, the last practicable date prior to the mailing of this Proxy Statement,
the Prospect Capital Merger Offer had a value of $[ • ] per Allied
Capital Share, which represented a [ • ]% premium to
the closing price of the Allied Capital Shares as of such date, a premium of
[ • ]% over
the October 23, 2009 closing price of the Allied Capital Shares and a premium of
[ • ]% over
the $[ • ] per
Allied Capital Share implied by the Proposed Ares Capital Merger.
The
premium represented by the Prospect Capital Merger Offer may be larger or
smaller at the effective time of the merger contemplated by the Prospect Capital
Merger Offer depending on the market prices of each of the Allied Capital Shares
and the Prospect Capital Shares and will fluctuate between now and then
depending on such market prices.
Information
with respect to the range of closing prices for the Allied Capital Shares for
certain dates and periods is set forth in the Allied Capital/Ares Capital N-14.
Prospect Capital urges stockholders to obtain a current market quotation for the
Allied Capital Shares, Prospect Capital Shares and Ares Capital
Shares.
|
·
|
A
vote "AGAINST" the Ares Capital Merger Agreement and the Proposed Ares
Capital Merger paves the way for Allied Capital stockholders to receive
through the Prospect Capital Merger Offer what we believe is a more
attractive investment in Prospect Capital Shares than the Ares Capital
Shares, with superior upside potential and less risk than
the
|
| |
Ares
Capital Shares. Specifically, we believe the Prospect Capital
Merger Offer has the potential for higher dividends, higher total returns,
greater combined ownership, and lower combined indebtedness for the Allied
Capital stockholders in comparison with the Proposed Ares Capital
Merger.
|
We
believe that the Prospect Capital Merger Offer, if consummated, could provide
superior dividend payments to Allied Capital stockholders compared to the
Proposed Ares Capital Merger. Based on our proposed exchange ratio and our most
recent quarterly dividend, our offer would provide Allied Capital stockholders
with a pro forma quarterly dividend of $0.164 per share of Allied Capital common
stock, which is more than 40% higher than the pro forma quarterly dividend of
$0.114 per share of Allied Capital common stock under the Proposed Ares Capital
Merger. In addition, Ares Capital cut its dividend in 2009 by 17% while Prospect
Capital has increased its dividend in each of the 21 quarters since its 2004
initial public offering.
We
also believe that the Prospect Capital Merger Offer provides a superior upside
potential to Allied Capital stockholders compared to the Proposed Ares Capital
Merger. Based on our proposed exchange ratio of 0.40 of a Prospect Capital Share
for each outstanding Allied Capital Share, Allied Capital stockholders would
receive 71.7 million shares of Prospect Capital common stock, representing 53%
of the ownership of the combined Prospect Capital/Allied Capital entity.
However, under the terms of the Proposed Ares Capital Merger, Allied Capital
stockholders would expect to own only 30% of the combined Ares Capital/Allied
Capital entity, after giving effect to the equity offering Ares Capital
announced on January 25, 2010. A Prospect Capital/Allied Capital combination
therefore would preserve for existing stockholders of Allied Capital a
significantly higher level of participation in any further improvements in the
value of Allied Capital's portfolio as the economy and markets improve than
would a combination with Ares Capital.
We
also believe the Prospect Capital Merger Offer would provide Allied Capital with
a lower leverage profile. Prospect Capital currently has a debt/equity ratio of
less than 0.1x, which, pro forma for the proposed Prospect Capital/Allied
Capital combination, would provide significant de-leveraging for Allied Capital
stockholders. Ares Capital, by comparison, has a debt/equity ratio of
approximately 0.7x as of its most recent quarterly financial statements, which
we believe makes an Ares Capital/Allied Capital combination riskier for Allied
Capital stockholders. Further, Prospect Capital currently
maintains investment grade ratings with Standard and Poor's and Moody's for
Prospect Capital's corporate rating and credit facility rating, respectively,
which we believe Allied Capital's lenders and stockholders would view
positively.
|
·
|
A
vote "AGAINST" the Ares Capital Merger Agreement and the Proposed Ares
Capital Merger recognizes that Allied Capital has repaid a substantial
amount of its debt in recent months, has little debt due in 2010 and,
therefore, does not need to rush to close a merger with Ares
Capital.
|
Allied
Capital, we believe based on its public filings, is not in default with its
lenders and does not face a liquidity crisis. As a result, we believe there is
no compelling reason for Allied Capital to rush to close a merger with Ares
Capital. The Allied Capital/Ares Capital N-14 states under "Recent
Developments" that "Allied Capital has also paid down approximately $389 million
of private debt since September 30, 2009 and has cash and money market and other
securities of approximately $185 million as of January 15, 2010." Assuming
that the private debt tranches are paid in succeeding order of maturities, based
on publicly available information, we believe there is no longer any private
debt maturing in 2010, a substantial amount has been repaid for the 2011
maturity, and Allied Capital has substantial cash on hand for further debt
reduction. In addition, the Allied Capital/Ares Capital N-14 indicates that
Allied Capital continues to produce significant cash flows through investment
income and proceeds from asset sales and repayments, thereby providing
visibility for further cash generation for debt reduction in the coming
months.
|
·
|
A
vote "AGAINST" the Ares Capital Merger Agreement and the Proposed Ares
Capital Merger encourages the Allied Capital Board to terminate the Ares
Capital Merger Agreement and accept the Prospect Capital Merger
Offer. We believe Allied Capital decided to merge with Ares
Capital with little to no serious marketing to other potential bidders,
thereby leaving value on the table and not serving the best interests of
the Allied Capital stockholders.
|
Allied
Capital is prohibited from engaging in negotiations or discussions with us or
any other potential bidder under the terms of the Ares Capital Merger Agreement
unless the Allied Capital Board recognizes the Prospect Capital Merger Offer as
a Superior Proposal (as defined in the Ares Capital Merger Agreement), which it
has been unwilling to do. If the Proposed Ares Capital Merger is rejected by
Allied Capital stockholders, the Allied Capital Board will be able to terminate
the Ares Capital Merger Agreement and will be able to reconsider the Prospect
Capital Merger Offer, which we hope the Allied Capital Board would
accept. In light of the fact that the Ares Capital Merger Agreement
must be approved by the affirmative vote of the holders of two-thirds of Allied Capital's
outstanding shares entitled to vote on the matter, the sooner you vote "AGAINST"
the Ares Capital Merger Agreement and the Proposed Ares Capital Merger, the
sooner the Allied Capital Board may decide to enter into discussions with
Prospect Capital.
Unfortunately,
the actions of the Allied Capital Board to date have been consistent with its
past refusal to engage with Prospect Capital, despite Prospect Capital's
expressions of interest in pursuing a transaction with Allied
Capital. The section entitled "The Merger — Background of the Merger"
in the Allied Capital/Ares Capital N-14 discloses that Allied Capital had
"explore[d] strategic alternatives, including continuing its existing business
on a stand-alone basis with its existing structure, converting to an operating
company, agreeing to a large investment by a strategic investor or entering into
a business combination with a financial services firm" prior to entering into
the Ares Capital Merger Agreement. However, in our view, the Allied Capital
Board decided to put Allied Capital up for sale without sufficiently considering
alternative indications of interest to the detriment of Allied Capital
stockholders. In fact, we believe that Allied Capital and its advisors
specifically excluded Prospect Capital from its sale process even though
Prospect Capital had already expressed great interest to Allied Capital in
pursuing a business combination that delivers a premium to Allied Capital
stockholders. The Prospect Capital Merger Offer demonstrates that a significant
premium, superior to that in the Proposed Ares Capital Merger, would have been,
and is, available to Allied Capital's stockholders. The Allied Capital Board
announced on January 19, 2010 that it had concluded that the First Prospect
Capital Merger Offer (as defined below) did not constitute a superior proposal
under the terms of the Ares Capital Merger Agreement even though the First
Prospect Capital Merger Offer provided a 10% premium over the Proposed Ares
Capital Merger, based upon closing market prices for Prospect Capital Shares and
Ares Capital Shares as of January 12, 2010. On January 26, 2010, Prospect
Capital raised its offer to acquire Allied Capital, making the implied value of
Prospect Capital's offer more than 20% greater than the implied value of the
Proposed Ares Capital Merger offer to Allied Capital's stockholders, based on
the prior day's after-market trading prices of Ares Capital Shares and Prospect
Capital Shares.
|
·
|
A
vote "AGAINST" the Ares Capital Merger Agreement and the Proposed Ares
Capital Merger clears the way for prompt completion of the Prospect
Capital Merger Offer.
|
If
the Proposed Ares Capital Merger is voted down by the Allied Capital
stockholders, Allied Capital will be able to terminate the Ares Capital Merger
Agreement and accept the Prospect Capital Merger Offer, which Prospect Capital
believes that it can promptly consummate. Prospect Capital has reviewed the Ares
Capital Merger Agreement and is prepared, subject to due diligence, to execute
an agreement with Allied Capital substantially similar to the Ares Capital
Merger Agreement. Prospect Capital believes it can complete its due diligence
within 15 business days once full access to due diligence materials has been
granted. Unlike Ares Capital, Prospect Capital has successfully
merged
with
another publicly traded business development company, Patriot Capital Funding,
Inc., following an auction, which should dispel any doubt as to Prospect
Capital's ability and resolve to complete the proposed Prospect Capital/Allied
Capital merger.
In
addition, while Ares Capital has not made any public announcement about the fate
of Allied Capital's professional staff in Washington, District of Columbia or
New York, New York, Prospect Capital is interested in retaining a significant
portion of the Allied Capital team, in order to maximize continuity of asset
management and monetization of the portfolio and to reduce integration risk. By
leveraging the Allied Capital team's existing relationships as well as Prospect
Capital's access to debt and equity capital markets and its lower existing and
pro forma leverage profile in comparison to Ares Capital, Prospect Capital is
confident that it will be able to maintain or refinance Allied Capital's
existing institutional debt.
Return
your [COLOR] proxy card and vote "AGAINST" the Ares Capital Merger Agreement and
the Proposed Ares Capital Merger today.
DO NOT RETURN ANY PROXY CARD THAT YOU
RECEIVE FROM ALLIED CAPITAL. Even if you have previously submitted a
proxy card furnished by Allied Capital, it is not too late to change your vote
by simply signing, dating and returning the enclosed [COLOR] proxy card
today.
We
urge you to send the Allied Capital Board a clear message that Allied Capital
stockholders reject the Ares Capital Merger Agreement and the Proposed Ares
Capital Merger and that the Allied Capital Board should accept the Prospect
Capital Merger Offer. VOTE
"AGAINST" THE ARES CAPITAL MERGER AGREEMENT AND THE PROPOSED ARES CAPITAL
MERGER.
Important
Notice Regarding the Availability of Proxy Materials for the Stockholder Meeting
to be Held on March 26, 2010:
The
Proxy Statement and our proxy materials are available free of charge on Prospect
Capital's website at www.prospectstreet.com.
BACKGROUND
OF THE SOLICITATION
Throughout
2009, Prospect Capital expressed an interest in pursuing a merger transaction
between Prospect Capital and Allied Capital and attempted on several occasions
to engage in merger discussions with Allied Capital.
In
April 2009, Graham D.S. Anderson, a member of the board of directors of Prospect
Capital, met with William L. Walton, Chairman of the Allied Capital Board, to
discuss a potential transaction.
Later
that month, Mr. Anderson and John Francis Barry III, Chairman and Chief
Executive Officer of Prospect Capital, continued such discussion with Mr.
Walton. Mr. Walton then suggested that Prospect Capital enter into a
confidentiality agreement with Allied Capital so that Prospect Capital could
commence its due diligence review of Allied Capital, with a view toward
submitting a proposal to acquire Allied Capital. Although Prospect Capital was
prepared at that time to commence such due diligence review, Allied Capital
broke off discussions with Prospect Capital. Allied Capital informed Prospect
Capital that Allied Capital wished to restructure its debt prior to continuing
discussions of a transaction with Prospect Capital.
Once
Allied Capital had restructured its debt in September 2009, Prospect Capital
contacted Joseph Taylor, the Managing Director at Allied Capital responsible for
capital markets, including asset dispositions, again expressing interest in a
potential transaction. Mr. Taylor subsequently informed Prospect Capital that he
had spoken with John Scheurer, Chief Executive Officer and President of Allied
Capital, that Mr. Scheurer had no interest in engaging in any discussions
regarding a potential transaction, and that Allied Capital would continue as a
standalone company without any interest in strategic combinations with Prospect
Capital.
On
October 26, 2009, Allied Capital and Ares Capital announced that they had
entered into the Ares Capital Merger Agreement. The Allied Capital/Ares Capital
N-14 provides a summary of certain events leading to Ares Capital and Allied
Capital entering into the Ares Capital Merger Agreement.
On
January 14, 2010, Prospect Capital delivered a proposal letter to the Allied
Capital Board in care of Mr. Scheurer (the "First Prospect Capital Merger Offer
Letter") containing an offer to acquire each outstanding Allied Capital Share in
exchange for 0.385 of a share of Prospect Capital Common Stock (the "First
Prospect Capital Merger Offer"). As of January 14, 2010 (based upon closing
market prices as of January 12, 2010), the First Prospect Capital Merger Offer
represented a value of $4.88 per Allied Capital Share, which was a 10% premium
to the $4.42 per Allied Capital Share value implied by an exchange ratio of
0.325 of Ares Capital, an 18% premium to the closing price of $4.13 of each
Allied Capital Share on January 12, 2010 and a 79% premium to the closing price
of $2.73 of each Allied Capital Share on October 23, 2009, the last trading day
prior to the public announcement of the Ares Capital Merger
Agreement.
On
January 19, 2010, Allied Capital filed a Form 8-K stating that the Allied
Capital Board unanimously rejected the First Prospect Capital Merger Offer and
that the Allied Capital Board determined that the First Prospect Capital Merger
Offer did not constitute a "Superior Proposal" as such term is defined in the
Ares Capital Merger Agreement. The Allied Capital Board also reaffirmed its
recommendation that Allied Capital's stockholders vote in favor of the approval
of the Proposed Ares Capital Merger and the Ares Capital Merger Agreement for
the reasons it initially approved the merger with Ares Capital.
On
January 20, 2010, Prospect Capital issued a press release containing a copy of a
letter it subsequently sent to the Allied Capital Board in connection with the
First Prospect Capital Merger Offer. The letter reads as follows:
January
20, 2010
Board
of Directors
c/o
John M. Scheurer
Chief
Executive Officer and President
Allied
Capital Corporation
1919
Pennsylvania Avenue N.W.
Washington,
DC 20006
Ladies
and Gentlemen:
We
were disappointed by your summary rejection of our offer to acquire Allied at a
significant premium to the implied value offered to Allied's shareholders by
Ares Corporation. The cavalier manner in which you have dealt with our bona fide
offer is a continuation of your stonewalling over the last nine months in the
face of our numerous expressions of serious interest in acquiring
Allied.
We
do not think it would be productive at this time to respond to each and every
point made in the Form 8-K filed by Allied yesterday. However, the Form 8-K
misleadingly fails to disclose several material facts -- made clear in our offer
-- that directly refute your stated reasons for rejecting our offer out of
hand.
◦ Superior Current Value.
Contrary to your assertion that we are offering only a "small premium" to the
Ares merger, our offer provides significantly superior current value for Allied
shareholders. More specifically, based on an after-market trading price of
$12.93 per share of Prospect common stock on January 19, 2010, Prospect's offer
represents a value of $4.98 per share of Allied common stock, which is an
approximately 10% premium to the $4.53 value per Allied share implied by an
exchange ratio of 0.325 of a share of Ares common stock in the Ares merger
(based on a $13.94 after-market trading price of Ares common stock price on
January 19, 2010).
◦ Superior Dividend Payments.
You have asserted without any support that Prospect's offer presents
"significant risks" relating to the combined company's ability to maintain
dividend payments. In fact, Ares cut its dividend in 2009 by 17% while Prospect
has increased its dividend in each of the 21 quarters since its 2004 initial
public offering. Prospect pays a $0.40875 per share dividend, compared to $0.35
per share for Ares. Based on our proposed exchange ratio of 0.385 of a share of
Prospect common stock for each share of Allied common stock, our offer would
provide Allied shareholders with a dividend of $0.157 per share of Allied common
stock as compared with a dividend of $0.114 per share of Allied common stock
under the Ares merger.
◦ Superior Access to Additional Debt
and Equity Capital. Contrary to your professed concern that Prospect's
offer poses "significant risks" concerning future access to the capital markets,
we believe that based on Prospect's track record, a Prospect/Allied combination
would provide Allied shareholders with superior access to debt and equity
capital markets. Prospect has successfully completed 13 equity offerings since
2004, including ten offerings aggregating more than $350 million since the
inception of the credit dislocation in mid-2007 and six equity offerings
aggregating more than $200 million during 2009. Unlike Ares, Prospect increased
both its credit facility size and its number of lenders over the last
year.
◦ Superior Leverage Profile. In
addition, your Form 8-K fails to acknowledge the point made in our offer that
Prospect currently has a debt/equity ratio of less than 0.1x, which, pro forma
for the proposed Prospect/Allied combination, would provide significant
de-leveraging for Allied shareholders. Ares, by comparison, has a debt/equity
ratio of approximately 0.7x, which Prospect believes makes an Ares/Allied
combination riskier for Allied's shareholders. Further, Prospect
enjoys
investment
grade ratings with Standard and Poor's and Moody's for Prospect's corporate
rating and credit facility rating, respectively, which we believe Allied's
lenders and shareholders would view positively.
As
you know, we have relied solely on Allied's public documents in making the
offer, which is conditioned on access to due diligence information. To the
extent that you can provide us, which your agreement with Ares allows you to do,
with information that demonstrates that a higher valuation of Allied is
justified, we would be prepared to discuss an increase in the consideration to
be paid in our offer.
In
this context, your criticism of our offer based on our need to conduct customary
due diligence is at best disingenuous. After all, it is within your own control
to provide us access to the information you have already provided to Ares. We
are confident that we could complete our due diligence review
expeditiously.
In
light of all of the foregoing, we believe your contention that our offer does
not constitute a "Superior Proposal" under the Ares merger is both unfounded and
contrary to the interests of Allied's shareholders.
We
remain convinced that our offer represents a compelling strategic combination
that we believe would generate superior value for Allied shareholders in
comparison to the Ares merger. We remain hopeful that Allied's Board of
Directors will see the value of our offer and act in the best interests of
Allied's shareholders. We urge you to immediately discharge your fiduciary
duties and to reconsider your refusal to provide Prospect with access to due
diligence that could result in even higher value to Allied's
shareholders.
We
look forward to hearing from you.
|
|
Very
truly yours,
|
|
|
|
|
|
Prospect
Capital Corporation
|
|
|
|
|
|
|
|
|
By: |
/s/
M. Grier Eliasek |
|
|
|
Name: M.
Grier Eliasek
|
|
|
Title: President
and COO
|
|
cc:
|
Gary
Swidler, BofA Merrill Lynch
|
|
|
Ian
Simmonds, BofA Merrill Lynch
|
On
January 26, 2010, Ares Capital filed Amendment No. 1 to the Allied Capital/Ares
Capital N-14, which, among other things, disclosed the First Prospect Capital
Merger Offer described above.
On
January 26, 2010, Prospect Capital announced that it delivered another letter to
the Allied Capital Board, raising its offer to acquire Allied Capital (the
"Second Prospect Capital Merger Offer Letter"). The Second Prospect
Capital Merger Offer Letter reads as follows:
January
26, 2010
Board
of Directors
c/o
John M. Scheurer
Chief
Executive Officer and President
Allied
Capital Corporation
1919
Pennsylvania Avenue N.W.
Washington,
D.C. 20006
Ladies
and Gentlemen:
We
hereby increase our offer to acquire Allied Capital Corporation to 0.40 of a
share of Prospect common stock for each share of Allied common stock. As
discussed below, the implied value of our offer is now more than
20% greater than the implied value of Ares' offer to Allied
shareholders.
Revised Superior Value: Based
on an after-market trading price of $12.56 per share of Prospect common stock on
January 25, 2010, Prospect's offer represents a value of $5.02 per share of
Allied common stock, which is an over 20%
premium to the $4.17 value per Allied share implied by an exchange ratio
of 0.325 of a share of Ares common stock in the Ares merger (based on a $12.84
after-market trading price of Ares common stock price on January 25,
2010).
Revised Superior Dividends:
Based on our proposed exchange ratio and Ares' and our most recent quarterly
dividend, our offer would provide Allied shareholders with a pro forma quarterly
dividend of $0.164 per share of Allied common stock, which is more than
40% higher than the pro forma quarterly dividend of $0.114 per share of
Allied common stock under the Ares merger.
Superior Upside Potential:
Based on our proposed exchange ratio, Allied shareholders would receive 71.7
million shares of Prospect common stock, representing 53% of
the ownership of the combined entity. A Prospect-Allied combination would
preserve greater upside for existing shareholders of Allied than would a
combination with Ares, where Allied shareholders would expect to own only
31% of the combined entity, after giving effect to the proposed equity
offering Ares announced yesterday.
Transaction Certainty: We are
confident that we can promptly consummate the proposed transaction. We have
reviewed the merger agreement signed between Allied and Ares and are
comfortable, subject to due diligence, executing an agreement with Allied
substantially similar to Allied's agreement with Ares. We believe we can
complete our due diligence within 15 business days once full access to due
diligence materials has been granted. Given our access to debt and equity
capital markets and our lower existing and pro forma leverage profile in
comparison to Ares, we are confident we will be able to maintain or refinance
Allied's existing institutional debt. Unlike Ares, we have successfully merged
with another publicly traded business development company, Patriot Capital,
following an auction, which should dispel any doubt as to our ability and
resolve to complete this merger.
Streamlined Integration: While
Ares has not made any public announcement about the fate of Allied's
professional staff in Washington, D.C. or New York, we are interested in
retaining a significant portion of the Allied team, in order to maximize
continuity of asset management and monetization of the portfolio and to reduce
integration risk.
We
believe our offer represents a compelling strategic combination that will
generate superior value for Allied shareholders in comparison to the Ares
proposal. Allied has successfully restructured its institutional debt, does not
face a liquidity crisis and has benefited from the improvement in the debt
markets. Accordingly, we do not understand why the Allied board insists on
barreling ahead with an
inferior
transaction with Ares without talking to us or engaging with us in any way. We
do not see how completely ignoring a superior offer serves Allied
shareholders.
Should
the Allied board continue to "stiff arm" us, we are prepared to pursue all
available options, including bringing the matter directly to Allied
shareholders.
We
look forward to your favorable response by 5 P.M., Eastern Standard Time on
Thursday, January 28, 2010.
|
|
Very
truly yours,
|
|
|
|
|
|
Prospect
Capital Corporation
|
|
|
|
|
|
By:
|
/s/
M. Grier Eliasek
|
|
|
|
Name:
M. Grier Eliasek
|
|
|
Title:
President and COO
|
|
cc:
|
Gary
Swidler, BofA Merrill Lynch
|
|
|
Ian
Simmonds, BofA Merrill Lynch
|
On
January 28, 2010, Mr. Scheurer informed M. Grier Eliasek, President and Chief
Operating Officer of Prospect Capital, that Allied Capital would not be
responding to the Second Prospect Capital Merger Offer Letter by the requested 5
P.M., Eastern Standard Time deadline and provided no indication of when Prospect
Capital should expect to hear a response.
CERTAIN
INFORMATION CONCERNING THE PROPOSED ARES CAPITAL MERGER
At
the Special Meeting, Allied Capital's stockholders of record at the close of
business on the Record Date will vote on whether to approve the Ares Capital
Merger Agreement and the Proposed Ares Capital Merger. According to the Allied
Capital/Ares Capital N-14, under the terms of the Ares Capital Merger Agreement,
each outstanding Allied Capital Share will be converted into the right to
receive 0.325 of a share of Ares Capital common stock, par value $0.001 per
share, subject to the payment of cash in lieu of fractional shares of Ares
Capital common stock. Subject to the terms and conditions of the Ares Capital
Merger Agreement, the transactions contemplated thereby will be accomplished in
two steps. In the first step, ARCC Odyssey Corp., a wholly owned subsidiary of
Ares Capital ("Merger Sub"), will merge with and into Allied Capital and the
separate corporate existence of Merger Sub will cease. Immediately thereafter,
in the subsequent combination, Allied Capital will merge with and into Ares
Capital and the separate corporate existence of Allied Capital will cease. Ares
Capital will be the surviving entity of the subsequent combination and Ares
Capital will succeed to and assume all the rights and obligations of Allied
Capital and will continue its existence as a corporation under Maryland state
law. As a result of the Proposed Ares Capital Merger, Allied Capital's
stockholders would own approximately 30% of the combined company's outstanding
common stock after giving effect to the equity offering Ares Capital announced
on January 25, 2010.
We
encourage you to read the full text of the Ares Capital Merger Agreement, since
such agreement, and not this summary, governs the Proposed Ares Capital
Merger. The Ares Capital Merger Agreement is filed as Exhibit 2.1 to
the Ares Capital Form 8-K filed with the SEC on October 30, 2009 and can be
found at the SEC's website (www.sec.gov).
The
conditions to the consummation of the Proposed Ares Capital Merger include the
following: (1) approval of the Ares Capital Merger Agreement and approval of the
Proposed Ares Capital Merger by Allied Capital's stockholders, (2) approval by
Ares Capital's stockholders of the issuance of the shares of Ares Capital common
stock to be issued pursuant to the Ares Capital Merger Agreement, (3)
authorization of the listing of such Ares Capital shares on NASDAQ, (4)
effectiveness of the registration statement registering Ares Capital shares to
be issued in the Proposed Ares Capital Merger, no issuance by the SEC of a stop
order and no initiation of a proceeding by the SEC to suspend the registration
statement's effectiveness, (5) absence of any order or law preventing or making
illegal the consummation of the Proposed Ares Capital Merger or any other
transactions contemplated thereby, (6) receipt of all regulatory approvals
required to consummate the Proposed Ares Capital Merger and any other
transactions contemplated thereby and the expiration of all statutory waiting
periods required by applicable law, (7) the truth and correctness of the
representations and warranties of Allied Capital set forth in the Ares Capital
Merger Agreement as of the date of the Ares Capital Merger Agreement and the
closing date, without regard to any "material adverse effect" or other
"materiality" qualifications (subject to certain exceptions), (8) the truth and
correctness of the representations and warranties of Ares Capital and Merger Sub
set forth in the Ares Capital Merger Agreement as of the date of the Ares
Capital Merger Agreement and the closing date, without regard to any "material
adverse effect" or other "materiality" qualifications (subject to certain
exceptions), (9) performance in all material respects by Allied Capital, Ares
Capital and Merger Sub of their respective obligations under the Ares Capital
Merger Agreement, (10) receipt by Ares Capital of a certificate signed on behalf
of Allied Capital by its Chief Executive Officer or Chief Financial Officer that
Allied Capital has satisfied certain conditions, (11) receipt by Allied Capital
of a certificate signed on behalf of Ares Capital and Merger Sub by Ares
Capital's Chief Executive Officer or Chief Financial Officer that Allied Capital
has satisfied certain conditions, (12) absence of the occurrence of any
condition, change, or event that, individually or in the aggregate, has or would
reasonably be expected to have, a material adverse effect in respect of Allied
Capital or Ares Capital, other than certain previously disclosed matters, (13)
receipt by Allied Capital and Ares Capital of opinions of their respective legal
counsel, substantially to the effect that, on the basis of facts,
representations and assumptions set forth in such opinion that are
consistent
with the state of facts existing at the closing date, the merger and subsequent
combination will be treated as a "reorganization" within the meaning of Section
368(a) of the Code, (14) delivery of a certificate by Allied Capital to Ares
Capital stating that it is not and has not been within the preceding five years
a "United States real property holding corporation" for U.S. federal income tax
purposes, (15) receipt and continued full force and effect of rating agency
confirmations and consents in respect of certain outstanding debt of Allied
Capital and Ares Capital, and (16) the absence of certain bankruptcy and
insolvency related events with respect to Allied Capital and its consolidated
subsidiaries (other than Ciena Capital LLC ("Ciena")) and Ares Capital and its
consolidated subsidiaries.
The
Ares Capital Merger Agreement provides that it may be terminated at any time
prior to the effective time (whether before or after the approvals of the
Ares Capital and Allied Capital stockholders sought by the Allied Capital/Ares
Capital N-14) as follows:
|
|
●
|
by
mutual consent of Ares Capital and Allied Capital as authorized by their
respective boards of directors; or
|
|
|
|
|
|
|
●
|
by
either Ares Capital or Allied Capital if:
|
|
|
|
|
|
|
|
(1)
|
any
governmental entity that must grant regulatory approval of the Proposed
Ares Capital Merger has denied such approval and such denial has become
final and non-appealable or a governmental entity of competent
jurisdiction issues a final and nonappealable order or promulgates any law
permanently enjoining or otherwise prohibiting or making illegal the
consummation of the transactions contemplated by the Ares Capital Merger
Agreement;
|
|
|
|
|
|
|
|
|
(2)
|
the
Proposed Ares Capital Merger is not completed by June 30,
2010;
|
|
|
|
|
|
|
|
|
(3)
|
the
stockholders of Allied Capital have failed to approve any of the matters
for which their approval is being sought at a duly held meeting or at any
adjournment or postponement thereof at which such matters have been voted
upon;
|
|
|
|
|
|
|
|
|
(4)
|
the
stockholders of Ares Capital have failed to approve any of the matters for
which their approval is being sought at a duly held meeting or at any
adjournment or postponement thereof at which such matters have been voted
upon; or
|
|
|
|
|
|
|
|
|
(5)
|
upon
receiving new and material information relating to certain claims and
proceedings concerning Ciena, Ares Capital's board of directors determines
in its reasonable and good faith judgment that there is a reasonable
likelihood that the liabilities for any monetary net losses related to
Ciena exceed 66 2/3% of the fair value of Ciena as of September 30, 2009
as such fair value is determined by the Allied Capital Board and Ares
Capital promptly notifies Allied Capital in writing of such determination
within 15 business days of receiving such new and material information
related to Ciena. During a period of five business days following the
delivery of this notice to Allied Capital, either party may terminate by
providing written notice to the other party without incurring a
termination fee.
|
The
Ares Capital Merger Agreement also provides that if the Ares Capital Merger
Agreement:
|
|
●
|
is terminated
by Ares Capital or Allied Capital pursuant to paragraph (3) above,
then Allied Capital will be required to pay to Ares Capital a
$15 million termination fee;
|
|
|
|
|
|
|
●
|
is terminated
by Ares Capital or Allied Capital pursuant to paragraph (4) above,
then Ares Capital will be required to pay to Allied Capital a
$30 million reverse termination fee;
or
|
| |
● |
is terminated
by Ares Capital pursuant to paragraph (2) above (as a result of the
failure of the financing consents condition to be satisfied) or by Ares
Capital or Allied Capital pursuant to paragraph (2) above (if each of
the conditions to closing other than the financing consents condition have
been satisfied or waived as of such date), then Ares Capital will be
required to pay to Allied Capital a $30 million reverse termination
fee. |
The
Ares Capital Merger Agreement also provides that neither Allied Capital nor Ares
Capital has the right to terminate the Ares Capital Merger Agreement if it has
breached in any material respect its obligations in any manner that has
proximately contributed to the occurrence of the failure of a condition to the
consummation of the Proposed Ares Capital Merger.
In
addition, the Ares Capital Merger Agreement provides that Allied Capital may
terminate the Ares Capital Merger Agreement at any time prior to the effective
time, if:
| |
(1) |
|
Ares
Capital or Merger Sub have breached any of their covenants or
representations or warranties and such breach, either individually or in
the aggregate, would result in the failure of Allied Capital's conditions
to consummate the merger to be satisfied and is not cured within 15
business days following written notice to Ares Capital or cannot be cured
within such time period (provided that Allied Capital is not then in
material breach of the merger agreement so as to cause any of Ares
Capital's conditions not to be satisfied);
|
| |
|
|
|
| |
(2) |
|
prior
to obtaining approval of Ares Capital stockholders at the Ares Capital
special meeting, (a) the board of directors of Ares Capital
withdraws, modifies, qualifies or takes any other action inconsistent with
its recommendation, (b) Ares Capital fails to include in the
registration statement the recommendation of its board of directors or
(c) Ares Capital fails to take a vote of its stockholders prior to
June 30, 2010;
|
| |
|
|
|
| |
(3) |
|
prior
to obtaining approval of Allied Capital stockholders at the Allied Capital
special meeting, (a) Allied Capital is not in material breach of any
of the terms of the Ares Capital Merger Agreement, (b) in accordance
with the procedures described in the Ares Capital Merger Agreement, the
Allied Capital Board authorizes Allied Capital to enter into, or Allied
Capital enters into, any agreement or contract with respect to a Superior
Proposal and (c) prior to such termination Allied Capital pays to
Ares Capital in immediately available funds a $30 million termination
fee; or
|
| |
|
|
|
| |
(4) |
|
Ares
Capital breaches, in any material respect, any of its obligations relating
to holding the Ares Capital special meeting and obtaining the approval of
its stockholders with respect to the matters to be voted on at such
meeting.
|
The
Ares Capital Merger Agreement also provides that Ares Capital will be required
to pay Allied Capital a $30 million reverse termination fee if Allied
Capital terminates the Ares Capital Merger Agreement pursuant to
paragraphs (1) (solely to the extent that Ares Capital has committed a
willful breach), (2) or (4) above.
The
Ares Capital Merger Agreement also provides that Ares Capital may terminate the
Ares Capital Merger Agreement at any time prior to the effective time,
if:
| (1) |
|
Allied
Capital has breached any of its covenants or representations or warranties
and such breach, either individually or in the aggregate, would result in
the failure of Ares Capital's conditions to consummate the merger to be
satisfied and is not cured within 15 business days following written
notice to Allied Capital or cannot be cured within such time period
(provided that Ares Capital is not then in material breach of the merger
agreement so as to cause any of Allied Capital's conditions not to be
satisfied);
|
|
|
|
|
|
(2)
|
|
prior
to obtaining approval of Allied Capital stockholders at the Allied Capital
special meeting, (a) the Allied Capital Board withdraws, modifies,
qualifies or takes any other
|
|
|
|
|
|
|
|
action
inconsistent with its recommendation or Allied Capital adopts, approves or
recommends a Takeover Proposal (as defined in the Ares Capital Merger
Agreement), (b) Allied Capital fails to include in the registration
statement the recommendation of its board of directors, (c) a tender
or exchange offer relating to any Allied Capital Shares has been commenced
and Allied Capital has not sent to its stockholders, within 10 business
days after its commencement, a statement by its board of directors
recommending rejection of such tender or exchange offer, (d) a
Takeover Proposal is publicly announced and Allied Capital fails to issue,
within 10 business days after such Takeover Proposal is announced, a press
release that reaffirms the recommendation of its board of directors or
(e) Allied Capital fails to take a vote of its stockholders prior to
June 30, 2010; or
|
|
|
|
|
| (3) |
|
Allied
Capital breaches, in any material respect, any of its obligations relating
to holding the Allied Capital special meeting and obtaining the approval
of its stockholders with respect to the matters to be voted on at such
meeting or the "non-solicitation" provisions described in the Ares Capital
Merger Agreement.
|
Pursuant
to the Ares Capital Merger Agreement, Allied Capital will be required to pay
Ares Capital a $30 million termination fee if Ares Capital terminates the
Ares Capital Merger Agreement pursuant to paragraphs (1) (solely to the
extent that Allied Capital has committed a willful breach), (2) or
(3) above.
If
the Ares Capital Merger Agreement is terminated, in no event will the maximum
aggregate liability of either Allied Capital or Ares Capital, as the case may
be, exceed the amount of the applicable fee above. The Ares Capital
Merger Agreement provides that the sole and exclusive remedy of Allied Capital,
Ares Capital, their respective stockholders, Merger Sub and any other person
with respect to breach of the Ares Capital Merger Agreement is payment of the
applicable fee described above.
WE
ARE SOLICITING PROXIES FROM ALLIED CAPITAL STOCKHOLDERS TO VOTE "AGAINST" THE
ARES CAPITAL MERGER AGREEMENT AND THE PROPOSED ARES CAPITAL MERGER. WE BELIEVE
THE PROPOSED ARES CAPITAL MERGER IS AN UNATTRACTIVE AND INFERIOR DEAL FOR
HOLDERS OF ALLIED CAPITAL SHARES AND DOES NOT REPRESENT THE BEST ALTERNATIVE FOR
ALLIED CAPITAL. WE BELIEVE OUR OFFER IS A AN ATTRACTIVE AND SUPERIOR ALTERNATIVE
FOR ALLIED CAPITAL STOCKHOLDERS.
CERTAIN
INFORMATION CONCERNING PROSPECT CAPITAL
Prospect
Capital is an externally-managed, non-diversified closed-end management
investment company incorporated under the laws of Maryland, with its principal
executive offices located at 10 East 40th Street, 44th Floor, New York, NY
10016. The telephone number of Prospect Capital is (212) 448-0702. Prospect
Capital lends to and invests in middle-market, privately-held companies. Its
investment objective is to generate both current income and long-term capital
appreciation through debt and equity investments. Prospect Capital has elected
to be treated as a business development company under the Investment Company Act
of 1940. Prospect Capital invests primarily in senior and subordinated debt and
equity of companies in need of capital for acquisitions, divestitures, growth,
development, project financing and recapitalization. Prospect Capital works with
the management teams or financial sponsors to seek investments with historical
cash flows, asset collateral or contracted pro-forma cash flows. Prospect
Capital Management LLC manages Prospect Capital's investments, and Prospect
Administration LLC provides the administrative services necessary for Prospect
Capital to operate. Prospect Capital's shares are traded on the NASDAQ Global
Select Market under the symbol "PSEC" and, as of the date preceding the mailing
of this Proxy Statement, Prospect Capital had a market capitalization of
approximately $[ • ]. As
of the date this Proxy Statement was first mailed to Allied Capital's
stockholders, Prospect Capital was the beneficial owner
of
10,000 Allied Capital Shares acquired in the open market prior to the Record
Date, or less than 1% of the outstanding Allied Capital Shares, and Prospect
Capital was entitled to vote as to all of the Allied Capital Shares it
owns.
Information
for each of the directors and executive officers of Prospect Capital who are
considered to be participants in this proxy solicitation and certain other
information is set forth in Schedule I hereto. Other than as set forth herein,
none of Prospect Capital or any of the participants set forth on Schedule I
hereto has any interest, direct or indirect, by security holdings or otherwise,
in the Proposed Ares Capital Merger.
OTHER
PROPOSALS TO BE PRESENTED AT THE SPECIAL MEETING
In
addition to soliciting proxies to approve matters related to the Proposed Ares
Capital Merger, the Allied Capital Board is also soliciting proxies for the
Special Meeting for a proposal to approve the adjournment of the Allied Capital
Special Meeting, if necessary or appropriate, to solicit additional proxies, if
there are not sufficient votes at the time of the Allied Capital Special Meeting
to approve the Ares Capital Merger Agreement and the Proposed Ares Capital
Merger (the "Adjournment Proposal"). Because the Adjournment Proposal is
designed to facilitate the approval of the Ares Capital Merger Agreement and the
Proposed Ares Capital Merger, Prospect Capital recommends voting "AGAINST" this
proposal.
YOU
CAN CAST YOUR VOTE WITH RESPECT TO ALL PROPOSALS TO BE CONSIDERED AT THE SPECIAL
MEETING ON OUR [COLOR] PROXY CARD. THEREFORE, THERE IS NO NEED TO VOTE ON ALLIED
CAPITAL'S PROXY CARD.
Other
than as set forth above, Prospect Capital is not currently aware of any other
proposals to be brought before the Special Meeting. Should other proposals be
brought before the Special Meeting, the persons named on the [COLOR] proxy card
will abstain from voting on such proposals unless such proposals adversely
affect the interests of Prospect Capital as determined by Prospect Capital in
its sole discretion, in which event such persons will vote on such proposals in
their discretion.
VOTING
PROCEDURES
According
to the Allied Capital/Ares Capital N-14, as of February 2, 2010, there were
[ • ] Allied
Capital Shares entitled to vote at the Special Meeting.
Only
holders of record of Allied Capital Shares at the close of business on the
Record Date are entitled to notice of and to vote at the Special
Meeting. Holders of record of Allied Capital Shares on the Record
Date are entitled to one vote per share.
Under
Allied Capital's bylaws, a quorum is required to be present in order to conduct
business at the Special Meeting. The presence at the Special Meeting, in person
or by proxy, of the holders of Allied Capital Shares entitled to cast a majority
of all of the votes entitled to be cast will constitute a quorum for the Special
Meeting. Proxies properly executed and marked with a positive vote, a negative
vote or an abstention will be considered to be present at the Special Meeting
for purposes of determining whether a quorum is present for the transaction of
all business at the Special Meeting. However, abstentions and broker non-votes
are not counted as votes cast on the matter.
The
approval of the Ares Capital Merger Agreement and the Proposed Ares Capital
Merger requires the affirmative vote of the holders of two-thirds of Allied
Capital's outstanding shares entitled to vote on the matter. Stockholders who
abstain, fail to return their proxies or do not otherwise vote, effectively will
be voting "AGAINST" the Ares Capital Merger Agreement and the Proposed Ares
Capital Merger. Brokers who hold shares of stock in "street-name" cannot vote
those shares if the brokers are not provided with voting instructions in
accordance with their procedures and this would also be counted as a vote
"AGAINST" the Ares Capital Merger Agreement and the Proposed Ares Capital
Merger.
The
Adjournment Proposal requires the affirmative vote of a majority of the votes
cast on the matter by the holders of Allied Capital Shares present in person or
represented by proxy at the Special Meeting. Stockholders present in person or
represented by proxy at the Special Meeting who abstain will have no effect on
the vote on the Adjournment Proposal. It is expected that brokers and other
nominees will not have discretionary authority to vote on the proposal to
adjourn the Special Meeting. However, broker shares for which written authority
to vote has not been obtained will not be treated as votes cast on the matter
and will have no effect on the vote on such proposal.
Allied
Capital's stockholders (i) may vote "AGAINST" one or both of the proposals, (ii)
may abstain from voting on one or both of the proposals or (iii) may vote for
one or both of the proposals by marking the proper box on the [COLOR] proxy card
and signing, dating and returning it promptly in the enclosed postage-paid
envelope. If an Allied Capital stockholder returns a [COLOR] proxy card that is
signed, dated and not marked with respect to a proposal, that stockholder will
be deemed to have voted "AGAINST" the approval of the Ares Capital Merger
Agreement and the Proposed Ares Capital Merger and "AGAINST" the Adjournment
Proposal.
All
Allied Capital Shares represented by properly executed proxies received in time
for the Special Meeting will be voted at the Special Meeting in the manner
specified by the stockholders giving those proxies. Stockholders may also
instruct the proxy solicitor on how to cast their vote by calling the proxy
solicitor or via the Internet pursuant to the instructions shown on the proxy
card.
Under
Maryland law and Allied Capital's bylaws, only the matters stated in the notice
of special meeting will be presented for action at the Special Meeting or at any
adjournment or postponement thereof.
If
you hold some or all of your shares in a brokerage account, your broker will not
be permitted to vote your shares unless you provide them with instructions on
how to vote your shares. For this reason, you should provide your broker with
instructions on how to vote your shares or arrange to attend the Special Meeting
and vote your shares in person. Stockholders are urged to authorize proxies by
telephone or the Internet if their broker has provided them with the opportunity
to do so. See your voting instruction form for details. If your broker holds
your shares and you attend the Special Meeting and wish to vote in person,
please bring a "legal proxy" from your broker authorizing you to vote your
shares at the Special Meeting.
With
respect to the Ares Capital Merger Agreement and the Proposed Ares Capital
Merger, if you do not provide your broker with instructions or attend the
Special Meeting, it will have the same effect as a vote "AGAINST" approval of
the Ares Capital Merger Agreement and the Proposed Ares Capital
Merger.
YOU
MAY REVOKE YOUR PROXY AT ANY TIME PRIOR TO ITS EXERCISE BY APPEARING AT THE
SPECIAL MEETING AND VOTING IN PERSON, BY SUBMITTING A DULY EXECUTED, LATER-DATED
PROXY, BY INSTRUCTING THE PROXY SOLICITOR TO CHANGE YOUR VOTE EITHER BY CALLING
THE PROXY SOLICITOR OR VIA INTERNET PURSUANT TO THE INSTRUCTIONS SHOWN ON THE
PROXY CARD OR BY SUBMITTING A WRITTEN NOTICE OF REVOCATION TO EITHER (A)
PROSPECT CAPITAL, CARE OF INNISFREE M&A INCORPORATED 501 MADISON AVENUE,
20TH FLOOR, NEW YORK, NY 10022, OR (B) THE PRINCIPAL EXECUTIVE OFFICES OF ALLIED
CAPITAL AT 1919 PENNSYLVANIA AVENUE, N.W., WASHINGTON, DISTRICT OF COLUMBIA
20006. A REVOCATION MAY BE IN ANY WRITTEN FORM VALIDLY SIGNED BY THE RECORD
HOLDER AS LONG AS IT CLEARLY STATES THAT THE PROXY PREVIOUSLY GIVEN IS NO LONGER
EFFECTIVE. STOCKHOLDERS WHO HOLD THEIR SHARES IN A BANK OR BROKERAGE ACCOUNT
WILL NEED TO NOTIFY THE PERSON RESPONSIBLE FOR THEIR ACCOUNT TO REVOKE OR
WITHDRAW PREVIOUSLY GIVEN INSTRUCTIONS. WE REQUEST THAT A COPY OF ANY REVOCATION
SENT TO ALLIED CAPITAL OR ANY
REVOCATION
NOTIFICATION SENT TO THE PERSON RESPONSIBLE FOR A BANK OR BROKERAGE ACCOUNT ALSO
BE SENT TO PROSPECT CAPITAL, CARE OF INNISFREE M&A INCORPORATED, AT THE
ADDRESS BELOW SO THAT PROSPECT CAPITAL MAY MORE ACCURATELY DETERMINE IF AND WHEN
PROXIES HAVE BEEN RECEIVED FROM THE HOLDERS OF RECORD ON THE RECORD DATE. UNLESS
REVOKED IN THE MANNER SET FORTH ABOVE, SUBJECT TO THE FOREGOING, DULY EXECUTED
PROXIES IN THE FORM ENCLOSED WILL BE VOTED AT THE SPECIAL MEETING AS SET FORTH
ABOVE.
BY
EXECUTING THE [COLOR] CARD YOU ARE AUTHORIZING THE PERSONS NAMED AS PROXIES TO
REVOKE ALL PRIOR PROXIES ON YOUR BEHALF.
If
you have any questions or require any assistance in voting your Allied Capital
Shares, please contact:
INNISFREE
M&A INCORPORATED
501
Madison Avenue, 20th
Floor
New
York, NY 10022
Banks
and Brokers should call: 212-750-5833
or
Toll
Free at: 877-750-9501
DISSENTERS'
RIGHTS
Allied
Capital's stockholders are not entitled to dissenters' appraisal rights in
connection with the Proposed Ares Capital Merger.
SOLICITATION
OF PROXIES
Except
as set forth below, Prospect Capital will not pay any fees or commissions to any
broker, dealer, commercial bank, trust company or other nominee for the
solicitation of proxies in connection with this solicitation.
Proxies
will be solicited by mail, telephone, facsimile, telegraph, the Internet,
e-mail, newspapers and other publications of general distribution and in person.
Directors and the officers of Prospect Capital listed on Schedule I hereto may
assist in the solicitation of proxies without any additional remuneration
(except as otherwise set forth in this Proxy Statement).
Prospect
Capital has retained Innisfree M&A Incorporated ("Innisfree") for
solicitation and advisory services in connection with solicitations relating to
the Special Meeting, for which Innisfree may receive a fee of up to $100,000. Up
to 50 people may be employed by Innisfree in connection with the solicitation of
proxies for the Special Meeting. Prospect Capital has also agreed to reimburse
Innisfree for out-of-pocket expenses and to indemnify Innisfree against certain
liabilities and expenses, including reasonable legal fees and related charges.
Innisfree will solicit proxies for the Special Meeting from individuals,
brokers, banks, bank nominees and other institutional holders. Directors,
officers and certain employees of Prospect Capital may assist in the
solicitation of proxies without any additional remuneration. The entire expense
of soliciting proxies for the Special Meeting by or on behalf of Prospect
Capital is being borne by Prospect Capital.
If
you have any questions concerning this Proxy Statement or the procedures to be
followed to execute and deliver a proxy, please contact Innisfree at the address
or phone number specified above.
STOCKHOLDER
NOMINATIONS AND PROPOSALS FOR THE 2010 ANNUAL MEETING
According
to the Allied Capital/Ares Capital N-14, stockholder proposals intended for
submission pursuant to Rule 14a−8 under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), for inclusion in Allied Capital's proxy statement
and form of proxy for its 2010 annual meeting of stockholders, which will only
be held if the merger is not completed, must have been received by Allied
Capital on or before November 27, 2009, unless the date of the 2010 annual
meeting is changed by more than 30 days from the date of the previous year's
meeting, then the deadline is a reasonable time before the Company begins to
print and send its proxy materials for the 2010 annual meeting. Such proposals
must also comply with the requirements as to form and substance established by
the SEC if such proposals are to be included in the proxy statement and form of
proxy. Any such proposal should be mailed to: Allied Capital Corporation, 1919
Pennsylvania Avenue, N.W., Washington, District of Columbia. 20006, Attention:
Corporate Secretary.
Stockholder
proposals or director nominations to be presented at the 2010 annual meeting of
stockholders, other than stockholder proposals submitted pursuant to Rule 14a−8
under the Exchange Act, must be delivered to, or mailed and received at, the
principal executive offices of Allied Capital not less than 90 days nor more
than 120 days in advance of the one year anniversary of the date Allied
Capital's proxy statement was released to stockholders in connection with the
previous year's annual meeting of stockholders. For its 2010 annual meeting of
stockholders, which will only be held if the merger is not completed, Allied
Capital must have received such proposals and nominations no earlier than
November 27, 2009 and no later than December 27, 2009. If the date of the
mailing of the notice for the 2010 annual meeting has been changed by more than
30 calendar days from the first anniversary of the date of mailing of the notice
for the previous year's annual meeting, stockholder proposals or director
nominations must be received no earlier than the 120th day prior to the date of
mailing of the notice and no later than the close of business on the later of
the 90th day prior to the mailing of the notice or the 10th day following the
day on which public announcement of the date of mailing of the notice for the
2010 annual meeting is first made. Such advance notice deadline would also
generally be the deadline for "timely" proposals made in accordance with Rule
14a-4(c) under the Exchange Act. Proposals must also comply with the other
requirements contained in Allied Capital's bylaws, including supporting
documentation and other information. Proxies solicited by Allied Capital will
confer discretionary voting authority with respect to these proposals, subject
to SEC rules governing the exercise of this authority.
FORWARD-LOOKING
STATEMENTS
This
proxy statement contains forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995, whose safe harbor for
forward-looking statements does not apply to business development companies.
Such forward-looking statements may relate to us and/or our industry and address
matters that involve risks and uncertainties. Forward-looking statements reflect
our current views and assumptions with respect to future events, operations,
business plans, business and investment strategies and portfolio management, the
performance of our investments and our investment management business and the
economy. These forward-looking statements are not historical facts, but rather
are based on current expectations, estimates and projections about our industry,
our beliefs, and our assumptions. Words such as “intends,” “intend,” “intended,”
“goal,” “estimate,” “estimates,” “expects,” “expect,” “expected,” “project,”
“projected,” “projections,” “plans,” “seeks,” “anticipates,” “anticipated,”
“should,” “could,” “may,” “will,” “designed to,” “foreseeable future,”
“believe,” “believes,” “currently anticipates,” “currently believes” and
“scheduled” and variations of these words and similar expressions are intended
to identify forward-looking statements. Our actual results or outcomes may
differ materially from those anticipated. Readers are cautioned not to place
undue reliance on these forward-looking statements, which speak only as of the
date the statement was made. We undertake no obligation to publicly update or
revise
any
forward-looking statements, whether as a result of new information, future
events or otherwise. These statements are not guarantees of future performance
and are subject to risks, uncertainties, and other factors, some of which are
beyond our control and difficult to predict and could cause actual results to
differ materially from those expressed or forecasted in the forward-looking
statements, including without limitation: our future operating results; our
business prospects and the prospects of our portfolio companies; the impact of
investments that we expect to make; our contractual arrangements and
relationships with third parties; the dependence of our future success on the
general economy and its impact on the industries in which we invest; the ability
of our portfolio companies to achieve their objectives; difficulty in obtaining
financing or raising capital, especially in the current credit and equity
environment; the level and volatility of prevailing interest rates and credit
spreads, magnified by the current turmoil in the credit markets; adverse
developments in the availability of desirable loan and investment opportunities
whether they are due to competition, regulation or otherwise; a compression of
the yield on our investments and the cost of our liabilities, as well as the
level of leverage available to us; our regulatory structure and tax treatment,
including our ability to operate as a business development company and a
regulated investment company; the adequacy of our cash resources and working
capital; the timing of cash flows, if any, from the operations of our portfolio
companies; the ability of our investment adviser to locate suitable investments
for us and to monitor and administer our investments; authoritative generally
accepted accounting principles or policy changes from such standard-setting
bodies as the Financial Accounting Standards Board, the Securities and Exchange
Commission, Internal Revenue Service, the NASDAQ Stock Market, and other
authorities that we are subject to, as well as their counterparts in any foreign
jurisdictions where we might do business; our ability to manage future growth;
our dependence on Prospect Capital Management’s key management personnel; the
highly competitive market for investment opportunities in which we operate;
uncertainty as to the value of our portfolio investments; additional risks to
which senior securities, including debt, expose us; changes in interest rates;
our need to raise additional capital to grow because of the requirement that we
distribute most of our income; the lack of liquidity in our investments;
fluctuations in our quarterly results; fluctuations in our net asset value;
potential conflicts of interest and their impact on investment returns; our
incentive fee’s impact on the types of investments made by Prospect Capital
Management; changes in laws or regulations; risks relating to our operation as a
business development company; risks relating to our investments and securities;
the integration of Patriot Capital Funding, Inc. or other businesses we acquire
or new business ventures we may start; uncertainty as to whether Allied Capital
will enter into and consummate the proposed transaction with Prospect Capital on
the terms set forth in our offer; and the risks, uncertainties and other factors
we identify in “Risk Factors” and elsewhere in our filings with the
SEC.
Although
we believe that the assumptions on which these forward-looking statements are
based are reasonable, any of those assumptions could prove to be inaccurate, and
as a result, the forward-looking statements based on those assumptions also
could be inaccurate. Important assumptions include our ability to originate new
loans and investments, certain margins and levels of profitability and the
availability of additional capital. In light of these and other uncertainties,
the inclusion of a projection or forward-looking statement in this press release
should not be regarded as a representation by us that our plans and objectives
will be achieved. These risks and uncertainties include those described or
identified in “Risk Factors” and elsewhere in our filings with the SEC. You
should not place undue reliance on these forward-looking statements, which apply
only as of the date of such filings.
OTHER
INFORMATION
The
information concerning Allied Capital and the Proposed Ares Capital Merger
contained herein has been taken from, or is based upon, publicly available
documents on file with the SEC and other publicly available information.
Although Prospect Capital has no knowledge that would indicate that
statements
relating to Allied Capital or the Ares Capital Merger Agreement contained in
this Proxy Statement, in reliance upon publicly available information, are
inaccurate or incomplete, to date it has not had access to the full books and
records of Allied Capital, was not involved in the preparation of such
information and statements and is not in a position to verify any such
information or statements. Accordingly, Prospect Capital does not take any
responsibility for the accuracy or completeness of such information or for
failure by Allied Capital to disclose events that may have occurred and may
affect the significance or accuracy of any such information.
Pursuant
to Rule 14a-5 promulgated under the Exchange Act, reference is made to the joint
proxy statement/prospectus included in the Allied Capital/Ares Capital N-14 for
information concerning the Ares Capital Merger Agreement, the Proposed Ares
Capital Merger, financial information regarding Ares Capital, Allied Capital and
the proposed combination of Ares Capital and Allied Capital, the proposals to be
voted upon at the Special Meeting, the Allied Capital Shares, the beneficial
ownership of Allied Capital Shares by the principal holders thereof, the name
and addresses of Allied Capital's investment advisors and administrators, how to
obtain copies of Allied Capital's annual reports, other information concerning
Allied Capital's management, the procedures for submitting proposals for
consideration at the next annual meeting of stockholders of Allied Capital and
certain other matters regarding Allied Capital and the Special Meeting. See
Schedule II for information regarding persons who own more than 5% of the Allied
Capital Shares and the ownership of the Allied Capital Shares by the management
of Allied Capital. Prospect Capital assumes no responsibility for the accuracy
or completeness of any such information.
WE
URGE YOU NOT TO RETURN ANY PROXY CARD YOU RECEIVE FROM ALLIED CAPITAL. EVEN IF
YOU PREVIOUSLY HAVE SUBMITTED A PROXY CARD FURNISHED BY ALLIED CAPITAL, IT IS
NOT TOO LATE TO CHANGE YOUR VOTE BY SIMPLY SIGNING, DATING AND RETURNING THE
ENCLOSED [COLOR] PROXY CARD TODAY. THEREFORE, WE URGE YOU TO SIGN, DATE AND
RETURN THE ENCLOSED [COLOR] PROXY CARD TO US.
WHETHER
OR NOT YOU INTEND TO ATTEND THE SPECIAL MEETING, YOUR PROMPT ACTION IS
IMPORTANT. MAKE YOUR VIEWS CLEAR TO THE ALLIED CAPITAL BOARD BY VOTING "AGAINST"
EACH PROPOSAL AND SIGNING, DATING AND RETURNING THE ENCLOSED [COLOR] PROXY CARD
TODAY.
IF
AN ALLIED CAPITAL STOCKHOLDER RETURNS A [COLOR] PROXY CARD THAT IS SIGNED, DATED
AND NOT MARKED WITH RESPECT TO A PROPOSAL, THAT STOCKHOLDER WILL BE DEEMED TO
HAVE VOTED "AGAINST" SUCH PROPOSAL.
YOUR
VOTE IS IMPORTANT, NO MATTER HOW MANY OR HOW FEW SHARES YOU OWN.
|
|
PROSPECT
CAPITAL CORPORATION
|
|
|
[ • ],
2010
|
IMPORTANT
VOTING INFORMATION
1. If
your Allied Capital Shares are held in your own name, please sign, date and
return the enclosed [COLOR] proxy card to Prospect Capital, care of Innisfree,
in the postage-paid envelope provided.
2. If
your Allied Capital Shares are held in "street-name," only your broker or bank
can vote your Allied Capital Shares and only upon receipt of your specific
instructions. If your Allied Capital Shares are held in "street-name," deliver
the enclosed [COLOR] proxy card to your broker or bank or contact the person
responsible for your account to vote on your behalf and to ensure that a [COLOR]
proxy card is submitted on your behalf. We urge you to confirm in writing your
instructions to the person responsible for your account and to provide a copy of
those instructions to Prospect Capital, care of Innisfree M&A Incorporated,
501 Madison Avenue, 20th
Floor, New York, NY 10022, at 212-750-5833, so that Prospect Capital will be
aware of all instructions given and can attempt to ensure that such instructions
are followed.
3. Do
not sign or return any [ALD COLOR] proxy card you may receive from Allied
Capital. If you have already submitted a [ALD COLOR] proxy card, it is not too
late to change your vote — simply sign, date and return the enclosed [COLOR]
proxy card. Only your latest dated proxy will be counted.
4. Only
Allied Capital's stockholders of record on February 2, 2010 are entitled to vote
at the Special Meeting. We urge each stockholder to ensure that the holder of
record of his or her Allied Capital Share(s) signs, dates, and returns the
enclosed [COLOR] proxy card as soon as possible.
If
you have any questions or require any assistance in voting your Allied Capital
Shares, please contact:
INNISFREE
M&A INCORPORATED
501
Madison Avenue, 20th
Floor
New
York, NY 10022
Banks
and Brokers should call: 212-750-5833
or
Toll
Free at: 877-750-9501
THE
PROSPECT CAPITAL MERGER OFFER DESCRIBED IN THIS PROXY STATEMENT MAY BECOME THE
SUBJECT OF A REGISTRATION STATEMENT ON FORM N-14 FILED WITH THE SEC. INVESTORS
AND SECURITY HOLDERS ARE ADVISED TO READ SUCH REGISTRATION STATEMENT, ALL OTHER
APPLICABLE DOCUMENTS AND ANY AMENDMENTS OR SUPPLEMENTS THERETO IF AND WHEN THEY
BECOME AVAILABLE BECAUSE EACH WILL CONTAIN IMPORTANT INFORMATION. INVESTORS AND
SECURITY HOLDERS MAY OBTAIN A FREE COPY OF ANY DOCUMENTS FILED BY PROSPECT
CAPITAL WITH THE SEC AT THE SEC'S WEBSITE (www.sec.gov) OR BY DIRECTING SUCH
REQUESTS TO INNISFREE M&A INCORPORATED, 501 MADISON AVENUE, 20TH FLOOR, NEW
YORK, NY 10022, AT 212-750-5833.
SCHEDULE
I
INFORMATION
CONCERNING DIRECTORS AND EXECUTIVE OFFICERS
OF
PROSPECT CAPITAL WHO ARE PARTICIPANTS
|
1.
|
Directors
and Executive Officers of Prospect Capital Who are
Participants.
|
The
following table sets forth certain information with respect to each director and
executive officer of Prospect Capital that is a participant in the solicitation.
Unless otherwise indicated, the current business address of each person is 10
East 40th Street, 44th Floor, New York, NY 10016 and the current business
telephone number is (212) 448-0702. Unless otherwise indicated, each such person
is a citizen of the United States, and each occupation set forth opposite an
individual's name refers to employment with Prospect Capital.
|
Name
and Current Business Address
|
|
Present
Principal Occupation or Employment, Material Positions Held During the
Past Five Years and Business Address Thereof,
Citizenship
|
|
|
|
|
|
John
F. Barry III
|
|
Mr.
Barry is chairman of the Board of Directors, and Chief Executive Officer
of Prospect Capital and is a control person of Prospect Capital Management
LLC and a managing director of Prospect Administration LLC. He is the
chairman of Prospect Capital's investment committee and has been an
officer of Prospect Capital since 1990. Mr. Barry has been the Managing
Director and Chairman of the Investment Committee of Prospect Capital
Management LLC and Prospect Administration LLC since June 2004. He has
also served on the boards of directors of twelve private and public
Prospect Capital portfolio companies. Mr. Barry has served on the board of
advisors of USEC Inc., a publicly-traded energy company. Mr. Barry has
served as chairman and chief executive officer of Bondnet Trading Systems.
From 1988 to 1989, Mr. Barry managed the investment bank of L.F.
Rothschild & Company, focusing on private equity and debt financings
for energy and other companies. From 1983 to 1988, Mr. Barry was a senior
investment and merchant banker at Merrill Lynch & Co., where he was a
founding member of the project finance group, executing more than $4
billion in energy and other financings. From 1979 to 1983, he was a
corporate securities attorney at Davis Polk & Wardwell, where he
advised energy companies and their commercial and investment bankers. From
1978 to 1979, Mr. Barry served as a law clerk to Circuit Judge, formerly
Chief Judge J. Edward Lumbard of the U.S. Court of Appeals for the Second
Circuit in New York City. Mr. Barry is chairman of the board of directors
of the Mathematics Foundation of America, a non-profit foundation which
enhances opportunities in mathematics education for students from diverse
backgrounds. Mr. Barry received his JD cum laude from Harvard Law School,
where he was an editor of the Harvard Law Review, and his Bachelor of Arts
magna cum laude from
|
|
|
|
Princeton
University, where he was a University Scholar.
|
|
|
|
|
|
M.
Grier Eliasek
|
|
Mr.
Eliasek is a director, President and Chief Operating Officer of Prospect
Capital and a managing director of Prospect Capital Management LLC and
Prospect Administration LLC. At Prospect Capital, Mr. Eliasek is
responsible for various administrative and investment management functions
and leads and supervises other Prospect Capital professionals in
origination and assessment of investments. Mr. Eliasek has served as a
senior investment professional at Prospect Capital since 1999. Prior to
joining Prospect Capital, he assisted the chief financial officer of
Amazon.com in 1999 in corporate strategy, customer acquisition, and new
product launches. From 1995 to 1998, Mr. Eliasek served as a consultant
with Bain & Company, a global strategy consulting firm, where he
managed engagements for companies in several different industries. At
Bain, Mr. Eliasek analyzed new lines of businesses, developed market
strategies, revamped sales organizations and improved operational
performance. Mr. Eliasek received his MBA from Harvard Business
School. Mr. Eliasek received his Bachelor of Science in Chemical
Engineering with Highest Distinction from the University of Virginia,
where he was a Jefferson Scholar and a Rodman Scholar.
|
|
|
|
|
|
Graham
D.S. Anderson
|
|
Mr.
Anderson is a director of Prospect Capital. He has served as a General
Partner with Euclid SR Partners since 2000 and prior to that from 1996
until the end of 2000 was a General Partner with Euclid Partners. Mr.
Anderson serves as a member of the Board of Directors of Acurian, Inc. (a
clinical trial recruitment company), FatWire Software Corp. (a web content
management company), iJet Risk Management (an operational risk management
information company), Plateau Systems Limited (a human capital management
software company) and SkinMedica Inc. (a dermatology and cosmeceuticals
company).
|
|
|
|
|
|
Andrew
C. Cooper
|
|
Mr.
Cooper is a director of Prospect Capital. He has 24 years of experience in
growth company management, venture investing and investment banking. He
has a wide range of operational, marketing, technology, and debt and
equity capital raising expertise. Mr. Cooper is an entrepreneur, who over
the last 11 years has founded, built, run and sold three companies. Prior
to that, Mr. Cooper focused on venture capital and investment banking for
Morgan Stanley for 14 years. He is Co-Chief Executive Officer of Unison
Site Management, Inc., a specialty finance company focusing on cell site
easements, and Executive Director of Brand Asset Digital, a digital media
marketing and distribution company. His current Board appointments include
Unison Site Management, LLC, Brand Asset Digital, LLC and Aquatic Energy,
LLC.
|
|
Eugene
S. Stark
|
|
Mr.
Stark is a director of Prospect Capital. He has served as Principal
Financial Officer, Chief Compliance Officer and Vice
President—Administration of General American Investors Company, Inc. from
May 2005 to the present. Prior to his role with General American Investors
Company, Inc., Mr. Stark served as the Chief Financial Officer of Prospect
Capital from January 2005 to April 2005. From May 1987 to December 2004
Mr. Stark served as Senior Vice President (division level) and Vice
President (corporate level) with Prudential Financial, Inc. in various
financial management positions. Mr. Stark serves as a member of the Board
of Directors of Prospect Capital Funding LLC, a wholly-owned subsidiary of
Prospect Capital Corporation, and sits on the Board of Trustees and is a
Member of the Finance Committee of Mount Saint Mary
Academy.
|
|
PARTICIPANT
EXECUTIVE OFFICERS
|
|
Name
and Current Business Address
|
|
Present
Principal Occupation or Employment, Material Positions Held During the
Past Five Years and Business Address Thereof,
Citizenship
|
|
|
|
|
|
John
F. Barry III
|
|
Chief
Executive Officer. For biographical information see under "Directors"
above.
|
|
|
|
|
|
M.
Grier Eliasek
|
|
President
and Chief Operating Officer. For biographical information see under
"Directors" above.
|
|
|
|
|
|
Brian
H. Oswald
|
|
Mr.
Oswald is Chief Financial Officer, Chief Compliance Officer, Secretary and
Treasurer of Prospect Capital. He began his career at KPMG Peat Marwick,
where he held various positions over his ten-year tenure, finishing as
Senior Manager in the financial institutions group. During his time at
KPMG, he served as the reviewing senior manager for several initial public
offerings of financial institutions. After KPMG, Mr. Oswald served as the
Executive Vice President and President of Gloversville Federal Savings and
Loan Association, served as the Director of Financial Reporting and
Subsidiary Accounting for River Bank America and served as the Corporate
Comptroller for Magic Solutions, Inc. In each of these positions, Mr.
Oswald instituted significant operational changes and was instrumental in
raising additional equity for River Bank America. From 2003 to 2005, Mr.
Oswald led Capital Trust, Inc., a self-managed finance and investment
management REIT which specializes in credit-sensitive structured financial
products, as Chief Financial Officer. From 1997 to 2003, he served as
Chief Accounting Officer for Capital Trust. Prior to joining Prospect
Capital, Mr. Oswald spent two years in the Structured Finance Division of
GSC Group, serving as Managing Director of Finance for this asset
management company. As GSC, Mr. Oswald managed the finances for
a
|
|
|
|
REIT,
two hedge funds and thirteen CDOs. Mr. Oswald joined Prospect Capital on
June 16, 2008. Mr. Oswald is a licensed Certified Public Accountant in the
States of New York and Pennsylvania, and is a Certified Management
Accountant. He also serves as a board member of RMJ Laboratories,
Inc.
|
SCHEDULE
II
THE
FOLLOWING TABLE IS REPRINTED FROM THE ALLIED CAPITAL / ARES CAPITAL N-14
FILED
WITH
THE SECURITIES AND EXCHANGE COMMISSION.
CONTROL
PERSONS AND PRINCIPAL STOCKHOLDERS OF ALLIED CAPITAL
According to
the Allied Capital/Ares Capital N-14 filed with the SEC, to Allied Capital's
knowledge, as of January 15, 2010, there were no persons that owned 25% or
more of Allied Capital's outstanding voting securities and no person would be
deemed to control Allied Capital, as such term is defined in the Investment
Company Act.
The
following table sets forth, as of January 15, 2010, each stockholder who
owned more than 5% of Allied Capital's outstanding shares of common stock, each
director, each named executive officer of Allied Capital and directors and
executive officers as a group. Based upon Schedule 13G and other filings
with the SEC, no stockholder owned more than 5% of Allied Capital's outstanding
shares of common stock as of January 15, 2010. Unless otherwise indicated,
Allied Capital has stated that it believes that each beneficial owner set forth
in the table has sole voting and investment power. Certain shares beneficially
owned by Allied Capital's directors and executive officers may be held in
accounts with third-party brokerage firms, where such shares may from time to
time be subject to a security interest for margin credit provided in accordance
with such brokerage firm's policies.
Allied
Capital's directors are divided into two groups—interested directors and
independent directors. Interested directors are "interested persons" as defined
in Section 2(a)(19) of the Investment Company Act.
|
Name
of Beneficial Owner
|
|
Number
of Shares Owned Beneficially(1)(3)
|
|
|
Percentage
of Class(2)
|
|
| Interested
Directors |
|
|
|
|
|
|
|
|
|
William
L. Walton(4)
|
|
|
2,319,863 |
|
|
|
1.29 |
% |
|
John
M. Scheurer(5)
|
|
|
1,299,407 |
|
|
|
* |
|
|
Joan
M. Sweeney(6)
|
|
|
1,147,761 |
|
|
|
* |
|
|
Robert
E. Long(7)
|
|
|
50,435 |
|
|
|
* |
|
| |
|
|
|
|
|
|
|
|
|
Independent
Directors:
|
|
|
|
|
|
|
|
|
|
Ann
Torre Bates(8)
|
|
|
50,044 |
|
|
|
* |
|
|
Brooks
H. Browne(9)
|
|
|
104,236 |
|
|
|
* |
|
|
John
D. Firestone(10)
|
|
|
87,231 |
|
|
|
* |
|
|
Anthony
T. Garcia(11)
|
|
|
94,083 |
|
|
|
* |
|
|
Lawrence
I. Hebert(12)
|
|
|
57,500 |
|
|
|
* |
|
|
Edward
J. Mathias(13)
|
|
|
44,936 |
|
|
|
* |
|
|
Alex
J. Pollock(14)
|
|
|
53,823 |
|
|
|
* |
|
|
Marc
F. Racicot(15)
|
|
|
26,338 |
|
|
|
* |
|
|
Laura
W. van Roijen(16)
|
|
|
93,289 |
|
|
|
* |
|
| |
|
|
|
|
|
|
|
|
|
Named
Executive Officers:
|
|
|
|
|
|
|
|
|
|
Penni
F. Roll(17)
|
|
|
1,137,879 |
|
|
|
* |
|
|
Daniel
L. Russell(18)
|
|
|
1,028,605 |
|
|
|
* |
|
|
Robert
D. Long(19)
|
|
|
424,954 |
|
|
|
* |
|
|
All
directors and executive officers as a group (22 in number)
|
|
|
10,227,122 |
|
|
|
5.50 |
% |
* Less than 1%
(1) Beneficial
ownership has been determined in accordance with Rule 13d-3 of the Exchange
Act.
(2) Based
on a total of 179,940,040 shares of Allied Capital common stock issued and
outstanding on January 15, 2010 and 6,069,872 shares of Allied Capital
common stock issuable upon the exercise of stock options exercisable within
60 days held by each executive officer and non-officer director.
(3) Beneficial
ownership has been determined in accordance with Rule 16a-1(a)(2) of the
Exchange Act.
(4) Includes
1,209,596 shares owned directly and 1,077,667 options exercisable within
60 days of January 15, 2010. Also includes 14,122 shares allocated to
the Allied Capital 401(k) Plan and 15,815 shares held in IRA or Keogh accounts.
Of the shares listed, 2,150 are held in margin accounts or otherwise pledged.
(5) Includes
353,548 shares owned directly and options to purchase 722,834 shares exercisable
within 60 days of January 15, 2010. Also includes 150,000 shares held
in a trust and 73,025 shares allocated to the Allied Capital 401(k) Plan. Of the
shares listed, 353,548 are held in margin accounts or otherwise pledged.
(6) Includes
728,031 shares owned directly and options to purchase 389,263 shares exercisable
within 60 days of January 15, 2010. Also includes 30,467 shares
allocated to the Allied Capital 401(k) Plan. Of the shares listed, 158,659 are
held in margin accounts or otherwise pledged.
(7) Includes
options to purchase 30,000 shares exercisable within 60 days of
January 15, 2010. Of the shares listed, 20,005 are held in margin accounts
or otherwise pledged.
(8) Includes
7,250 shares held in IRA or Keogh accounts, options to purchase 30,000 shares
exercisable within 60 days of January 15, 2010 and 7,000 shares held
by Ms. Bates' spouse. Also includes 3,499 shares held in a revocable trust
and 700 shares held in an IRA account by Ms. Bates' father over which
Ms. Bates has power-of-attorney.
(9) Includes
12,280 shares held in IRA or Keogh accounts, 2,000 shares held by
Mr. Browne's spouse and options to purchase 40,000 shares exercisable
within 60 days of January 15, 2010. Of the shares listed, 9,500 are
held in margin accounts or otherwise pledged.
(10) Includes
9,415 shares held in IRA or Keogh accounts and includes options to purchase
35,000 shares exercisable within 60 days of January 15, 2010.
(11) Includes
options to purchase 20,000 shares exercisable within 60 days of
January 15, 2010.
(12) Includes
9,529 shares held in IRA or Keogh accounts, 9,000 shares held in a revocable
trust and options to purchase 20,000 shares exercisable within 60 days of
January 15, 2010.
(13) Includes
33,000 shares held in IRA or Keogh accounts and includes options to purchase
10,000 shares exercisable within 60 days of January 15, 2010.
(14) Includes
4,000 shares held in IRA or Keogh accounts, 200 shares held by
Mr. Pollock's son in a custodial account for which Mr. Pollock serves
as custodian and options to purchase 20,000 shares exercisable within
60 days of January 15, 2010.
(15) Includes
options to purchase 10,000 shares exercisable within 60 days of
January 15, 2010.
(16) Includes
16,224 shares held in IRA or Keogh accounts and options to purchase 50,000
shares exercisable within 60 days of January 15, 2010.
(17) Includes
236,327 shares owned directly and options to purchase 878,845 shares exercisable
within 60 days of January 15, 2010 and 22,707 shares allocated to the
Allied Capital 401(k) Plan. Of the shares listed, 1,100 are held in margin
accounts or otherwise pledged.
(18) Includes
83,873 shares owned directly and options to purchase 944,732 shares exercisable
within 60 days of January 15, 2010.
(19) Includes
370,593 shares owned directly and 50,361 shares held in IRA or Keogh accounts
and 4,000 shares held in a trust. Effective September 14, 2009,
Mr. Long was no longer employed by Allied Capital.
IMPORTANT
If
your Allied Capital Shares are held in your own name, please sign, date and
return the enclosed [COLOR] proxy card today. If your shares are held in
"street-name," only your broker or bank can vote your shares and only upon
receipt of your specific instructions. Please return the enclosed [COLOR] proxy
card to your broker or bank and contact the person responsible for your account
to ensure that a [COLOR] proxy card is voted on your behalf.
We
urge you not to sign any proxy card you may receive from Allied Capital, even as
a protest vote.
If
you have any questions or require any assistance in voting your Allied Capital
Shares, please contact:
INNISFREE
M&A INCORPORATED
501
Madison Avenue, 20th
Floor
New
York, NY 10022
Banks
and Brokers should call: 212-750-5833
or
Toll
Free at: 877-750-9501
PRELIMINARY
PROXY CARD – SUBJECT TO COMPLETION, DATED JANUARY 29, 2010
PROXY
CARD
YOUR
VOTE IS IMPORTANT
Please
complete, date, sign and mail your proxy card in the envelope provided as soon
as possible.
If
you have any questions or require any assistance in executing your proxy, please
call:
INNISFREE
M&A INCORPORATED
501
Madison Avenue, 20th
Floor
New
York, NY 10022
Banks
and Brokers should call (212) 750-5833 or Toll-free at (877)
750-9501
THIS
PROXY IS SOLICITED BY PROSPECT CAPITAL CORPORATION IN OPPOSITION TO THE
SOLICITATION BY THE BOARD OF DIRECTORS OF
ALLIED
CAPITAL CORPORATION ("ALLIED CAPITAL" OR THE "COMPANY")
FOR
THE ALLIED CAPITAL CORPORATION SPECIAL MEETING
TO
BE HELD ON MARCH 26, 2010
The
undersigned, a holder of Common Shares of Allied Capital Corporation
(the "Allied Capital Shares"), held of record on February 2, 2010, acknowledges
receipt of the Proxy Statement of Prospect Capital Corporation dated [ ], 2010,
and the undersigned revokes all prior proxies delivered in connection with the
Special Meeting of Stockholders of Allied Capital (the "Special Meeting") to
approve the merger of ARCC Odyssey Corp., a wholly owned subsidiary of Ares
Capital Corporation, with and into Allied Capital Corporation and to approve the
Agreement and Plan of Merger, as such agreement may be amended from time to
time, dated as of October 26, 2009, among Allied Capital Corporation, Ares
Capital Corporation and ARCC Odyssey Corp. (the "Agreement and Plan of Merger"),
and certain other related proposals in connection with the Agreement and Plan of
Merger and appoints [ ] and [ ] and/or each of them, with full power of
substitution, proxies for the undersigned to vote all Allied Capital Shares
which the undersigned would be entitled to vote at the Special Meeting, to be
held on Friday, March 26, 2010, at 10:00 a.m. Eastern Time. at [ • ],
Washington, District of Columbia, and any adjournment or postponement thereof,
and instructs said proxies to vote as follows:
EXCEPT
AS PROVIDED HEREIN, THIS PROXY WILL BE VOTED IN ACCORDANCE WITH THE
SPECIFICATIONS MADE. IF NO
SPECIFICATIONS ARE MADE AND YOU HAVE SIGNED THIS PROXY CARD, THIS PROXY WILL BE
VOTED "AGAINST" EACH OF THE PROPOSALS. IN ADDITION, THE NAMED PROXIES ARE AUTHORIZED TO
VOTE IN THEIR DISCRETION ON ANY OTHER MATTERS THAT MAY PROPERLY BE PRESENTED AT
THE SPECIAL MEETING.
YOUR
VOTE IS IMPORTANT – PLEASE SIGN, DATE AND RETURN THIS PROXY CARD IN THE ENCLOSED
ENVELOPE.
|
VOTE
BY INTERNET — [
]
Use
the Internet to transmit your voting instructions and for electronic
delivery of information up until 11:59 P.M. Eastern Time the day before
the cut–off date or meeting date. Have your proxy card in hand when you
access the web site and follow the instructions to obtain your records and
to create an electronic voting instruction form.
|
|
VOTE
BY PHONE — [TELEPHONE NUMBER]
Use
any touch–tone telephone to transmit your voting instructions up until
11:59 P.M. Eastern Time the day before the cut–off date or meeting date.
Have your proxy card in hand when you call and then follow the
instructions.
|
|
VOTE
BY MAIL
Mark,
sign, and date your proxy card and return it in the postage–paid envelope
we have provided or return it to Prospect Capital Corporation, c/o
Innisfree M&A Incorporated at the address specified
above.
|
|
Proposals
|
|
|
|
|
|
For
|
Against
|
Abstain
|
|
1.
|
To
consider and vote upon a proposal to approve the merger of ARCC Odyssey
Corp., a wholly owned subsidiary of Ares Capital Corporation, or "Ares
Capital," with and into Allied Capital and to approve the Agreement and
Plan of Merger, as such agreement may be amended from time to time, dated
as of October 26, 2009, among Allied Capital, Ares Capital and ARCC
Odyssey Corp.
|
¨
|
¨
|
¨
|
|
|
|
For
|
Against
|
Abstain
|
|
2.
|
To
consider and vote upon a proposal to approve the adjournment of the Allied
Capital special meeting, if necessary or appropriate, to solicit
additional proxies, if there are not sufficient votes at the time of the
Allied Capital special meeting to approve the foregoing
proposal.
|
¨
|
¨
|
¨
|
|
|
|
|
|
|
|
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.
|
|
|
|
|
|
|
|
Signature
[PLEASE SIGN WITHIN
BOX] Date
|
|
|
|
|
|
|
|
|
|
|