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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
FORM 10-K
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/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 1995
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
COMMISSION FILE NO. 0-22832
ALLIED CAPITAL LENDING CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
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<TABLE>
<S> <C>
MARYLAND 52-1081052
(STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER
OF INCORPORATION) IDENTIFICATION NO.)
C/O ALLIED CAPITAL ADVISERS, INC.
1666 K STREET, N.W., NINTH FLOOR 20006
WASHINGTON, D.C. (ZIP CODE)
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICE)
</TABLE>
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (202) 331-1112
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SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
<TABLE>
<CAPTION>
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
- ------------------- -------------------
<S> <C>
NONE NONE
</TABLE>
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
COMMON STOCK, $0.0001 PAR VALUE
(TITLE OF CLASS)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days. YES X NO
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. / /
The aggregate market value of the registrant's common stock held by
non-affiliates of the registrant as of March 18, 1996 was approximately
$41,600,286 based upon the average bid and asked price for the registrant's
common stock on that date. As of March 18, 1996 there were 4,385,829 shares of
the registrant's common stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's Annual Report to Stockholders for the year ended
December 31, 1995 are incorporated by reference into Parts II and IV of this
Report. Portions of the registrant's definitive Proxy Statement for the Annual
Meeting of Stockholders to be held on May 13, 1996 are incorporated by
reference into Part III of this Report.
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<PAGE> 2
PART I
ITEM 1. BUSINESS.
Allied Capital Lending Corporation (the "Company") was incorporated in
1976 and is engaged in the business of making loans to small businesses,
including loans that are partially guaranteed by the U.S. Small Business
Administration ("SBA") pursuant to the SBA's 7(a) loan program. The Company is
a closed-end management investment company that elected in 1993 to be regulated
as a business development company ("BDC") under the Investment Company Act of
1940, as amended (the "1940 Act"). The Company is also a small business
lending company ("SBLC") approved by the SBA. In April 1995, the Company
formed ACLC Limited Partnership (the "Subsidiary") in order to participate in
the SBA's 504 loan program and make other small business loans. Allied Capital
Advisers, Inc. ("Advisers") serves as the investment adviser of the Company
under an investment advisory agreement.
Prior to consummation of the Company's initial public offering in
November 1993, the Company was a wholly owned subsidiary of Allied Capital
Corporation ("Allied I"). After that date, Allied I continued to hold a
significant number of the Company's shares, but agreed to divest itself of such
shares by December 31, 1998 through public offerings, private placements,
distributions to Allied I stockholders or otherwise. In late December 1994,
Allied I declared a special dividend payable in shares of the Company's stock
held by Allied I (which was paid in early January 1995), which resulted in the
distribution of an aggregate of 335,086 of the Company's shares to the
stockholders of Allied I. That distribution reduced Allied I's ownership of
the Company's shares to 1,244,914 shares, or approximately 28% of the Company's
shares then outstanding. Allied I has not made or declared any other
distributions that are payable with Company stock held by Allied I. Allied I's
holdings of the Company's shares represent approximately 28% of the Company's
shares outstanding as of December 31, 1995.
The Section 7(a) Guaranteed Loan Program
Pursuant to Section 7(a) of the Small Business Act of 1958, as
amended, the SBA will guarantee 80% of any qualified loan up to $100,000
regardless of maturity, and 75% of any such loan over $100,000 regardless of
maturity, to a maximum guarantee of $750,000 for any one borrower. SBA
regulations define qualified small businesses generally as businesses with no
more than $5 million in annual sales and no more than 500 employees.
In December 1994, in a move unexpected by the Company, the SBA
temporarily altered its regulations concerning the Section 7(a) guaranteed loan
program and announced that it would place a loan size cap of $500,000 on the
loans that it would guarantee under the Section 7(a) guaranteed loan program.
In late 1995, the SBA altered the regulations again and restored the maximum
guarantee of $750,000 for any one borrower, thus effectively raising the
maximum loan size with a 75% guarantee to $1 million. The SBA's 1994 reduction
in the maximum loan size under the 7(a) guaranteed program had no significant
impact on the Company's results of operations for 1995 because the Company had a
substantial backlog of loans already approved under prior rules; however, the
frequency of regulatory changes in 1994 and 1995 prompted the Company to
reevaluate its lending programs and expand its operations with additional small
business loan programs. The Company continues to explore other financial
products and is actively pursuing entry into other loan programs to diversify
its portfolio.
The SBA designates certain participants in the Section 7(a) guaranteed
loan program as "preferred lenders" in designated markets. As of December 31,
1995, the Company was a preferred lender in the Washington, DC area and in
Richmond, Virginia. In February 1996, the Company was granted preferred lender
status by the SBA in 47 regional markets, including the Washington, DC and
Richmond, Virginia markets.
The SBA also designates certain participants in the Section 7(a)
guaranteed loan program as "certified lenders." Applications for loan
guarantees submitted by certified lenders receive expedited processing by the
SBA. The SBA has designated the Company as a certified lender in all markets
in which it is a preferred lender.
As permitted by SBA regulations, the Company systematically sells to
investors, without recourse, the guaranteed portion of its loans. Under
legislation adopted in 1993, a fee at the rate of 0.4% per annum on the
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outstanding principal balance of such loans sold in the secondary market is
payable to the SBA. Such loan sales by the Company generally take place
approximately three months after the closing of the loan and, under current
market conditions, are made at a price of around 110% of the principal amount
of the portion of the loan sold. In October 1995, the SBA amended its
regulations and raised the annual fee on the guaranteed portion of loans
approved by the SBA after October 12, 1995 to 0.5% per annum regardless of sale
to the secondary market. The SBA also is entitled to a fee of 50% of any cash
premium in excess of 10% received on loan sales. The Company continues to
service loans sold for a normal servicing fee of approximately 0.4% per annum
of the outstanding principal amount of such loans. To the extent that the
Company receives any higher servicing fee, the value of such additional
servicing fee is accrued as an excess servicing asset. At December 31, 1995,
the Company was servicing approximately $144 million aggregate principal amount
of loans, of which approximately 67% had been sold to investors.
The Company requires capital to make loans, to carry those loans for
approximately three months until sale occurs, and to carry the unsold portion
of the principal amount of the loans to maturity. For the purpose of carrying
the guaranteed portions of such loans pending their sale, the Company has
obtained lines of credit aggregating $17 million from a commercial bank as of
December 31, 1995 that expire in July, 1996. The Company is in the process of
revising these lines of credit.
Section 7(a) guaranteed loans may be made to qualifying small
businesses for the purposes of acquiring real estate, purchasing machinery or
equipment or to provide working capital. Such loans made to acquire real
estate may have maturities of up to 25 years; loans made for the purpose of
purchasing machinery and equipment may have maturities of up to 15 years; and
loans made to provide working capital may have maturities of up to seven years.
These loans are secured by a mortgage or other lien on the assets of the
borrower and, frequently, of its principals. The Company generally does not
make unsecured working capital loans. In all cases, the principals of the
small businesses must personally guarantee the payment of interest on and
principal of the loans.
The Company may, from time to time, concentrate its loans in
particular industries, but the Company does not intend to concentrate its loans
in any industry. At December 31, 1995, the Company had in its portfolio or was
servicing loans to, among others, hotels and motels, restaurants,
manufacturers, retail shops, food stores, professional services, laundries and
cleaners, home furnishings concerns, gasoline stations, business services
firms, recreational services providers, automobile exhaust repair shops,
personal services providers and automotive repair concerns.
The interest on loans recently made by the Company generally is at a
variable rate, which is generally 2.75% per annum above the prime rate, as
published in The Wall Street Journal or other financial newspaper, adjusted
monthly.
All loans are payable in equal monthly installments of principal and
interest from the dates on which the loans are made (or the first day of the
month following any month in which there occurs an interest rate adjustment) to
their respective maturities.
504 Loan Program and Companion Loans
During 1995 as part of the Company's efforts to diversify its lending
activities, the Company through its Subsidiary began participating in the SBA's
504 loan programs. Under the SBA's 504 loan program, qualified small
businesses can purchase or build real estate with favorable long-term debt.
Loans made under this program are structured such that the entrepreneur
provides at least 10% of the project cost in equity, the Company (through its
Subsidiary) provides 50% of the project cost in a 20-year adjustable rate first
mortgage and a local certified development company ("CDC") provides a 20-year
fixed rate second mortgage for the remaining 40% of the project cost. Both
loans are fully amortizing and the total project cost can be as large as $2.5
million.
In addition to partnering with local CDCs to finance projects that
require up to $2.5 million in financing, during 1995 through its Subsidiary,
the Company also began providing companion or "piggyback" loans ("Companion
Loans") in conjunction with traditional SBA 7(a) guaranteed loans. For this
type of financing, the
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Company provides an unguaranteed first mortgage loan for up to 50% of the real
estate value and a second mortgage loan through the 7(a) program with a 75% SBA
guarantee. The total of the two loans is generally 80% or less of the
appraised value of the real estate. The Company now also partners with local
banks by providing second mortgage loans that are partially guaranteed by the
SBA in conjunction with the banks' conventional first mortgage loans to
qualifying small businesses.
The Company finances its SBA 504 loans and Companion Loans with a line
of credit that the Subsidiary has with an investment bank. As of December 31,
1995, this line of credit had a $20 million capacity of which $4.5 million had
been borrowed. The interest rate on this facility is equal to LIBOR plus 2%
per annum, and the facility expires September 27, 1996.
Loan Generation
The Company has made arrangements with certain financial consulting
organizations, or regional associates, to refer to the Company potential loans
to small businesses in certain designated territories. Any prospective loan
referred to the Company by any regional associate is reviewed by the Company's
portfolio manager and its credit committee and is not closed unless approved or
ratified by the Board of Directors of the Company and, in the case of Section
7(a) guaranteed loans, by the SBA. If and when a loan referred by a regional
associate is closed, such organization is compensated by an origination fee
calculated using a formula agreed upon by the Company and such regional
associate. The origination fees currently paid by the Company to its regional
associates range from 0.5% to 5% of the principal amount of each loan made by
the Company that was referred by the respective regional associate. The
regional associates from time to time may assist the Company in monitoring any
loans referred by them or otherwise made in their territories. For those
services, the regional associates are compensated with a fixed fee per visit.
The Company's Operation as a BDC
As a BDC, the Company may not acquire any assets other than
"Qualifying Assets" unless, at the time the acquisition is made, Qualifying
Assets represent at least 70% of the value of the Company's total assets. The
principal categories of Qualifying Assets relevant to the business of the
Company are the following:
(1) Securities purchased in transactions not involving any public offering
from the issuer of such securities, which issuer is an eligible
portfolio company. An eligible portfolio company is defined as any
issuer that is organized and has its principal place of business in
the United States and does not have any class of publicly traded
securities with respect to which a broker may extend margin credit.
(2) Cash, cash items, Government securities, or high quality debt
securities maturing in one year or less from the time of investment.
In addition, to treat securities described in (1) above as a
Qualifying Asset for the purpose of the 70% test, a BDC must make available to
the issuer of those securities significant managerial assistance. Making
available significant managerial assistance means, among other things, any
arrangement whereby the BDC, through its directors, officers or employees,
offers to provide, and, if accepted, does provide, significant guidance and
counsel concerning the management, operations or business objectives and
policies of a portfolio company. Managerial assistance is made available to
the portfolio companies by the Company's officers and the investment officers
of Advisers who manage the Company's investments. Each portfolio company is
assigned for monitoring purposes to an investment officer and is contacted and
counseled if it appears to be encountering business or financial difficulties.
The Company also provides management assistance and counselling on a continuing
basis to any portfolio company that requests it, whether or not difficulties
are perceived. The Company's officers and directors are highly experienced in
providing this type of managerial assistance to small businesses. The Company
may not change the nature of its business so as to cease to be, or withdraw its
election as, a BDC unless authorized by vote of a majority (as defined in the
1940 Act), of the Company's shares. As a BDC, the Company is entitled to
borrow money and issue senior securities representing indebtedness as long as
its indebtedness representing senior securities has asset coverage to the
extent of at least 200%.
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Investment Adviser
Advisers is the investment adviser of the Company pursuant to an
investment advisory agreement. Under that agreement, Advisers manages the
loans made by the Company, subject to the supervision and control of the Board
of Directors of the Company, and evaluates, structures, closes and monitors
those loans made by the Company. The Company will not make any loan or other
investment that has not been recommended by Advisers. Except as to those
investment decisions that require specific approval by the Company's Board,
Advisers has the authority to effect loans and sales of portions of loans for
the Company's account. Advisers also serves as the investment adviser of
Allied I, Allied Capital Corporation II ("Allied II"), Allied Capital
Commercial Corporation ("Allied Commercial"), Business Mortgage Investors, Inc.
("BMI"), Allied Venture Partnership and Allied Technology Partnership. Some of
the directors and officers of Advisers are also directors and officers of the
Company.
The current agreement provides that the Company will pay all of its
own operating expenses, except those specifically required to be borne by
Advisers. The expenses paid by Advisers include the compensation of its
officers and the cost of office space, equipment, and other personnel necessary
for day-to-day operations. The expenses that are paid by the Company include
the Company's share of transaction costs (including legal and auditing)
incident to the acquisition and disposition of investments, regular legal and
auditing fees and expenses, the fees and expenses of the Company's directors,
the costs of printing and distributing proxy statements and other
communications to stockholders, the costs of promoting the Company's stock, and
the fees and expenses of the Company's custodian and transfer agent. The
Company, rather than Advisers, is also required to pay expenses associated with
litigation and other extraordinary or non-recurring expenses with respect to
its operations and investments, as well as expenses of required and optional
insurance and bonding. Advisers is, however, entitled to retain for its own
account any fees paid by or for the account of any company, including a
portfolio company, for special investment banking or consulting work performed
for that company which is not related to the Company's such investment
transaction or follow-on managerial assistance. Advisers will report to the
Board of Directors not less often than quarterly all fees received by Advisers
from any source whatever and whether, in its opinion, any such fee is one that
Advisers is entitled to retain under the provisions of the current agreement.
In the event that any member of the Board of Directors should disagree, the
matter will be conclusively resolved by a majority of the Board of Directors,
including a majority of the independent Directors. If the Company uses the
services of attorneys or paraprofessionals on the staff of Advisers for the
Company's corporate purposes in lieu of outside counsel, the Company will
reimburse Advisers for such services at hourly rates calculated to cover the
cost of such services, as well as for incidental disbursements by Advisers in
connection with such services.
As compensation for its services to and the expenses paid for the
account of the Company, Advisers is entitled to be paid quarterly, in arrears,
a fee equal to 0.625% per quarter of the quarter-end value of the Company's
total assets (other than interim investments and cash) and 0.125% per quarter
of the quarter-end value of the Company's interim investments and cash. Such
fees on an annual basis equal approximately 2.5% of the Company's total assets
(other than interim investments and cash) and 0.5% of the Company's interim
investments and cash. For the purposes of calculating the fee, the values of
the Company's assets are determined as of the end of each calendar quarter.
The quarterly fee is paid as soon as practicable after the values have been
determined.
Because of the Company's practice of selling a significant portion of
the loans that it originates, the Company believes that the fees to Advisers
provided for by the existing advisory agreement are comparable to the fees paid
by other investment companies, notwithstanding the efforts and resources
devoted by Advisers to evaluating, structuring, closing and servicing the types
of private investments in which the Company specializes.
Employees
The Company has no employees as all of its personnel are furnished by
Advisers.
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ITEM 2. PROPERTIES.
The Company does not own or lease any properties or other tangible
assets.
ITEM 3. LEGAL PROCEEDINGS.
The Company is not a defendant in any material pending legal
proceeding, and no such material proceedings are known by the Company to be
contemplated.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
On November 9, 1995, the Company held a Special Meeting of
Stockholders in order to amend the Company's investment objective to allow the
Company to expand the types of loans it makes to include loans other than those
guaranteed by the SBA. A total of 2,382,450 votes were cast for the amendment,
and 360,887 votes were cast against the amendment. The Company also amended
one of its investment policies to allow it to make such loans which are not
guaranteed by the SBA. A total of 2,357,096 votes were cast for amending the
policies and 383,830 votes were cast against such an amendment.
EXECUTIVE OFFICERS OF THE REGISTRANT.
The following table sets forth the names, ages and positions of the
executive officers of the Company as of March 1, 1996, as well as certain other
information with respect to those persons:
<TABLE>
<CAPTION>
Positions Currently Principal Occupations
Name Age Held with the Company During Past Five Years
---- --- --------------------- ----------------------
<S> <C> <C> <C>
David Gladstone 53 Chairman and Chief Executive Employed by Allied I or Advisers since
Officer 1974. Chairman and Chief Executive
Officer of Allied I, Allied II, Allied
Commercial and Advisers; Director,
President and Chief Executive Officer of
BMI and Allied Capital Mortgage
Corporation ("Allied Mortgage"); Director
of The Riggs National Corporation;
Trustee of The George Washington
University.
George C. Williams 69 Vice Chairman of Employed by Allied I or Advisers since
the Board 1959. Vice Chairman of Allied I, Allied
II, Allied Commercial and Advisers;
Chairman of BMI and Allied Mortgage; He
is the father of G. Cabell Williams III.
Katherine C. Marien 47 President and Chief Operating Employed by Advisers since 1992;
Officer Executive Vice President of Allied I,
Allied II, Allied Commercial, BMI and
Advisers; Executive Vice President of the
Company from 1992 to 1994; Financial
Consultant with Wilks & Schwartz
Broadcasting from 1990 to 1992; Financial
Consultant to USA Mobile Communications,
Inc. from 1991 to 1992; Senior Vice
President of Communications Equity
Associates from 1989 to 1991.
</TABLE>
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<TABLE>
<S> <C> <C> <C>
Joan M. Sweeney 36 Executive Vice President Employed by Advisers since 1993;
President and Chief Operating Officer of
Advisers; Executive Vice President of
Allied I, Allied II, Allied Commercial,
BMI, and Allied Mortgage; Senior Manager
at Ernst & Young from 1990 to 1993.
Jon A. DeLuca 33 Executive Vice President, Employed by Advisers since 1994;
Treasurer and Chief Financial Executive Vice President, Treasurer and
Officer Chief Financial Officer of Allied I,
Allied II, Allied Commercial, BMI,
Advisers and Allied Mortgage. Manager of
Entrepreneurial Services at Coopers &
Lybrand from 1986 to 1994.
Thomas R. Salley 38 General Counsel and Secretary Employed by Advisers since 1988; General
Counsel and Secretary of Allied I, Allied
II, Allied Commercial, BMI, Allied
Mortgage and Advisers.
G. Cabell Williams III 41 Executive Vice President Employed by Advisers since 1981;
Director, Chief Operating Officer and
President of Allied I; Executive Vice
President of Allied II, Allied
Commercial, Advisers and BMI.
</TABLE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.
Information in response to this Item is incorporated by reference to
the "Investor Information" section of, and to Notes 6 and 8 of the Notes to
Consolidated Financial Statements contained in, the Company's Annual Report to
Stockholders for the year ended December 31, 1995 (the "1995 Annual Report").
ITEM 6. SELECTED FINANCIAL DATA.
Information in response to this Item is incorporated by reference to
the table in the "Consolidated Comparison of Financial Highlights" section of
the 1995 Annual Report.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
Information in response to this Item is incorporated by reference to
the "Management's Discussion and Analysis" section of the 1995 Annual Report.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
Information in response to this Item is incorporated by reference to
the Consolidated Financial Statements, notes thereto and Report of Independent
Accountants thereon contained in the 1995 Annual Report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
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PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
Information in response to this Item is incorporated by reference to
the identification of directors and nominees contained in the "Election of
Directors" section and the subsection captioned "Compliance with Reporting
Requirements of Section 16(a) of the Securities Exchange Act of 1934" of the
Company's definitive proxy statement in connection with its 1996 Annual Meeting
of Stockholders, scheduled to be held on May 13, 1996 (the "1996 Proxy
Statement"). Information in response to this Item also is included under the
caption "Executive Officers of the Registrant" of this Report.
ITEM 11. EXECUTIVE COMPENSATION.
Information in response to this Item is incorporated by reference to
the subsections captioned "Compensation of Executive Officers and Directors,"
"Incentive Stock Options" and "Compensation of Directors" of the 1996 Proxy
Statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
Information in response to this Item is incorporated by reference to
the subsection captioned "Beneficial Ownership of Common Stock" of the 1996
Proxy Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Information in response to this Item is incorporated by reference to
the subsection captioned "Certain Transactions" of the 1996 Proxy Statement.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(a) Documents filed as part of this Report:
1. A. The following financial statements are incorporated by reference
to the 1995 Annual Report:
Consolidated Balance Sheet at December 31, 1995 and 1994.
Consolidated Statement of Operations for the years ended December 31,
1995, 1994 and 1993.
Consolidated Statement of Changes in Net Assets for the years ended
December 31, 1995, 1994 and 1993.
Consolidated Statement of Cash Flows for the years ended December 31,
1995, 1994, and 1993.
Consolidated Statement of Investments in Small Business Concerns as
of December 31, 1995.
Notes to Consolidated Financial Statements.
B. The Report of Independent Accountants with respect to the
financial statements listed in A. above is incorporated by reference
to the 1995 Annual Report.
2. No financial statement schedules of the Company are filed herewith
because (i) such schedules are not required or (ii) the information
required has been presented in the aforementioned financial
statements.
3. The following exhibits are filed herewith or incorporated by
reference as set forth below:
(3)(i)(1) Amended and Restated Articles of Incorporation of the Company.
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(3)(ii)* By-laws of the Company, as amended.
(4) Instruments defining rights of security holders -- See Exhibits
(3)(i) and (3)(ii).
(10)(a)(2) Investment Advisory Agreement between the Company and Allied
Capital Advisers, Inc. dated May 9, 1995.
(10)(c)(3) Tax Indemnification Agreement dated November 12, 1993 between
the Company and Allied Capital Corporation.
(10)(d)* Promissory notes, dated August 31, 1995, and July 26, 1995,
between the Company and The Riggs National Bank of Washington,
DC.
(10)(e)* Promissory note, dated September 27, 1995, between ACLC Limited
Partnership and Lehman Commercial Paper, Inc.
(10)(f)(4) Form of agreement between the Company and its regional
associates.
(10)(g)(5) The Company's Stock Option Plan, as amended.
(10)(h)(1) The Company's Dividend Reinvestment Plan.
(11)* Statement re computation of per share earnings.
(13)*(6) 1995 Annual Report to Stockholders.
(23)* Consent of Matthews, Carter and Boyce, independent accountants.
(27)* Financial Data Schedule.
- ---------------------------
* Filed herewith.
(1) Incorporated by reference to such document filed as an exhibit of the same
number to the Company's registration statement on Form N-2 (No. 33-68836).
(2) Incorporated by reference to Exhibit A to the Company's definitive proxy
statement of relating to its annual meeting of stockholders held on May 9,
1995.
(3) Incorporated by reference to an exhibit of the same number to the Form
10-K filed by Allied Capital Corporation for the year ended December 31,
1993.
(4) Incorporated by reference to an exhibit to Amendment No. 1 to the
Company's registration statement on Form N-2 (No. 33-68836).
(5) Incorporated by reference to Exhibit B to the Company's definitive proxy
statement of relating to its annual meeting of stockholders held on May
20, 1994.
(6) Except to the extent that portions of this exhibit are incorporated herein
by reference, this document shall not be deemed to have been filed
pursuant to the Securities Exchange Act of 1934.
(b) Reports on Form 8-K.
No reports on Form 8-K have been filed for the three months ended December
31, 1995.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed
on its behalf by the undersigned, thereunto duly authorized on March __, 1996.
-------------------------------------------------
David Gladstone
Chairman of the Board and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
Registrant in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Title
Signature (Capacity) Date
- --------- ---------- ----
<S> <C> <C>
Chairman and March __, 1996
- --------------------------------- Chief Executive Officer
David Gladstone (Principal Executive Officer)
Vice Chairman of the Board March __, 1996
- ---------------------------------
George C. Williams
Director, President and March __, 1996
- --------------------------------- Chief Operating Officer
Katherine C. Marien
Director March __, 1996
- ---------------------------------
Jon W. Barker
Director March __, 1996
- ---------------------------------
Eleanor Deane Bierbower
Director March __, 1996
- ---------------------------------
Anthony T. Garcia
Director March __, 1996
- ---------------------------------
Robert V. Fleming II
Director March __, 1996
- ---------------------------------
Arthur H. Keeney III
Director March __, 1996
- ---------------------------------
Frank L. Langhammer
Executive Vice President, March __, 1996
- --------------------------------- Treasurer, and Chief Financial
Jon A. DeLuca Officer (Principal Financial
and Accounting Officer)
</TABLE>
<PAGE> 11
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------ -----------
<S> <C>
(3)(ii) By-laws of the Company, as amended.
(10)(d) Promissory notes, dated August 31, 1995, and July 26, 1995, between the Company and The Riggs National Bank of
Washington, DC.
(10)(e) Promissory note, dated September 27, 1995, between ACLC Limited Partnership and Lehman Commercial Paper, Inc.
(11) Statement re computation of per share earnings.
(13) 1995 Annual Report to Stockholders.
(23) Consent of Matthews, Carter and Boyce, independent accountants.
(27) Financial Data Schedule.
</TABLE>
<PAGE> 1
EXHIBIT 3(ii)
---------------------------
ALLIED CAPITAL LENDING CORPORATION
(a Maryland corporation)
-------------------
BYLAWS
-------------------
As adopted by the Sole Director on September 12, 1990 and amended by the Sole
Stockholder on
August 8, 1991, March 24, 1992 and by the Board of Directors
on November 12, 1993, August 12, 1994 and November 9, 1995.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
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Page
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ARTICLE I
OFFICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1. Office . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 2. Additional Offices . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II
MEETINGS OF STOCKHOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1. Time and Place . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 2. Annual Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 3. Notice of Annual Meeting . . . . . . . . . . . . . . . . . . . . . . 1
Section 4. Special Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 5. Notice of Special Meeting . . . . . . . . . . . . . . . . . . . . . 2
Section 6. Presiding Officer; Statement of Affairs; Order of Business. . . . . 2
Section 7. Quorum; Adjournments . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 8. Voting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 9. Action By Consent . . . . . . . . . . . . . . . . . . . . . . . . . . 4
ARTICLE III
DIRECTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 1. General Powers; Number; Tenure . . . . . . . . . . . . . . . . . . . 4
Section 2. Vacancies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 3. Removal; Resignation . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 4. Place of Meetings . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 5. Annual Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 6. Regular Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 7. Special Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 8. Quorum; Adjournments . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 9. Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 10. Action by Consent . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 11. Meetings by Telephone or Similar Communications . . . . . . . . . . 6
ARTICLE IV
COMMITTEES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 1. Executive Committee . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 2. Powers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 3. Procedure; Meetings . . . . . . . . . . . . . . . . . . . . . . . . 6
</TABLE>
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<TABLE>
<S> <C>
Section 4. Quorum . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 5. Other Committees . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 6. Vacancies; Changes; Discharges . . . . . . . . . . . . . . . . . . . 7
Section 7. Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 8. Action by Consent . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 9. Meetings by Telephone or Similar Communications . . . . . . . . . . 7
Section 10. Audit Committee . . . . . . . . . . . . . . . . . . . . . . . . . . 8
ARTICLE V
NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 1. Form; Delivery . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 2. Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
ARTICLE VI
OFFICERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 1. Designations . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 2. Term of Office; Removal . . . . . . . . . . . . . . . . . . . . . . 9
Section 3. Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 4. The Chairman of the Board . . . . . . . . . . . . . . . . . . . . . 9
Section 5. The President . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 6. The Vice Presidents . . . . . . . . . . . . . . . . . . . . . . . 10
Section 7. The Secretary . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 8. The Assistant Secretary . . . . . . . . . . . . . . . . . . . . . 10
Section 9. The Treasurer . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 10. The Assistant Treasurer . . . . . . . . . . . . . . . . . . . . . 11
ARTICLE VII
INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES AND AGENTS . . . . . . . . . 11
Section 1. Generally . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 2. Limitation for Disabling Conduct . . . . . . . . . . . . . . . . . 11
ARTICLE VIII
STOCK CERTIFICATES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 1. Form; Signatures; Statements . . . . . . . . . . . . . . . . . . . 13
Section 2. Registration of Transfer . . . . . . . . . . . . . . . . . . . . . 14
Section 3. Registered Stockholders . . . . . . . . . . . . . . . . . . . . . 14
Section 4. Record Date . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 5. Lost, Stolen or Destroyed Certificates . . . . . . . . . . . . . . 15
</TABLE>
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<TABLE>
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ARTICLE IX
GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 1. Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 2. Reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 3. Fiscal Year . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 4. Seal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
ARTICLE X
AMENDMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
CERTIFICATE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
</TABLE>
<PAGE> 5
BYLAWS
------
ARTICLE I
OFFICES
Section 1. Office. The principal office of the Corporation shall be:
5422 Albia Road, Bethesda, Maryland 20816; the Corporation shall also have an
office at 1666 K Street, N.W., Washington, D.C. 20006-2803.
Section 2. Additional Offices. The Corporation may also have offices at
such other places, both within and without the State of Maryland, as the
stockholders may from time to time determine or as the business of the
Corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. Time and Place. Meetings of stockholders for any purpose may
be held at such time and place, within or without the State of Maryland, as the
Board of Directors may fix from time to time and as shall be stated in the
notice of the meeting or in a duly executed waiver of notice thereof.
Section 2. Annual Meeting. Annual meetings of stockholders, commencing
with the year 1991, shall be held each year on the second Thursday of May, at
10:00 a.m., or at such other date and time within thirty-one (31) days of such
date, as shall be designated by the Board of Directors and stated in the notice
of the meeting. At such annual meeting, the stockholders shall elect a Board of
Directors and transact such other business as may properly be brought before
the meeting.
Section 3. Notice of Annual Meeting. Written notice of the annual
meeting, stating the place, date and time thereof, shall be given to each
stockholder entitled to vote at such meeting not less than 10 (unless a longer
period is required by law) nor more than 90 days prior to the meeting.
Section 4. Special Meetings. Special meetings of the stockholders, for
any purpose or purposes, unless otherwise prescribed by statute or by the
Articles of Incorporation, may be called by the Chairman of the Board, if any,
or the President and shall be called by the Chairman of the Board, if any, the
President or the Secretary either (i) at the request in writing of a majority
of the Board of Directors, or, except as expressly set forth below, (ii) at the
request in writing of stockholders entitled to not less than 30% of all the
votes entitled to be cast at such meeting. Such request by stockholders shall
state the purpose or purposes of such meeting and the matters to be acted on
thereat. If the request is made by the stockholders, the President or
Secretary shall
<PAGE> 6
inform such stockholders of the reasonably estimated cost of preparing and
mailing such notice of the meeting, and, upon payment to the Corporation of
such costs by such stockholders, the President or Secretary shall give notice
stating the purpose or purposes of the meeting, as required by these Bylaws, to
all stockholders entitled to vote at such meeting. Notwithstanding the
foregoing, no special meeting need be called upon request of the holders of
shares entitled to cast less than a majority of all votes entitled to be cast
at such meeting to consider any matter which is substantially the same as a
matter voted upon at any annual meeting or special meeting of stockholders held
during the preceding twelve (12) calendar months.
Section 5. Notice of Special Meeting. Written notice of a special
meeting, stating the place, date and time thereof and the purpose or purposes
for which the meeting is called, shall be given to each stockholder entitled to
vote at such meeting not less than 10 (unless a longer period is required by
law) nor more than 90 days prior to the meeting.
Section 6. Presiding Officer; Statement of Affairs; Order of Business.
a. Meetings of stockholders shall be presided over by the
Chairman of the Board, if any, or, if he is not present (or, if there is none),
by the President, or, if he is not present, by a Vice President, or, if he is
not present, by such person as may have been chosen by the Board of Directors,
or if none of such persons is present, by a chairman to be chosen by the
stockholders owning a majority of the shares of capital stock of the
Corporation issued and outstanding and entitled to vote at the meeting and who
are present in person or represented by proxy. The Secretary of the
Corporation, or, if he is not present, an Assistant Secretary, or, if he is not
present, such person as may be chosen by the Board of Directors, or if none of
such persons is present, then such person as may be chosen by the stockholders
owning a majority of the shares of capital stock of the Corporation issued and
outstanding and entitled to vote at the meeting and who are present in person
or represented by proxy shall act as secretary of the meeting.
b. The following order of business, unless otherwise ordered at
the meeting, shall be observed as far as practicable and consistent with the
purposes of the meeting:
i. Call of the meeting to order.
ii. Presentation of proof of mailing of the notice of the
meeting and, if the meeting is a special meeting, the
call thereof.
iii. Presentation of proxies.
iv. Announcement that a quorum is present.
v. Reading and approval of the minutes of the previous
meeting.
vi. Reports, if any, of officers.
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vii. Submission of statement of affairs by Treasurer, if
the meeting is an annual meeting.
viii. Election of directors, if the meeting is an annual
meeting or a meeting called for that purpose.
ix. Miscellaneous business.
x. Adjournment.
Section 7. Quorum; Adjournments. The presence in person or by proxy of
stockholders entitled to cast a majority of the votes thereat shall be
necessary to, and shall constitute a quorum for, the transaction of business at
all meetings of the stockholders, except as otherwise provided by statute or by
the Articles of Incorporation. If, however, a quorum shall not be present or
represented at any meeting of the stockholders, the stockholders entitled to
vote thereat, present in person or represented by proxy, shall have the power
to adjourn the meeting from time to time, without notice of the adjourned
meeting if the time and place thereof are announced at the meeting at which the
adjournment is taken, until a quorum shall be present or represented. Even if
a quorum shall be present or represented at any meeting of the stockholders,
the stockholders entitled to vote thereat, present in person or represented by
proxy, shall have the power to adjourn the meeting from time to time for good
cause, without notice of the adjourned meeting if the time and place thereof
are announced at the meeting at which the adjournment is taken, until a date
which is not more than 30 days after the date of the original meeting. At such
adjourned meeting, at which a quorum shall be present in person or represented
by proxy, any business may be transacted which might have been transacted at
the meeting as originally called. If the adjournment is for more than 30 days,
or, if after the adjournment a new record date is fixed for the adjourned
meeting, a notice of the adjourned meeting shall be given to each stockholder
of record entitled to vote at the meeting.
Section 8. Voting.
a. At any meeting of stockholders, every stockholder having the
right to vote shall be entitled to vote in person or by proxy. Except as
otherwise provided by law or the Articles of Incorporation, each stockholder of
record shall be entitled to one vote for each share of capital stock registered
in his or its name on the books of the Corporation, on each matter submitted to
a vote at a meeting of stockholders, except that no stockholder shall be
entitled to vote in respect of any shares of capital stock if any installment
payable thereon is overdue and unpaid.
b. Except as otherwise provided by law or the Articles of
Incorporation, a majority of the votes cast at a meeting of stockholders, duly
called and at which a quorum is present, shall be sufficient to take or
authorize action upon any matter which may properly come before such meeting.
3
<PAGE> 8
Section 9. Action By Consent. Any action required or permitted to be
taken at any meeting of stockholders may be taken without a meeting, without
prior notice and without a vote, if a written consent, setting forth such
action, is signed by all the stockholders entitled to vote on the subject
matter thereof and any other stockholders entitled to notice of a meeting of
stockholders (but not to vote thereat) have waived in writing any rights which
they may have to dissent from such action, and such consent and waiver are
filed with the records of the Corporation. Such written consent shall be filed
with the minutes of meetings of stockholders.
ARTICLE III
DIRECTORS
Section 1. General Powers; Number; Tenure. The business and affairs
of the Corporation shall be managed by its Board of Directors, which may
exercise all powers of the Corporation and perform all lawful acts and things
which are not by law, the Articles of Incorporation or these Bylaws directed or
required to be exercised or performed by, or are conferred upon or reserved to,
the stockholders. The number of directors shall be that provided in the
Articles of Incorporation until increased or decreased pursuant to the
following provisions, but shall never be less than 3 unless otherwise permitted
by law. A majority of the entire Board of Directors may, at any time and from
time to time, increase or decrease the number of directors of the Corporation
as set forth in the Articles of Incorporation, subject to the foregoing
limitation. The tenure of office of a director shall not be affected by any
decrease in the number of directors so made by the Board. The directors shall
be elected at the annual meeting of the stockholders, except as provided in
Section 2 of this Article, and each director elected shall hold office until
the next succeeding annual meeting or until his successor is elected and shall
qualify. Directors need not be stockholders.
Section 2. Vacancies. Any vacancy occurring in the Board of
Directors for any cause other than by reason of an increase in the number of
directors may, unless otherwise provided in these Bylaws, be filled by a
majority of the remaining members of the Board of Directors, although such
majority is less than a quorum. Any vacancy occurring by reason of an increase
in the number of the directors may, unless otherwise provided in these Bylaws,
be filled by action of a majority of the directors constituting the entire
Board of Directors. A director elected by the Board of Directors to fill a
vacancy shall be elected to hold office until the next annual meeting of the
stockholders or until his successor is elected and shall qualify. If there are
no directors in office, any officer or stockholder may call a special meeting
of stockholders in accordance with the provisions of the Articles of
Incorporation or these Bylaws, at which meeting such vacancies shall be filled.
Section 3. Removal; Resignation.
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<PAGE> 9
a. Except as otherwise provided by law or the
Articles of Incorporation, at any meeting of stockholders, duly called and at
which a quorum is present, the stockholders may, by the affirmative vote of the
holders of a majority of the votes entitled to be cast thereon, remove any
director or directors from office with or without cause and may elect a
successor or successors to fill any resulting vacancy or vacancies for the
unexpired terms of any removed director or directors.
b. Any director may resign at any time by giving
written notice to the Board of Directors, the Chairman of the Board, the
President or the Secretary of the Corporation. Unless otherwise specified in
such written notice, a resignation shall take effect upon delivery thereof to
the Board of Directors or the designated officer. It shall not be necessary
for a resignation to be accepted before it becomes effective.
Section 4. Place of Meetings. The Board of Directors may hold
meetings, annual, regular or special, either within or without the State of
Maryland.
Section 5. Annual Meeting. The annual meeting of each newly elected
Board of Directors shall be held immediately following the annual meeting of
stockholders, and no notice of such meeting shall be necessary to the newly
elected directors in order legally to constitute the meeting, provided a quorum
shall be present.
Section 6. Regular Meetings. Additional regular meetings of the
Board of Directors may be held without notice, at such time and place as may
from time to time be determined by the Board of Directors.
Section 7. Special Meetings. Special meetings of the Board of
Directors may be called by the Chairman of the Board, if any, the President or
by 2 or more directors on at least 2 days' notice to each director, if such
notice is delivered personally or sent by telegram or telecopy, or on at least
3 days' notice, if sent by mail. Special meetings shall be called by the
Chairman of the Board, if any, the President or the Secretary in like manner
and on like notice on the written request of one-half or more of the number of
directors then in office. Except as otherwise provided by law, the Articles of
Incorporation or Article X of these Bylaws, any such notice need not state the
purpose or purposes of such meeting.
Section 8. Quorum; Adjournments. At all meetings of the Board of
Directors, a majority of the number of directors then in office shall
constitute a quorum for the transaction of business, and the act of a majority
of the directors present at any meeting at which there is a quorum shall be the
act of the Board of Directors, except as may be otherwise specifically provided
by law or the Articles of Incorporation. If a quorum is not present at any
meeting of the Board of Directors, the directors present may adjourn the
meeting from time to time, without notice other than announcement at the
meeting, until a quorum shall be present.
5
<PAGE> 10
Section 9. Compensation. Directors shall be entitled to such
compensation for their services as directors and to such reimbursement for any
reasonable expenses incurred in attending directors' meetings as may from time
to time be fixed by the Board of Directors. The compensation of directors (if
any) may be on such basis as is determined by the Board of Directors. Any
director may waive compensation for any meeting. Any director receiving
compensation under these provisions shall not be barred from serving the
Corporation in any other capacity and receiving compensation and reimbursement
for reasonable expenses for such other services.
Section 10. Action by Consent. Any action required or permitted to be
taken at any meeting of the Board of Directors may be taken without a meeting
if a written consent to such action is signed by all members of the Board of
Directors and such written consent is filed with the minutes of the proceedings
of the Board (except for those instances where the Investment Company Act of
1940 requires actions be taken by the Corporation's Board of Directors in
person, including without limitation the selection of independent auditors and
the approval of an Investment Agreement.)
Section 11. Meetings by Telephone or Similar Communications. The
Board of Directors may participate in a meeting by means of a conference
telephone or similar communications equipment by means of which all directors
participating in the meeting can hear each other at the same time, and
participation by such means shall be conclusively deemed to constitute presence
in person at such meeting (except for those instances where the Investment
Company Act of 1940 requires actions be taken by the Corporation's Board of
Directors in person, including without limitation the selection of independent
auditors and the approval of an Investment Agreement.)
ARTICLE IV
COMMITTEES
Section 1. Executive Committee. The Board of Directors may appoint
an Executive Committee consisting of not less than 2 directors, one of whom
shall be designated as Chairman of the Executive Committee. The Chairman of
the Board and the President shall be elected members of the Executive
Committee. Each member of the Executive Committee shall continue as a member
thereof until the expiration of his term as a director, or his earlier
resignation as a member or as a director, unless sooner removed as a member or
as a director.
Section 2. Powers. The Executive Committee shall have and may
exercise those rights, powers and authority of the Board of Directors as may
from time to time be granted to it by the Board of Directors (except the power
to declare dividends or distributions on stock, to issue stock but only to the
extent permitted by law, to recommend to stockholders any action requiring
stockholders' approval, to amend these Bylaws or to approve any merger or share
exchange
6
<PAGE> 11
which does not require stockholders' approval) and may authorize the seal of
the Corporation to be affixed to all papers which may require the same.
Section 3. Procedure; Meetings. The Executive Committee shall fix
its own rules of procedure and shall meet at such times and at such place or
places as may be provided by such rules or as the members of the Executive
Committee shall provide. The Executive Committee shall keep regular minutes of
its meetings and deliver such minutes to the Board of Directors. The Chairman
of the Executive Committee, or, in his absence, a member of the Executive
Committee chosen by a majority of the members present, shall preside at the
meetings of the Executive Committee, and another member thereof chosen by the
Executive Committee shall act as Secretary of the Executive Committee.
Section 4. Quorum. A majority of the Executive Committee shall
constitute a quorum for the transaction of business, and the affirmative vote
of a majority of the members thereof shall be required for any action of the
Executive Committee. In the absence of any member of the Executive Committee,
the members thereof present at any meeting, whether or not they constitute a
quorum, may appoint a member of the Board of Directors to act in the place of
such absent member.
Section 5. Other Committees. The Board of Directors, by resolutions
adopted by a majority of the whole Board, may appoint directors, as it shall
deem advisable and impose upon such committee or committees such functions and
duties, and grant such rights, powers and authority, as the Board of Directors
shall prescribe (except the power to declare dividends or distributions on
stock, to issue stock except to the extent permitted by law, to recommend to
stockholders any action requiring stockholders' approval, to amend these Bylaws
or to approve any merger or share exchange which does not require stockholders'
approval).
Section 6. Vacancies; Changes; Discharges. The Board of Directors
shall have the power at any time to fill vacancies in, to change the membership
of, and to discharge any committee.
Section 7. Compensation. Members of any committee shall be entitled
to such compensation for their services as members of any such committee and to
such reimbursement for any reasonable expenses incurred in attending committee
meetings as may from time to time be fixed by the Board of Directors. The
compensation (if any) of members of any committee may be on such basis as is
determined by the Board of Directors. Any member may waive compensation for
any meeting. Any committee member receiving compensation under these
provisions shall not be barred from serving the Corporation in any other
capacity and from receiving compensation and reimbursement of reasonable
expenses for such other services.
Section 8. Action by Consent. Any action required or permitted to be
taken at any meeting of any committee of the Board of Directors may be taken
without a meeting if a written
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<PAGE> 12
consent to such action is signed by all members of the committee and such
written consent is filed with the minutes of its proceedings.
Section 9. Meetings by Telephone or Similar Communications. The
members of any committee which is designated by the Board of Directors may
participate in a meeting of such committee by means of a conference telephone
or similar communications equipment by means of which all members participating
in the meeting can hear each other at the same time, and participation by such
means shall be conclusively deemed to constitute presence in person at such
meeting.
Section 10. Audit Committee. The Board of Directors may appoint from
its membership an Audit Committee with an odd number of, but not less than
three, members, one of whom shall be designated chairman. The duties of the
said Audit Committee shall be as follows: (1) to issue instructions to and
receive reports from outside accounting firms and to serve as the liaison
between the Corporation and the said firms; (2) to review all potential
conflict-of-interest situations arising in respect of the Corporation's affairs
and involving the Corporation's affiliates or employees, and to make a report,
verbal or written, to the full Board of Directors with recommendations for
their resolutions. The Audit Committee shall act by majority vote of its
members. Meetings of this said Committee may be convened by any one of its
members or by the Chairman of the Board of Directors upon the same notice as
for meetings of the full Board.
ARTICLE V
NOTICES
Section 1. Form; Delivery. Whenever, under the provisions of law, the
Articles of Incorporation or these Bylaws, notice is required to be given to
any director or stockholder, it shall not be construed to mean exclusively
personal notice unless otherwise specifically provided, but such notice may be
given in writing, by mail, addressed to such director or stockholder, at his or
its post office address as it appears on the records of the Corporation, with
postage thereon prepaid. Any such notice shall be deemed to have been given at
the time it is deposited in the United States mail. Notice to a director may
also be given personally or by telegram or telecopy sent to his address as it
appears on the records of the Corporation.
Section 2. Waiver. Whenever any notice is required to be given under the
provisions of law, the Articles of Incorporation or these Bylaws, a written
waiver thereof, signed by the person or persons entitled to said notice and
filed with the records of the meeting, whether before or after the time stated
therein, shall be conclusively deemed to be equivalent to such notice. In
addition, any stockholder who attends a meeting of stockholders in person, or
is represented at such meeting by proxy, without protesting at the commencement
of the meeting the lack of notice thereof to him, or any director who attends a
meeting of the Board of Directors without
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protesting at the commencement of the meeting such lack of notice, shall be
conclusively deemed to have waived notice of such meeting.
ARTICLE VI
OFFICERS
Section 1. Designations. From and after the date of adoption of these
Bylaws, the officers of the Corporation shall be chosen by the Board of
Directors and shall be a President, a Secretary and a Treasurer. The Board of
Directors may also choose a Chairman of the Board, a Vice President or Vice
Presidents, one or more Assistant Secretaries and/or Assistant Treasurers and
such other officers and/or agents as they shall deem necessary or appropriate.
All officers of the Corporation shall exercise such powers and perform such
duties as shall from time to time be determined by the Board of Directors. Any
number of offices (except those of President and Vice President) may be held by
the same person, unless the Articles of Incorporation or these Bylaws otherwise
provide, but no person shall execute, acknowledge or verify any instrument in
more than one capacity, if such instrument is required by law, the Articles of
Incorporation or these Bylaws to be executed, acknowledged or verified by two
or more officers.
Section 2. Term of Office; Removal. The Board of Directors at its annual
meeting, after each annual meeting of stockholders, shall choose a President, a
Secretary and a Treasurer. The Board of Directors may also choose a Vice
President or Vice Presidents, one or more Assistant Secretaries and/or
Assistant Treasurers, and such other officers and agents as it shall deem
necessary or appropriate. The officers of the Corporation shall hold office
until their successors are chosen and shall qualify. Any officer elected or
appointed by the Board of Directors may be removed at any time by the
affirmative vote of a majority of the directors then in office when, in their
judgment, the best interests of the Corporation will be served thereby. Such
removal shall be without prejudice to the contractual rights, if any, of the
person so removed. Any vacancy occurring in any office of the Corporation may
be filled for the unexpired portion of the term by the Board of Directors.
Section 3. Compensation. The salaries of all officers of the Corporation
(if any) shall be fixed from time to time by the Board of Directors and no
officer shall be prevented from receiving such salary by reason of the fact
that he is also a director of the Corporation.
Section 4. The Chairman of the Board. The Chairman of the Board (if the
Board of Directors so deems advisable and selects one) shall be an officer of
the Corporation and, subject to the direction of the Board of Directors, shall
perform such executive, supervisory and management functions and duties as may
be assigned to him from time to time by the Board. He shall, if present,
preside at all meetings of the stockholders and of the Board of Directors. In
the absence of the President, the Chairman of the Board shall have general
supervision, direction and control over the business and affairs of the
Corporation. The Chairman of the Board shall execute in the corporate name all
appropriate deeds, mortgages, bonds, contracts or other instruments requiring
9
<PAGE> 14
a seal, under the Seal of the Corporation, except in cases where such execution
shall be expressly delegated to another by the Board of Directors. The
Chairman of the Board shall be a member of the Executive Committee and an
ex-officio member of each standing committee.
Section 5. The President.
a. The President shall be the chief operating officer of the
Corporation and, subject to the direction of the Board of Directors, shall have
general charge of the business, affairs and property of the Corporation and
general supervision over its other officers and agents. In general, the
President shall perform all duties incident to the office of President and
shall see that all orders and resolutions of the Board of Directors are carried
into effect. In the absence of the Chairman of the Board, the President shall
preside at all meetings of the stockholders and of the Board of Directors. The
President may be a member of the Executive Committee and may be an ex-officio
member of each standing committee.
b. Unless otherwise prescribed by the Board of Directors, the
President shall have full power and authority on behalf of the Corporation to
attend, act and vote at any meeting of security holders of other corporations
in which the Corporation may hold securities. At such meeting the President
shall possess and may exercise any and all rights and powers incident to the
ownership of such securities which the Corporation might have possessed and
exercised if it had been present. The President shall execute in the corporate
name all appropriate deeds, mortgages, bonds, contracts or other instruments
requiring a seal of the Corporation, except in cases in which the signing or
execution thereof shall be expressly delegated by the Board of Directors to
some other officer or agent of the Corporation. The Board of Directors may
from time to time confer like powers and authority upon any other person or
persons.
Section 6. The Vice Presidents. The Vice President, if any (or in the
event there be more than one, the Vice Presidents in the order designated, or,
in the absence of any designation, in the order of their election), shall, in
the absence of the President or in the event of his disability, perform the
duties and exercise the powers of the President and shall generally assist the
President and perform such other duties and have such other powers as may from
time to time be prescribed by the Board of Directors.
Section 7. The Secretary. The Secretary shall attend all meetings of the
Board of Directors and meetings of the stockholders and record all votes and
the proceedings of the meetings in a book to be kept for that purpose and shall
perform like duties for the Executive Committee or other committees, if
required. He shall give, or cause to be given, notice of all meetings of
stockholders and special meetings of the Board of Directors, and shall perform
such other duties as may from time to time be prescribed by the Board of
Directors, Chairman of the Board or the President, under whose supervision he
shall act. He shall have custody of the seal of the Corporation, and he, or an
Assistant Secretary, shall have authority to affix the same to any
10
<PAGE> 15
instrument requiring it, and, when so affixed, the seal may be attested by his
signature or by the signature of such Assistant Secretary. The Board of
Directors may give general authority to any other officer to affix the seal of
the Corporation and to attest the affixing thereof by his signature.
Section 8. The Assistant Secretary. The Assistant Secretary, if any (or,
in the event there be more than one, the Assistant Secretaries in the order
designated, or, in the absence of any designation, in the order of their
election), shall, in the absence of the Secretary or in the event of his
disability, perform the duties and exercise the powers of the Secretary and
shall perform such other duties and have such other powers as may from time to
time be prescribed by the Board of Directors.
Section 9. The Treasurer. The Treasurer shall have the custody of the
corporate funds and other valuable effects, including securities, and shall
keep full and accurate accounts of receipts and disbursements in books
belonging to the Corporation and shall deposit all moneys and other valuable
effects in the name and to the credit of the Corporation in such depositories
as may from time to time be designated by the Board of Directors. He shall
disburse the funds of the Corporation as may be ordered by the Board of
Directors, taking proper vouchers for such disbursements, and shall render to
the Chairman of the Board, the President and the Board of Directors, at regular
meetings of the Board of Directors, or whenever the Board of Directors may
require it, an account of all his transactions as Treasurer and of the
financial condition of the Corporation.
Section 10. The Assistant Treasurer. The Assistant Treasurer, if any (or
in the event there shall be more than one, the Assistant Treasurers in the
order designated, or, in the absence of any designation, in the order of their
election), shall, in the absence of the Treasurer or in the event of his
disability, perform the duties and exercise the powers of the Treasurer and
shall perform such other duties and have such other powers as may from time to
time be prescribed by the Board of Directors.
ARTICLE VII
INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES AND AGENTS
Section 1. Generally. Reference is made to Section 2-418 (and any
other relevant provisions) of the Corporations and Associations Article of the
Annotated Code of Maryland (1985), as amended. Particular reference is made to
the class of persons (hereinafter called "Indemnitees") who may be indemnified
by a Maryland corporation pursuant to the provisions of such Section 2-418,
namely, any entity (including the Corporation's investment adviser) or person
(or the heirs, executors or administrators of such person) who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative
or investigative, by reason of the fact that such person is or was a director,
officer, employee or agent of such corporation, or is or was serving at the
request of such corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise.
The Corporation shall (and is hereby obligated to) indemnify the Indemnitees,
11
<PAGE> 16
and each of them, in each and every situation where the Corporation is
obligated to make such indemnification pursuant to the aforesaid statutory
provisions. The Corporation shall indemnify the Indemnitees, and each of them,
in each and every situation where, under the aforesaid statutory provisions,
the Corporation is not obligated, but is nevertheless permitted or empowered,
to make such indemnification, if the Board of Directors determine that such
Indemnitee acted in good faith and in a manner such Indemnitee reasonably
believed to be in or not opposed to the best interests of the Corporation, and,
in the case of any criminal action or proceeding, that such Indemnitee had no
reasonable cause to believe that such Indemnitee's conduct was unlawful.
Section 2. Limitation for Disabling Conduct. Notwithstanding any of
the foregoing, the Corporation may not limit any liability, indemnify any
director or officer of the Corporation against any liability, to the
Corporation or its security holders to which such director or officer might
otherwise be subject by reason of "disabling conduct", as hereinafter defined;
and the Corporation may not provide indemnification to any such person against
any such liability until a determination is made that the subject liability did
not arise by reason of the subject person's disabling conduct.
a. In the case of a director or officer of the Corporation,
such determination shall include a determination that the liability for which
such indemnification is sought did not arise by reason of such person's
disabling conduct. Such determination may be based on:
i. a final decision on the merits by a court or
other body before whom the action, suit or proceeding was brought that the
person to be indemnified was not liable by reason of disabling conduct, or
ii. in the absence of such a decision, a reasonable
determination, based on a review of the facts, that the person to be
indemnified was not liable by reason of such person's disabling conduct by
(1) the vote of a majority of a quorum of
directors who are disinterested, non-party directors, or
(2) an independent legal counsel in a written
opinion.
In making such determination, such
disinterested, non-party directors or independent legal counsel, as the case
may be, may deem the dismissal for insufficiency of evidence of any disabling
conduct of either a court action or an administrative proceeding against a
person to be indemnified to provide reasonable assurance that such person was
not liable by reason of disabling conduct.
b. For the purpose of this Section:
12
<PAGE> 17
i. "disabling conduct" of a director or officer
shall mean such person's willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of the office or any
other conduct prohibited under Section 17(h) of the Investment Company Act of
1940 or any other applicable securities laws;
ii. "disinterested, non-party director" shall mean a
director of the Corporation who is neither an "interested person" of the
Corporation as defined in Section 2(a)(19) of the Investment Company Act of
1940 nor a party to the action, suit or proceeding in connection with which
indemnification is sought;
iii. "independent legal counsel" shall mean a member
of the Bar of the State of Maryland who is not, and not at least two (2) years
prior to his engagement to render the opinion in question has not been,
employed or retained by the Corporation, by any investment adviser to the
principal underwriter for the Corporation, or by any person affiliated with any
of the foregoing; and
iv. "the Corporation" shall include, in addition to
the resulting Corporation, any constituent Corporation (including any
constituent of a constituent) absorbed in a consolidation or merger which, if
its separate existence had continued, would have had power and authority to
indemnify its directors, officers, employees or agents.
c. The Corporation may purchase insurance to cover the
payment of costs incurred in performing the Corporation's obligations under
Section 1 hereof, but it is understood that no insurance may be obtained for
the purpose of indemnifying any disabling conduct, as defined in Section 2(b)
hereof.
d. The Corporation may advance legal fees and other expenses
pursuant to the indemnification rights set forth in Section 1 hereof so long
as, in addition to the other requirements therefor, the Corporation either:
i. obtains security for the advance from the
Indemnitee;
ii. obtains insurance against losses arising by
reason of lawful advances; or
iii. it shall be determined, pursuant to the means
set forth in Section 2 (a)(ii) hereof, that there is reason to believe that the
Indemnitee ultimately will be found entitled to indemnification.
ARTICLE VIII
STOCK CERTIFICATES
13
<PAGE> 18
Section 1. Form; Signatures; Statements.
a. Every holder of stock in the Corporation shall be entitled
to have a certificate, signed by the Chairman of the Board or the President or
a Vice President and countersigned by the Treasurer or an Assistant Treasurer
or the Secretary or an Assistant Secretary of the Corporation, exhibiting the
number and class (and series, if any) of shares owned by him or it, and bearing
the seal of the Corporation. Such signatures and seal may be facsimile. In
case any officer who has signed, or whose facsimile signature was placed on, a
certificate shall have ceased to be such officer before such certificate is
issued, it may nevertheless be issued by the Corporation with the same effect
as if he were such officer at the date of its issue.
b. Every certificate representing stock issued by the
Corporation, if it is authorized to issue stock of more than one class, shall
set forth upon the face or back of the certificate, a full statement or summary
of the designations, preferences, limitations and relative rights of the shares
of each class authorized to be issued and, if the Corporation is authorized to
issue any preferred or special class of stock in series, the variations in
relative rights and preferences between the shares of each such series so far
as the same have been fixed and determined and the authority of the Board of
Directors to fix and determine the relative rights and preferences of
subsequent series. In lieu of such full statement or summary, there may be set
forth upon the face or back of each certificate a statement that the
Corporation will furnish to the stockholder, upon request and without charge, a
full statement of such information.
c. Every certificate representing shares which are restricted
or limited as to transferability by the Corporation shall either (i) set forth
on the face or back of the certificate a full statement of such restrictions or
limitations or (ii) state that the Corporation will furnish such a statement
upon request and without charge to any holder of such shares.
Section 2. Registration of Transfer. Upon surrender to the Corporation
or any transfer agent of the Corporation of a certificate for shares duly
endorsed or accompanied by proper evidence of succession, assignment or
authority to transfer, it shall be the duty of the Corporation or its transfer
agent to issue a new certificate to the person entitled thereto, to cancel the
old certificate and to record the transaction upon its books.
Section 3. Registered Stockholders.
Except as otherwise provided by law, the Corporation shall be
entitled to recognize the exclusive right of a person who is registered on its
books as the owner of shares of its capital stock to receive dividends or other
distributions, to vote as such owner, and to hold liable for calls and
assessments a person who is registered on its books as the owner of shares of
its capital stock. The Corporation shall not be bound to recognize any
equitable or legal claim to or interest in such shares on the part of any other
person except that the Board of Directors may adopt by resolution a procedure
by which a stockholder may certify in writing to the Corporation that any
14
<PAGE> 19
shares of its capital stock registered in the name of such stockholder are held
for the account of a specified person other than such stockholder.
If a stockholder desires that notices and/or dividends shall
be sent to a name or address other than the name or address appearing on the
stock ledger maintained by the Corporation (or by the transfer agent or
registrar, if any), such stockholder shall have the duty to notify the
Corporation (or the transfer agent or registrar, if any), in writing, of such
desire. Such written notice shall specify the alternate name or address to be
used.
Section 4. Record Date. In order that the Corporation may determine the
stockholders of record who are entitled to notice of or to vote at any meeting
of stockholders or any adjournment thereof, or entitled to receive payment of
any dividend or the allotment of any rights, or to make a determination of the
stockholders of record for any other proper purpose, the Board of Directors
may, in advance, fix a date as the record date for any such determination.
Such date shall not be more than 60 nor less than 10 days before the date of
any such meeting, nor more than 60 days prior to the date of any other action.
A determination of stockholders of record entitled to notice of or to vote at a
meeting of stockholders shall apply to any adjournment of the meeting taken
pursuant to Section 8 of Article III; provided, however, that the Board of
Directors may fix a new record date for the adjourned meeting.
Section 5. Lost, Stolen or Destroyed Certificates. The Board of
Directors may direct that a new certificate be issued in place of any
certificate theretofore issued by the Corporation which is claimed to have been
lost, stolen or destroyed, upon the making of an affidavit of that fact by the
person claiming the certificate to be lost, stolen or destroyed. When
authorizing such issuance of a new certificate, the Board of Directors may, in
its discretion and as a condition precedent to the issuance thereof, require
the owner of such lost, stolen or destroyed certificate, or his legal
representative, to advertise the same in such manner as it shall require and/or
to give the Corporation a bond in such sum, or other security in such form, as
it may direct as indemnity against any claim that may be made against the
Corporation with respect to the certificate claimed to have been lost, stolen
or destroyed.
ARTICLE IX
GENERAL PROVISIONS
Section 1. Dividends. Except as otherwise provided by law or the
Articles of Incorporation, dividends upon the outstanding capital stock of the
Corporation may be declared by the Board of Directors at any annual, regular or
special meeting, and may be paid in cash, in property or in shares of the
Corporation's capital stock.
Section 2. Reserves. The Board of Directors shall have full power,
subject to the provisions of law and the Articles of Incorporation, to
determine whether any, and, if so, what part, of the
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<PAGE> 20
funds legally available for the payment of dividends shall be declared as
dividends and paid to the stockholders of the Corporation. The Board of
Directors, in its sole discretion, may fix a sum which may be set aside or
reserved over and above the paid-in capital of the Corporation for working
capital or as a reserve for any proper purpose, and may, from time to time,
increase, diminish or vary such fund or funds.
Section 3. Fiscal Year. The fiscal year of the Corporation shall be as
determined from time to time by the Board of Directors.
Section 4. Seal. The corporate seal shall have inscribed thereon the
name of the Corporation, the year of its incorporation and the words "Corporate
Seal" and "Maryland".
ARTICLE X
AMENDMENTS
The Board of Directors shall have the power to make, alter, amend and
repeal these Bylaws, and to adopt new bylaws, by an affirmative vote of a
majority of the entire Board of Directors, provided that notice of the proposal
to make, alter, amend or repeal these Bylaws, or to adopt new bylaws, was
included in the notice of the meeting of the Board of Directors at which such
action takes place.
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<PAGE> 21
CERTIFICATE
We, KATHERINE C. MARIEN and THOMAS R. SALLEY, President and Secretary,
respectively, of ALLIED CAPITAL LENDING CORPORATION (the "Corporation"), a
Maryland corporation, DO HEREBY CERTIFY that the foregoing is a true and
correct copy of the Corporation's Bylaws as amended and in effect the date
hereof.
IN WITNESS WHEREOF, I have hereunto set my hands and affixed the corporate
seal of the Corporation this 9th day of November, 1995.
/s/ KATHERINE C. MARIEN
-------------------------------
Katherine C. Marien, President
/s/ THOMAS R. SALLEY
-------------------------------
Thomas R. Salley, Secretary
[Corporate Seal]
17
<PAGE> 1
EXHIBIT 10(d)
PROMISSORY NOTE
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
Principal Loan Date Maturity Loan No. Call Collateral Account Officer Initials
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$2,000,000.00 08-31-1995 07-31-1996 00001 4A UN 185043 1094 [sig]
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
References in the shaded area are for Lender's use only and do not limit the
applicability of this document to any particular loan or item.
Borrower: ALLIED CAPITAL LENDING CORPORATION (TIN:
52-1081052)
1666 K STREET, NW SUITE 901
WASHINGTON, DC 20006
LENDER: THE RIGGS NATIONAL BANK OF WASHINGTON, D.C.
800 17TH STREET, N.W.
WASHINGTON, DC 20006
<TABLE>
<S> <C> <C>
Principal Amount: $2,000,000.00 Initial Rate: 9.000% Date of Note: August 31, 1995
</TABLE>
PROMISE TO PAY. ALLIED CAPITAL LENDING CORPORATION ("Borrower") promises to
pay to The Riggs National Bank of Washington, D.C. ("Lender"), or order, in
lawful money of the United States of America, the principal amount of Two
Million & 00/100 Dollars ($2,000,000.00) or so much as may be outstanding,
together with Interest on the unpaid outstanding principal balance of each
advance. Interest shall be calculated from the date of each advance until
repayment of each advance.
PAYMENT. Borrower will pay this loan on demand, or if no demand is made, in
one payment of all outstanding principal plus all accrued unpaid interest on
July 31, 1996. In addition, Borrower will pay regular monthly payments of
accrued unpaid interest beginning October 1, 1995, and all subsequent interest
payments are due on the same day of each month after that. Interest on this
Note is computed on a 365/365 simple interest basis; that is, by applying the
ratio of the annual interest rate over the number of days in a year, multiplied
by the outstanding principal balance, multiplied by the actual number of days
the principal balance is outstanding. Borrower will pay Lender at Lender's
address shown above or at such other place as Lender may designate in writing.
Unless otherwise agreed or required by applicable law, payments will be applied
first to any unpaid collection costs and any late charges, then to any unpaid
interest, and any remaining amount to principal.
VARIABLE INTEREST RATE. The interest rate on this Note is subject to change
from time to time based on changes in an index which is the Prime Rate as
Published in The Wall Street Journal (the "Index"). The term "Prime Rate"
shall mean the rate reported in The Wall Street Journal newspaper in its "Money
Rates" column as the Prime Rate and, if more than one rate or a range of rates
are reported as the Prime Rate, then the highest such rate, changing as and when
such rate shall change (the "Wall Street Journal Prime Rate"). If The Wall
Street Journal shall cease to publish a Prime Rate, then "Prime Rate" shall
mean that rate announced from time to time by The Riggs National Bank of
Washington, D.C. ("Riggs") as its prime rate of interest, which rate may or may
not change from time to time in Riggs' sole discretion, Riggs having no
obligation to reset the rate at any time or for any reason (the "Riggs Prime
Rate"). The "Prime Rate," as determined by either method, is not necessarily
the lowest rate charged by the Lender on loans. The Borrower further
acknowledges that with respect to all matters relevant hereto, a certificate
signed by an officer of Lender setting forth the Prime Rate in effect on any
applicable date shall be conclusive and binding. The Borrower expressly
acknowledges and agrees that (i) the Wall Street Journal Prime Rate and the
Riggs Prime Rate are independent reference rates which may or may not change at
the same time, with the same frequency, or in the same amounts, and (ii) there
is no guaranty that by using the Wall Street Journal Prime Rate as a reference
rate the interest charged on the Promissory Note will always or at any time be
less than if the Riggs Prime Rate was used as the reference rate. Lender will
tell Borrower the current Index rate upon Borrower's request. Borrower
understands that Lender may make loans based on other rates as well. The
interest rate change will not occur more often than each day. The Index
currently is 8.750% per annum. The interest rate to be applied to the unpaid
principal balance of this Note will be at a rate of 0.250 percentage points
over the Index, resulting in an initial rate of 9.000% per annum. NOTICE:
Under no circumstances will the interest rate on this Note be more than the
maximum rate allowed by applicable law.
PREPAYMENT. Borrower may pay without penalty all or a portion of the amount
owed earlier than it is due. Early payments will not, unless agreed to by
Lender in writing, relieve Borrower of Borrower's obligation to continue to
make payments of accrued unpaid interest. Rather, they will reduce the
principal balance due.
LATE CHARGE. If a payment is 10 days or more late, Borrower will be charged
5.000% of the unpaid portion of the regularly scheduled payment.
DEFAULT. Borrower will be in default if any of the following happens: (a)
Borrower fails to make any payment when due. (b) Borrower breaks any promise
Borrower has made to Lender, or Borrower fails to comply with or to perform
when due any other term, obligation, covenant, or condition contained in this
Note or any agreement related to this Note, or in any other agreement or loan
Borrower has with Lender. (c) Borrower defaults under any loan, extension of
credit, security agreement, purchase or sales agreement, or any other
agreement, in favor of any other creditor or person that may materially affect
any of Borrower's property or Borrower's ability to repay this Note or perform
Borrower's obligations under this Note or any of the Related Documents. (d) Any
representation or statement made or furnished to Lender by Borrower or on
Borrower's behalf is false or misleading in any material respect either now or
at the time made or furnished. (e) Borrower becomes insolvent, a receiver is
appointed for any part of Borrower's property, Borrower makes an assignment for
the benefit of creditors, or any proceeding is commenced either by Borrower or
against Borrower under any bankruptcy or insolvency laws. (f) Any creditor
tries to take any of Borrower's property on or in which Lender has a lien or
security interest. This includes a garnishment of any of Borrower's accounts
with Lender. (g) Any of the events described in this default section occurs
with respect to any guarantor of this Note. (h) A material adverse change
occurs in Borrower's financial condition, or Lender believes the prospect of
payment or performance of the Indebtedness is impaired. (i) Lender in good
faith deems itself insecure.
LENDER'S RIGHTS. Upon default, Lender may declare the entire unpaid principal
balance on this Note and all accrued unpaid interest, together with all other
applicable fees, costs and charges, if any, immediately due and payable,
without notice, and then Borrower will pay that amount. Upon default,
including failure to pay upon final maturity, Lender, at its option, may also,
if permitted under applicable law, increase the variable interest rate on this
Note to 3.250 percentage points over the Index. The interest rate will not
exceed the maximum rate permitted by applicable law. This Note shall be
governed by, construed and enforced in accordance with the laws of the District
of Columbia. Lender and Borrower hereby waive the right to any jury trial in
any action, proceeding, or counterclaim brought by either party against the
other.
CONFESSION OF JUDGMENT. Borrower hereby irrevocably authorizes and empowers
any attorney-at-law to appear in any court of record and to confess judgment
against Borrower for the unpaid amount of this Note as evidenced by an
affidavit signed by an officer of Lender setting forth the amount then due,
plus costs of suit, and to release all errors, and waive all rights of appeal.
If a copy of this Note, verified by an affidavit, shall have been filed in the
proceeding, it will not be necessary to file the original as a warrant of
attorney. Borrower waives the right to any stay of execution and the benefit
of all exemption laws now or hereafter in effect. No single exercise of the
foregoing warrant and power to confess judgment will be deemed to exhaust the
power, whether or not any such exercise shall be held by any court to be
invalid, voidable, or void; but the power will continue undiminished and may be
exercised from time to time as Lender may elect until all amounts owing on this
Note have been paid in full.
RIGHT OF SETOFF. Borrower grants to Lender a contractual possessory security
interest in, and hereby assigns, conveys, delivers, pledges, and transfers to
Lender all Borrower's right, title and interest in and to, Borrower's accounts
with Lender (whether checking, savings, or some other account), including
without limitation all accounts hold jointly with someone else and all accounts
Borrower may open in the future, excluding however all IRA, Keogh, and trust
accounts. Borrower authorizes Lender, to the extent permitted by applicable
law, to charge or setoff all sums owing on this Note against any and all such
accounts.
<PAGE> 2
<TABLE>
<S> <C> <C>
08-31-1995 PROMISSORY NOTE Page 2
(Continued)
</TABLE>
LINE OF CREDIT. This Note evidences a revolving line of credit. Advances
under this Note may be requested either orally or in writing by Borrower or by
an authorized person. Lender may, but need not, require that all oral requests
be confirmed in writing. All communications, instructions, or directions by
telephone or otherwise to Lender are to be directed to Lender's office shown
above. The following party or parties are authorized to request advances under
the line of credit until Lender receives from Borrower at Lender's address
shown above written notice of revocation of their authority: Katherine C.
Marien, President. Borrower agrees to be liable for all sums either: (a)
advanced in accordance with the instructions of an authorized person or (b)
credited to any of Borrower's accounts with Lender. The unpaid principal
balance owing on this Note at any time may be evidenced by endorsements on this
Note or by Lender's internal records, including daily computer print-outs.
Lender will have no obligation to advance funds under this Note if: (a)
Borrower or any guarantor is in default under the terms of this Note or any
agreement that Borrower or any guarantor has with Lender, including any
agreement made in connection with the signing of this Note; (b) Borrower or any
guarantor ceases doing business or is insolvent; (c) any guarantor seeks,
claims or otherwise attempts to limit, modify or revoke such guarantor's
guarantee of this Note or any other loan with Lender; (d) Borrower has applied
funds provided pursuant to this Note for purposes other than those authorized
by Lender, or (e) Lender in good faith deems itself insecure under this Note or
any other agreement between Lender and Borrower.
GENERAL PROVISIONS. This Note is payable on demand. The inclusion of specific
default provisions or rights of Lender shall not preclude Lender's right to
declare payment of this Note on its demand. Lender may delay or forgo
enforcing any of its rights or remedies under this Note without losing them.
Borrower and any other person who signs, guarantees or endorses this Note, to
the extent allowed by law, waive presentment, demand for payment, protest and
notice of dishonor. Upon any change in the terms of this Note, and unless
otherwise expressly stated in writing, no party who signs this Note, whether as
maker, guarantor, accommodation maker or endorser, shall be released from
liability. All such parties agree that Lender may renew or extend (repeatedly
and for any length of time) this loan, or release any party or guarantor or
collateral; or impair, fail to realize upon or perfect Lender's security
interest in the collateral; and take any other action deemed necessary by
Lender without the consent of or notice to anyone. All such parties also agree
that Lender may modify this loan without the consent of or notice to anyone
other than the party with whom the modification is made.
PRIOR TO SIGNING THIS NOTE, BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS OF
THIS NOTE, INCLUDING THE VARIABLE INTEREST RATE PROVISIONS. BORROWER AGREES TO
THE TERMS OF THE NOTE AND ACKNOWLEDGES RECEIPT OF A COMPLETED COPY OF THE NOTE.
BORROWER:
ALLIED CAPITAL LENDING CORPORATION
By: /s/ KATHERINE C. MARIEN (SEAL)
-----------------------------------
Katherine C. Marien, President
ATTEST:
/s/ THOMAS R. SALLEY
- --------------------- (Corporate Seal)
Secretary
Variable Rate. Line of Credit. LASER PRO, Reg. U.S. Pat. & T.M. Off., Ver.
3.20 (c) 1995 CFI ProServices, Inc. All rights reserved.[DC-D20 ALL
CAPLN.LN C1.OVL]
<PAGE> 3
1995 REPLACEMENT PROMISSORY NOTE
$15,000,000.00 July 26, 1995
ALLIED CAPITAL LENDING CORPORATION, a corporation organized under the laws
of Maryland (the "Borrower"), for value received, hereby promises to pay to the
order of THE RIGGS NATIONAL BANK OF WASHINGTON, D.C. (the "Bank") at its
office, 800 17th Street, N.W., Washington, D.C. 20006, in lawful money of the
United States and in immediately available funds the principal sum of fifteen
million and no/100 dollars ($15,000,000.00) or, if less, the aggregate unpaid
principal amount of all loans advanced or re-advanced by the Bank to the
Borrower hereunder.
1. Payment of Principal and Interest; Prepayment; Etc.
(a) Principal Payments. The principal amount of each
loan hereunder and all other amounts due hereunder shall be due on July 31,
1996.
(b) Interest Rate; Interest Payments. This Note
shall bear interest on the unpaid principal balance hereof from its date until
maturity, payable on the first day of each month commencing with the first such
date after the date hereof, and at maturity, at a rate per annum (calculated on
the basis of a 360 day year for the actual number of days involved) for each
Rate Period (and shall be fixed for the duration of each Rate Period) equal to
two and two-tenths percent (2.20%) in excess of LIBOR for such Rate Period. As
used herein:
"Eurodollar Business Day" means any day except a Saturday, Sunday or
other day on which commercial banks in the District of Columbia, or
London, England are generally authorized to close.
"Governmental Authority" includes, without limitation, any
department, commission, board, bureau, agency, administration,
service or other instrumentality of the United States of America or
any state, District of Columbia, municipality or any other
governmental entity.
"LIBOR" means, for each Rate Period, the rate per annum (rounded
upwards, if necessary, to the next higher 1/100 of 1%) which is equal
to the London interbank offered rate at which deposits in U.S.
Dollars are offered by banks in London, England in the London
interbank Eurodollar market for a period of time equal to the Rate
Period as reported to the Bank by an On-Line Information Service at
approximately 10:00 a.m. (Washington, D.C. time) on the first
Eurodollar Business Day of the calendar week in which such Rate
Period commences. LIBOR is not necessarily the rate at which the
Bank offers or receives interbank deposits in the London interbank
Eurodollar market or elsewhere. If
IMPORTANT NOTICE
THIS INSTRUMENT CONTAINS A CONFESSION OF JUDGMENT PROVISION WHICH CONSTITUTES A
WAIVER OF IMPORTANT RIGHTS YOU MAY HAVE AS A DEBTOR AND ALLOWS THE CREDITOR TO
OBTAIN A JUDGMENT AGAINST YOU WITHOUT ANY FURTHER NOTICE.
<PAGE> 4
for any reason the Bank is unable to access an On-Line Information
Service, or if none of the Bank's On-Line Information Services
reports a LIBOR, then the Bank shall use the comparable rate
published in the "Money Rates" column of The Wall Street Journal
newspaper. The Bank shall, promptly upon request, notify the
Borrower telephonically of LIBOR. The determination by the Bank of
LIBOR shall be final and conclusive and shall be binding upon the
parties hereto in the absence of manifest error.
"On-Line Information Service" means a textline or other on-line
information service provided to the Bank by any of Reuters
Information Services, Inc., Knight-Ridder Financial/Americas, Dow
Jones Telerate Inc. or Bloomberg Financial Markets News Services.
"Rate Period" means each 30-day period following the date hereof. If
any Rate Period would otherwise begin on a day which is not a
Eurodollar Business Day, such Rate Period shall begin on the next
preceding day which is a Eurodollar Business Day.
If (i) dollar deposits in the requested amount and for the applicable
rate period are not available in the applicable money market or are not
available in sufficient quantities for the Bank, in its sole discretion, to
ascertain the LIBOR, (ii) in the sole judgment of the Bank it becomes unlawful
or impracticable for the Bank to maintain loans based upon the LIBOR for any
reason, including, without limitation, the introduction of or any change in any
applicable law, rule or regulation or in the interpretation or administration
thereof by any governmental authority charged with the interpretation or
administration thereof or compliance by the Bank with any request or directive
(whether or not having the force of law) of any such authority, or (iii) the
Bank, in good faith, determines that it is impracticable to maintain loans
based on the LIBOR because of increased taxes, regulatory costs, reserve
requirements, expenses or any other costs or charges that affect the LIBOR
rate, then upon the occurrence of any of the above events, the interest rate
hereunder shall be immediately (or at the option of the Bank, at the end of the
current Rate Period), without further action of the Borrower or the Bank,
converted to the rate which is equal to the Prime Rate (the "Prime Rate
Option"). Notwithstanding the foregoing, in the event any of the conditions
enumerated in subparagraphs (i) through (iii) occurs, the Bank agrees to
provide notice thereof to the Borrower. During the thirty (30) day period
following the receipt of such notice, the Bank and the Borrower shall negotiate
in good faith with a view toward modifying the terms of this Note to provide a
substitute basis for the LIBOR which is financially a substantial equivalent.
If during such thirty (30) day period the Bank and the Borrower shall agree in
writing upon such substitute basis, then such substitute basis shall be
retroactive to and effective from the date of such notice (or at the option of
Bank, at the end of the current Rate Period). If during such thirty (30) day
period the Bank and the Borrower shall not agree upon such substitute basis,
then the LIBOR rate shall be converted to the Prime Rate Option as set forth
above.
After maturity, whether by acceleration or otherwise, this Note shall
bear interest payable on demand at a rate per annum equal to 2% in excess of
the Prime Rate, changing as and when the Prime Rate shall change. To the
extent permitted by law, any payment of interest on this Note not made when due
shall bear interest from the date when due until payment is made payable on
demand, at a rate per annum equal to 2% in excess of the Prime Rate, changing
as and when the Prime Rate shall change.
2
<PAGE> 5
"Prime Rate" means the rate reported in The Wall Street
Journal newspaper in its "Money Rates" column as the prime rate and, if more
than one rate or a range of rates is reported as the prime rate, then the
"Prime Rate" shall mean the higher or highest such rate. If The Wall Street
Journal shall cease to publish a Prime Rate, then "Prime Rate" shall mean that
rate announced from time to time by the Bank as its prime rate of interest,
which rate may or may not change from time to time in the Bank's sole
discretion, the Bank having no obligation to reset the rate at any time or for
any reason. The "Prime Rate" as determined by either method is used as a
reference rate for fixing the lending rates on certain commercial loans and is
not necessarily the lowest or most favorable rate of interest charged by the
Bank on loans. The Borrower acknowledges that with respect to all matters
relevant hereto a certificate signed by an officer of the Bank, setting forth
the "Prime Rate" in effect on any applicable date, shall be binding and
conclusive.
(c) Prepayment. This Note may be prepaid in whole at
any time, or in part from time to time, without premium or penalty. This Note
shall immediately be prepaid to the extent that the principal amount hereof at
any time exceeds the Maximum Amount (as defined in the Line of Credit, Security
and Pledge Agreement hereinafter defined).
(d) Advances; Evidence of Amounts Due. This Note is
held by the Bank as a master note against which loans may be advanced in lesser
amount(s) than the principal amount. The Borrower shall be liable only for so
much of the principal amount as shall be equal to the total of the amounts
advanced or re-advanced against this Note to or for the Borrower by the Bank
from time to time, less all payments made by or for the Borrower and applied by
the Bank to principal. The Borrower shall also be liable for interest on each
such advance or re-advance as shown on the Bank's books and records, provided
that the rate of such interest is in accordance with the applicable rate or
rates specified in this Note. The Borrower acknowledges that a statement
signed by an officer of the Bank setting forth the amount of principal and
interest owed hereon as reflected in such books and records shall be
presumptive evidence of the facts stated therein and shall, absent manifest
error, be conclusive and binding. Any statement of account delivered to the
Borrower shall be deemed correct and accepted unless a written statement of
exceptions thereto is delivered to the Bank within 30 days after mailing of
such statement of account. In making any advance or re-advance hereunder, the
Bank shall be entitled to rely upon any notice of borrowing or other
instructions, whether oral, written or by any form of telecommunication,
purporting to be made by a person designated to the Bank by the Borrower as an
Authorized Representative of the Borrower, and deposit of the proceeds of an
advance or re-advance hereunder in a deposit account in the name of the
Borrower or the remittance of any proceeds to persons designated in such
instructions shall conclusively establish that such loan was duly made
hereunder.
(e) Payments Due on Non-Business Days. A "Business
Day" means any day except a Saturday, Sunday or other day on which commercial
banks in the District of Columbia are generally authorized to close. If any
installment of principal on this Note becomes due and payable on a day which is
not a Business Day, the maturity thereof shall be extended to the next
succeeding Business Day, and interest shall be payable thereon at the rate
herein specified during such extension. If any payment of interest on any loan
evidenced by this Note becomes due and payable on a day which is not a Business
Day, such payment shall be made on the next succeeding Business Day, together
with interest accrued during such extension.
3
<PAGE> 6
2. Use of Loans. The loans made hereunder shall be used for
the purpose of carrying on a business or commercial activity within the meaning
of the District of Columbia Code Sections 28-3301(d)(1)(B).
3. Events of Default, Remedies. The occurrence of any Event
of Default under the Line of Credit, Security and Pledge Agreement (hereinafter
defined) shall constitute an Event of Default hereunder. Upon the occurrence
of an Event of Default, the Bank is entitled to exercise the remedies set forth
in such Line of Credit Agreement.
4. Expenses. The Borrower agrees to pay all out-of-pocket
charges and expenses incurred by the Bank (including the reasonable fees and
expenses of its outside counsel and, in the case of salaried counsel employed
by the Bank, the cost (as determined by the Bank) of the services of such
counsel calculated on an hourly basis) in connection with the negotiation,
preparation and execution of this Note and any amendments, waivers,
modifications or supplements hereto, and the enforcement of any provision of
this Note or any amendment, waiver, modification or supplement hereto and the
collection of this Note.
5. Right of Set-Off. Upon the occurrence and during the
continuance of any Event of Default the Bank and any branch or affiliate acting
on its behalf is hereby authorized at any time and from time to time, to the
fullest extent permitted by law, to set-off and apply any and all deposits
(general or special, time or demand, provisional or final, but excluding any
third party funds held in escrow or in trust by the Borrower, which funds are
not commingled with other funds in the Borrower's general account) at any time
held and other indebtedness at any time owing by the Bank or any branch or
affiliate of the Bank acting on its behalf to or for the credit or the account
of the Borrower against any and all of the obligations of the Borrower now or
hereafter existing under this Note or otherwise irrespective of whether the
Bank shall have made any demand under this Note and although such obligations
may be unmatured. The Bank agrees promptly to notify the Borrower after any
such set-off and application, provided, that, the failure to give such notice
shall not affect the validity of such set-off and application. Although the
Bank may in its discretion take any act to confirm, indicate, or otherwise
evidence a set-off, such act shall not be deemed to be necessary for an
effective set-off. The rights of the Bank under this paragraph 5 are in
addition to other rights and remedies (including, without limitation, other
rights of set-off) which the Bank may have.
6. Waivers and Consents; Confession of Judgment. Except as
otherwise expressly set forth herein, the Borrower and all endorsers,
guarantors, and sureties of this Note (collectively the "Obligors") severally
(a) waive all applicable exemption rights, whether under the laws of the
District of Columbia or otherwise, and also waive demand, presentment for
payment, notice of nonpayment, protest, notice of protest, notice of
acceleration, and diligence in collecting this Note, (b) agree to the release
of any party primarily or secondarily liable hereon and agree that it will not
be necessary for any holder hereof, in order to enforce payment of this Note by
any party, to first institute suit against any other Obligor, and (c) consent
to any one or more extensions or postponements of time of payment of this Note
on any terms or any other indulgences with respect thereto. THE PLEADING OF
ANY STATUTE OF LIMITATIONS AS A DEFENSE TO ANY DEMAND AGAINST THE BORROWER OR
THE OBLIGORS, AND THE RIGHT OF THE BORROWER AND ANY OBLIGOR TO TRIAL BY JURY IN
ANY SUIT, ACTION OR PROCEEDING IN CONNECTION HEREWITH, ARE HEREBY EXPRESSLY
WAIVED. Any acknowledgment, waiver, new promise, payment of principal or
interest or otherwise by any
4
<PAGE> 7
Obligor, with respect to the Obligations hereunder, shall be deemed to be made
as agent of each other Obligor for the purposes hereof, and shall, if the
statute of limitations in favor of any Obligor against the Bank shall have
commenced to run, toll the running of such statute of limitations, and if such
statute of limitations shall have expired, prevent the operation of such
statute. The Borrower hereby authorizes any Clerk of any Court of Record in
State of Maryland to enter judgment by confession against the Borrower in favor
of the holder of this Note for the full amount of the indebtedness due
hereunder, interest and cost, including attorney's fees of fifteen percent
(15%), waives summons and other process and does further consent to the
immediate execution of said judgment, expressly waiving the benefit of any
homestead or other exemption laws. If judgment is to be entered in the
Commonwealth of Virginia, the Borrower hereby duly constitutes and appoints
Linda A. Madrid or James P. Cooke (any of whom may act alone) the Borrower's
true and lawful attorney in fact, for the Borrower, in Borrower's name, place
and stead, and upon default of payment hereof as set forth herein to confess
judgment against the Borrower, in the Circuit Court of Arlington County,
Virginia or in any other Court of Record in the Commonwealth of Virginia, upon
such Obligation, including all costs of collection, attorney's fees of fifteen
percent (15%) and court costs, hereby ratifying and confirming the acts of
said attorney in fact as fully as if done by themselves, expressly waiving
benefit of any homestead or other exemption laws. If judgment is to be entered
in the District of Columbia, the Borrower authorizes, Linda A. Madrid or James
P. Cooke (any of whom may act alone), to appear in any court of record in the
District of Columbia, or any court of the United States, when the obligations
have become due and in accordance with applicable law, and confess judgment
against the Borrower in favor of the Bank, with interest, together with the
costs of suit, and thereupon to release all errors and waive all rights of
appeal. If and to the extent that the signature of an attorney for the
Borrower is required under any applicable rule or procedure for the entry of a
confession of judgment, the Borrower hereby appoints and constitutes all or any
of the aforesaid persons their attorney in fact and at law to execute and
deliver such confession of judgment on their behalf (any of whom may act alone
pursuant to this power of attorney), and further agrees that any conflict of
interest inherent in such arrangement is irrevocably waived, and agrees that
such power of attorney shall be deemed coupled with an interest and shall be
irrevocable. If any provision or term of this note is left blank or contains a
blank through oversight or by intent, the Borrower and each party consents to
and authorizes the bank to complete such provision or blank as appropriate at
any time.
7. Governing Law, Jurisdiction, Notice, Etc. This Note is
deemed to be a contract under the laws of the District of Columbia (except for
the conflict of law provisions thereof) and shall be governed by, and construed
in accordance with, the laws of such jurisdiction. Wherever possible each
provision of this Note shall be interpreted in such manner as to be effective
and valid under applicable law, but if any provision of this Note shall be
prohibited by or invalid under such law, such provision shall be ineffective to
the extent of such prohibition or invalidity, without invalidating the
remainder of such provision or the remaining provisions of this Note. If any
action arising out of this Note is commenced in any District of Columbia or
Federal court located in the District of Columbia, each party signatory hereto
hereby consents to the jurisdiction of any such court in any such action and to
the laying of venue in the District of Columbia. Any process in such action
shall be duly served if mailed by registered mail, postage prepaid, to the
Borrower at its address given herein or its last known business address, or if
otherwise served in acceptance with law. Any other notice or demand hereunder
may be made by hand delivery or certified or registered mail, return receipt
requested, to such address, with the same effect as if delivered in person.
5
<PAGE> 8
8. Incorporated Provisions. This Note is the Note referred to
in a Line of Credit, Security and Pledge Agreement dated as of August 31, 1994,
as amended from time to time, between the Borrower and the Bank (the "Line of
Credit, Security and Pledge Agreement"), referred to herein above, and is
subject to payment and acceleration upon the terms specified therein, and
hereby incorporates by reference all of the provisions thereof.
ALLIED CAPITAL LENDING CORPORATION
By: /s/ KATHERINE C. MARIEN
---------------------------
Name: Katherine C. Marien
Title: President
6
<PAGE> 9
EXHIBIT A
LIBOR PROVISIONS
This Exhibit A is attached to and forms a part of that certain 1995
Replacement Promissory Note (as amended, modified, supplemented or replaced
from time to time, the "Note"), dated July 26, 1995, in the principal amount
of $15,000,000.00, made by ALLIED CAPITAL LENDING CORPORATION, a Maryland
corporation (the "Borrower") and payable to the order of THE RIGGS NATIONAL
BANK OF WASHINGTON, D.C., a national banking association (the "Bank"). Terms
defined in the Note and not otherwise defined herein shall have the same
defined meanings when such terms are used herein.
1. "Governmental Authority" includes, without limitation, any
department, commission, board, bureau, agency, administration, service or other
instrumentality of the United States of America or any state, District of
Columbia, municipality or any other governmental entity.
2. Funding. The Bank shall be entitled, but not obligated, to
fund all or any portion of the principal amount of the Note in any manner it
may determine in its sole discretion, including, without limitation, in the
London interbank market and within the United States, but all calculations and
transactions hereunder shall be conducted as though the Bank actually funds the
total principal amount of the Note through the purchase in London of offshore
dollar deposits in maturities corresponding to the applicable Rate Period.
3. Taxes. All payments with respect to funds based on LIBOR
(including, without limitation, payments of principal and interest) are payable
free and clear of any and all present and future taxes, levies, imposts,
duties, deductions, withholdings, fees, liabilities and similar charges (the
"Taxes"). If, as a result of any change in applicable law or regulation or in
the interpretation thereof by any Governmental Authority charged with the
administration thereof, or the introduction of any law or regulation, any Taxes
are required to be withheld or deducted from any amount payable to the Bank
with respect to funding based on LIBOR, the amount payable will be increased to
the amount which, after deduction from such increased amount of all Taxes
required to be withheld or deducted therefrom, will yield to the Bank the
amount stated to be payable with respect thereto. The Borrower will execute
the deliver to the Bank at its request such further instruments as may be
necessary or desirable to give full force and effect to any such increase,
including, but not limited to, a new Note to be issued in exchange for this
Note. The Borrower will also hold the Bank harmless and indemnify it for any
stamp or other taxes with respect to the preparation, execution, delivery,
performance or enforcement of this Note (all of which shall be included in
"Taxes"). The Borrower will, upon the request of the Bank, provide the Bank
with evidence satisfactory to it of the payment of any Taxes with respect to
the Bank's funding based on LIBOR. If any of the Taxes specified in this
Paragraph 3 are paid by the Bank, the Borrower will, upon demand of the Bank,
reimburse the Bank for such payments, together with any interest, penalties and
expenses in connection therewith, plus interest thereon at the default rate
specified in this Note (calculated as if such payments constituted overdue
amounts of principal) from the date such payment or payments are made to the
date of reimbursement by the Borrower.
4. Additional Costs. In the event that any time the Bank
shall be required to maintain reserves against "Eurocurrency Liabilities" under
Regulation D of the Board of Governors of the
7
<PAGE> 10
Federal Reserve System or in the event that there shall occur any change in
applicable law or regulation or in the interpretation thereof by any
Governmental Authority charged with the administration thereof or the
introduction of any law or regulation subjects the Bank to any tax of any kind
whatsoever with respect to its funding based on LIBOR, or changes the basis of
taxation of payments to the Bank of principal of or interest payable with
respect to any funding based on LIBOR (except for changes in the rate of tax
based solely on the overall net income of the Bank) or imposes, modifies or
deems applicable any reserve, special deposit, capital ratio or similar
requirement against assets held by or deposits in or for the accounts of, or
loans by, the Bank or imposes on the Bank, directly or indirectly, any other
conditions affecting the funding based on LIBOR or the cost of U.S. dollar
deposits obtained by the Bank in the London Eurodollar interbank market, and
the result of any of the foregoing is to increase the cost to the Bank of
making or maintaining loans based on LIBOR, then the Borrower will pay to the
Bank from time to time upon its demand the additional amount or amounts (a
certificate of an officer of the Bank setting forth the calculation of such
costs shall be conclusive and binding, absent manifest error) necessary to
compensate the Bank for such additional costs.
IN WITNESS WHEREOF, the Borrower has caused this Exhibit A to be duly
executed by its duly authorized representatives as of the date first above
written.
ALLIED CAPITAL LENDING CORPORATION
By: /s/ KATHERINE C. MARIEN
---------------------------
Name: Katherine C. Marien
Title: President
8
<PAGE> 1
EXHIBIT 10(e)
PROMISSORY NOTE
$20,000,000 September 27, 1995
New York, New York
FOR VALUE RECEIVED, ACLC LIMITED PARTNERSHIP, a Maryland limited
partnership (the "Borrower"), hereby promises to pay to the order of LEHMAN
COMMERCIAL PAPER INC., a New York corporation, whose address is 3 World
Financial Center, 200 Vesey Street, 9th Floor, New York, New York, 10285 (the
"Lender"), in lawful money of the United States of America, the lesser of (a)
TWENTY MILLION DOLLARS ($20,000,000) and (b) the outstanding principal amount
of the Loan (as defined in the Agreement hereinafter referred to) made by the
Lender to the undersigned pursuant to that certain Loan and Security Agreement,
dated as of September 27, 1995 (as amended or otherwise modified from time to
time, the "Agreement"), among the undersigned, the lenders parties thereto (the
"Lenders"), and Lehman Commercial Paper Inc., as agent for the Lenders, plus
interest thereon from the date of each such Loan as provided in the Agreement.
All such payment obligations (whether in respect of the aggregate principal
amount of outstanding Loans made, interest thereon, or other payment
obligations of the Borrower under the Agreement) shall be made in lawful money
of the United States of America, in immediately available funds, on the dates
and in the amounts, specified in, or determined in accordance with, the
Agreement.
The holder of this Note is authorized to record the date and amount
of each Loan, and the date and amount of each repayment of principal thereof,
on the schedule annexed hereto, and any such recordation shall be conclusive
evidence of the accuracy of the amounts so recorded (absent manifest error);
provided that the failure of the holder hereof to make such recordation (or any
error in such recordation) shall not affect the obligations of the Borrower
hereunder or under the Agreement.
It is intended that the rate of interest herein shall never exceed
the maximum rate, if any, which may be legally charged on the loan evidenced by
this Note (the "Maximum Rate"), and if the provisions for interest contained in
this Note would result in a rate higher than the Maximum Rate, interest shall
nevertheless be limited to the Maximum Rate, and any amounts which may be paid
toward interest in excess of the Maximum Rate shall be applied to the reduction
of principal, or, at the option of the Lender, returned to the Borrower.
Capitalized terms not otherwise defined herein shall have the
respective meanings ascribed to them in the Agreement. Notwithstanding the
pledge of the Collateral, the Borrower hereby acknowledges, admits and agrees
that the Borrower's obligations under this Note are recourse obligations of
such Borrower to which such Borrower pledges its full faith and credit.
The Borrower, and any endorsers or guarantors hereof, (a) severally
waive diligence, presentment, protest and demand and also notice of protest,
demand, dishonor and nonpayments of
<PAGE> 2
this Note, (b) expressly agree that this Note, or any payment hereunder, may be
extended from time to time, and consent to the acceptance of further
Collateral, the release of any Collateral for this Note, the release of any
party primarily or secondarily liable hereon, and (c) expressly agree that it
will not be necessary for the Lender, in order to enforce payment of this Note,
to first institute or exhaust the Lender's remedies against the Borrower or any
other party liable hereon or against any Collateral for this Note. No
extension of time for the payment of this Note, or any installment hereof, made
by agreement by the Lender with any person now or hereafter liable for the
payment of this Note, shall affect the liability under this Note of the
Borrower, even if the Borrower is not a party to such agreement; provided,
however, that the Lender and the Borrower, by written agreement between them,
may affect the liability of the Borrower.
Any reference herein to the Lender shall be deemed to include and
apply to every subsequent holder of this Note.
Reference is made to the Agreement for provisions concerning
mandatory principal prepayments, Collateral, acceleration and other material
terms affecting this Note.
THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED UNDER THE LAWS OF THE
STATE OF NEW YORK.
ACLC LIMITED PARTNERSHIP,
By: /s/ Allied Capital Lending Corporation
----------------------------------
Its General Partner
By: /s/ KATHERINE C. MARIEN
----------------------------------
Its: President
-3-
<PAGE> 1
Exhibit 11
Allied Capital Lending Corporation
Computation of Earnings Per Common Share
For the Years Ended December 31, 1995, 1994 and 1993
<TABLE>
<CAPTION>
For the Year Ended December 31,
------------------------------------------------
1995 1994 1993
------------------------------------------------
<S> <C> <C> <C>
Primary Earnings Per Common Share:
Net Increase in Net Assets Resulting
from Operations $5,252,000 $4,531,000 $2,674,000
================================================
Weighted average number of
shares outstanding 4,375,876 4,368,425 2,587,013
Weighted average number of
shares issuable on exercise
of outstanding stock options - - 252
------------------------------------------------
Weighted average number of shares and
share equivalents outstanding 4,375,876 4,368,425 2,587,265
================================================
Earnings per Share $1.20 $1.04 $1.03
================================================
Fully Diluted Earnings Per Common Share:
Net Increase in Net Assets Resulting
from Operations $5,252,000 $4,531,000 $2,674,000
================================================
Weighted average number of
shares and share equivalents
outstanding as computed for
primary earnings per share 4,375,876 4,368,425 2,587,265
Weighted average of additional
shares issuable on exercise
of outstanding stock options - - 548
------------------------------------------------
Weighted average of shares and
share equivalents outstanding, as adjusted 4,375,876 4,368,425 2,587,813
================================================
Earnings per Share $1.20 $1.04 $1.03
================================================
</TABLE>
<PAGE> 1
COMPANY PROFILE
ALLIED CAPITAL LENDING CORPORATION
[PHOTO]
ALLIED CAPITAL LENDING CORPORATION is an investment company that has been
lending to small businesses for eighteen years. The market demand for small
business finance is strong with few providers, and the Company has developed a
specialty in this market niche. Allied Capital Lending provides investors with
the unique opportunity to profit from our investment experience and the
ever-growing small business marketplace.
The Company operates much like a bank or finance company in its origination of
secured loans to small businesses. Allied Capital Lending provides a unique
advantage to stockholders when compared to traditional lending institutions
because, as a business development company, it pays no corporate taxes and all
of its pre-tax profits are distributed to stockholders.
THE ALLIED CAPITAL COMPANIES
Allied Capital Lending Corporation is one company in the Allied Capital complex
of public and private companies dedicated to financing the growth of small,
private businesses. With more than $650 million in combined total assets,
Allied Capital is a small business finance specialist and has financed
everything from equipment purchases, construction loans and commercial real
estate mortgages to management buyouts and acquisitions. Over the last 37
years, Allied Capital has invested in the growth of thousands of businesses
nationwide while providing substantial returns to its stockholders.
CONTENTS
<TABLE>
<S> <C>
Financial Highlights 1
Letter To Our Stockholders 2
Portfolio Manager's Report 4
Management's Discussion And Analysis 11
Consolidated Comparison Of
Financial Highlights 14
Consolidated Financial Statements 15
Consolidated Statement Of
Investments In Small
Business Concerns 19
Notes To Consolidated
Financial Statements 20
Report Of Independent Accountants 25
Regional Associates 26
Directors And Officers 27
Investor Information 28
</TABLE>
Cover Photography: The United States Capitol and Reflecting Pool by
Carol M. Highsmith
<PAGE> 2
Financial Highlights
Allied Capital Lending Corporation
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------
December 31,
(in thousands, except per share amounts) 1995 1994
- ------------------------------------------------------------------------------------------
<S> <C> <C>
Total Investments at Value $ 47,147 $ 32,771
Total Assets $ 55,480 $ 37,619
Shareholders' Equity (Net Asset Value) $ 32,884 $ 32,788
Net Increase in Net Assets Resulting from Operations $ 5,252 $ 4,531
Earnings Per Share $ 1.20 $ 1.04
Distributions Per Share $ 1.22 $ 1.08
Number of Common Shares Outstanding 4,385 4,370
- ------------------------------------------------------------------------------------------
</TABLE>
[MAP]
- - Allied Capital Lending Corporation has loans to small businesses in 33
states and the District of Columbia, and a network of regional
associates (*), who provide a local presence and identify loan
opportunities for the Company.
1
<PAGE> 3
Letter To Our Stockholders
Allied Capital Lending Corporation
[PHOTO]
David Gladstone
Chairman & Chief Executive Officer
ALLIED CAPITAL LENDING PAID A TOTAL OF
$1.22 PER SHARE TO STOCKHOLDERS FOR 1995.
THE COMPANY'S OBJECTIVE IS TO CONTINUE
TO INCREASE THE TOTAL ANNUAL DISTRIBUTIONS
TO STOCKHOLDERS EACH YEAR.
This year Allied Capital Lending Corporation finished the year with a 16%
increase in earnings, a 13% increase in total distributions to stockholders and
a 28% increase in the price of the Company's stock. Our total investment
income increased by nearly 33% during the year and our net investment income
rose by 11%. Our new loan volume increased by 10%. By all measures, 1995 was
a successful year for our company.
Our total return for 1995 showed improvement from 1994. For the year, Allied
Capital Lending provided a 40% total return to stockholders, which includes the
effects of dividend reinvestment and price appreciation. The board of
directors increased the regular quarterly dividend rate by a total of 11%
during the year by voting for three consecutive dividend increases. Our
objective continues to be to increase the total distributions to stockholders
annually.
Our greatest challenge this year was confronting the changes that were made to
the Small Business Administration's (SBA) guaranteed loan programs in late
1994, which
[FIGURE]
2
<PAGE> 4
"In 1995, Allied Capital
Lending increased the total
distributions to stockholders
by 13%."
effectively cut the maximum loan size permitted by the program in half.
Despite the changes in the program, Allied Capital Lending closed more than $48
million in new loans to more than 85 different entrepreneurs this year, a new
record for our loan origination volume. In late 1995, our ability to make
loans of up to $1 million with a 75% government guarantee was restored. Our
concern over changes in certain SBA programs prompted us to expand our product
line, and we received stockholder approval in 1995 to broaden our investment
objective and policies. In 1995, we closed more than $10 million in loans
outside of the SBA guaranteed loan program. We will continue to seek to expand
our product line as new opportunities arise.
Since 1978, Allied Capital Lending has provided real estate financing,
construction financing and machinery and equipment financing to the nation's
small businesses. Our familiarity with the SBA's loan process and the
guarantee programs has made us one of the most knowledgeable and active
non-bank lenders in the business. We expect to continue to be a leader in the
field of small business finance as we broaden our financial products for small
businesses and continue to expand our national network of regional associates.
In February 1996, we were granted Preferred Lender status by the SBA in 47
regional markets. As Kathy Marien discusses in her Portfolio Manager's report,
this should streamline our lending process and increase our competitiveness.
Our goal is to increase our profitability and the total annual distributions to
stock holders each year. We appreciate the loyalty of our stockholders.
All stockholders are cordially invited to attend our Annual Meeting of
Stockholders at 10:00 am on Monday, May 13, 1996 at the Strathmore Hall Arts
Center, 10701 Rockville Pike, North Bethesda, Maryland.
David Gladstone
Chairman of the Board
3
<PAGE> 5
Portfolio Manager's Report
Allied Capital Lending Corporation
[PHOTO]
Katherine C. Marien
President, Chief Operating
Officer & Portfolio Manager
This year was a year of challenge and new opportunities for Allied Capital
Lending Corporation. Faced with changes in the SBA guaranteed loan program
that threatened to hamper our ability to increase loan origination volume, the
Company made changes to diversify its business, and we expanded our product
line of small business loans to create a solid base for our small business
lending operations for the next several years.
Because of increased levels of demand for small business loans and limited
budget dollars allocated to the program, in late 1994 the SBA reduced the
maximum loan size for guaranteed loans under its 7(a) loan program from $1
million to $500,000, and during 1995 the agency eliminated the ability to
refinance maturing debt. The SBA subsequently revised the 7(a) loan program
lending regulations in October 1995, but nonetheless these changes affected our
1995 business and caused concern for our future operations. Since many of
Allied Capital Lending's loans in 1994 were in excess of $500,000, and many of
our borrowers had used at least part of their loan proceeds to refinance other
debt, we knew we had to expand our product line.
Fortunately, we entered 1995 with a substantial backlog of loans already
approved under the 7(a) loan program's prior rules. This provided the Company
with time to adjust its marketing strategy and adapt to the new environment.
Our organizational structure is flexible enough to adjust rapidly to changing
conditions, and the suppliers of our lines of credit were supportive of our
efforts to diversify. While we continued to originate 7(a) loans, the bread
and butter of our loan business, we established two new commercial real estate
products - 504 program loans and companion loans, which are made in conjunction
with traditional SBA-guaranteed loans. These new products enabled us, despite
the limitations, to continue to serve borrowers who needed larger loans.
504 LOAN PORTFOLIO
Under the SBA 504 certified development company loan program, small businesses
can purchase or build real estate with very favorable long-term debt. Loans
made through the 504 program, which can be as large as $2.5 million, are
structured such that the entrepreneur provides at least 10% of the project cost
in equity, Allied Capital Lending provides 50% of the project cost in a 20-year
floating-rate first mortgage loan, and a local certified development company
(CDC) provides a 20-year fixed-rate second mortgage loan for the remaining 40%
of the project cost. Both loans are fully amortizing and the rate on the CDC
loan is currently under 9%. Allied Capital Lending has a secure first mortgage
loan and the borrower has affordable long-term financing for the growth of the
small business.
We were approached by the owners of OI WOODLAND PARK, L.L.C. to participate
with a Colorado CDC to finance a new 60-room Country Inn Hotel at the foot of
Pike's Peak. In addition to a 20-year first mortgage loan for 35% of the
project cost, Allied Capital Lending provided the short-term construction
financing for the entire project. This was our first loan under the SBA 504
loan program, and the construction financing was successfully refinanced later
in the year with our first
4
<PAGE> 6
"We established two new commercial
real estate products, which enabled
us, despite SBAlending restrictions,
to continue to serve customers who
need larger loans."
mortgage loan and a subordinated debenture provided by the SBA. The hotel
opened in the autumn of 1995 and has been operating near capacity since its
first day in business.
GREEN MOUNTAIN AUTO WORLD, located in Denver, Colorado is an auto plaza that
offers general automotive repair including exhaust system, electrical system
and brake repair, emissions testing and repair, tire sales and service,
tune-ups, suspension work, and auto glass repair and replacement. The owner
has successfully operated a full-service retail gasoline station and repair
service on a nearby site since 1974. Capitalizing on twenty years of
established customer relationships and the success of the existing facility,
the owner purchased the land and applied to Allied Capital Lending and a
Colorado CDC to provide financing for the remainder of the project. We
provided the construction financing and a 50% permanent first mortgage.
Construction was completed in December 1995, and the permanent financing will
be completed in April 1996.
COMPANION LOAN PORTFOLIO
Companion or "piggyback" loans in conjunction with traditional SBA 7(a)
guaranteed loans are used to finance projects that require up to $2 million in
debt. For this type of financing, Allied Capital Lending provides an
unguaranteed first mortgage loan for up to 50% of the real estate value and a
second mortgage loan through the 7(a) program with a 75% SBA guarantee. The
total of the two loans is 80% or less of the appraised value of the real
estate. We also partner with local banks by providing second mortgage loans
that are partially guaranteed by the SBA in conjunction with the banks'
conventional first mortgage loans to qualifying small businesses.
[PHOTO]
LOCATED AT THE FOOT OF PIKE'S PEAK
IN COLORADO, THIS NEW 60-ROOM
COUNTRY INN HOTEL WAS ALLIED CAPITAL
LENDING'S FIRST LOAN UNDER THE SBA
504 LOAN PROGRAM. THE HOTEL OPENED IN
THE AUTUMN OF 1995 AND HAS BEEN OPERATING
NEAR CAPACITY SINCE ITS FIRST DAY IN BUSINESS.
5
<PAGE> 7
Portfolio Manager's Report
Allied Capital Lending Corporation
[FIGURE]
The BEST WESTERN OF WHITMORE LAKE in Michigan is a 61-room motel on a resort
lake just ten miles west of Detroit. We provided a companion loan to the
owners of this hotel in conjunction with a traditional SBA 7(a) loan. Allied
Capital Lending's total financing of $1.8 million included an unguaranteed
first mortgage loan, which was used to refinance an existing first mortgage
loan on the property, and an SBA-guaranteed second mortgage loan which was used
to buy out a partner of the owners.
ABLE AIR EQUIPMENT in South Easton, Massachusetts provides sales, installation
and service for industrial air compressors. Able Air was purchased by its
current owner in 1983, and outgrew its existing facility steadily over time.
Allied Capital Lending provided the owner with an unguaranteed loan, which was
used to refinance the mortgage loan on the current facility and to provide
long-term working capital. We also provided an SBA-guaranteed loan which Able
Air used to purchase a new facility. Because of the entrepreneur's
significant equity in the existing facility, we were able to provide 100% of
the financing for this project.
SBA-GUARANTEED LOANS
SBA-guaranteed loans still account for the majority of our loan portfolio.
These loans, which provide up to $1 million in financing, continue to be sought
after by small businesses throughout the United States and are guaranteed up to
75% by the SBA.
AMK MANUFACTURING CORPORATION in Alpharetta, Georgia was established in 1984
after the entrepreneur worked for a number of years designing world
championship race car chassis and fabricating props for the motion picture
industry. AMK is a structural metal fabricator that utilizes the "just in
time" production philosophy and provides its services for the aerospace,
medical, motion picture, plastics and refining industries. Allied Capital
Lending provided financing to purchase and renovate the building that the
company had been leasing, and to refinance short-term debt secured by its
working capital and equipment.
CLAY HILL PIZZA in Middleburg, Florida is a pizza and submarine sandwich shop
owned by a mother and daughter. They purchased the business in early 1994 with
an option to buy the building in which it operates. During 1994, Clay Hill
experienced an 18% increase in sales and improved the business' gross margin by
12%. With Allied Capital Lending's loan under the SBA low-documentation loan
program, sometimes referred to as LowDoc, the business owners were able to
exercise their option to buy the building.
AUNTIE'S DAY CARE in Ashland, Virginia, approached Allied Capital Lending when
the day care facility had 93 children enrolled and a waiting list of 46
additional children. Allied Capital Lending provided construction and
permanent financing for a new 12,000 square foot facility designed to
6
<PAGE> 8
"Our network of regional associates
continues to expand and has proven
adaptable to changing regulatory and
market conditions."
accommodate up to 174 children. The expanded day care facility created
seventeen new jobs in the community.
TIME OUT SPORTS BAR in Cranberry, Pennsylvania was purchased by its current
owners in 1988. Since that time, they have expanded the building and added a
new deck, hockey rink and outdoor bar. The establishment also has billiard
tables, three big-screen televisions, pinball and basketball machines, and dart
boards. Revenues have more than doubled over the last four years, and Allied
Capital Lending's loan enabled the owners to consolidate debt, complete the
outdoor bar, and buy out one of their financial partners who was not active in
the business.
Allied Capital Lending provided a 25-year loan to a husband and wife team to
build and operate a new DAIRY QUEEN in Travis County, Texas, just outside of
Austin. This Dairy Queen will be the first national brand fast food facility
in this rural area. The owners have previously run several other successful
small businesses, including a retail fresh produce business and a custom home
building company.
We indicated last year that we expected the communications industry to provide
a new market for us in 1995 following the SBA's decision to allow media
companies to receive SBA-guaranteed loans. We closed several loans in this
industry during 1995, we have several more in our backlog of loans, and we
expect to see growth in loan origination volume from this industry in 1996.
One loan we made this year to the broadcasting industry was to KMCK-FM. The
manager and minority owner of this Fayetteville, Arkansas radio station had
operated the station for five years when the majority owner entered into an
agreement to sell the station to him. Under the manager's leadership, the
station had experienced increased revenues and profitability, and entered into
Local Management and Time Sales Agreements with three other stations in the
market. Allied Capital Lending provided a 15-year loan, which the manager used
to acquire the majority owner's interest in the station. KMCK-FM continued to
grow and perform well throughout 1995.
[POWER 105 FM KMCK LOGO]
FOLLOWING THE SBA'S
DECISION TO ALLOW BROADCAST
CORPORATIONS TO RECEIVE SBA-GUARANTEED
LOANS, WE CLOSED SEVERAL LOANS IN THIS
AREA DURING 1995, INCLUDING KMCK-FM IN
FAYETTEVILLE, ARKANSAS.
7
<PAGE> 9
Portfolio Manager's Report
Allied Capital Lending Corporation
ALLIED CAPITAL LENDING HAS INCREASED
ITS LOAN ORIGINATION VOLUME STEADILY
OVER THE PAST FIVE YEARS. DESPITE
SBA REGULATIONS IMPOSED ON THE SIZE OF
OUR LOANS FOR MOST OF 1995, THE COMPANY
INCREASED ITS LOAN ORIGINATION VOLUME BY
10% TO $48.2 MILLION IN 1995.
[FIGURE]
Allied Capital Lending provided a loan to HERALD PUBLISHING COMPANY in Houston,
Texas to refinance its existing debt, which included a note held by the Federal
Deposit Insurance Corporation (FDIC). Herald Publishing is the publisher of
the Jewish Herald-Voice weekly newspaper, the only newspaper published in
Houston for the Jewish community.
These profiles represent only a few of the small businesses we financed during
the year. This collection of loans reflects our continued commitment to
providing long-term fully amortizing loans to a wide variety of small
businesses throughout the United States.
REGULATORY UPDATE
Throughout much of the year, the viability of the Small Business Administration
and its loan programs were the subject of often heated debates in Congress and
the White House. While there were strong forces at work to eliminate the SBA
and its programs as part of the overall deficit reduction program, in the final
analysis, Congress realized what Allied Capital Lending has known for many
years: Small, private companies are the backbone of the American economy.
Small business create new jobs and contribute significantly to the country's
economic growth. The 7(a) and 504 loan programs offered by the SBA are
integral to the maintenance of the economy's growth momentum in this sector.
On October 12, 1995, President Clinton signed into law a new framework for
these loan programs, which reduced their cost to the federal government, and in
January 1996, Congress passed a budget bill assuring funding and staffing
through fiscal year 1996 for the SBA loan programs. We hope that the debate
over the viability of these programs is over and the only question to be
debated annually will be how much can be allocated to these beneficial
programs.
8
<PAGE> 10
The most significant legislative changes were made in the 7(a) guaranteed loan
program, the largest of the loan programs offered by the SBA. Historically,
smaller loans with maturities of ten years or less were guaranteed up to 90%;
larger, longer term loans received a 75% guarantee. Under the new rules, loans
of $100,000 or less now receive an 80% guarantee and any loans over $100,000
receive a 75% guarantee regardless of maturity. This change will have little
impact on Allied Capital Lending since most of our loans are over $100,000 in
size and have carried a 75% guarantee.
Administrative changes have also been instituted by the SBA, many of which will
have a favorable impact on the Company's ability to respond quickly and
competitively to our borrowers' needs. The most significant change is the
SBA's National Preferred Lender Program. Allied Capital Lending's application
for Preferred Lender status in 47 of the regional markets in which we currently
operate was approved during the first quarter of 1996. This status recognizes
our experience level with the 7(a) loan program and allows us to make
guaranteed loans without the often lengthy credit review process at each local
SBA office. Instead, the SBA will only review our loan applications for
borrower eligibility issues and will rely on our due diligence and credit
decisions. The paperwork and time involved in approving and closing our
SBA-guaranteed loans should decrease accordingly. As we expand our geographic
territories, we hope to also expand our Preferred Lender status.
[PHOTO]
ALLIED CAPITAL LENDING
CURRENTLY HAS 54 LOANS
TO MANUFACTURING COMPANIES
IN THE PORTFOLIO REPRESENTING
12% OF THE TOTAL INVESTMENTS.
OPERATIONS UPDATE
Allied Capital Lending has two sources of revenue or investment income -
interest income on loans held in the portfolio and gains from the sale of the
SBA-guaranteed portions of loans. Our reliance on interest income as a
percentage of total investment income increased from 51% in 1993 to 61% in 1994
largely due to the decreased levels of secondary market purchase premiums
during 1994 and the increased level of interest rates on a larger portfolio.
In 1995, the percentage of revenue generated from interest income
9
<PAGE> 11
Portfolio Manager's Report
Allied Capital Lending Corporation
[PHOTO]
ALLIED CAPITAL LENDING PROVIDED
$1 MILLION IN FINANCING FOR THE
RENOVATION OF THIS B-CC SHELL STATION
LOCATED IN BETHESDA, MARYLAND. THE PROJECT
DOUBLED THE NUMBER OF JOBS AVAILABLE AT
THE STATION.
increased further to 74% as the number and dollar amount of the non-guaranteed
loans that we made and held in our portfolio increased. Due to the restoration
of the $1 million loan limit for SBA guaranteed loans and generally lower
interest rates, we expect that this trend will not be as pronounced in 1996.
However, as we increase our emphasis on originating unguaranteed loans and they
become a larger percentage of our portfolio, we still expect our reliance on
interest income to increase.
Our network of regional associates continues to expand, and has proven
adaptable to changing regulatory and market conditions. Throughout 1995, these
independent financial consultants were able to identify lending opportunities
incorporating our new product line that met the loan size and purpose
restrictions. As the new regional associates in Alabama, Arizona, Pennsylvania
and Oregon develop their markets and existing regional associates resume
providing our traditional fully amortizing long-term real estate loans in
larger dollar amounts, we expect another year of strong loan generation for
1996.
In 1995, we successfully managed many challenges and created new opportunities.
We believe we are a stronger company today, better able to meet the financing
needs of our small business borrowers and to compete in the world of small
business finance.
10
<PAGE> 12
Management's Discussion And Analysis
Allied Capital Lending Corporation
LIQUIDITY AND CAPITAL RESOURCES
During 1995, Allied Capital Lending Corporation (the Company) expanded its
product lines to small businesses as a result of the changes made to the U. S.
Small Businesses Administration (SBA) guaranteed loan program during December
1994. These changes in the SBA guaranteed loan program reduced the maximum
loan size allowable under the program from $1 million to $500,000. The Company
reacted quickly to the change in regulations and developed additional products
for small businesses by utilizing the SBA 504 certified development company
loan program, and by offering companion senior loans with SBA 7(a) guaranteed
loans.
Because the Company had a substantial backlog of guaranteed loans at December
31, 1994 that had been approved by the SBA prior to the 1994 regulation
changes, and because of the development of new products, the Company was able
to achieve its 1995 loan origination goals. In late 1995, the SBA again
revised its guaranteed loan program and increased the maximum loan guarantee to
$750,000. Thus, the Company is now able to once again provide up to a $1
million loan with a 75% government guarantee. This change should benefit the
Company's loan origination activity prospectively.
The Company originated $48.2 million in new loans during 1995, a 10% increase
over new loan originations of $43.9 million in 1994. Net of loan sales,
repayments and changes in portfolio valuation, the Company increased its total
loans to small businesses by $14.4 million or 44% during 1995 compared to 1994.
At December 31, 1995, loans to small businesses totaled 85% of the Company's
total assets, compared to 87% at December 31, 1994.
The Company financed this growth in new loans through borrowings under the
Company's credit facilities.
During 1995, the Company modified a credit facility it has with a bank,
consisting of a secured and unsecured line of credit. The secured line of
credit was increased from $13 million to $15 million and the interest rate was
changed from the Wall Street Journal floating prime rate to LIBOR plus 2.2% per
annum. As of December 31, 1995, the Company was paying an interest rate of
7.95% per annum, as compared to an interest rate of 8.5% per annum at December
31, 1994 per annum, and had total borrowings under this facility equal to $13.3
million. This line of credit is used to finance loans made under the SBA 7(a)
guaranteed loan program.
The unsecured line of credit has a borrowing limit of $2 million and bears
interest at the Wall Street Journal prime rate plus 0.25%. As of December 31,
1995 and 1994, the Company was paying an interest rate of 8.75% per annum, and
had total borrowings under the facility equal to $1.1 million at December 31,
1995. The Company's credit facility expires on July 31, 1996; however, the
Company is currently renegotiating the terms of this credit facility with its
bank and believes the credit facility will be renewed with similar terms.
During September 1995, the Company, through its subsidiary, entered into a
credit agreement whereby the subsidiary could borrow up to $20 million in order
to finance its loans closed under the SBA 504 program and companion loans
closed in conjunction with guaranteed loans. This credit agreement bears
interest at LIBOR plus 2% and expires in September 1996. As of December 31,
1995, the Company was paying interest ranging from 7.75% to 7.93% per annum and
had total borrowings under this agreement equal to $4.5 million.
Management plans to continue to use leverage to finance the growth of the
Company, however as a business development company (BDC), the Company must
maintain 200% asset coverage for indebtedness representing senior securities,
which will limit the Company's ability to borrow. It is management's belief
that the Company will have access to the capital resources necessary to expand
and develop its business. The Company may seek to obtain funds through
additional equity offerings or debt financings. The Company anticipates that
adequate cash will be available to make new loans, fund its operating and
administrative expenses, satisfy debt service obligations and pay dividends in
1996.
11
<PAGE> 13
Management's Discussion And Analysis
Allied Capital Lending Corporation
RESULTS OF OPERATIONS
Comparison of 1995 of 1994.
For the year ended December 31, 1995, the net increase in net assets resulting
from operations was $5.2 million or $1.20 per share as compared to $4.5 million
or $1.04 per share for the year ended December 31, 1994, which represented a
16% increase. The net increase in net assets resulting from operations, which
includes ordinary investment income, realized gains and losses, and unrealized
appreciation and depreciation in the portfolio, increased primarily due to
continued growth in the Company's portfolio of loans to small businesses.
The Company's investments consist primarily of loans to small, privately held
companies. These types of investments, by their nature, carry a high degree of
business and financial risk. The Company thus obtains a high level of
collateral to secure these loans and seeks to achieve a level of current income
from its investments in these businesses commensurate with the risks assumed.
Loans in the portfolio generally carry variable interest rates up to the prime
rate plus 2.75% per annum. Given these variable rates, the interest income on
the portfolio will fluctuate with the changes in the prime interest rate. The
Company had a net increase in total investments of $14.4 million in 1995 which
should result in improved investment income in future years, with the degree of
such improvement dependent upon prime interest rate fluctuations.
Interest income increased by $2.3 million in 1995 over 1994 to $6 million. This
increase was directly related to the net increase in invested assets of $14.4
million during the year. Premium income from the sale of loans in 1995
decreased 11% to $2.1 million as compared to $2.3 million in the prior year.
Overall total investment income increased by $2 million in 1995 or 33%.
Investment advisory fees increased by $329,000 or 41% to $1.1 million in 1995
due to the growth of investments and other assets, upon which the investment
advisory fee is based. The Company pays investment advisory fees at an
approximate annual rate of 2.5% on invested assets and 0.5% on cash and cash
equivalents.
In total, all other expenses increased by $1.1 million to $1.5 million for 1995
as compared to $376,000 for 1994. This increase in other expenses is primarily
due to the increase in interest expense of $884,000 to $959,000 in 1995
compared to $75,000 in 1994 as a result of the Company leveraging its
portfolio. Total borrowings increased from $3.1 million at December 31, 1994
to $18.9 million at December 31, 1995.
Costs of stockholder services increased by $94,000 to $148,000 in 1995. The
Company had a special stockholders meeting in 1995 to expand the Company's
investment objective and policies. The Company also incurred higher
stockholder costs because Allied Capital Corporation (former Parent), the
Company's former Parent, distributed 335,086 shares of the Company's common
stock to the former Parent's stockholders in lieu of a cash dividend in January
1995, thus increasing the number of the Company's stockholders. Other
operating expenses increased $85,000 to $201,000 in 1995 from $116,000 in 1994
due to increased costs of operations resulting from growth.
Total dividends from taxable income for 1995 equaled $1.22 per share. Taxable
income was greater than the net increase in net investment income before net
unrealized appreciation on investments because of certain timing differences in
the recognition of income for federal income tax purposes.
Comparison of 1994 to 1993.
For the year ended December 31, 1994, the net increase in net assets resulting
from operations was $4.5 million as compared to $2.7 million for the year ended
December 31, 1993, a 69% increase. The net increase in net assets resulting
from operations, which includes ordinary investment income, realized gains and
losses, and unrealized appreciation and depreciation in the portfolio,
increased primarily due to continued growth in the Company's portfolio of loans
to small businesses and increases in the prime interest rate.
12
<PAGE> 14
Management's Discussion And Analysis
Allied Capital Lending Corporation
Interest income increased $1.5 million or 64% in 1994 to $3.7 million. This
increase was both a function of the net increase in total investments of $11
million during the year and the rise in the prime interest rate during the
year. At December 31, 1993, the prime rate was 6% per annum, and as a result
the Company's approximate lending rate was 8.75% per annum. At December 31,
1994, the prime rate had risen to 8.5% per annum, causing the Company's
approximate lending rate to increase to 11.25% per annum. Premiums on the sale
of loans stayed relatively constant during 1994 at $2.3 million even though
total loans sold in 1994 were $37 million as compared to $23 million sold in
1993. The rise in interest rates during 1994 had the effect of depressing loan
sale premiums in the secondary market during certain periods throughout the
year; however, this effect was mitigated by the increase in yield on the
portfolio. Overall total investment income increased by $1.6 million in 1994
or 36%.
The Company completed its first full year of operating as a public company in
1994. In 1993, the Company operated as a subsidiary of the former Parent for
almost eleven months of the year preceding the initial public offering in
November 1993. As a result, the change in expense levels between 1994 and 1993
are mostly due to the change in operations of a separate public company.
Investment advisory fees increased by $239,000 or 42% to $811,000 in 1994.
This was due to the fact that for a majority of 1993, the Company's total
assets were approximately $22 million, and as a result of new capital generated
by the initial public offering, assets during 1994 were approximately $36
million, an overall increase in assets of approximately $14 million or 64%.
The Company paid investment advisory fees at an approximate annual rate of 2.5%
on invested assets, and 0.5% on cash and cash equivalents.
In total, other operating expenses and interest expense declined in 1994 by
$564,000 primarily due to the fact that for much of 1993 the Company had
outstanding loans from the former Parent of approximately $10 million which
generated interest expense totalling $707,000. Upon the completion of the
initial public offering, these loans were repaid, and the Company's borrowings
in 1994 under its new credit facilities were at substantially lower levels,
causing 1994 interest expense to be only $75,000.
Total quarterly dividends and the annual extra dividend from taxable income for
1994 were $1.08 per share. Taxable income was greater than the net investment
income before net unrealized depreciation on investments because of certain
timing differences in the recognition of income for federal income tax purposes
versus financial reporting purposes.
13
<PAGE> 15
Consolidated Comparison Of Financial Highlights
Allied Capital Lending Corporation
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
For the Years Ended December 31,
(in thousands, except per share amounts) 1995 1994 1993 1992(1) 1991(1)
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
DISTRIBUTIONS
- -------------------------------------------------------------------------------------------------------------------
Tax distributions declared
subsequent to the initial public offering(2) $ 5,339 $ 4,718 $ 350 $ - $ -
Per share $ 1.22 $ 1.08 $ 0.08 $ - $ -
Tax distributions declared
prior to the initial public offering(3) $ - $ - $ 2,422 $ 2,063 $ 3,571
Per share $ - $ - $ 1.02 $ 0.87 $ 1.50
OPERATIONS
- -------------------------------------------------------------------------------------------------------------------
Interest $ 5,966 $ 3,716 $ 2,260 $ 1,380 $ 4,738
Premium income $ 2,090 $ 2,349 $ 2,196 $ 1,958 $ 3,205
Total investment income $ 8,056 $ 6,065 $ 4,456 $ 3,338 $ 7,943
Per share $ 1.84 $ 1.39 $ 1.72 $ 1.40 $ 3.34
Net investment income $ 5,438 $ 4,878 $ 2,944 $ 2,011 $ 4,331
Per share $ 1.24 $ 1.12 $ 1.14 $ 0.84 $ 1.82
Net realized losses and net unrealized
appreciation (depreciation) on investments $ (186) $ (347) $ (270) $ (43) $ (196)
Per share $ (0.04) $ (0.08) $ (0.11) $ (0.01) $ (0.08)
Net increase in net assets resulting
from operations $ 5,252 $ 4,531 $ 2,674 $ 1,968 $ 4,135
Per share $ 1.20 $ 1.04 $ 1.03 $ 0.83 $ 1.74
Weighted average number of shares
and share equivalents outstanding 4,376 4,368 2,587 2,380 2,380
FINANCIAL POSITION
- -------------------------------------------------------------------------------------------------------------------
Investments at value $ 47,147 $32,771 $ 21,793 $ 12,241 $ 10,509
Investments at cost $ 47,302 $32,935 $ 21,905 $ 12,421 $ 10,864
Total assets $ 55,480 $37,619 $ 34,953 $ 17,420 $ 14,927
Total debt(4) $ 18,914 $ 3,130 $ - $ 7,860 $ 4,292
Shareholders' equity (net asset value) $ 32,884 $32,788 $ 32,955 $ 5,505 $ 5,600
Per share $ 7.50 $ 7.50 $ 7.54 $ 2.31 $ 2.35
Per share market price at end of year $ 13.25 $ 10.38 $ 15.75 $ - $ -
Shares outstanding at end of year 4,385 4,370 4,368 2,380 2,380
</TABLE>
(1) Prior to the 1993 initial public offering, the Company's former Parent
and sole stockholder and board of directors approved an increase in the
authorized shares and a stock split effected in the form of a stock
dividend to the sole stockholder. All share data for prior years
presented have been restated to reflect the stock split.
(2) 1993 is based on 4,368,420 shares outstanding subsequent to the initial
public offering, and dividends for the three months ended December 31,
1993.
(3) 1993 is based on 2,380,000 shares outstanding prior to the initial
public offering, and dividends for the nine months ended September 30,
1993. 1991 excludes a return of capital paid to the Company's former
Parent.
(4) Debt outstanding prior to 1993 represents borrowings from the Company's
former Parent.
14
<PAGE> 16
Consolidated Balance Sheet
Allied Capital Lending Corporation
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
December 31,
(in thousands, except number of shares) 1995 1994
- ----------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Investments at Value:
Loans receivable (cost: 1995 _ $46,451; 1994 _ $32,935) $ 46,223 $ 32,771
Loans held for sale (cost: 1995 _ $851; 1994 _ $0) 924 -
------------------------------
Total investments 47,147 32,771
Cash and cash equivalents 3,020 1,297
Accrued interest receivable 732 451
Excess servicing asset 3,828 2,700
Other assets 753 400
------------------------------
Total assets $ 55,480 $ 37,619
==============================
LIABILITIES AND SHAREHOLDERS' EQUITY
- ----------------------------------------------------------------------------------------------
Liabilities:
Notes payable $ 18,914 $ 3,130
Dividends and distributions payable 340 262
Accounts payable and accrued expenses 3,012 1,209
Investment advisory fee payable 330 230
------------------------------
Total liabilities 22,596 4,831
------------------------------
Commitments and Contingencies
Shareholders' Equity:
Common stock, $.0001 par value, 20,000,000 shares
authorized; 4,384,921 and 4,370,400 shares issued
and outstanding at December 31, 1995 and 1994 - -
Additional paid-in capital 33,252 33,069
Net unrealized depreciation on investments (155) (164)
Distributions in excess of accumulated earnings (213) (117)
------------------------------
Total shareholders' equity 32,884 32,788
------------------------------
Total liabilities and shareholders'equity $ 55,480 $ 37,619
==============================
</TABLE>
The accompanying notes are an integral part of these financial statements.
15
<PAGE> 17
Consolidated Statement Of Operations
Allied Capital Lending Corporation
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
For the Years Ended December 31,
(in thousands, except per share amounts) 1995 1994 1993
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Investment Income:
Interest $ 5,966 $ 3,716 $ 2,260
Premium income 2,090 2,349 2,196
------------------------------------------
Total investment income 8,056 6,065 4,456
------------------------------------------
Operating Expenses:
Investment advisory fee 1,140 811 572
Interest expense 959 75 707
Legal and accounting fees 170 131 124
Stockholder services 148 54 -
Other operating expenses 201 116 109
------------------------------------------
Total expenses 2,618 1,187 1,512
------------------------------------------
Net investment income 5,438 4,878 2,944
Net realized losses on investments (195) (295) (338)
------------------------------------------
Net investment income before net unrealized
appreciation (depreciation) on investments 5,243 4,583 2,606
Net unrealized appreciation (depreciation) on investments 9 (52) 68
------------------------------------------
Net increase in net assets resulting from operations $ 5,252 $ 4,531 $ 2,674
==========================================
Earnings per share $ 1.20 $ 1.04 $ 1.03
==========================================
Weighted average number of shares and
share equivalents outstanding 4,376 4,368 2,587
==========================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
16
<PAGE> 18
Consolidated Statement Of Changes In Net
Assets Allied Capital Lending Corporation
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
For the Years Ended December 31,
(in thousands, except per share amounts) 1995 1994 1993
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Increase in Net Assets Resulting from Operations:
Net investment income $ 5,438 $ 4,878 $ 2,944
Net realized losses on investments (195) (295) (338)
Net unrealized appreciation (depreciation) on investments 9 (52) 68
------------------------------------------
Net increase in net assets resulting from operations 5,252 4,531 2,674
Distributions to Stockholders from:
Net investment income (5,339) (4,718) (2,772)
Capital Share Transactions:
Sale of common stock in initial public offering - - 27,548
Issuance of common shares in lieu of cash distributions 183 20 -
------------------------------------------
Total increase (decrease) in net assets 96 (167) 27,450
Net assets at beginning of year 32,788 32,955 5,505
==========================================
Net assets at end of year $ 32,884 $ 32,788 $ 32,955
==========================================
Net asset value per share $ 7.50 $ 7.50 $ 7.54
==========================================
Shares outstanding at end of year 4,385 4,370 4,368
==========================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
17
<PAGE> 19
Consolidated Statement Of Cash Flows
Allied Capital Lending Corporation
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
For the Years Ended December 31,
(in thousands) 1995 1994 1993
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash Flows from Operating Activities:
Net increase in net assets resulting from operations $ 5,252 $ 4,531 $ 2,674
Adjustments to reconcile net increase in net assets resulting from
operations to net cash provided by operating activities:
Premium income (2,090) (2,349) (2,196)
Amortization of loan discounts and fees (286) (362) (188)
Net realized losses on investments 195 295 338
Net unrealized (appreciation) depreciation on investments (9) 52 (68)
Changes in assets and liabilities:
Accrued interest receivable (281) (227) (8)
Excess servicing asset (1,128) (1,094) (233)
Other assets (353) (67) 604
Accounts payable and accrued expenses 1,803 (372) (411)
Investment advisory fee payable 100 163 67
-----------------------------------------
Net cash provided by operating activities 3,203 570 579
-----------------------------------------
Cash Flows from Investing Activities:
Loan originations (48,213) (43,853) (30,482)
Proceeds from the sale of loans 31,816 32,509 20,992
Collection of principal 4,211 2,728 1,702
-----------------------------------------
Net cash used in investing activities (12,186) (8,616) (7,788)
-----------------------------------------
Cash Flows from Financing Activities:
Dividends and distributions paid (5,078) (4,785) (4,135)
Proceeds from issuance of common stock _ _ 27,548
Payment of long term debt _ _ (7,860)
Net borrowings under revolving lines of credit 15,784 3,130 _
-----------------------------------------
Net cash provided by (used in) financing activities 10,706 (1,655) 15,553
-----------------------------------------
Net increase (decrease) in cash and cash equivalents 1,723 (9,701) 8,344
Cash and cash equivalents, beginning of year 1,297 10,998 2,654
-----------------------------------------
Cash and cash equivalents, end of year $ 3,020 $ 1,297 $ 10,998
=========================================
Supplemental Disclosure of Cash Flow Information
Noncash investing and financing activities:
Issuance of common shares in lieu of cash distributions $ 183 $ 20 $ _
=========================================
Interest paid $ 849 $ 70 $ 744
=========================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
18
<PAGE> 20
Consolidated Statement Of Investments In Small Business Concerns
Allied Capital Lending Corporation
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
DECEMBER 31, 1995
NUMBER PERCENT OF
TYPE OF BUSINESS OF LOANS COST VALUE PORTFOLIO
(in thousands, except number of loans and percentages)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Autoexhaust Repair 38 $ 237 $ 215 *
- ---------------------------------------------------------------------------------------------------------------------------
Automotive Repair 29 819 819 2
- ---------------------------------------------------------------------------------------------------------------------------
Bakeries 5 88 88 *
- ---------------------------------------------------------------------------------------------------------------------------
Car Washes 3 621 621 1
- ---------------------------------------------------------------------------------------------------------------------------
Contractors 5 439 439 1
- ---------------------------------------------------------------------------------------------------------------------------
Day Care Centers 8 1,710 1,710 4
- ---------------------------------------------------------------------------------------------------------------------------
Food Stores 11 1,849 1,844 4
- ---------------------------------------------------------------------------------------------------------------------------
Gasoline Stations 24 8,530 8,530 18
- ---------------------------------------------------------------------------------------------------------------------------
Hobbies and Games 9 41 41 *
- ---------------------------------------------------------------------------------------------------------------------------
Home Furnishings 14 532 532 1
- ---------------------------------------------------------------------------------------------------------------------------
Hotels and Motels 43 11,559 11,559 25
- ---------------------------------------------------------------------------------------------------------------------------
Laundries and Cleaners 57 480 473 1
- ---------------------------------------------------------------------------------------------------------------------------
Manufacturing 54 5,596 5,583 12
- ---------------------------------------------------------------------------------------------------------------------------
Personal Services 14 1,125 1,162 2
- ---------------------------------------------------------------------------------------------------------------------------
Professional Services 17 779 779 2
- ---------------------------------------------------------------------------------------------------------------------------
Restaurants 62 3,935 3,874 8
- ---------------------------------------------------------------------------------------------------------------------------
Retail Shops 36 2,225 2,222 5
- ---------------------------------------------------------------------------------------------------------------------------
Wholesalers 7 952 951 2
- ---------------------------------------------------------------------------------------------------------------------------
Miscellaneous Businesses 84 5,785 5,705 12
- ---------------------------------------------------------------------------------------------------------------------------
Total loans 520 $ 47,302 $ 47,147
===========================================================================================================================
</TABLE>
* Less than 1%.
The accompanying notes are an integral part of these financial statements.
19
<PAGE> 21
Notes To Consolidated Financial Statements
Allied Capital Lending Corporation
NOTE 1. ORGANIZATION AND BASIS OF PRESENTATION
Organization. Allied Capital Lending Corporation (the Company) is a closed-end
management investment company that has elected to be regulated as a business
development company under the Investment Company Act of 1940. The Company is
an authorized small business lending company and engages in the business of
originating loans to qualified small businesses throughout the United States.
The Company raised net proceeds of approximately $27,500,000 in equity through
an initial public offering (IPO) in November 1993. Prior to the IPO, the
Company was a wholly owned subsidiary of Allied Capital Corporation (former
Parent). As of December 31, 1995, Allied Capital Corporation owned
approximately 28 percent of the Company's outstanding common stock.
The Company has an investment advisory agreement with Allied Capital Advisers,
Inc. (Advisers), whereby Advisers manages the investments of the Company
subject to the supervision and control of the Company's board of directors.
Certain directors and officers of Advisers are also directors and officers of
the Company.
Basis of Presentation. In April 1995, ACLC Limited Partnership (subsidiary)
was formed so the Company could participate in the U.S. Small Business
Administration (SBA) 504 loan program and originate other types of small
business loans. The Company is the general partner and has a 99 percent
interest in the subsidiary. Accordingly, the consolidated financial statements
of the Company include the accounts of the Company and this majority owned
subsidiary. All significant intercompany accounts and transactions have been
eliminated in consolidation.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Valuation of Investments. Loans receivable and the related excess servicing
asset are valued by the Company's board of directors. Generally, the board of
directors considers the fair value of the loans receivable to approximate their
carrying value or amortized cost. Unrealized depreciation is recorded by the
Company when the board of directors determines that significant doubt exists as
to the ultimate realization of the loan.
Loans that are held for sale are valued by the board of directors based upon
the net proceeds which the Company may reasonably expect to receive for the
sale of the guaranteed portion of the loan assuming such transaction occurred
on the valuation date. The Company designates and classifies the guaranteed
portion of a current loan as a security held for sale once the loan has been
fully disbursed and held for at least 90 days.
Interest Income. Interest income is recorded on the accrual basis to the
extent that such amounts are expected to be collected. Interest income also
includes servicing fees on loans sold to the secondary market less the
amortization of any excess servicing asset.
Premium Income. Premium income represents the differential in the value
attributable to the sale of the guaranteed portion of a loan to the secondary
market over the carrying amount of the loan.
Realized Losses and Unrealized Appreciation or Depreciation on Investments.
Realized losses result when a loan is written off as uncollectible. Unrealized
appreciation or depreciation reflects the difference between cost and value.
Distributions to Stockholders. Distributions to stockholders are recorded on
the ex-dividend date.
Federal Income Taxes. The Company's objective is to comply with the
requirements of the Internal Revenue Code that are applicable to regulated
investment companies. The Company annually distributes all of its taxable
income to its stockholders; therefore, a federal income tax provision is not
required.
Dividends declared by the Company in December that are payable to stockholders
of record on a specified date in such month, but paid during January of the
following year, are treated as if the distribution was received by the
stockholder on December 31 of the year declared.
Earnings Per Share. Earnings are defined as net investment income, net
realized losses on investments and net unrealized appreciation or depreciation
on investments. The computation of earnings per share is based on the weighted
average number of shares and share equivalents outstanding during the period.
20
<PAGE> 22
Notes To Consolidated Financial Statements
Allied Capital Lending Corporation
Cash and Cash Equivalents. Cash equivalents consist of highly liquid
investments with insignificant interest rate risk and original maturities of
three months or less at the acquisition date. At December 31, cash and cash
equivalents consisted of the following:
<TABLE>
<CAPTION>
- ----------------------------------------------------
(in thousands) 1995 1994
- ----------------------------------------------------
<S> <C> <C>
Cash $ 214 $ 0
Repurchase agreements 2,806 1,297
------------------------
Total $ 3,020 $ 1,297
========================
- ----------------------------------------------------
</TABLE>
On December 31, 1995, the Company had purchased $2,806,000 of overnight
repurchase agreements collateralized by U.S. government securities under
agreements to resell on January 2, 1996.
Incentive Stock Option Plan. Statement of Financial Accounting Standards No.
123, issued in October 1995, established new accounting standards for
stock-based compensation plans and is effective for fiscal years beginning
after December 15, 1995. This new standard will have no material impact on the
Company's financial statements.
Reclassifications. Certain reclassifications have been made to the 1994 and
1993 financial statements to conform with the 1995 financial statement
presentation.
NOTE 3. INVESTMENTS
The Company and its subsidiary originate loans to qualified small businesses
under and in conjunction with the SBA 7(a) and 504 programs, respectively.
Under the SBA 7(a) program, the Company originates loans that are guaranteed by
the SBA and are collateralized, generally with first liens on real estate
and/or personal property of the borrower. The SBA guarantees repayment between
75 percent and 80 percent of up to a $1,000,000 face amount and a maximum of
three months of accrued interest on the guaranteed portion of the loans
originated. The Company generally sells the guaranteed portion of its loans
into the secondary market, and retains the rights to service such loans. The
loans generally provide for an annual variable rate of interest equal to the
then prevailing prime rate, as reported in the Wall Street Journal, plus 2.75
percent. The Wall Street Journal prime interest rate was 8.5 percent at
December 31, 1995 and 1994. The loans generally have a term of seven to 25
years and may be prepaid without penalty. The principal balance of the sold
portions of such loans serviced by the Company is approximately $97,000,000 and
$82,000,000 at December 31, 1995 and 1994, respectively.
The subsidiary originates real estate loans to qualified small businesses
pursuant to the SBA 504 program and originates companion loans to SBA 7(a)
guaranteed loans. Under the SBA 504 loan program, small businesses can
purchase or build real estate with very favorable long-term debt. Loans the
subsidiary finances through the 504 program are structured such that the
entrepreneur provides at least 10 percent of the project cost in equity, the
subsidiary provides 50 percent of the project cost in a 20-year floating rate
first mortgage, and a local certified development company (CDC) provides a
20-year fixed rate second mortgage loan for the remaining 40 percent of the
project cost. Both loans are fully amortizing and the subsidiary loan provides
for an annual variable rate of interest equal to the then prevailing prime
rate, as reported in the Wall Street Journal, plus up to 2.75 percent. The
subsidiary also may originate senior loans secured by real estate as a
companion loan to the SBA 7(a) guaranteed loans. The companion loan is similar
in terms to the SBA 7(a) guaranteed loan with the exception that the companion
loan is senior in debt priority to the SBA 7(a) guaranteed loan, and carries no
government guarantee.
At December 31, 1995 and 1994, loans with a cost basis of $3,835,000 and
$979,000 were not performing and were not accruing interest.
At December 31, total investments consisted of the following:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------
(in thousands) 1995 1994
- --------------------------------------------------------------------
<S> <C> <C>
At amortized cost:
Guaranteed portion under
7(a) program $ 10,275 $ 11,808
Unguaranteed portion under
7(a) program 33,223 21,127
504 program and companion loans 3,804 _
--------------------------
Total $ 47,302 32,935
==========================
At value:
Guaranteed portion under
7(a) program $ 10,275 $ 11,808
Unguaranteed portion under
7(a) program 33,068 20,963
504 program and companion loans 3,804 _
--------------------------
Total $ 47,147 $ 32,771
==========================
- --------------------------------------------------------------------
</TABLE>
21
<PAGE> 23
Notes To Consolidated Financial Statements
Allied Capital Lending Corporation
For federal income tax purposes the unrealized depreciation for all securities,
based on cost, and the aggregate cost of total investments as of December 31,
1995 were $155,000 and $47,302,000, respectively.
NOTE 4. EXCESS SERVICING ASSET
When the Company sells the guaranteed portion of a SBA 7(a) loan it originates
into the secondary market, it retains the unguaranteed portion and the right to
service the entire loan. The Company recognizes premium income equal to the
difference between the amount received from the purchaser and the carrying
principal amount of the guaranteed portion sold plus the value of the servicing
rights retained in excess of a normal servicing fee (excess servicing asset).
The value of the excess servicing asset at the transaction date is based on
various factors including premiums realized on comparable transactions in the
secondary market and comparable market bids with normal servicing rates on SBA
loans.
NOTE 5. INVESTMENT ADVISORY AGREEMENT
The Company has entered into an investment advisory agreement with Advisers,
which is approved at least annually by the board of directors or by vote of the
holders of a majority of the outstanding shares of the Company. The agreement
may be terminated at any time on sixty days' notice, without penalty, by the
Company's board of directors or by a vote of the holders of a majority of the
Company's outstanding shares and will terminate automatically in the event of
its assignment.
The Company pays all operating expenses, except those specifically required to
be borne by Advisers. The expenses paid by Advisers include the compensation
of the Company's officers and the cost of office space, equipment and other
personnel required for the Company's day-to-day operations. The expenses that
are paid by the Company include the Company's share of transaction costs
incident to investment activities, legal and accounting fees, the fees and
expenses of the Company's independent directors and the fees of its
officer-directors, the costs of printing and mailing proxy statements and
reports to stockholders, costs associated with promoting the Company's stock,
and the fees and expenses of the Company's custodian and transfer agent. The
Company is also required to pay expenses associated with litigation and other
extraordinary or non-recurring expenses, as well as expenses of required and
optional insurance and bonding. All fees paid by or for the account of an
actual or prospective portfolio borrower in connection with an investment are
treated as commitment fees and are received by the Company, rather than by
Advisers. Advisers is entitled to retain for its own account any fees paid by
or for the account of a company, including a portfolio company, for special
investment banking or consulting work performed for that company which is not
related to such investment transaction or management assistance.
As compensation for its services to and the expenses paid for the account of
the Company, Advisers is paid, quarterly in arrears, a fee equal to 0.625
percent per quarter of the quarter-end value of the Company's consolidated
total assets, less interim investments, cash and cash equivalents plus 0.125
percent per quarter of the quarter-end value of consolidated interim
investments, cash and cash equivalents. These fees on an annual basis
approximate 2.5 percent on consolidated invested assets, and 0.5 percent on
consolidated interim investments, cash and cash equivalents. Advisory fees for
1993 included the Company's pro rata share of the former Parent's investment
advisory fee and other costs of approximately $505,000.
NOTE 6. DIVIDENDS AND DISTRIBUTIONS
The Company's board of directors declared and the Company paid dividends of
$0.30 per share for the fourth quarter, $0.29 per share for the third quarter,
$0.2825 per share for the second quarter and $0.27 per share for the first
quarter of 1995. The Company's board of directors also declared an extra
distribution in the fourth quarter of $0.0775 per share, which was paid to
stockholders on January 31, 1996, for a total distribution in 1995 equal to
$1.22 per share.
The distributions of taxable income declared by the board of directors for
1995, 1994 and 1993 were considered ordinary income for federal income tax
purposes.
The 1995 distributions of $1.22 per share were comprised of cash payments and
issuance of the Company's shares pursuant to the Company's dividend
reinvestment plan in the amounts of $1.18 and $0.04, per share, respectively.
The 1994 distributions of $1.08 per share were comprised of cash payments and
issuance of the Company's common shares pursuant to the Company's dividend
reinvestment plan in the amounts of $1.07 and $0.01, per share, respectively.
1993 distributions were paid in cash.
22
<PAGE> 24
Notes To Consolidated Financial Statements
Allied Capital Lending Corporation
NOTE 7. NOTES PAYABLE
The Company has a $15,000,000 secured line of credit with a bank. The interest
rate associated with this line of credit is equal to LIBOR plus 2.2 percent per
annum, payable monthly. As of December 31, 1995 and 1994, the Company was
paying interest at 7.95 percent and 8.5 percent per annum, respectively, on the
amount outstanding under this line. The line of credit requires a quarterly
facility fee of 0.375 percent per annum on the unused portion of the line of
credit. As of December 31, 1995, the Company had outstanding borrowings under
the secured line of credit equal to $13,335,000.
The Company has a $2,000,000 unsecured line of credit with a bank, which bears
interest at the Wall Street Journal prime rate plus 0.25 percent per annum,
payable monthly, and expires July 31, 1996. As of December 31, 1995 and 1994,
the Company was paying interest at 8.75 percent per annum, on the amount
outstanding under this line. The line of credit requires a quarterly facility
fee of 0.375 percent per annum on the unused portion of the line of credit. As
of December 31, 1995, the Company had outstanding borrowings under the
unsecured line of credit equal to $1,055,000.
Both the secured and unsecured lines of credit expire on July 31, 1996.
The subsidiary has a credit agreement whereby the subsidiary can borrow up to
$20,000,000 in order to finance its loans to small business concerns. This
credit agreement bears interest at a rate equal to LIBOR plus 2 percent per
annum, payable monthly, and expires on September 27, 1996. As of December 31,
1995, the subsidiary was paying interest ranging from 7.75 to 7.93 percent per
annum on the amount outstanding under this line. The agreement requires a
quarterly facility fee of 0.15 percent per annum on the unused portion of the
line. As of December 31, 1995, the subsidiary had outstanding borrowings under
this agreement equal to $4,524,000.
NOTE 8. SHAREHOLDERS' EQUITY
The Company has a dividend reinvestment plan (the Plan). Stockholders of
record are automatically enrolled in the Plan, and the Plan is considered an
"opt-out" plan. The Company may instruct the stock transfer agent to buy
shares in the open market or to issue new shares. When the Company issues new
shares, the price is equal to the average of the closing sales prices reported
for the shares for the five days on which trading in the shares takes place
immediately prior to and including the dividend payment date. During 1995 and
1994, the Company issued 14,536 and 1,980 new shares pursuant to the Plan at an
average price of $12.60 per share and $10.63 per share, respectively.
The Company has an incentive stock option plan (ISO plan) which provides for
the granting of stock options or shares to the Company's officers. The number
of shares of the Company's stock available for option under the plan total
504,860. Options may be granted under the plan at a price not less than the
market value of the underlying shares on the date of the grant and in any event
not less than the original offering price of the Company's shares ($15) and are
exercisable over a ten-year period. The ISO plan also permits a one-time grant
of options to each member of the board of directors who is not an employee of
the investment adviser to purchase 10,000 shares of the Company's common stock.
Holders of ten percent or more of the Company's stock must exercise their
options within a five year period.
Officers of the Company may borrow from the Company the funds necessary to
exercise vested options. There were no loans outstanding at December 31, 1995
or 1994.
23
<PAGE> 25
Notes To Consolidated Financial Statements
Allied Capital Lending Corporation
A summary of the activity in the ISO plan is as follows:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
1995 1994 1993
<S> <C> <C> <C>
- -------------------------------------------------------------------------------------------------
Options outstanding at January 1, 283,310 266,640 _
Options granted 266,646 50,000 266,640
Options exercised _ _ _
Options canceled (56,666) (33,330) _
-----------------------------------------
Options outstanding at December 31, 493,290 283,310 266,640
=========================================
Options available for grant 11,570 221,550 26,860
Options exercisable 259,974 153,318 79,992
-----------------------------------------
Option prices per share:
Granted $ 15.00 $ 15.00 $ 15.00
Exercised $ _ $ _ $ _
Canceled $ 15.00 $ 15.00 $ _
-----------------------------------------
- -------------------------------------------------------------------------------------------------
</TABLE>
NOTE 9. COMMITMENTS AND CONTINGENCIES
The Company had total loan commitments outstanding at December 31, 1995 to
various qualified small businesses totaling $33,000,000.
In connection with the sale of the guaranteed portion of loans in 1992, the
Internal Revenue Service may assert that these transactions subject the Company
to a liability for income taxes of up to $845,000 for that year. If the
Internal Revenue Service in the future asserts such a claim, management and tax
counsel believe that the Company has valid defenses for the position that such
transactions do not subject the Company to a liability for additional income
taxes; however, the Company has an agreement with the former Parent pursuant to
which the Company is indemnified against such liability if asserted.
NOTE 10. CONCENTRATIONS OF CREDIT RISK
The Company and the subsidiary place their cash in financial institutions and
at times, cash held in checking accounts may be in excess of the FDIC insurance
limit.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
NOTE 11. QUARTERLY FINANCIAL HIGHLIGHTS (UNAUDITED)
- -----------------------------------------------------------------------------------------------------------
(in thousands, except per share amounts) 1995
QTR 1 QTR 2 QTR 3 QTR 4
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Total investment income $ 1,827 $ 1,771 $ 2,327 $ 2,131
Net investment income $ 1,394 $ 1,231 $ 1,580 $ 1,233
Net increase in net assets resulting from operations $ 1,345 $ 1,248 $ 1,402 $ 1,257
Per share $ 0.31 $ 0.29 $ 0.32 $ 0.29
- -----------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
1994
- -----------------------------------------------------------------------------------------------------------
Qtr 1 Qtr 2 Qtr 3 Qtr 4
<S> <C> <C> <C> <C>
Total investment income $ 1,137 $ 1,512 $ 1,537 $ 1,879
Net investment income $ 873 $ 1,213 $ 1,242 $ 1,550
Net increase in net assets resulting from operations $ 856 $ 1,228 $ 1,306 $ 1,141
Per share $ 0.20 $ 0.28 $ 0.30 $ 0.26
- -----------------------------------------------------------------------------------------------------------
</TABLE>
Quarterly amounts for 1994 have been reclassified to conform with
classifications used in the financial statements for 1995.
- --------------------------------------------------------------------------------
24
<PAGE> 26
Report Of Independent Accountants
Allied Capital Lending Corporation
TO THE BOARD OF DIRECTORS AND STOCKHOLDERS
ALLIED CAPITAL LENDING CORPORATION
We have audited the consolidated balance sheet of Allied Capital Lending
Corporation as of December 31, 1995 and 1994, including the consolidated
statement of investments in small business concerns as of December 31, 1995 and
the related consolidated statements of operations, changes in net assets and
cash flows for each of the three years in the period ended December 31, 1995
and the selected per share data presented as financial highlights for each of
the five years in the period ended December 31, 1995. These financial
statements and per share data are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements and per share data based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and per
share data are free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included the examination or confirmation of
securities owned at December 31, 1995 and 1994. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and selected per share data referred
to above present fairly, in all material respects, the financial position of
Allied Capital Lending Corporation as of December 31, 1995 and 1994, and the
consolidated results of their operations, changes in net assets and cash flows
for each of the three years in the period ended December 31, 1995, and the
selected per share data for each of the five years in the period ended December
31, 1995 in conformity with generally accepted accounting principles.
As explained in Note 2, the consolidated financial statements include
securities valued at $47,147,000 as of December 31, 1995 and $32,771,000 as of
December 31, 1994, (85% and 87%, respectively, of total assets) whose values
have been estimated by the Board of Directors in the absence of readily
ascertainable market values. We have reviewed the procedures used by the Board
of Directors in arriving at its estimate of value of such securities and have
inspected underlying documentation, and, in the circumstances, we believe the
procedures are reasonable and the documentation appropriate. However, because
of the inherent uncertainty of valuation, those estimated values may differ
significantly from the values that would have been used had a ready market for
the securities existed, and the differences could be material.
McLean, Virginia
February 2, 1996
25
<PAGE> 27
Regional Associates
Allied Capital Lending Corporation
AMERICAN SEED CAPITAL
1660 Lincoln Street
Suite 1666
Denver, CO 80264
(303) 832-1666
BOVIS FINANCIAL SERVICES
P.O. Box 3845
225 Kiefer Drive
Montgomery, AL 36109
(800) 467-9884
CAPITAL ALTERNATIVES, INC.
2000 Hycroft Drive
Pittsburgh, PA 15241
(412) 831-2513
CAPITAL ASSET PARTNERS
900 Wilshire Drive
Suite 304
Troy, MI 48084
(810) 362-2002
THE DOMAIN CORPORATION
745 Craig Road
Suite 200
St. Louis, MO 63141-7122
(314) 993-1357
DOOLEY FINANCIAL SERVICES
93 8th Avenue
Sea Cliff, NY 11579
(516) 674-4069
FIRST MIDWEST FINANCIAL, L.L.C.
214 Spruce Tree Center
1600 University Avenue
St. Paul, MN 55104
(612) 649-3588
GLASER CAPITAL CORPORATION
Atrium One
Suite 1710
201 East Fourth Street
Cincinnati, OH 45202
(513) 852-5192
JANE DIVEN & ASSOCIATES
Route 601
Route 1, Box 312C
Bluemont,VA 22012
(540) 554-2400
MEDIA SERVICES GROUP, INC.
170 Westminster Street
Suite 701
Providence, RI 02903
(401) 454-3130
MEDIA SERVICES GROUP, INC.
6802 Patterson Avenue
Richmond, VA 23226
(804) 282-5561
MERCHANTS FUNDING CORPORATION
167 Washington Street
Norwell, MA 02061
(617) 982-2336
MITCHELL CAPITAL CORPORATION
900 East Eighth Avenue
Suite 300
King of Prussia, PA 19406
(610) 768-8991
THE MORTGAGE STORE
Gainey Ranch Financial Center
Suite 200
7373 E. Doubletree Ranch Road
Scottsdale, AZ 85258
(602) 443-3191
PACIFIC NW GROUP
14456 Southwest Arabian Drive
Beaverton, OR 97008
(503) 524-0407
SOUTHERN CAPITAL ADVISORS, INC.
9951 Atlantic Boulevard
Suite 254
Jacksonville, FL 32225
(904) 721-9392
SPARKS FINANCIAL GROUP, INC.
6363 Woodway
Suite 911
Houston, TX 77057
(713) 780-8886
26
<PAGE> 28
Directors And Officers
Allied Capital Lending Corporation
DIRECTORS
David Gladstone(1)
Chairman of the Board &
Chief Executive Officer
George C. Williams(1)
Vice Chairman of the Board
Katherine C. Marien
President & Chief Operating Officer
Jon W. Barker(2)
Associate, Grubb & Ellis (real estate firm)
Eleanor Deane Bierbower(1,3)
Managing Partner
Deane Investment Company, L.P.
Robert V. Fleming II(1,2,3)
Principal, Hoskinson, Davis & Fleming, Inc.
(real estate firm)
Anthony T. Garcia(2)
Senior Vice President, Lehman Brothers, Inc.
Frank L. Langhammer(1,3)
Vice President & Chief Financial Officer
Overseas Private Investment Corporation
Arthur H. Keeney III(2)
Director, President & Chief Executive Officer,
The East Carolina Bank
OFFICERS
David Gladstone
Chairman of the Board
George C. Williams
Vice Chairman of the Board
Katherine C. Marien
President & Chief Operating Officer
William F. Dunbar
Executive Vice President
John M. Scheurer
Executive Vice President
Joan M. Sweeney
Executive Vice President
G. Cabell Williams III
Executive Vice President
Tricia B. Daniels
Senior Vice President
Jon A. DeLuca
Senior Vice President, Treasurer &
Chief Financial Officer
George Stelljes III
Senior Vice President
Thomas R. Salley
General Counsel & Secretary
Vicki R. Johnson
Vice President
David Melendez
Vice President
Mary E. Olson
Vice President
Suzanne V. Sparrow
Vice President, Investor Relations
Donald L. Benfer
Assistant Vice President
Penni F. Roll
Controller & Assistant Treasurer
Kelly A. Anderson
Corporate Controller & Assistant Treasurer
(1) Executive Committee
(2) Audit Committee
(3) Compensation Committee
27
<PAGE> 29
Investor Information Allied Capital
Lending Corporation
CORPORATE HEADQUARTERS
c/o Allied Capital Advisers, Inc.
1666 K Street, NW, 9th Floor
Washington, DC 20006
Tel: (202) 331-1112
Fax: (202) 659-2053
TRANSFER AGENT & REGISTRAR
Information on transferring securities, replacing a lost or stolen certificate,
or processing a change of address should be directed to:
American Stock Transfer & Trust Company
40 Wall Street, 46th Floor
New York, NY 10005
(800) 937-5449
DIVIDEND REINVESTMENT PLAN
For the benefit of our stockholders, the Company provides a dividend
reinvestment plan. All communication regarding this service should be directed
to the Company's transfer agent and registrar who also serves as the plan
administrator.
MARKET LISTING
Nasdaq National Market
Symbol: ALCL
CUSIP Number: 019 042 100
ANNUAL MEETING OF STOCKHOLDERS
The 1996 Annual Meeting of Stockholders will be held at 10:00 a.m. on Monday,
May 13, 1996 at Strathmore Hall Arts Center, 10701 Rockville Pike, North
Bethesda, Maryland. All stockholders are welcome to attend.
FORM 10-K
A copy of the Company's Annual Report on Form 10-K for the year ended December
31, 1995, as filed with the Securities and Exchange Commission, will be sent at
no charge to any stockholder upon request to the Investor Relations Department
at the Company's corporate headquarters.
INDEPENDENT ACCOUNTANTS
Matthews, Carter and Boyce
McLean, VA
NUMBER OF STOCKHOLDERS
As of December 31, 1995, there were approximately 1,700 stockholders of record.
The Company estimates there were 7,800 beneficial stockholders.
INVESTMENT ADVISER
Allied Capital Advisers, Inc.
Washington, DC
Shares of the investment adviser are traded on Nasdaq National Market under the
symbol ALLA.
QUARTERLY STOCK PRICE AND DISTRIBUTIONS TO STOCKHOLDERS
The following table sets forth the high and low bid prices of the Company's
common stock by calendar quarter during 1995 and 1994 and the distributions
paid per share. These quotations represent interdealer quotations and do not
include markups, markdowns or commissions and may not necessarily represent
actual transactions.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
1995 1994
DISTRIBUTIONS Distributions
HIGH LOW PER SHARE High Low Per Share
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
First Quarter $ 12.75 $ 9.50 $ 0.27 $ 15.75 $ 14.25 $ 0.25
Second Quarter $ 12.00 $ 13.25 $ 0.2825 $ 15.25 $ 12.50 $ 0.25
Third Quarter $ 13.00 $ 12.00 $ 0.29 $ 14.25 $ 13.00 $ 0.25
Fourth Quarter $ 13.25 $ 12.00 $ 0.30 $ 14.25 $ 9.75 $ 0.27
Annual Extra Distribution $ 0.0775 $ 0.06
---------- --------
Total Distribution $ 1.22 $ 1.08
========== ========
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
28
<PAGE> 1
EXHIBIT 23
CONSENT OF INDEPENDENT ACCOUNTANTS
As independent accountants, we hereby consent to the incorporation by reference
in this Form 10-K of our report dated February 2, 1996 included in Allied
Capital Lending Corporation's Annual Report to stockholders. It should be noted
that we have not audited any financial statements of the company subsequent to
December 31, 1995 or performed any audit procedures subsequent to the date of
our report.
MATTHEWS, CARTER AND BOYCE
McLean, Virginia
March 22, 1996
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM ALLIED
CAPITAL LENDING CORPORATION AND SUBSIDIARY'S CONSOLIDATED BALANCE SHEET AND
CONSOLIDATED STATEMENTS OF OPERATIONS, CHANGES IN NET ASSETS AND CASH FLOWS AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS
INCORPORATED BY REFERENCE IN FORM 10-K.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 47,302
<INVESTMENTS-AT-VALUE> 47,147
<RECEIVABLES> 732
<ASSETS-OTHER> 753
<OTHER-ITEMS-ASSETS> 6,848
<TOTAL-ASSETS> 55,480
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 22,596
<TOTAL-LIABILITIES> 22,596
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 33,252
<SHARES-COMMON-STOCK> 4,385
<SHARES-COMMON-PRIOR> 4,370
<ACCUMULATED-NII-CURRENT> (213)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (155)
<NET-ASSETS> 32,884
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 5,966
<OTHER-INCOME> 2,090
<EXPENSES-NET> 2,618
<NET-INVESTMENT-INCOME> 5,438
<REALIZED-GAINS-CURRENT> (195)
<APPREC-INCREASE-CURRENT> 9
<NET-CHANGE-FROM-OPS> 5,252
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 5,339
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 14,536
<NET-CHANGE-IN-ASSETS> 96
<ACCUMULATED-NII-PRIOR> (117)
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,140
<INTEREST-EXPENSE> 959
<GROSS-EXPENSE> 2,618
<AVERAGE-NET-ASSETS> 32,836
<PER-SHARE-NAV-BEGIN> 7.50
<PER-SHARE-NII> 1.24
<PER-SHARE-GAIN-APPREC> (0.04)
<PER-SHARE-DIVIDEND> 1.22
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 7.50
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 7,892
<AVG-DEBT-PER-SHARE> 1.80
</TABLE>
