EXHIBIT 1.0
Underwriting
Agreement
Dated January 5, 2006
Wachovia Capital Markets, LLC
One Wachovia Center
301 South College Street
Charlotte, NC 28288-0610
Ladies and Gentlemen:
Introductory . American Capital Strategies, Ltd., a
Delaware corporation (the " Company "), and Wachovia Capital
Markets, LLC (in its capacity as the forward seller, the "
Forward Seller "), at the request of the Company in
connection with the " Forward Agreement " (as defined below)
attached hereto as Exhibit A , confirms its agreement with
Wachovia Capital Markets, LLC (in its capacity as the underwriter,
the " Underwriter ") with respect to (a) the sale by the
Forward Seller and the possible issuance and sale by the Company of
Common Stock (as defined below) to the Underwriter pursuant to
Section 12(a) hereof and purchase by the Underwriter of 4,000,000
shares of Common Stock, including the Borrowed Shares (as defined
below) (the " Firm Shares ") and all or any part of 600,000
additional shares of Common Stock (the " Option Shares ") as
provided in Section 3(b) hereof (the Firm Shares and Option Shares
collectively being referred to as the " Shares "), and (b)
the grant by the Company to the Underwriter of the option described
in Section 3(b) hereof to purchase all or any part of the Option
Shares to cover over-allotments, if any. " Common Stock "
shall refer to the $0.01 par value per share of common stock of the
Company. " Forward Agreement " shall refer to the following
letter agreement, which relates to the forward sale by the Company
of a number of shares of Common Stock of the Company equal to the
number of shares of Common Stock to be borrowed and sold by the
Forward Seller pursuant to this Agreement (the " Borrowed
Shares ") dated the date hereof and entered into by and between
the Company and Wachovia Bank, National Association. Wachovia Bank,
National Association is hereafter referred to as the " Forward
Counterparty ". Of the Firm Shares, the number of shares issued
and sold by the Company pursuant to Section 12(a) hereof, if any,
will be issued and sold to the Underwriter by the Company (the "
Company Firm Shares ") and 4,000,000 shares (subject to
reduction for any shares issued and sold by the Company pursuant to
Section 12(a) hereof) will be sold to the Underwriter by the
Forward Seller (the " Forward Seller Firm Shares ").
The Company has filed with the Securities and Exchange
Commission (the " Commission ") pursuant to the Securities
Act of 1933, as amended, and the rules and regulations promulgated
thereunder (the " Securities Act ") and the Investment
Company Act of 1940, as amended, and the rules and regulations
promulgated thereunder (the " Investment Company Act "), a
registration statement on Form N-2 for the offer and sale of an
aggregate amount of $3,000,000,000 of securities (File No.
333-125278), which registration statement became effective on
August 8, 2005, a copy of which has heretofore been delivered to
you. Such registration statement meets the requirements set forth
in Rule 415(a)(1) under the Securities Act and complies in all
other material respects with such Rule. The Company proposes to
file with the Commission pursuant to Rule 497 under the Securities
Act, a supplement, dated as of January 6, 2006, to the prospectus
dated as of August 8, 2005, relating to the Shares and the method
of distribution thereof and has previously advised you of all
further information (financial and other) with respect to the
Shares set forth therein. Such registration statement, including
the exhibits thereto, as amended at the date hereof, is hereinafter
called the " Registration Statement "; such prospectus, in
the form in which it was filed with the Commission pursuant to Rule
497 under the Securities Act, is hereinafter called the " Basic
Prospectus "; such supplement to the Basic Prospectus, in the
form in which it will be filed with the Commission pursuant to Rule
497 under the Securities Act, is hereinafter called the "
Prospectus Supplement "; and the Basic Prospectus and the
Prospectus Supplement together are hereinafter called the "
Prospectus ". Each prospectus, subject to completion, used
in connection with a public offering is called a " Preliminary
Prospectus " and any reference to the " most recent
Preliminary Prospectus " shall be deemed to refer to the
Preliminary Prospectus dated the date hereof. All references in
this underwriting agreement (this " Agreement ") to the
Registration Statement, a Preliminary Prospectus, the Prospectus,
or any amendments or supplements to any of the foregoing, shall
include any copy thereof filed with the Commission pursuant to its
Electronic Data Gathering, Analysis and Retrieval System ("
EDGAR ").
All references in this Agreement to financial statements and
schedules and other information which is "contained," "included" or
"stated" in the Registration Statement or the Prospectus (and all
other references of like import) shall be deemed to mean and
include all such financial statements and schedules and other
information which is or is deemed to be incorporated by reference
in the Registration Statement or the Prospectus, as the case may
be; and all references in this Agreement to amendments or
supplements to the Registration Statement or the Prospectus shall
be deemed to mean and include the filing of any document under the
Securities Exchange Act of 1934, as amended, and the rules and
regulations thereunder (the " Exchange Act ") which is or is
deemed to be incorporated by reference in the Registration
Statement or the Prospectus, as the case may be.
The Company hereby confirms its
agreements with the Underwriter as follows:
Section 1. Representations and
Warranties of the Company . The Company represents, warrants
and covenants to the Underwriter, the Forward Seller and the
Forward Counterparty as of the date hereof, as of the Applicable
Time (as defined in Section 1(a) hereof), as of the Closing Date
(as defined in Section 3(c) hereof), and as of each Date of
Delivery (defined in Section 3(b) hereof), and agrees with the
Underwriter, the Forward Seller and the Forward Counterparty as
follows:
(a) Compliance with Registration
Requirements . The Registration Statement has been declared
effective by the Commission under the Securities Act. The Company
has complied to the Commission's satisfaction with all requests of
the Commission for additional or supplemental information. No stop
order suspending the effectiveness of the Registration Statement is
in effect and no proceedings for such purpose have been instituted
or are pending or, to the best knowledge of the Company, are
contemplated or threatened by the Commission.
The Prospectus when filed complied in
all material respects with the Securities Act and Investment
Company Act and, if filed by electronic transmission pursuant to
EDGAR (except as may be permitted by Regulation S-T under the
Securities Act), was identical to the copy thereof delivered to the
Underwriter for use in connection with the public offering and sale
of the Shares. On each of the following dates, being (a) the date
hereof, (b) when the Registration Statement became effective, (c)
when the Prospectus Supplement is first filed pursuant to Rule 497
under the Securities Act, (d) when, prior to the Closing Date, any
other amendment to the Registration Statement becomes effective,
(e) when, prior to the Closing Date, any supplement to the
Prospectus is filed with the Commission, and (f) at the Closing
Date, (i) the Registration Statement, as amended as of any such
time, and the Prospectus, as amended or supplemented as of any such
time, complied or will comply in all material respects with the
applicable requirements of the Securities Act and the rules
thereunder, (ii) the Registration Statement, as amended as of any
such time, did not, does not and will not contain any untrue
statement of a material fact and did not, does not and will not
omit to state any material fact required to be stated therein or
necessary to make the statements therein not misleading and (iii)
the Prospectus, as amended or supplemented as of any such time, did
not and will not contain an untrue statement of a material fact and
did not and will not omit to state a material fact necessary in
order to make the statements therein, in the light of the
circumstances under which they were made, not misleading. As of the
Applicable Time, the Prospectus, the most recent Preliminary
Prospectus and the information included on Exhibit E hereto
(which information the Underwriter has informed the Company is
being conveyed orally by the Underwriter to prospective purchasers
at or prior to confirming sales of the Shares in the public
offering), all considered together (collectively, the " Pricing
Disclosure Package "), did not include any untrue statement of
a material fact or omit to state any material fact necessary in
order to make the statements therein, in the light of the
circumstances under which they were made, not misleading. The
representations and warranties set forth in the three immediately
preceding sentences do not apply to statements in or omissions from
the Registration Statement, any Rule 462(b) Registration Statement,
or any post-effective amendment thereto, or the Prospectus, or any
amendments or supplements thereto, made in reliance upon and in
conformity with information relating to the Underwriter furnished
to the Company by the Underwriter in writing expressly for use
therein. There are no contracts or other documents required to be
described in the Prospectus or to be filed as exhibits to the
Registration Statement which have not been described or filed as
required.
As used in this subsection and
elsewhere in this Agreement:
" Applicable Time " means 9:30
a.m. (New York time) on January 6, 2006 or such other time as
agreed by the Company and the Underwriter; provided that, if,
subsequent to the date of this Agreement, the Company and the
Underwriter have determined that the Pricing Disclosure Package
included an untrue statement of material fact or omitted a
statement of material fact necessary to make the information
therein not misleading, and have agreed, in connection with the
public offering of the Shares, to provide an opportunity to
purchasers to terminate their old contracts and enter into new
contracts, then "Applicable Time" will refer to the information
available to purchasers at the time of entry into the first such
new contract.
(b) Offering Materials Furnished to
the Underwriter . The Company has delivered to the Underwriter
one complete conformed copy of the Registration Statement and of
each consent and certificate of experts filed as a part thereof,
and conformed copies of the Registration Statement (without
exhibits) and any Preliminary Prospectuses and the Prospectus, as
amended or supplemented, in such quantities and at such places as
the Underwriter has reasonably requested.
(c) Distribution of Offering
Material By the Company . The Company has not distributed and
will not distribute, prior to the later of the final Date of
Delivery (as defined below) and the completion of the Underwriter's
distribution of the Shares, any offering material in connection
with the public offering and sale of the Shares other than the
Pricing Disclosure Package, the Prospectus or the Registration
Statement.
(d) Authorization of Agreement
. This Agreement has been duly authorized, executed and delivered
by, and is a valid and binding agreement of, the Company,
enforceable in accordance with its terms, except as rights to
indemnification hereunder may be limited by applicable law and
except as the enforcement hereof may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws
relating to or affecting the rights and remedies of creditors or by
general equitable principles.
(e) Authorization of Forward
Agreement . The Forward Agreement has been duly authorized,
executed and delivered by the Company and constitutes a valid and
binding agreement of the Company, enforceable in accordance with
its terms, except as the enforcement thereof may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar
laws relating to or affecting the rights and remedies of creditors
or by general equitable principles. The Forward Agreement conforms
in all material respects to the descriptions thereof in the
Prospectus.
(f) Authorization of the Shares
. (i) The Shares to be purchased by the Underwriter from the
Company (including any Shares to be purchased pursuant to Section
12 hereof), have been duly authorized for issuance and sale
pursuant to this Agreement and when issued and delivered by the
Company pursuant to this Agreement will be validly issued and fully
paid and non-assessable.
(ii) The shares of Common Stock to be purchased by the Forward
Counterparty pursuant to the Forward Agreement, whether pursuant to
physical settlement, as a result of acceleration or otherwise, have
been duly authorized and reserved for issuance and, when issued and
delivered by the Company to the Forward Counterparty pursuant to
the Forward Agreement against payment of the consideration set
forth therein, will be validly issued and fully paid and
non-assessable.
(g) No Applicable Registration or
Other Similar Rights . There is no person with registration or
other similar rights to have any equity or debt securities
registered for sale under the Registration Statement or included in
the public offering contemplated by this Agreement, except for such
rights as have been duly waived.
(h) No Material Adverse Change
. Subsequent to the respective dates as of which information is
given in the Pricing Disclosure Package and the Prospectus: (i)
there has been no material adverse change, or any development that
could reasonably be expected to result in a material adverse
change, in the condition, financial or otherwise, or in the
earnings, business, operations or prospects, whether or not arising
from transactions in the ordinary course of business, of the
Company and its subsidiaries, considered as one entity (any such
change or effect, where the context so requires, is called a "
Material Adverse Change " or a " Material Adverse
Effect "); (ii) the Company and its subsidiaries, considered as
one entity, have not incurred any material liability or obligation,
indirect, direct or contingent, not in the ordinary course of
business nor entered into any material transaction or agreement not
in the ordinary course of business; and (iii) there has been no
dividend or distribution of any kind declared, paid or made by the
Company or, except for dividends paid to the Company or other
subsidiaries, any of its subsidiaries on any class of capital stock
or repurchase or redemption by the Company or any of its
subsidiaries of any class of capital stock.
(i) Independent Accountants .
Ernst & Young LLP, who have expressed their opinion with
respect to the financial statements (which term as used in this
Agreement includes the related notes thereto) filed with the
Commission as a part of the Registration Statement and the
financial statements included in the Prospectus, are independent
public or certified public accountants as required by the
Securities Act and the Exchange Act, and to the Company's
knowledge, are not in violation of the auditor independence
requirements of the Sarbanes-Oxley Act of 2002, as amended, and the
rules of the Commission promulgated thereunder (the "
Sarbanes-Oxley Act ").
(j) Preparation of the Financial
Statements . The financial statements filed with the Commission
as a part of the Registration Statement and the financial
statements included in the Prospectus present fairly the financial
position of the Company and its subsidiaries as of and at the dates
indicated and the results of their operations and cash flows for
the periods specified. The supporting schedules, if any, included
in the Registration Statement present fairly the information
required to be stated therein. Such financial statements and any
supporting schedules, have been prepared in conformity with
generally accepted accounting principles applied on a consistent
basis throughout the periods involved, except as may be expressly
stated in the related notes thereto. No other financial statements
or supporting schedules are required to be included in the
Registration Statement. The financial data set forth in the
Prospectus under the captions "Prospectus Summary--Summary
Financial Data", "Selected Financial Data" and "Capitalization"
fairly present the information set forth therein on a basis
consistent with that of the audited financial statements contained
in the Registration Statement and in the Prospectus.
(k) Company's Accounting System
. The Company and each of its subsidiaries maintain a system of
accounting controls sufficient to provide reasonable assurances
that (i) transactions are executed in accordance with management's
general or specific authorization; (ii) transactions are recorded
as necessary to permit preparation of financial statements in
conformity with generally accepted accounting principles as applied
in the United States and to maintain accountability for assets;
(iii) access to assets is permitted only in accordance with
management's general or specific authorization; and (iv) the
recorded accountability for assets is compared with existing assets
at reasonable intervals and appropriate action is taken with
respect to any differences.
(l) Subsidiaries of the Company
. The Company does not own or control, directly or indirectly, any
corporation, association or other entity other than entities in
which it has an investment (each, a " Portfolio Company "
and collectively, the " Portfolio Companies ") and the
subsidiaries listed in Item 27 of the Registration Statement. The
term " subsidiary " as used in this Agreement shall be
deemed to exclude each Portfolio Company.
(m) Incorporation and Good Standing
of the Company and its Subsidiaries . Each of the Company and
its subsidiaries has been duly organized and is validly existing as
a corporation, limited liability company or statutory trust, as the
case may be, in good standing under the laws of the jurisdiction in
which it is organized with full corporate power and authority to
own its properties and conduct its business as described in the
Prospectus, and is duly qualified to do business as a foreign
corporation, limited liability company or statutory trust, as the
case may be, and is in good standing under the laws of each
jurisdiction that requires such qualification.
(n) Capitalization of the
Subsidiaries . All the outstanding shares of capital stock or
interests of each subsidiary have been duly and validly authorized
and issued and are fully paid and non-assessable, and, except as
otherwise set forth in the Prospectus, all outstanding shares of
capital stock or interests of the subsidiaries are owned by the
Company either directly or through wholly owned subsidiaries free
and clear of any security interests, claims, liens or encumbrances,
except as set forth in Exhibit B attached hereto and made a
part hereof.
(o) No Prohibition on Subsidiaries
from Paying Dividends or Making Other Distributions . No
subsidiary of the Company is currently prohibited, directly or
indirectly, from paying any dividends to the Company, from making
any other distribution on such subsidiary's capital stock, from
repaying to the Company any loans or advances to such subsidiary
from the Company or from transferring any of such subsidiary's
property or assets to the Company or any other subsidiary of the
Company, except as described in or contemplated by the Prospectus
or as provided in the Debt Facilities (as defined in the
Prospectus) and the note purchase agreements executed in connection
with the Company's September 2004 and August 2005 unsecured note
offerings.
(p) Capitalization and Other
Capital Stock Matters . The authorized, issued and outstanding
Common Stock of the Company is as set forth in the Prospectus under
the caption "Capitalization" (other than for subsequent issuances,
if any, pursuant to the Forward Agreement or employee benefit plans
described in the Prospectus or upon exercise of outstanding options
described in the Prospectus). The Common Stock (including the
Shares) conform in all material respects to the description thereof
contained in the Prospectus. All of the issued and outstanding
Common Stock has been duly authorized and validly issued, is fully
paid and non-assessable and has been issued in compliance with
federal and state securities laws. None of the outstanding Common
Stock was and the Shares will not be issued in violation of any
preemptive rights, rights of first refusal or other similar rights
to subscribe for or purchase securities of the Company. There are
no authorized or outstanding options, warrants, preemptive rights,
rights of first refusal or other rights to purchase, or equity or
debt securities convertible into or exchangeable or exercisable
for, any capital stock of the Company or any of its subsidiaries
other than those accurately described in the Prospectus. The
description of the Company's stock option, stock bonus and other
stock plans or arrangements, and the options or other rights
granted thereunder, set forth in the Prospectus, accurately and
fairly presents the information required to be shown with respect
to such plans, arrangements, options and rights.
(q) Nasdaq National Market .
The Common Stock is registered pursuant to Section 12(b) or 12(g)
of the Exchange Act and is listed on the Nasdaq National Market,
and the Company has taken no action designed to, or likely to have
the effect of, terminating the registration of the Common Stock
under the Exchange Act or delisting the Common Stock from the
Nasdaq National Market, nor has the Company received any
notification that the Commission or the National Association of
Securities Dealers, Inc. (the " NASD ") is contemplating
terminating such registration or listing.
(r) No Consents, Approvals or
Authorizations Required . No consent, approval, authorization,
filing with or order of any court or governmental agency or
regulatory body is required in connection with the transactions
contemplated by this Agreement or the Forward Agreement, except as
have been obtained or made under the Securities Act, the Investment
Company Act and such as may be required (i) under the blue sky laws
of any jurisdiction in connection with the purchase and
distribution of the Shares by the Underwriter in the manner
contemplated herein and in the Prospectus, and (ii) by the
NASD.
(s) No Defaults or Violations .
Neither the Company nor any subsidiary is in violation or default
of (i) any provision of its charter, by-laws, or other
organizational document (ii) the terms of any indenture, contract,
lease, mortgage, deed of trust, note agreement, loan agreement or
other agreement, obligation, condition, covenant or instrument to
which it is a party or bound or to which its property is subject or
(iii) any statute, law, rule, regulation, judgment, order or decree
of any court, regulatory body, administrative agency, governmental
body, arbitrator or other authority having jurisdiction over the
Company or such subsidiary or any of its properties, as applicable,
except any such violation or default which would not, singly or in
the aggregate, result in a Material Adverse Change except as
otherwise disclosed in the Prospectus. All shareholder consents or
approvals for acts requiring such consents or approvals have been
obtained by the Company.
(t) No Actions, Suits or
Proceedings . Except as otherwise disclosed in the Prospectus,
no action, suit or proceeding by or before any court or
governmental agency, authority or body or any arbitrator involving
the Company or any of its subsidiaries or its or their property is
pending or, to the best knowledge of the Company, threatened that
(i) could reasonably be expected to have a Material Adverse Effect
on the performance of this Agreement, the consummation of any of
the transactions contemplated by this Agreement or the Forward
Agreement or (ii) could reasonably be expected to result in a
Material Adverse Change.
(u) All Necessary Permits, Etc
. The Company and each subsidiary possess such valid and current
certificates, authorizations or permits issued by the appropriate
state, federal or foreign regulatory agencies or bodies necessary
to conduct their respective businesses, and neither the Company nor
any subsidiary has received any notice of proceedings relating to
the revocation or modification of, or non-compliance with, any such
certificate, authorization or permit which, singly or in the
aggregate, if the subject of an unfavorable decision, ruling or
finding, could reasonably be expected to result in a Material
Adverse Change.
(v) Title to Properties . The
Company and each of its subsidiaries has good and marketable title
to all the properties and assets reflected as owned in the
financial statements referred to in the Prospectus, in each case
free and clear of any security interests, mortgages, liens,
encumbrances, equities, claims and other defects, except such as do
not materially and adversely affect the value of such property and
do not materially interfere with the use made or proposed to be
made of such property by the Company or such subsidiary. The real
property, improvements, equipment and personal property held under
lease by the Company or any subsidiary are held under valid and
enforceable leases, with such exceptions as are not material and do
not materially interfere with the use made or proposed to be made
of such real property, improvements, equipment or personal property
by the Company or such subsidiary.
(w) Tax Law Compliance . The
Company and its subsidiaries have filed all necessary federal,
state and foreign income and franchise tax returns and have paid
all taxes required to be paid by any of them and, if due and
payable, any related or similar assessment, fine or penalty levied
against any of them. The Company has made adequate charges,
accruals and reserves in the applicable financial statements
referred to in Section 1(j), above, in respect of all federal,
state and foreign income and franchise taxes for all periods as to
which the tax liability of the Company or any of its subsidiaries
has not been finally determined. The Company is not aware of any
tax deficiency that has been or might be asserted or threatened
against the Company or any subsidiary that could result in a
Material Adverse Change.
(x) Intellectual Property
Rights . The Company and each of its subsidiaries owns or
possesses adequate rights to use all patents, patent rights or
licenses, inventions, collaborative research agreements, trade
secrets, know-how, trademarks, service marks, trade names and
copyrights which are necessary to conduct its businesses as
described in the Registration Statement and Prospectus; the
expiration of any patents, patent rights, trade secrets,
trademarks, service marks, trade names or copyrights would not
result in a Material Adverse Change that is not otherwise disclosed
in the Prospectus; neither the Company nor any of its subsidiaries
has received any notice of, nor does it have knowledge of, any
infringement of or conflict with asserted rights of the Company by
others with respect to any patent, patent rights, inventions, trade
secrets, know-how, trademarks, service marks, trade names or
copyrights; and neither the Company nor any of its subsidiaries has
received any notice of, and has no knowledge of, any infringement
of or conflict with asserted rights of others with respect to any
patent, patent rights, inventions, trade secrets, know-how,
trademarks, service marks, trade names or copyrights which, singly
or in the aggregate, if the subject of an unfavorable decision,
ruling or finding, might result in a Material Adverse Change. There
is no claim being made against the Company or any of its
subsidiaries regarding patents, patent rights or licenses,
inventions, collaborative research, trade secrets, know-how,
trademarks, service marks, trade names or copyrights. The Company
and its subsidiaries do not in the conduct of their business as now
or proposed to be conducted as described in the Prospectus infringe
or conflict with any right or patent of any third party, or any
discovery, invention, product or process which is the subject of a
patent application filed by any third party, known to the Company
or any of its subsidiaries, which such infringement or conflict is
reasonably likely to result in a Material Adverse Change.
(y) No Transfer Taxes or Other
Fees . There are no transfer taxes or other similar fees or
charges under Federal law or the laws of any state, or any
political subdivision thereof, required to be paid in connection
with the execution and delivery of this Agreement or the issuance
and sale by the Company of the Shares.
(z) BDC Election; RIC . The
Company has duly filed with the Commission, pursuant to Section
54(a) of the Investment Company Act, a duly completed and executed
Form N-54A, pursuant to which the Company has elected to be subject
to the provisions of Sections 55 through 65 of the Investment
Company Act (the " Company BDC Election "); the Company has
not filed with the Commission any notice of withdrawal of the
Company BDC Election pursuant to Section 54(c) of the Investment
Company Act; the Company BDC Election remains in full force and
effect, and, to the Company's actual knowledge, no order of
suspension or revocation of such election under the Investment
Company Act has been issued or proceedings therefor initiated or
threatened by the Commission. The provisions of the charter and the
bylaws of the Company do not violate the applicable requirements of
the Investment Company Act and the rules and regulations thereunder
in any material respect, and the provisions of such charter and
bylaws are in full force and effect; the descriptions in the
Prospectus under the captions "Business-Investment Objectives and
Policies" and "Regulation" do not violate the applicable
requirements of the Investment Company Act in any material respect.
The Company is, and at all times through completion of the
transactions contemplated hereby, will be, in compliance in all
material respects with the terms and conditions of the Securities
Act and the Investment Company Act. As required by Subchapter M of
the Internal Revenue Code of 1986, as amended (the " Code
"), the Company is currently in compliance with requirements to
qualify as a regulated investment company under the Code.
(aa) Insurance . The Company
and each of its subsidiaries are insured by recognized, financially
sound and reputable institutions with policies in such amounts and
with such deductibles and covering such risks as are generally
deemed adequate and customary for their businesses including, but
not limited to, policies covering real and personal property owned
or leased by the Company and its subsidiaries against theft,
damage, destruction, acts of vandalism and earthquakes, general
liability and Directors and Officers liability. The Company has no
reason to believe that it or any subsidiary will not be able (i) to
renew its existing insurance coverage as and when such policies
expire or (ii) to obtain comparable coverage from similar
institutions as may be necessary or appropriate to conduct its
business as now conducted and at a cost that would not result in a
Material Adverse Change. Neither the Company nor any subsidiary has
been denied any insurance coverage which it has sought or for which
it has applied.
(bb) Labor Matters . No labor
disturbance by the employees of the Company or any of its
subsidiaries exists or, to the best of the Company's knowledge, is
imminent.
(cc) No Price Stabilization or
Manipulation . Neither the Company nor any of its subsidiaries
has taken and will not take, directly or indirectly, any action
designed to or that might be reasonably expected to cause or result
in stabilization or manipulation of the price of the Common Stock
to facilitate the sale or resale of the Shares.
(dd) Related Party Transactions
. There are no business relationships or related-party transactions
involving the Company or any subsidiary or any other person
required to be described in the Prospectus which have not been
described as required. Since July 30, 2002, the Company has not, in
violation of the Sarbanes-Oxley Act, directly or indirectly,
including through a subsidiary, extended or maintained credit,
arranged for the extension of credit, or renewed an extension of
credit, in the form of a personal loan to or for any executive
officer or director of the Company.
(ee) No Unlawful Contributions or
Other Payments . Neither the Company nor any of its
subsidiaries nor, to the best of the Company's knowledge, any
employee or agent of the Company or any subsidiary, has made any
contribution or other payment to any official of, or candidate for,
any federal, state or foreign office in violation of any law or of
the character required to be disclosed in the Prospectus.
(ff) Environmental Laws . (i)
The Company is in compliance with all rules, laws and regulations
relating to the use, treatment, storage and disposal of toxic
substances and protection of health or the environment ("
Environmental Laws ") that are applicable to its business,
except where the failure to comply would not result in a Material
Adverse Change, (ii) the Company has received no notice from any
governmental authority or third party of an asserted claim under
Environmental Laws, which claim is required to be disclosed in the
Registration Statement and the Prospectus, (iii) the Company
will not be required to make future material capital expenditures
to comply with Environmental Laws and (iv) no property that is
owned, leased or occupied by the Company has been designated as a
Superfund site pursuant to the Comprehensive Response,
Compensation, and Liability Act of 1980, as amended (42 U.S.C.
section 9601, et seq.), or otherwise designated as a contaminated
site under applicable state or local law.
(gg) ERISA Compliance . The
Company and its subsidiaries and any "employee benefit plan" (as
defined under the Employee Retirement Income Security Act of 1974,
as amended, and the regulations and published interpretations
thereunder (collectively, " ERISA ")) established or
maintained by the Company, its subsidiaries or their ERISA
Affiliates (as defined below) are in compliance in all material
respects with ERISA. " ERISA Affiliate " means, with respect
to the Company or a subsidiary, any member of any group of
organizations described in Sections 414(b), (c), (m) or (o) of the
Code, which the Company or such subsidiary is a member. No
"reportable event" (as defined under ERISA) that has not been
waived under ERISA has occurred or is reasonably expected to occur
with respect to any "employee benefit plan" established or
maintained by the Company, its subsidiaries or any of their ERISA
Affiliates. No "employee benefit plan" established or maintained by
the Company, its subsidiaries or any of their ERISA Affiliates, if
such "employee benefit plan" were terminated, would have any
material "amount of unfounded benefit liabilities" (as defined
under ERISA). Neither the Company, its subsidiaries nor any of
their ERISA Affiliates has incurred or reasonably expects to incur
any material liability under (i) Title IV of ERISA with respect to
termination of, or withdrawal from, any "employee benefit plan" or
(ii) Sections 412, 4971, 4975 or 4980B of the Code. Each "employee
benefit plan" established or maintained by the Company, its
subsidiaries or any of their ERISA Affiliates that is intended to
be qualified under Section 401(a) of the Code, including the
American Capital Strategies, Ltd. Investment and Employee Stock
Ownership Plan (the " ESOP "), is so qualified and nothing
has occurred, whether by action or failure to act, which would
cause the loss of such qualification.
The Company has not received any
notification of any investigation, examination, audit or review of
any type by or with the Internal Revenue Service or Department of
Labor regarding or in connection with any "employee benefit plan"
established or maintained by the Company, its subsidiaries or any
of their ERISA Affiliates other than the notification relating to
the tax year ended September 1997 of the Company by the Internal
Revenue Service with respect to the Form 1120.
(hh) Exchange Act Compliance .
The documents filed by the Company with the Commission complied and
will comply in all material respects with the requirements of the
Exchange Act, and, when read together with the other information in
the Prospectus, at the time the Registration Statement and any
amendments thereto become effective and at the Closing Date and
each Date of Delivery will not contain an untrue statement of a
material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in the
light of the circumstances under which they were made, not
misleading.
(ii) Reports Filed . The
Company has filed all reports required to be filed pursuant to the
Securities Act, the Investment Company Act and the Exchange
Act.
(jj) Conditions for Use of Form
N-2 . The Company has satisfied the conditions for the use of
Form N-2, as set forth in the general instructions thereto, with
respect to the Registration Statement and Rule 415(a)(1) of the
Act.
(kk) Options . Apart from
options to purchase shares issued under the Employees' Option Plan
and the Director Option plan, the Company does not have any
outstanding options, warrants or rights to purchase its shares, or
any securities convertible into or exchangeable for its shares.
(ll) Sarbanes-Oxley Act
Compliance .
The Company has complied in all material respects with Sections 302
and 906 of the Sarbanes-Oxley Act and has made the evaluations of
the company's disclosure controls and procedures required under
Rule 13a-15 under the Exchange Act. The Company has completed its
required assessment under Section 404 of the Sarbanes-Oxley Act and
the rules and regulations promulgated in connection therewith
(collectively " Section 404 ") and included such assessment
in its Annual Report on Form 10-K for the fiscal year ended
December 31, 2004 (the " Form 10-K "). The Company's
assessment under Section 404 concluded that its internal control
over financial reporting was effective as of December 31, 2004 and
this assessment has been audited by Ernst & Young LLP as stated
in their report which was included in the Form 10-K.
(mm) Officer Certificates . Any
certificate signed by an officer of the Company and delivered to
the Underwriter or to counsel for the Underwriter shall be deemed
to be a representation and warranty by the Company to the
Underwriter as to the matters set forth therein.
(nn) No Conflict . The
performance of the Underwriting Agreement and the Forward Agreement
and the consummation of the transactions contemplated in this
Agreement and the Forward Agreement will not (a) result in any
violation of the Company's charter or bylaws or (b) result in a
material breach or violation of any of the terms and provisions of,
or constitute a default under, any bond, debenture, note or other
evidence of indebtedness, or any lease, contract, indenture,
mortgage, deed of trust, loan agreement, joint venture or other
agreement or instrument to which the Company is a party or by which
its properties are bound, or any applicable statute, rule or
regulation or any order, writ or decree of any court, government or
governmental agency or body having jurisdiction over the Company or
any of its subsidiaries, or over any of their properties or
operations.
Section 2. Representations and
Warranties by the Forward Seller . The Forward Seller
represents and warrants to the Underwriter as of the date hereof
and as of the Closing Date (as defined in Section 3(c) hereof), and
agrees with the Underwriter, as follows:
(a) Authorization of this
Agreement . This Agreement has been duly authorized, executed
and delivered by such Forward Seller and, at the Closing Date and
at each Date of Delivery, the Forward Seller will have full right,
power and authority to sell, transfer and deliver the Borrowed
Shares.
(b) Authorization of the Forward
Agreement . The Forward Agreement has been duly authorized,
executed and delivered by, and is a valid and binding agreement of,
the Forward Counterparty enforceable against the Forward
Counterparty in accordance with its terms, except as the
enforcement thereof may be limited by bankruptcy, insolvency
(including, without limitation, all laws relating to fraudulent
transfers), reorganization, moratorium or other similar laws
relating to or affecting the rights and remedies of creditors or by
general equitable principles (regardless of whether enforcement is
considered in a proceeding in equity or at law).
(c) Right to Transfer . The
Forward Seller will, at the Closing Date, have the free and
unqualified right to transfer the Borrowed Shares to be sold by the
Forward Seller hereunder, free and clear of any security interest,
mortgage, pledge, lien, charge, claim, equity or encumbrance of any
kind; and upon delivery of such Borrowed Shares and payment of the
purchase price as herein contemplated, assuming the Underwriter has
no notice of any adverse claim, the Underwriter will have the free
and unqualified right to transfer to the Borrowed Shares purchased
by it from the Forward Seller, free and clear of any security
interest, mortgage, pledge, lien, charge, claim, equity or
encumbrance of any kind.
Section 3. Purchase, Sale and
Delivery of the Shares .
(a) The Firm Shares .
(i) On the basis of the
representations, warranties and agreements herein contained and
upon the terms and conditions set forth herein, the Company and the
Forward Seller agree to sell, severally and not jointly, to the
Underwriter, and the Underwriter agrees to purchase, the Forward
Seller Firm Shares from the Forward Seller and any shares of Common
Stock sold by the Company pursuant to Section 12(a) hereof, at the
price of $34.84 per share.
(ii) If the Company does not meet all
of the conditions to effectiveness set forth in the Forward
Agreement on or prior to the Closing Date, the Forward Seller, in
its sole judgment, may choose not to borrow and deliver for sale
the Forward Seller Firm Shares. In addition, in the event that, in
the sole judgment of the Forward Seller, it is unable to borrow and
deliver for sale under this Agreement all of the Forward Seller
Firm Shares or if, in the Forward Seller's sole judgment it would
entail a stock loan cost in excess of a rate equal to 135 basis
points per annum, then the Forward Seller shall only be required to
deliver for sale the aggregate number of shares of Common Stock
that the Forward Seller is able to so borrow at or below such
cost.
(iii) If, pursuant to Section
3(a)(ii), the Forward Seller does not borrow and deliver for sale
the Forward Seller Firm Shares, the Forward Seller will use its
best efforts to notify the Company no later than the Closing
Date.
(b) The Option Shares .
(i) In addition, on the basis of the
representations, warranties and agreements herein contained and
upon the terms and conditions set forth herein, the Company hereby
grants an option to the Underwriter to purchase all or any portion
of the Option Shares at the price of $34.84 per share, less an
amount per share equal to any dividends or distributions declared
by the Company and payable on the Firm Shares but not payable on
the Option Shares. The option granted hereunder will expire thirty
(30) days after the date of this Agreement and may be exercised in
whole or in part from time to time only for the purpose of covering
over-allotments which may be made in connection with the offering
and distribution of the Firm Shares upon notice by the Underwriter
to the Company setting forth the number of Option Shares as to
which the Underwriter is then exercising the option and the time
and date of payment and delivery for such Option Shares. Any such
time and date of delivery (each, a " Date of Delivery ")
shall be determined by the Underwriter, but shall not be later than
seven (7) full business days after the exercise of said option,
nor, in any event, prior to the Closing Date (as defined in Section
3(c) below).
(c) Payment .
(i) Payment of the purchase price for,
and delivery of the Firm Shares shall be made at the offices of
Arnold & Porter LLP, Thurman Arnold Building, 555 Twelfth
Street, N.W., Washington, D.C. 20004-1206 (or at such other place
as may be agreed upon by the Company, the Underwriter and the
Forward Seller) at 10:00 a.m. (Eastern Time) on the third (3
rd ) full business day following the date of this
Agreement (or the fourth (4 th ) full business day if
this Agreement is executed and delivered after 4:30 p.m. (Eastern
Time)) or at such other time and date not later than seven (7) full
business days following the first day that Shares are traded, as
the Underwriter, the Forward Seller and the Company may determine,
or at such time and date to which payment and delivery shall have
been postponed pursuant to Section 9 and Section 12 hereof, (the "
Closing Date "). If the Company has not made available to
the Underwriter copies of the Prospectus within the time provided
in Sections 3(f) and 4(d) hereof, the Underwriter may, in its sole
discretion, postpone the Closing Date or applicable Date of
Delivery, as the case may be, until no later than two (2) business
days following delivery of copies of the Prospectus to the
Underwriter.
(ii) In addition, in the event that
any or all of the Option Shares are purchased by the Underwriter,
payment of the purchase price and delivery of such Option Shares
shall be made at the above-mentioned offices, or at such other
place as shall be agreed upon by the Underwriter and the Company,
on each Date of Delivery as specified in the notice from the
Underwriter to the Company.
(iii) Payment for the Shares shall be
made at the Closing Date (and each subsequent Date of Delivery, as
applicable) by wire transfer of immediately available funds to the
order of the Company or the Forward Seller.
(d) Public Offering of the
Shares . The Underwriter hereby advises the Company that the
Underwriter intends to offer for sale to the public, as described
in the Prospectus, the Shares as soon after this Agreement has been
executed as the Underwriter, in its sole judgment, has determined
is advisable and practicable and that the Underwriter intends to
first allocate the Borrowed Shares to purchasers in the public
offering.
(e) Delivery of the Shares .
The Company shall deliver, or cause to be delivered, a credit
representing any shares of Common Stock issued and sold by the
Company to the Underwriter pursuant to Section 12(a) and the
Forward Seller shall so deliver or cause to be delivered, subject
to Section 3(a)(ii), the Forward Seller Firm Shares, in each case,
to an account or accounts at The Depository Trust Company, as
designated by the Underwriter for the account of the Underwriter at
the Closing Date, against the irrevocable release of a wire
transfer of immediately available funds for the amount of the
purchase price therefor. The Company shall also deliver, or cause
to be delivered a credit representing the Option Shares that the
Underwriter has agreed to purchase at the Closing Date (or the Date
of Delivery, as the case may be), to an account or accounts at The
Depository Trust Company as designated by the Underwriter for the
account of the Underwriter, at the Closing Date or the Date of
Delivery, as the case may be, against the irrevocable release of a
wire transfer of immediately available funds for the amount of the
purchase price therefor. Time shall be of the essence, and delivery
at the time and place specified in this Agreement is a further
condition to the obligations of the Underwriter.
(f) Delivery of Prospectus to the
Underwriter . Not later than 12:00 noon (Eastern Time) on the
second business day following the date the Shares are released by
the Underwriter for sale to the public, the Company shall deliver
or cause to be delivered copies of the Prospectus in such
quantities and at such places as the Underwriter shall request.
(g) Offering by the Underwriter
. The Underwriter hereby represents, warrants and covenants to the
Company as follows:
(i) it has not offered or sold and,
prior to the expiration of a period of six (6) months from the
later of the Closing Date or final Date of Delivery, will not offer
or sell any shares included in the offering to persons in the
United Kingdom except to persons whose ordinary activities involve
acquiring, holding, managing or disposing of investments (as
principal or agent) for the purposes of their businesses or
otherwise in circumstances which have not resulted and will not
result in an offer to the public in the United Kingdom
