<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 10, 1996
FILE NO. 333-02185
- - - --------------------------------------------------------------------------------
- - - --------------------------------------------------------------------------------
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-2
(Check appropriate box or boxes)
/ / REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
/ / PRE-EFFECTIVE AMENDMENT NO.
/X/ POST-EFFECTIVE AMENDMENT NO. 1
ALLIED CAPITAL LENDING CORPORATION
Exact Name of Registrant as Specified in Charter
C/O ALLIED CAPITAL ADVISERS, INC.
1666 K STREET, N.W., 9TH FLOOR
WASHINGTON, D.C. 20006-2803
Address of Principal Executive Offices (Number, Street, City, State, Zip Code)
(202) 331-1112
Registrant's Telephone Number, Including Area Code
DAVID GLADSTONE, CHAIRMAN AND CHIEF EXECUTIVE OFFICER
ALLIED CAPITAL ADVISERS, INC.
1666 K STREET, N.W., 9TH FLOOR
WASHINGTON, D.C. 20006-2803
Name and Address of Agent For Service (Number, Street, City, State, Zip Code)
Copy to:
STEVEN B. BOEHM, ESQUIRE
SUTHERLAND, ASBILL & BRENNAN
1275 PENNSYLVANIA AVENUE, N.W.
WASHINGTON, D.C. 20004-2404
Approximate Date of Proposed Public Offering: As soon as practicable after
the effective date of the registration statement.
If any securities being registered on this form will be offered on a delayed or
continuous basis in reliance on Rule 415 under the Securities Act of 1933, other
than securities offered in connection with a dividend reinvestment plan, check
the following box: /X/
It is proposed that this filing will become effective (check appropriate box)
/ / when declared effective pursuant to section 8(c)
/ / This form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, and the Securities Act
registration statement number of the earlier effective registration statement
for the same offering is - .
CALCULATION OF REGISTRATION FEE UNDER THE SECURITIES ACT OF 1933
<TABLE>
<CAPTION>
- - - ----------------------------------------------------------------------------------------------------------------
PROPOSED MAXIMUM PROPOSED MAXIMUM
OFFERING PRICE AGGREGATE
TITLE OF SECURITIES AMOUNT BEING PER OFFERING AMOUNT OF
BEING REGISTERED REGISTERED SHARE PRICE REGISTRATION FEE
- - - ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $0.0001 par value... 722,410 shares $14.625 (1) $10,565,246.25(1) $ 3,643.19(2)
Common Stock, $0.0001 par value... 835 shares $14.5625(3) $ 12,159.69(3) $ 100.00(2)
- - - ----------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Estimated for purposes of calculating the registration fee pursuant to Rule
457(c) under the Securities Act of 1933, as amended (the "1933 Act"), based
on the average of the high and low prices per share on March 28, 1996 on the
Nasdaq National Market.
(2) Previously paid.
(3) Estimated for purposes of calculating the registration fee pursuant to Rule
457(c) and the 1933 Act based on the average of the high and low prices per
share on April 23, 1996 on the Nasdaq National Market.
The registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the registrant shall
file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to Section 8(a), may
determine.
- - - --------------------------------------------------------------------------------
- - - --------------------------------------------------------------------------------
<PAGE> 2
CROSS REFERENCE SHEET
Pursuant to Rule 495(a) under the Securities Act of 1933
Showing the Location of Information Required by Form N-2 in
Part A (Prospectus), Part B (Statement of Additional Information), and
Part C (Other Information) of the Registration Statement
<TABLE>
<CAPTION>
ITEM OF FORM N-2 CAPTION OR LOCATION IN PROSPECTUS
- - - ------------------------------------------------- ------------------------------------------
PART A: INFORMATION REQUIRED IN A PROSPECTUS
<C> <S> <C>
1. Outside Front Cover Outside Front Cover Page; [Supplement]
2. Inside Front and Outside Back Cover Page Outside Front Cover Page
3. Fee Table and Synopsis Summary; Fees and Expenses; Available
Information
4. Financial Highlights Financial Highlights; Management's
Discussion and Analysis of Financial
Condition and Results of Operations
5. Plan of Distribution The Offer; [Supplement]
6. Selling Shareholders (Not Applicable)
7. Use of Proceeds Use of Proceeds
8. General Description of the Registrant The Company; Public Trading and Net Asset
Value Information; Financial Statements;
[Supplement]
9. Management Management; Custodian, Transfer and
Dividend Paying Agent and Registrar
10. Capital Stock, Long-Term Debt, and Other Authorized Classes of Securities;
Securities Description of Common Stock; The
Company; [Supplement]
11. Defaults and Arrears on Senior Securities (Not Applicable)
12. Legal Proceedings (Not Applicable)
13. Table of Contents of the Statement of Table of Contents of the Statement of
Additional Information Additional Information
<CAPTION>
PART B: INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION
<C> <S> <C>
14. Cover Page Outside Front Cover Page
15. Table of Contents Table of Contents
16. General Information and History Not Applicable
17. Investment Objective and Policies [Prospectus:] The Company
18. Management Management
19. Control Persons and Principal Holders of Control Persons and Principal Holders of
Securities Securities
20. Investment Advisory and Other Services Investment Advisory and Other Services
21. Brokerage Allocation and Other Practices [Prospectus:] The Company
22. Tax Status Tax Status
23. Financial Statements [Prospectus:] Financial Statements
<CAPTION>
PART C: OTHER INFORMATION
<C> <S> <C>
24. Financial Statements and Exhibits Financial Statements and Exhibits
25. Marketing Arrangements (Not Applicable)
26. Other Expenses of Issuance and Other Expenses of Issuance and
Distribution Distribution
27. Persons Controlled by or Under Common Persons Controlled by or Under Common
Control Control
28. Number of Holders of Securities Number of Holders of Securities
29. Indemnification Indemnification
30. Business and Other Connections of Business and Other Connections of
Investment Adviser Investment Adviser
31. Location of Accounts and Records Locations of Accounts and Records
32. Management Services Management Services
33. Undertakings Undertakings
</TABLE>
<PAGE> 3
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO THE REGISTRATION OR QUALIFICATION UNDER THE SECURITIES
LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION:
THE DATE OF ISSUANCE OF THIS PRELIMINARY PROSPECTUS, AS SUPPLEMENTED HEREBY, IS
JULY 10, 1996.
SUPPLEMENT DATED JULY , 1996,
TO PROSPECTUS DATED APRIL 29, 1996
ALLIED CAPITAL LENDING CORPORATION
The Company has received from existing stockholders, during the
Subscription Period (from May 6, 1996 through June 4, 1996) for the rights
offering of the Company's common stock just completed (the "Offer" or "Rights
Offering"), subscriptions for 548,887 Shares at a Subscription Price of $13.04
per Share, which was 95% of the average of the last reported sales price of a
share of the Company's common stock on the Nasdaq National Market on each of the
last five trading days of the Subscription Period. The gross proceeds from the
Rights Offering were approximately $7,157,500 before deducting the solicitation
fees of approximately $132,000 (equal to 2.50% of the Subscription Price for
each Share issued as a result of the soliciting efforts of broker-dealers that
have executed and delivered a Soliciting Dealer Agreement to the Company) and
before deducting the offering costs payable by the Company. The net proceeds to
the Company from the Rights Offering (after deducting the solicitation fees but
before deducting the offering costs) were approximately $7,025,500.
As disclosed in the prospectus dated April 29, 1996 (the "Prospectus"), the
Company reserved the right to offer and sell to Additional Offerees any Shares
not subscribed for in the Rights Offering ("unsubscribed-for Shares") (see
Prospectus page 16--"Sales of Shares Subsequent to the Offer"). Having exercised
its discretion to increase the number of shares offered (see Prospectus page 2)
by 15% (i.e., 94,336 Shares in addition to the original 628,909 Shares for an
aggregate total of 723,245 Shares), the Company intends now to proceed with a
public offering of the total 174,358 unsubscribed-for Shares (the "Public
Offering").
Following the completion of the Rights Offering and the subsequent issuance
of additional shares of the Company's common stock in connection with the
payment of its quarterly dividend (see Prospectus page 26-- "Dividend
Reinvestment Plan"), 4,943,163 shares of the Company's common stock were
outstanding, 25.2% of which continued to be owned by Allied I. Following the
completion of the Public Offering, Allied I's ownership of the Company's common
stock is anticipated to represent 24.3% of the Company's shares then
outstanding. (See Prospectus page 17--"Organization".)
In the Public Offering, the Shares of the Company's common stock are
offered by Lehman Brothers Inc. (the "Underwriter"), subject to prior sale,
when, as and if delivered to and accepted by the Underwriter, and subject to its
right to reject orders in whole or in part. The principal business address of
Lehman Brothers Inc. is Three World Financial Center, New York, New York
10285-1900. Lehman Brothers Inc. is a broker-dealer registered under the
Securities Exchange Act of 1934 and is a member of the National Association of
Securities Dealers, Inc. ("NASD").
The Underwriter has advised the Company that it proposes to offer the
Shares to the public at $12.74 per Share. The price to be paid by the public of
$12.74 per Share in the Public Offering is $0.30 per Share less than the
Subscription Price paid by existing stockholders in the Rights Offering and
thereby reflects the cash dividend of that amount paid on June 28, 1996, to
stockholders of record as of June 14, 1996. The last sale price for a share of
the Company's common stock on Nasdaq on July 9, 1996 was $13.625. There can be
no assurance that the Shares will trade subsequent to the Public Offering at or
above this price. After the Public Offering of the Shares, the Underwriter may
change the price at which the Shares are offered to the public.
The Company will allow underwriting discounts of $0.326 per Share, or 2.56%
of the offering price, to the Underwriter for sales of Shares in the Public
Offering. Accordingly, the "Sales Load (as a percentage of offering price)" set
forth under "Fees and Expenses" on Prospectus page 4 is 2.56% in the Public
Offering as opposed to 2.50% in the Rights Offering.
In the Public Offering, the aggregate Subscription Price, Sales Load, and
Proceeds (before deduction of offering costs) to the Company will be $2,221,321,
$56,841, and $2,164,480, respectively. Offering costs incurred in connection
with both the Rights Offering and the Public Offering are currently estimated to
be $272,000.
The Underwriter has agreed, subject to the terms and conditions set forth
in the underwriting agreement by and among the Company, Advisers, and the
Underwriter (the "Underwriting Agreement"), to purchase from the Company, and
the Company has agreed to sell to the Underwriter, the 174,358 unsubscribed-for
Shares.
S-1
<PAGE> 4
The Underwriting Agreement provides that the obligations of the Underwriter
to purchase the Shares listed above are subject to certain conditions. The
Underwriting Agreement also provides that the Underwriter is committed to
purchase, and the Company is obligated to sell, all of the unsubscribed-for
Shares offered by the Prospectus, as supplemented hereby, if any of the Shares
being sold pursuant to the Underwriting Agreement are purchased.
The Underwriter has informed the Company that it does not intend to confirm
sales to any account over which it exercises discretionary authority. During the
Subscription Period, the Underwriter purchased 33,303 shares and sold 40,744
shares in its capacity as a market maker in the Company's common stock.
The Company and Advisers, as its investment adviser, have agreed to
indemnify the Underwriter against certain liabilities, including liabilities
under the Securities Act of 1933, or to contribute to payments that the
Underwriter may be required to make in respect thereof.
Lehman Brothers Inc., which is acting as Underwriter in the Public
Offering, from time to time offers investment banking services to the Company,
for which it receives customary compensation. Lehman Brothers Inc. is the lender
on the Company's $20 million line of credit expiring September 27, 1996 (see
Prospectus page 23). Anthony T. Garcia, a Director of the Company, is Senior
Vice President of Lehman Brothers Inc.
By letter dated June 7, 1996, the Company has received notification from
the SBA that it could proceed with the reorganization described on Prospectus
page 17. Exemptive relief being sought from the Commission for the
reorganization is still pending.
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK AT
A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
TRANSACTIONS MAY BE EFFECTED ON THE NASDAQ NATIONAL MARKET OR OTHERWISE. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
S-2
<PAGE> 5
The Prospectus dated April 29, 1996, which the preceding pages supplement,
is incorporated herein by reference from the Prospectus included in
Pre-Effective Amendment No. 2 to the Company's registration statement on Form
N-2, as filed with the Commission on April 29, 1996 (Accession No.
0000950133-96-000425).
<PAGE> 6
PART B
INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION
<PAGE> 7
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY ANY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION
STATEMENT BECOMES EFFECTIVE. THIS STATEMENT OF ADDITIONAL INFORMATION DOES
NOT CONSTITUTE A PROSPECTUS.
SUBJECT TO COMPLETION:
THE DATE OF ISSUANCE OF THIS PRELIMINARY STATEMENT OF ADDITIONAL INFORMATION IS
JULY 10, 1996.
723,245 SHARES
ALLIED CAPITAL LENDING CORPORATION
COMMON STOCK
------------------------
STATEMENT OF ADDITIONAL INFORMATION
JULY , 1996
This Statement of Additional Information is not a prospectus. It should be
read with the prospectus dated April 29, 1996 relating to this offering (the
"Prospectus") and the supplement thereto dated July , 1996, which may be
obtained by calling the Company at (202) 973-6326 and asking for Investor
Relations. Terms not defined herein have the same meaning as given to them in
the Prospectus.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE IN THE LOCATION
STATEMENT OF RELATED
OF ADDITIONAL DISCLOSURE IN
INFORMATION THE PROSPECTUS
------------- --------------
<S> <C> <C>
CHANGE OF NAME...................................................... B-2 17
MANAGEMENT.......................................................... B-2 24
Directors and Certain Officers.................................... B-2 --
Compensation...................................................... B-5 --
Stock Options..................................................... B-7 --
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES................. B-7 --
INVESTMENT ADVISORY AND OTHER SERVICES.............................. B-8 --
Investment Advisory Agreement..................................... B-8 24-25
Custodian Services................................................ B-9 27
Accounting Services............................................... B-9 27
TAX STATUS.......................................................... B-10 26
</TABLE>
B-1
<PAGE> 8
CHANGE OF NAME
The Company changed its name from "Allied Lending Corporation" to "Allied
Capital Lending Corporation" in September 1993 in anticipation of its initial
public offering in November 1993.
MANAGEMENT
DIRECTORS AND CERTAIN OFFICERS
The directors and certain officers of the Company as of July 8, 1996 are
listed below together with their respective positions with the Company and a
brief statement of their principal occupations during the past five years and
any positions held with affiliates of the Company:
<TABLE>
<CAPTION>
POSITION(S) HELD PRINCIPAL OCCUPATION(S) DURING PAST FIVE
NAME, ADDRESS(1) AND AGE WITH THE COMPANY (5) YEARS
- - - -------------------------- ------------------------- -----------------------------------------
<S> <C> <C>
David Gladstone* Chairman of the Board and Employed by Allied Capital Corporation
(Age 54) Chief Executive ("Allied I") or Allied Capital Advisers,
Officer(2) Inc. ("Advisers") since 1974; Chairman
and Chief Executive Officer of Allied I,
Allied Capital Corporation II ("Allied
II"), Allied Capital Commercial
Corporation ("Allied Commercial"), and
Advisers; Director, President, and Chief
Executive Officer of Business Mortgage
Investors, Inc. ("BMI") and Allied
Capital Mortgage Corporation ("Allied
Mortgage"); Director of The Riggs
National Corporation (bank holding
company); Trustee of The George
Washington University. He has served as a
director of the Company since 1976.
George C. Williams*(3) Director Employed by Allied I or Advisers from
(Age 70) 1959 to July 5, 1996; Director of Allied
I, Allied II, Allied Commercial, BMI,
Allied Mortgage and Advisers; Vice
Chairman of Allied I, Allied II, Allied
Commercial, and Advisers until May 1996.
Chairman of Allied Mortgage and BMI until
May 1996. He has served as a director of
the Company since 1976.
Katherine C. Marien* Director, President and Employed by Advisers since 1992;
(Age 47) Chief Operating Executive Vice President of Allied I,
Officer(2) Allied II, Allied Commercial, BMI, Allied
Mortgage 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. She
has served as a director of the Company
since 1995.
</TABLE>
B-2
<PAGE> 9
<TABLE>
<CAPTION>
POSITION(S) HELD PRINCIPAL OCCUPATION(S) DURING PAST FIVE
NAME, ADDRESS(1) AND AGE WITH THE COMPANY (5) YEARS
- - - -------------------------- ------------------------- -----------------------------------------
<S> <C> <C>
Jon W. Barker Director Associate with Grubb & Ellis (commercial
(Age 52) real estate firm) since 1993; Vice
President of Shannon & Luchs Company
(commercial real estate firm) from 1979
to 1993. He has served as a director of
the Company since 1993.
Eleanor Deane Bierbower Director(2) Financial consultant since 1992; Managing
(Age 39) Partner of Deane Investment Company L.P.
since 1992; Chief Credit Officer of
Palmer National Bank from 1988 to 1992.
She has served as a director of the
Company since 1993.
Robert V. Fleming II Director(2) Principal of Hoskinson Davis & Fleming
(Age 43) (real estate firm) since 1984; Member of
the Board of Consultants of Riggs Bank
N.A.; Trustee of the National Child
Research Center; Member of the Associates
Board of National Rehabilitation
Hospital. He has served as a director of
the Company since 1993.
Anthony T. Garcia* Director Senior Vice President of Lehman Brothers
(Age 39) Inc.; Director of Allied Commercial. He
has served as a director of the Company
since 1993.
Arthur H. Keeney III Director President, Chief Executive Officer,
(Age 52) Chairman of the Executive Committee and
Director of The East Carolina Bank since
1995; Vice President and General Manager
of The OMG Company (manufacturer of
electronic training devices) from 1994 to
1995; Recruiting Consultant with Don
Richards and Associates, Inc. (personnel
services provider) from 1993 to 1994;
Executive Director of the American
Foundation for Urologic Disease from 1991
to 1993; Executive Vice President at
Signet Bank from 1983 to 1991. He has
served as a director of the Company since
1995.
Robin B. Martin Director(2) President and Chief Executive Officer of
(Age 47) The Deer River Group (broadcasting
consulting firm) since 1978. Trustee,
Rensselaer Polytechnic Institute since
1986; Chairman Emeritus, The Corcoran
Gallery of Art. He has served as a
director of the Company since May 1996.
G. Cabell Williams III(3) Executive Vice President Employed by Advisers since 1981;
(Age 42) Director, Chief Operating Officer and
President of Allied I; Executive Vice
President of Allied II, Allied
Commercial, Advisers, Allied Mortgage and
BMI.
</TABLE>
B-3
<PAGE> 10
<TABLE>
<CAPTION>
POSITION(S) HELD PRINCIPAL OCCUPATION(S) DURING PAST FIVE
NAME, ADDRESS(1) AND AGE WITH THE COMPANY (5) YEARS
- - - -------------------------- ------------------------- -----------------------------------------
<S> <C> <C>
Jon A. DeLuca Executive Vice President, Employed by Advisers since 1994;
(Age 33) Treasurer, and Chief Executive Vice President, Treasurer, and
Financial Officer Chief Financial Officer of Allied I,
Allied II, Allied Commercial, BMI, Allied
Mortgage and Advisers. Manager of
Entrepreneurial Services at Coopers &
Lybrand from 1986 to 1994.
Thomas R. Salley Secretary Partner, Andrews & Kurth, L.L.P. since
(Age 38) April 1996; Secretary of Allied I, Allied
II, Allied Commercial, BMI, Allied
Mortgage and Advisers; General Counsel of
Allied I, Allied II, Allied Commercial,
BMI, Allied Mortgage and Advisers, and
employed by Advisers since 1988 or
inception to April 1996.
Joan M. Sweeney Executive Vice President Employed by Advisers since 1993;
(Age 36) President and Chief Operating Officer of
Advisers; Executive Vice President of
Allied I, Allied II, Allied Commercial,
Allied Mortgage and BMI; Senior Manager
at Ernst & Young from 1990 to 1993.
</TABLE>
- - - ---------------
* These directors are "interested persons" as defined in the 1940 Act.
(1) Unless otherwise indicated, the address of directors and officers of the
Company is 1666 K Street, N.W., 9th Floor, Washington, DC 20006-2803.
(2) Member of the Executive Committee, which is intended, during intervals
between meetings of the Board of Directors, to exercise all powers of the
Board in the management and direction of the business and affairs of the
Company, except where action by the Board is required by applicable law.
(3) George C. Williams is the father of G. Cabell Williams III.
B-4
<PAGE> 11
COMPENSATION
The Company has no employees and does not pay any cash compensation to any
of its officers, other than directors' fees to those of its officers who are
also directors. All of the Company's officers are employed by Advisers, the
Company's investment adviser, which pays their cash compensation. The Company,
from time to time, grants stock options to its officers under the Company's
Stock Option Plan.
During 1995, each director received a fee of $1,000 for each meeting of the
Board of Directors of the Company or each separate committee meeting attended
and $500 for each committee meeting held on the same day as a Board meeting. The
same fees will be paid in 1996. In addition, on December 26, 1995 each
non-officer director (Ms. Bierbower and Messrs. Barker, Fleming, Garcia, Frank
L. Langhammer and Keeney) received a one-time grant of options to purchase
10,000 shares of the Company's common stock at $15.00 per share pursuant to the
Company's Stock Option Plan. On May 13, 1996 Mr. Martin, a non-officer director
first elected to the Board in May 1996, similarly received a one-time grant of
options to purchase 10,000 shares of the Company's common stock at $15.00 per
share. The exercise price of those grants was the minimum provided under the
Company's Stock Option Plan. Mr. Langhammer's unvested options to purchase 6,667
shares were cancelled by their terms when he stepped down as a director in May
1996; his vested options to purchase 3,333 shares will expire unless exercised
by July 12, 1996.
The following table sets forth certain details of compensation paid to
directors during 1995, as well as compensation paid for serving as a director of
the two other investment companies to which the Company may be deemed related.
COMPENSATION TABLE
<TABLE>
<CAPTION>
PENSION OR ESTIMATED TOTAL COMPENSATION
AGGREGATE RETIREMENT BENEFITS ANNUAL FROM COMPANY AND
COMPENSATION FROM ACCRUED AS PART OF BENEFITS UPON RELATED COMPANIES
NAME AND POSITION THE COMPANY(1) COMPANY EXPENSES RETIREMENT PAID TO DIRECTORS(2)
- - - -------------------------------- ----------------- ------------------- ------------- --------------------
<S> <C> <C> <C> <C>
David Gladstone................. $ 9,000 $ 0 $ 0 $ 25,000
Chairman of the Board and
Chief Executive Officer
George C. Williams.............. 9,000 0 0 24,000
Vice Chairman of the Board(3)
Katherine C. Marien............. 4,000 0 0 4,000
Director, President and Chief
Operating Officer
Jon W. Barker................... 10,000 0 0 10,000
Director
Eleanor Deane Bierbower......... 8,000 0 0 8,000
Director
Robert V. Fleming II............ 10,000 0 0 10,000
Director
Anthony T. Garcia............... 7,000 0 0 7,000
Director
Frank L. Langhammer............. 9,000 0 0 9,000
Director(4)
Arthur H. Keeney III............ 7,000 0 0 7,000
Director
</TABLE>
- - - ---------------
(1) Consists only of directors' fees.
(2) Comprised solely of amounts paid as compensation to directors by the
Company, Allied I and Allied II.
(3) George C. Williams resigned as Vice Chairman, effective May 1996, but
remains a director of the Company.
(4) Frank L. Langhammer, a former director of the Company, did not stand for
re-election to the Board in May 1996.
B-5
<PAGE> 12
SUMMARY COMPENSATION TABLE
Under Commission rules applicable to BDCs, the Company is required to set
forth certain information regarding compensation paid from the Company during
the last three fiscal years to its Chief Executive Officer and its President and
the four other most highly compensated officers of Advisers, who are also
officers of the Company. However, the Company has no employees and does not pay
any cash compensation to any of its officers (other than directors' fees to
those of its officers who are also directors). All of the Company's officers are
employed by Advisers, which pays all of their cash compensation. The following
chart summarizes the grants of options by the Company to the named executive
officers during the past three fiscal years including the securities underlying
those options, and any long term incentive plan ("LTIP") payouts.
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
--------------------------------------------
AWARDS
----------------------------
SECURITIES PAYOUTS
RESTRICTED UNDERLYING ------------
NAMES AND PRINCIPAL POSITION YEAR STOCK AWARD(S) OPTIONS LTIP PAYOUTS
- - - -------------------------------------------------- ---- -------------- ---------- ------------
<S> <C> <C> <C> <C>
David Gladstone................................... 1993 $0 66,660 $0
Chairman and Chief Executive 1994 0 0 0
Officer 1995 0 19,998 0
George C. Williams................................ 1993 $0 13,332 $0
Vice Chairman(1) 1994 0 0 0
1995 0 0 0
Katherine C. Marien............................... 1993 $0 66,660 $0
President and Chief 1994 0 0 0
Operating Officer 1995 0 33,330 0
John M. Scheurer.................................. 1993 $0 6,666 $0
Executive Vice President 1994 0 0 0
1995 0 6,666 0
G. Cabell Williams III............................ 1993 $0 13,332 $0
Executive Vice President 1994 0 0 0
1995 0 6,666 0
Joan M. Sweeney................................... 1993 $0 13,332 $0
Executive Vice President 1994 0 0 0
1995 0 6,666 0
</TABLE>
- - - ---------------
(1) George C. Williams resigned as an officer of Advisers and the Company,
effective May 1996.
B-6
<PAGE> 13
STOCK OPTIONS
The following table sets forth, for the Company's Chief Executive Officer
and its President and the four other most highly compensated officers of
Advisers, who are also officers of the Company, the details relating to option
grants in 1995 and the potential realizable value of each grant, as prescribed
to be calculated by the Commission.
<TABLE>
<CAPTION>
OPTION GRANTS IN LAST FISCAL YEAR
----------------------------------------------------------------------------------
POTENTIAL
REALIZABLE VALUE AT
ASSUMED ANNUAL
RATES OF STOCK
PERCENT OF PRICE APPRECIATION
NUMBER OF TOTAL OPTIONS OVER 10-YEAR
SECURITIES GRANTED TO EXERCISE TERM(1)
UNDERLYING EMPLOYEES PRICE PER EXPIRATION -------------------
NAME OPTIONS GRANTED IN 1995 SHARE DATE 5% 10%
- - - ------------------------------- --------------- ------------- --------- ---------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
David Gladstone................ 19,998 9.7% $ 15.00 02/15/05 $58,351 $270,596
George C. Williams............. 0 N/A N/A N/A N/A N/A
Katherine C. Marien............ 33,330 16.1% $ 15.00 02/15/05 $97,252 $450,994
John M. Scheurer............... 6,666 3.2% $ 15.00 02/15/05 $19,450 $ 90,199
G. Cabell Williams III......... 6,666 3.2% $ 15.00 02/15/05 $19,450 $ 90,199
Joan M. Sweeney................ 6,666 3.2% $ 15.00 02/15/05 $19,450 $ 90,199
</TABLE>
- - - ---------------
(1) Potential realizable value is net of the option exercise price but before
any tax liabilities that may be incurred. These amounts represent certain
assumed rates of appreciation, as mandated by the Commission. Actual gains,
if any, on stock option exercises are dependent on the future performance
of the shares, overall market conditions, and the continued employment of
the option holder. The potential realizable value may not necessarily be
realized.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As of July 8, 1996, there were 4,943,163 shares of the Company's common
stock outstanding. The following table sets forth certain information as of July
8, 1996 regarding the shares of the Company's common stock beneficially owned by
the two persons known by the Company to own beneficially more than 5% of the
Company's common stock, as well as all directors and executive officers as a
group:
<TABLE>
<CAPTION>
NAME AND ADDRESS NUMBER OF PERCENTAGE
OF BENEFICIAL OWNER SHARES OWNED OF CLASS
- - - --------------------------------------------------------------------- ------------ ----------
<S> <C> <C>
Allied Capital Corporation (Maryland)(1)............................. 1,244,914(2) 25.2%
1666 K Street, NW, Ninth Floor
Washington, DC 20006
Liberty Investment Management........................................ 363,751(3) 7.4%
2502 Rocky Point Drive, Suite 500
Tampa, FL 33607
All directors and executive officers as a group (12 in number)(4).... 193,659 3.9%
</TABLE>
- - - ---------------
(1) Allied Capital Corporation has agreed to vote its shares on all matters only
in the same proportion as the shares voted by the Company's public
stockholders.
(2) Shares owned of record.
(3) Shares owned beneficially.
(4) Included in the total number of shares beneficially owned are 153,318 shares
underlying unexercised stock options that are exercisable within 60 days of
July 8, 1996, and 6,000 shares owned by the Allied Employee Stock Ownership
Plan, for which David Gladstone and G. Cabell Williams III are co-trustees
and share voting power.
B-7
<PAGE> 14
INVESTMENT ADVISORY AND OTHER SERVICES
Subject to the supervision and control of its Board of Directors, the
investments of the Company are managed by Allied Capital Advisers, Inc., a
publicly owned investment adviser located at 1666 K Street, N.W., 9th Floor,
Washington, D.C. 20006-2803, telephone (202) 331-1112. Advisers is registered
with the Commission under the Investment Advisers Act of 1940. The shares of
Advisers are traded on the Nasdaq National Market (symbol: ALLA).
As of July 8, 1996, Advisers employed thirty-three (33) investment and
other professionals, as well as thirty-six (36) other employees. David Gladstone
and George C. Williams (no longer an employee of Advisers, as discussed below)
have 60 years of combined experience in making the types of investments proposed
to be made by the Company. Mr. Gladstone holds an MBA degree from the Harvard
Business School and worked for Price Waterhouse and ITT Corporation before
joining the Allied Capital organization in 1974. He is the author of Venture
Capital Handbook and Venture Capital Investing, both published by Simon &
Schuster/Prentice Hall. Mr. Williams is a past President of the National
Association of Small Business Investment Companies and has lectured as a
resident executive at the McIntyre School of Commerce at the University of
Virginia. Effective July 5, 1996, Mr. Williams retired as an employee of
Advisers, but has entered into a consulting agreement with Advisers. He remains
a director of Advisers and the Company.
All investments of the Company must be approved by a credit committee
composed of the senior investment officers of Advisers, including David
Gladstone and Katherine C. Marien. Additionally, the Board of Directors of the
Company reviews and approves all loans made by the Company.
David Gladstone, George C. Williams, and Katherine C. Marien are interested
persons and affiliated persons, as those terms are defined in the 1940 Act, of
the Company and its investment adviser.
Advisers is at this time a party to investment advisory agreements with the
Company and with Allied I and Allied II, both business development companies
which, directly or through one or more small business investment company
subsidiaries, specialize in making loans with equity features to and equity
investments in small business concerns. Advisers is the general partner of a
private limited partnership which itself is the general partner of two privately
funded venture capital limited partnerships, Allied Venture and Allied
Technology, engaging in the same business as the Allied I and Allied II but no
longer making new investments. Advisers serves as the investment adviser to
those two limited partnerships. All of these entities co-invest with one
another. In addition, Advisers is the investment manager of Allied Commercial, a
publicly held real estate investment trust (a "REIT"), and the co-manager of
BMI, a privately held REIT. Allied Commercial and BMI participate with one
another in buying interest-paying business loans secured by real estate. At
March 31, 1996, total assets under Advisers' management were over $721 million.
INVESTMENT ADVISORY AGREEMENT
In May 1995, the Company's stockholders approved a new investment advisory
agreement with Advisers (the "current agreement"). The current agreement will
remain in effect from year to year as long as its continuance is approved at
least annually by the Board of Directors, including a majority of the
disinterested directors, or by the vote of the holders of a majority, as defined
in the 1940 Act, of the outstanding voting securities of the Company. The
current agreement may, however, be terminated at any time on sixty (60) days'
notice, without the payment of any penalty, by the Board of Directors or by vote
of a majority of the Company's outstanding voting securities, as defined, and
will terminate automatically in the event of its assignment.
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. Some of
the directors and officers of Advisers are also directors and officers of the
Company.
B-8
<PAGE> 15
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 accounting fees) 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.
CUSTODIAN SERVICES
Under a Custodian Agreement, Riggs Bank N.A., whose principal business
address is 808 17th Street, N.W., Washington, D.C. 20006, holds all securities
of the Company, provides record keeping services, and serves as the Company's
custodian.
ACCOUNTING SERVICES
The firm of Matthews, Carter and Boyce was the independent accountant for
the Company for the year ended December 31, 1995 and has been selected to serve
as such for the year ending December 31, 1996 by the Board of Directors and such
selection was ratified by the shareholders of the Company. Its business address
is: 8200 Greensboro Drive, Suite 1000, McLean, Virginia 22102-3864. Its phone
number is (703)761-4600. Matthews, Carter and Boyce is also the independent
accountant for the Company's subsidiary.
Matthews, Carter and Boyce, or its predecessor, has served as the Company's
independent accountant since its inception and has no financial interest in the
Company. The expense recorded during the fiscal year ended December 31, 1995,
for the professional services provided to the Company by Matthews, Carter and
Boyce consisted of fees for audit services (which included the audit of the
consolidated financial statements of the Company and review of the filings by
the Company of reports and registration statements with the Commission, the SBA
or other regulatory authorities) and for non-audit services, the fees for which
the latter aggregated approximately 17% of the total fees. The non-audit
services, which were arranged for by management without prior consideration by
the Board of Directors, consisted of non-audit related consultation and the
preparation of tax returns for the Company.
B-9
<PAGE> 16
TAX STATUS
The Company, which has elected to be treated as a "business development
company" under the 1940 Act, has qualified and expects to continue to qualify as
a regulated investment company ("RIC") under the Internal Revenue Code of 1986,
as amended ("Code"). As such, the Company is not subject to Federal income tax
on that part of its investment company taxable income (consisting generally of
net investment income and net short-term capital gains, if any) and any net
capital gain (the excess of net long-term capital gain over net short-term
capital loss) that it distributes to its shareholders. It is the Company's
intention to distribute substantially all such income and gains.
The "Distribution Requirement," in order to qualify for that treatment, is
that the Company must distribute to its shareholders for each taxable year at
least 90% of its investment company taxable income. The Company must also meet
the following additional requirements: (1) The Company must derive at least 90%
of its gross income each taxable year from dividends, interest, payments with
respect to securities loans, and gains from the sale or other disposition of
securities or foreign currencies, or other income (including gains from options,
futures, or forward contracts) derived with respect to its business of investing
in securities or those currencies ("Income Requirement"); (2) The Company must
derive less than 30% of its gross income each taxable year from gains (without
including losses) on the sale or other disposition of securities, or any of the
following, that were held for less than three months--options, futures, or
forward contracts (other than those on foreign currencies), or foreign
currencies (or options, futures, or forwards thereon) that are not directly
related to the Company's principal business of investing in securities (or
options and futures with respect thereto) ("Short-Short Limitation"); (3) At the
close of each quarter of the Company's taxable year, at least 50% of the value
of its total assets must be represented by cash and cash items, U.S. Government
securities, securities of other RIC's, and other securities that, with respect
to any one issuer, do not exceed 5% of the value of the Company's total assets
and that do not represent more than 10% of the outstanding voting securities of
the issuer; and (4) At the close of each quarter of the Company's taxable year,
not more than 25% of the value of its total assets may be invested in securities
(other than U.S. Government securities or the securities of other RIC's) of any
one issuer.
The Company will be subject to a nondeductible 4% excise tax on amounts not
distributed to shareholders on a timely basis or if the Company does not
distribute at least 98% of its net investment income and net capital gains. The
Company intends to make sufficient distributions to avoid this 4% excise tax.
The Company, formerly a wholly owned subsidiary of Allied I, originates
loans which are partially guaranteed by the SBA. The Company then sells the
guaranteed portion of these loans in the secondary market. 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.
Although the Company presently does not expect to do so, it is authorized
to borrow funds and to sell assets in order to satisfy its distribution
requirements. However, under the 1940 Act, the Company will not be permitted to
make distributions to stockholders while the Company's debt obligations and
other senior securities are outstanding unless certain "asset coverage" tests
are met. Moreover, the Company's ability to dispose of assets to meet its
distribution requirements may be limited by other requirements relating to its
tax status as a RIC, including the Short-Short Limitation and the
diversification requirements. If the Company disposes of assets in order to meet
its distribution requirements, it may make such dispositions at times which,
from an investment standpoint, are not advantageous.
If the Company fails to satisfy the Distribution Requirement or otherwise
fails to qualify as a RIC in any taxable year, it will be subject to tax in such
year on all of its taxable income, regardless of whether the Company makes any
distributions to its stockholders. In addition, in that case, all of the
Company's distributions to its stockholders will be characterized as ordinary
income (to the extent of the Company's
B-10
<PAGE> 17
current and accumulated earnings and profits). In contrast, as explained below,
if the Company qualifies as a RIC, a portion of its distributions may be
characterized as long-term capital gain in the hands of stockholders.
Dividends paid by the Company from net investment income, the excess of net
short-term capital gain over net long-term capital loss, and original issue
discount or certain market discount income will be taxable to stockholders as
ordinary income to the extent of the Company's current or accumulated earnings
and profits. Distributions paid by the Company from the excess of net long-term
capital gain over net short-term capital loss will be taxable as long-term
capital gains regardless of the stockholder's holding period for his or her
shares.
To the extent that the Company retains any net capital gain, it may
designate such retained gain as "deemed distributions" and pay a tax thereon for
the benefit of its stockholders. In that event, the stockholders will be
required to report their share of retained net capital gain on their tax returns
as if it had been distributed to them and report a credit for the tax paid
thereon by the Company. The amount of the deemed distribution net of such tax
would be added to the stockholder's cost basis for his shares. Since the Company
expects to pay tax on net capital gain at the regular corporate tax rate of 35%
and the maximum rate payable by individuals on net capital gain is 28%, the
amount of credit that individual stockholders may report would exceed the amount
of tax that they would be required to pay on net capital gain. Stockholders who
are not subject to federal income tax or tax on capital gains should be able to
file a Form 990T or other appropriate form that allows them to recover the
excess taxes paid on their behalf.
Any dividend declared by the Company in October, November, or December of
any calendar year, payable to stockholders of record on a specified date in such
a month and actually paid during January of the following year, will be treated
as if it had been received by the stockholders on December 31 of the year in
which the dividend was declared.
Investors should be careful to consider the tax implications of buying
shares just prior to a distribution. Even if the price of the shares includes
the amount of the forthcoming distribution, the stockholder generally will be
taxed upon receipt of the distribution and will not be entitled to offset the
distribution against the tax basis in his shares.
A stockholder may recognize taxable gain or loss if he sells or exchanges
his shares. Any gain arising from (or, in the case of distributions in excess of
earnings and profits, treated as arising from) the sale or exchange of shares
generally will be a capital gain or loss except in the case of dealers or
certain financial institutions. This capital gain or loss normally will be
treated as a long-term capital gain or loss if the stockholder has held his
shares for more than one year; otherwise, it will be classified as short-term
capital gain or loss. However, any capital loss arising from the sale or
exchange of shares held for six months or less will be treated as a long-term
capital loss to the extent of the amount of capital gain dividends received with
respect to such shares and, for this purpose, the special rules of Section
246(c)(3) and (4) of the Code generally apply in determining the holding period
of shares. Net capital gain of noncorporate taxpayers is currently subject to a
maximum federal income tax rate of 28% while other income may be taxed at rates
as high as 39.6%. Corporate taxpayers are currently subject to federal income
tax on net capital gain at the maximum 35% rate also applied to ordinary income.
Tax rates imposed by states and local jurisdictions on capital gain and ordinary
income may differ.
The Company may be required to withhold U.S. federal income tax at the rate
of 31% of all taxable dividends and distributions payable to stockholders who
fail to provide the Company with their correct taxpayer identification number.
Withholding from dividends and distributions also is required for shareholders
who otherwise are subject to backup withholding. Backup withholding is not an
additional tax, and any amounts withheld may be credited against a stockholder's
U.S. federal income tax liability.
Federal withholding taxes at a 30% rate (or a lesser treaty rate) may apply
to distributions to stockholders that are nonresident aliens or foreign
partnerships, trusts, or corporations. Foreign investors should consult their
tax advisors with respect to the possible U.S. federal, state, and local tax
consequences and foreign tax consequences of an investment in the Company.
B-11
<PAGE> 18
The Company will send to each of the stockholders, as promptly as possible
after the end of each fiscal year, a notice detailing, on a per share and per
distribution basis, the amounts includible in such stockholder's taxable income
for such year as ordinary income and as long-term capital gain. In addition, the
federal tax status of each year's distributions generally will be reported to
the Internal Revenue Service.
The foregoing is only a general summary of some of the important federal
income tax considerations generally affecting the Company and its shareholders.
No attempt is made to present a complete explanation of the federal tax
treatment of the Company's activities. Potential investors are urged to consult
their own tax advisers for more detailed information and for information
regarding any applicable state, local, or foreign taxes.
B-12
<PAGE> 19
PART C
OTHER INFORMATION
<PAGE> 20
PART C
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
1. FINANCIAL STATEMENTS
The following financial statements of Allied Capital Lending Corporation
(the "Registrant" or "Company") are incorporated into Part A of this
Post-Effective Amendment No. 1 to the Company's registration statement on
Form N-2 (the "Registration Statement") by reference from pages F-1 through
F-14 of the Prospectus included in Pre-Effective Amendment No. 2 to the
Registration Statement, as filed with the Commission on April 29, 1996
(Accession No. 0000950133-96-000425):
Consolidated Balance Sheet -- March 31, 1996 (unaudited) and December 31,
1995 and 1994
Consolidated Statement of Operations -- For the Three Months Ended March
31, 1996 and 1995 (unaudited) and the Years Ended December 31, 1995, 1994
and 1993
Consolidated Statement of Changes in Net Assets -- For the Three Months
Ended March 31, 1996 and 1995 (unaudited) and the Years Ended December 31,
1995, 1994 and 1993
Consolidated Statement of Cash Flows -- For the Three Months Ended March
31, 1996 and 1995 (unaudited) and the Years Ended December 31, 1995, 1994
and 1993
Consolidated Statement of Investments in Small Business Concerns -- March
31, 1996 (unaudited) and December 31, 1995 and 1994
Notes to Consolidated Financial Statements
Report of Independent Accountants
2. EXHIBITS
<TABLE>
<S> <C>
a. Amended and Restated Articles of Incorporation of the Registrant(1)
b. By-Laws of the Registrant, as amended(6)
c. None
d.1. Specimen certificate of Registrant's Common Stock, par value $0.0001, the rights of
holders of which are defined in Exhibits a and b(9)
e. Registrant's Dividend Reinvestment Plan(1)
f. None
g. Investment Advisory Agreement between Registrant and Allied Capital Advisers, Inc.
("Advisers")(2)
h.2. Form of Underwriting Agreement among Lehman Brothers Inc.; the Registrant; and
Advisers*
i. Registrant's Incentive Stock Option Plan, as amended(5)
j. Custodian Agreement between Riggs Bank N.A. (formerly known as The Riggs National
Bank of Washington, D.C.) and the Registrant, dated February 27, 1989(4)
k.1. Tax Indemnification Agreement dated November 12, 1993 between the Registrant and
Allied Capital Corporation(3)
k.2. Amended and Restated Line of Credit, Security and Pledge Agreement, dated February
26, 1996 and as amended April 18, 1996, and Promissory Note dated February 26, 1996,
between the Company and Riggs Bank N.A. (formerly known as The Riggs National Bank
of Washington, D.C.)(9)
k.3.A. Promissory Note, dated September 27, 1995, between ACLC Limited Partnership and
Lehman Commercial Paper, Inc.(7)
k.3.B. Loan and Security Agreement, dated September 25, 1995, between ACLC Limited
Partnership and Lehman Commercial Paper Inc.(9)
k.4. Form of agreement between the Company and its regional associates(4)
k.7. Line of Credit, Security and Pledge Agreement and Promissory Note, dated April 18,
1996, between ACLC Limited Partnership and Riggs Bank N.A.(9)
l. Opinion of Sutherland, Asbill & Brennan as to the legality of the common stock being
registered, and Consent to the use of such Opinion**
</TABLE>
C-1
<PAGE> 21
<TABLE>
<S> <C>
m. None
n. Consent of Matthews, Carter and Boyce, independent accountants*
o. None
p. None
q. None
r. Financial Data Schedule*
s.1 Powers of Attorney of certain signatories of this registration statement(8)
s.2 Power of Attorney of a signatory of this registration statement*
</TABLE>
- - - ---------------
* Filed herewith.
** To be filed by subsequent post-effective amendment.
(1) Incorporated by reference to an exhibit of the same number to the Company's
registration statement on Form N-2 (File No. 33-68836).
(2) Incorporated by reference to Exhibit A to the Company's definitive proxy
statement relating to its annual meeting of stockholders held on May 9, 1995
(File No. 0-22832).
(3) Incorporated by reference to Exhibit 10(c) to the Form 10-K filed by Allied
Capital Corporation for the year ended December 31, 1993 (File No. 814-97).
(4) Incorporated by reference to an exhibit to Amendment No. 1 to the Company's
registration statement on Form N-2 (File No. 33-68836).
(5) Incorporated by reference to Exhibit B to the Company's definitive proxy
statement relating to its annual meeting of stockholders held on May 20,
1994 (File No. 0-22832).
(6) Incorporated by reference to Exhibit 3(ii) filed with the Company's Annual
Report on Form 10-K for the year ended December 31, 1995 (File No. 0-22832).
(7) Incorporated by reference to Exhibit 10(e) filed with the Company's Annual
Report on Form 10-K for the year ended December 31, 1995 (File No. 0-22832).
(8) Incorporated by reference to an exhibit of same number to the Company's
initial registration statement on Form N-2 (File No. 333-02185), as filed
with the Commission on April 2, 1996.
(9) Incorporated by reference to an exhibit of the same number to Pre-Effective
Amendment No. 1 to the Company's registration statement on Form N-2 (File
No. 333-02185), as filed with the Commission on April 26, 1996.
ITEM 25. MARKETING ARRANGEMENTS
The Company has no marketing arrangements to be disclosed pursuant to this
Item.
ITEM 26. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The expenses in connection with the distribution of the securities being
offered hereby (including the rights offering and subsequent sales), other than
underwriting discounts and commissions, are estimated as follows:
<TABLE>
<S> <C>
Securities and Exchange Commission Registration Fee............... $ 3,743
NASD Filing Fee................................................... 1,556
Blue Sky Fees and Expenses........................................ 2,840
Information Agent's Fees and Expenses............................. 56,346
Transfer Agent's and Registrar's Fees and Expenses................ 38,500
Expenses of Nominees.............................................. 22,000
Printing and Conversion Expenses.................................. 66,586
Legal Fees and Expenses........................................... 75,000
Accountant's Fees and Expenses.................................... 5,100
--------
Total................................................... $271,671
========
</TABLE>
C-2
<PAGE> 22
ITEM 27. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL
<TABLE>
<S> <C>
Allied Capital Lending Corporation (the Registrant)* -- Maryland
Subsidiary:
ACLC Limited Partnership -- Maryland............................................ 99%
Allied Capital Corporation(1)* -- Maryland
Subsidiaries:
Allied Investment Corporation -- Maryland....................................... 100%
Allied Capital Financial Corporation -- Maryland................................ 100%
Allied Development Corporation -- District of Columbia.......................... 100%
Allied Capital Corporation II* -- Maryland
Subsidiaries:
Allied Investment Corporation II -- Maryland.................................... 100%
Allied Financial Corporation II -- Maryland..................................... 100%
Allied Capital Commercial Corporation* -- Maryland
Subsidiaries:
ALCC Holdings, Inc. -- Maryland................................................. 100%
ALCC Acceptance Corporation -- Maryland......................................... 100%
Business Mortgage Investors, Inc.* -- Maryland
Subsidiaries:
BMI Holdings, Inc. -- Maryland.................................................. 100%
BMI Acceptance Corporation -- Maryland.......................................... 100%
Allied Capital Funding, L.L.C.** -- Delaware
Allied Capital Mortgage Corporation* -- Maryland
Allied Capital Advisers, Inc. -- Maryland
Subsidiary:
Allied Capital Property Corporation -- Maryland................................. 100%
</TABLE>
- - - ---------------
* Each of these entities is, like the Registrant, advised by Advisers. By so
including these entities herein, the Registrant does not concede that it and
such other entities are controlled by Advisers.
** The members of Allied Capital Funding, L.L.C. are ALCC Acceptance
Corporation and BMI Acceptance Corporation.
(1) Allied Capital Corporation owned 1,244,914 shares, or approximately 25.2% of
the Company's outstanding common stock, at July 8, 1996. The Registrant does
not concede that it is controlled by Allied I. On matters requiring a vote
of the Company's stockholders, Allied I has agreed to vote its shares only
in the same proportion as the shares voted by the Company's public
stockholders.
ITEM 28. NUMBER OF HOLDERS OF SECURITIES
The following table presents the number of record holders of each class of
securities of the Company and its Subsidiary outstanding as of June 30, 1996:
<TABLE>
<CAPTION>
NUMBER OF
TITLE OF CLASS RECORD HOLDERS
--------------------------------------------------------------- --------------
<S> <C>
Common Stock................................................... 1,637*
LIBOR + 2.2% Secured Revolving Line of Credit (The Company).... 1
LIBOR + 2.0% Secured Revolving Line of Credit
(ACLC Limited Partnership)................................... 1
LIBOR + 2.7% Secured Revolving Line of Credit
(ACLC Limited Partnership)................................... 1
</TABLE>
* Estimate. The Company estimates that there are a total of 7,800
beneficial owners of its common stock.
C-3
<PAGE> 23
ITEM 29. INDEMNIFICATION
The Annotated Code of Maryland, Corporations and Associations, Section
2-418 provides that a Maryland corporation may indemnify any director of the
corporation and any person who, while a director of the corporation, is or was
serving at the request of the corporation as a director, officer, partner,
trustee, employee, or agent of another foreign or domestic corporation,
partnership, joint venture, trust, or other enterprise or employee benefit plan,
made a party to any proceeding by reason of service in that capacity unless it
is established that the act or omission of the director was material to the
matter giving rise to the proceeding and was committed in bad faith or was the
result of active and deliberate dishonesty; or the director actually received an
improper personal benefit in money, property or services; or, in the case of any
criminal proceeding, the director had reasonable cause to believe that the act
or omission was unlawful. Indemnification may be made against judgments,
penalties, fines, settlements, and reasonable expenses actually incurred by the
director in connection with the proceeding, but if the proceeding was one by or
in the right of the corporation, indemnification may not be made in respect of
any proceeding in which the director shall have been adjudged to be liable to
the corporation. Such indemnification may not be made unless authorized for a
specific proceeding after a determination has been made, in the manner
prescribed by the law, that indemnification is permissible in the circumstances
because the director has met the applicable standard of conduct. On the other
hand, the director must be indemnified for expenses if he has been successful in
the defense of the proceeding or as otherwise ordered by a court. The law also
prescribes the circumstances under which the corporation may advance expenses
to, or obtain insurance or similar cover for, directors.
The law also provides for comparable indemnification for corporate officers
and agents.
The Articles of Incorporation of the Company provide that its directors and
officers shall, and its agents in the discretion of the Board of Directors may,
be indemnified to the fullest extent permitted from time to time by the laws of
Maryland. The Company's By-Laws also, however, provide that the Company may not
indemnify any director or officer against liability to the Registrant or its
security holders to which he might otherwise be subject by reason of such
person's willful misfeasance, bad faith, gross negligence or reckless disregard
of the duties involved in the conduct of his office unless a determination is
made by final decision of a court, by vote of a majority of a quorum of
directors who are disinterested, non-party directors or by independent legal
counsel that the liability for which indemnification is sought did not arise out
of such disabling conduct.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Company pursuant to the provisions described above, or otherwise, the Company
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Company of expenses incurred or
paid by a director, officer or controlling person in the successful defense of
an action, suit or proceeding) is asserted by a director, officer or controlling
person in connection with the securities being registered, the Company will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of the court of the issue.
The Registrant, in conjunction with its investment adviser and other
entities managed thereby, carries liability insurance for the benefit of its
directors and officers on a claims-made basis of up to $2,500,000, subject to a
$200,000 retention and the other terms thereof.
ITEM 30. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
Advisers, the investment adviser of the Registrant, is engaged in the
business of identifying, evaluating, structuring, closing, and monitoring the
investments made by the Registrant as well as other public and private entities
engaged in small business finance. Certain information about the activities of
each current director or
C-4
<PAGE> 24
executive officer of Allied Capital Advisers, Inc., in which he or she is
engaged, or has been engaged at any time during the past two fiscal years ended
December 31, 1995, is set forth below:
<TABLE>
<CAPTION>
NAME AND PRINCIPAL ADDRESS* OF
EACH COMPANY WITH WHICH THE
NAMED PERSON HAS HAD ANY CONNECTION
NAME AND THE NATURE OF SUCH CONNECTION
- - - ------------------------- ------------------------------------------------------------------
<S> <C>
David Gladstone.......... Chairman of the Board and Chief Executive Officer, Allied Capital
Advisers, Inc., Allied Capital Corporation, Allied Capital
Corporation II, Allied Capital Lending Corporation, and Allied
Capital Commercial Corporation; Director, President and Chief
Executive Officer, Business Mortgage Investors, Inc. and Allied
Capital Mortgage Corporation; Director, The Riggs National
Corporation, 808 17th Street, N.W., Washington, DC 20006; Trustee
of The George Washington University, 2121 I Street, N.W.,
Washington, DC 20052.
George C. Williams....... Director and formerly Vice Chairman of the Board, Allied Capital
Advisers, Inc., Allied Capital Corporation, Allied Capital
Corporation II, Allied Capital Lending Corporation, and Allied
Capital Commercial Corporation; Chairman, Business Mortgage
Investors, Inc. and Allied Capital Mortgage Corporation.
Brooks H. Browne......... Director, Allied Capital Advisers, Inc.; President, Environmental
Enterprises Assistance Fund, 1901 N. Moore Street, Suite 1004,
Arlington, VA 22209.
Robert E. Long........... Director, Allied Capital Advisers, Inc.; Chairman and Chief
Executive Officer, Business Network News, Inc., 99 Canal Center
Plaza, Suite 220, Alexandria, VA 22314; Director, American Heavy
Lift Shipping Company, 365 Canal Street, New Orleans, LA 70130;
Global Travel, Inc., 1911 N. Fort Meyer Drive, Arlington, VA
22209, CSC Scientific, Inc., 8315 Lee Highway, Fairfax, VA 22031;
Outer Seal Building Products, Inc., 5114 College Avenue, College
Park, MD 20740; Business News Network, Inc., 99 Canal Center
Plaza, Suite 220, Alexandria, VA 22314; and Ambase Corporation, 51
Weavers Street, Greenwich, CT 06831.
William L. Walton........ Director, Allied Capital Advisers, Inc.; Director and President,
Education Partners, Inc.; Director, Odyssey Publishing Co.;
Chairman, Success Lab, Inc.; and President, Language Odyssey (all
located at 401 N. Michigan Avenue, Suite 3370, Chicago, IL 60611).
Joan M. Sweeney.......... Director, President, and Chief Operating Officer, Allied Capital
Advisers, Inc.; Executive Vice President, Allied Capital
Corporation, Allied Capital Corporation II, Allied Capital Lending
Corporation, Allied Capital Commercial Corporation, Business
Mortgage Investors, Inc. and Allied Capital Mortgage Corporation.
William F. Dunbar........ Executive Vice President, Allied Capital Advisers, Inc.; President
and Chief Operating Officer, Allied Capital Corporation II;
Executive Vice President, Allied Capital Corporation, Allied
Capital Commercial Corporation, Allied Capital Lending
Corporation, and Business Mortgage Investors, Inc.
Katherine C. Marien...... Executive Vice President, Allied Capital Advisers, Inc.; President
and Chief Operating Officer, Allied Capital Lending Corporation;
Executive Vice President, Allied Capital Corporation, Allied
Capital Corporation II, Allied Capital Commercial Corporation, and
Business Mortgage Investors, Inc.
</TABLE>
C-5
<PAGE> 25
<TABLE>
<CAPTION>
NAME AND PRINCIPAL ADDRESS* OF
EACH COMPANY WITH WHICH THE
NAMED PERSON HAS HAD ANY CONNECTION
NAME AND THE NATURE OF SUCH CONNECTION
- - - ------------------------- ------------------------------------------------------------------
<S> <C>
John M. Scheurer......... Executive Vice President, Allied Capital Advisers, Inc.; President
and Chief Operating Officer, Allied Capital Commercial
Corporation; Executive Vice President, Allied Capital Corporation,
Allied Capital Corporation II, Allied Capital Lending Corporation
and Allied Capital Mortgage Corporation; Executive Vice President
and Chief Operating Officer, Business Mortgage Investors, Inc.
George Stelljes III...... Executive Vice President, Allied Capital Advisers, Inc.; Senior
Vice President, Allied Capital Corporation, Allied Capital
Corporation II, Allied Capital Commercial Corporation, Allied
Capital Lending Corporation, and Business Mortgage Investors,
Inc.; Director, Total Foam, Inc., 80 Rowe Avenue, Unit B, Milford,
CT 06460; and Colorado Directory, Inc., 6061 S. Willow Drive,
Suite 232, Englewood, CO 80111.
G. Cabell Williams III... Executive Vice President, Allied Capital Advisers, Inc.; President
and Chief Operating Officer, Allied Capital Corporation; Executive
Vice President, Allied Capital Corporation II, Allied Capital
Commercial Corporation, Allied Capital Lending Corporation and
Business Mortgage Investors, Inc. Director, President, and
Treasurer, Broadcast Holdings, Inc., 1025 Vermont Avenue, N.W.,
Suite 1030, Washington, DC 20005 and Georgetown Broadcasting
Company, Inc., 1416 Highmarket Street, Georgetown, SC 29442;
Director, Environmental Enterprises Assistance Fund, 1901 N. Moore
Street, Suite 1004, Arlington, VA 22209.
Jon A. DeLuca............ Executive Vice President, Treasurer and Chief Financial Officer,
Allied Capital Advisers, Inc., Allied Capital Corporation, Allied
Capital Corporation II, Allied Capital Lending Corporation, Allied
Capital Commercial Corporation, Business Mortgage Investors, Inc.
and Allied Capital Mortgage Corporation. Manager, Entrepreneurial
Services, Coopers & Lybrand (1986-1994).
</TABLE>
- - - ---------------
* The business address of Allied Capital Advisers, Inc., Allied Capital
Corporation, Allied Capital Corporation II, Allied Capital Lending
Corporation, Allied Capital Commercial Corporation, Business Mortgage
Investors, Inc., and Allied Capital Mortgage Corporation is c/o Allied Capital
Advisers, Inc., 1666 K Street, N.W., Ninth Floor, Washington, D.C. 20006-2803.
ITEM 31. LOCATIONS OF ACCOUNTS AND RECORDS
All of the accounts and records of the Registrant, including all the
accounts, books and documents required to be maintained by Section 31(a) of the
1940 Act and the rules thereunder, are maintained by Allied Capital Advisers,
Inc., 1666 K Street, N.W., Ninth Floor, Washington, D.C. 20006-2803.
ITEM 32. MANAGEMENT SERVICES
Other than with its investment adviser, the Registrant is not a party to
any contract pursuant to which any person performs management-related services
to the Registrant.
C-6
<PAGE> 26
ITEM 33. UNDERTAKINGS
1. The Registrant undertakes to suspend the offering of shares until the
Prospectus is amended if: (1) subsequent to the effective date of its
Registration Statement, the net asset value declines more than ten
percent from its net asset value as of the effective date of the
Registration Statement; or (2) the net asset value increases to an
amount greater than its net proceeds as stated in the Prospectus.
2. Not Applicable.
3. Not Applicable.
4. a. The Registrant undertakes to file, during any period in which offers
or sales are being made, a post-effective amendment to this
registration statement:
(1) To include any prospectus required by Section 10(a)(3) of the 1933
Act;
(2) To reflect in the prospectus any fact or events arising after the
effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set
forth in the registration statement; and
(3) To include any material information with respect to the plan of
distribution not previously disclosed in the Registration Statement
or any material change to such information in the Registration
Statement;
b. The Registration undertakes that, for the purpose of determining any
liability under the Securities Act of 1933, each such post-effective
amendment shall be deemed to be a new registration statement relating
to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering
thereof; and
c. The Registrant undertakes to remove from registration by means of a
post-effective amendment any of the securities being registered which
remain unsold at the termination of the offering.
5. Not Applicable.
6. The Registrant undertakes to send by first class mail or other means
designed to ensure equally prompt delivery, within two business days of
receipt of a written or oral request, any Statement of Additional
Information.
C-7
<PAGE> 27
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Washington, and District
of Columbia, on the 10th day of July, 1996.
ALLIED CAPITAL LENDING CORPORATION
By: /s/ David Gladstone
------------------------------------
David Gladstone
Chairman of the Board and Chief
Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- - - ------------------------------------- ---------------------------------------- --------------
<C> <S> <C>
/s/ David Gladstone Chairman of the Board and Chief July 10, 1996
- - - ------------------------------------- Executive Officer (Principal Executive
David Gladstone Officer) and Director
* Director
- - - -------------------------------------
George C. Williams
* President and Chief Operating Officer
- - - ------------------------------------- and Director
Katherine C. Marien
* Director
- - - -------------------------------------
Jon W. Barker
* Director
- - - -------------------------------------
Eleanor Deane Bierbower
* Director
- - - -------------------------------------
Robert V. Fleming II
* Director
- - - -------------------------------------
Anthony T. Garcia
* Director
- - - -------------------------------------
Arthur H. Keeney III
* Director
- - - -------------------------------------
Robin B. Martin
* Executive Vice President, Treasurer and
- - - ------------------------------------- Chief Financial Officer (Principal
Jon A. DeLuca Financial Officer and Principal
Accounting Officer)
* By: /s/ David Gladstone
- - - -------------------------------------
</TABLE>
David Gladstone, Attorney-in-Fact and Agent, on July 10, 1996, pursuant to
the Powers of Attorney filed as Exhibit s.1 to the initial registration
statement or pursuant to the Power of Attorney filed as Exhibit s.2
herewith.
<PAGE> 28
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- - - ------ ------------------------------------------------------------------------------------
<S> <C>
h.2. Form of Underwriting Agreement among Lehman Brothers Inc.; the Registrant; and
Advisers
n. Consent of Matthews, Carter and Boyce, independent accountants
r. Financial Data Schedule
s.2 Power of Attorney of a signatory of this registration statement
</TABLE>
<PAGE> 1
EXHIBIT h.2
174,358 SHARES
ALLIED CAPITAL LENDING CORPORATION
COMMON STOCK
UNDERWRITING AGREEMENT
July __, 1996
LEHMAN BROTHERS INC.
Three World Financial Center
New York, New York 10285
Dear Sirs:
Allied Capital Lending Corporation, a Maryland corporation
(the "Company"), proposes to issue and sell to Lehman Brothers Inc. (the
"Underwriter") 174,358 shares (the "Shares") of Common Stock, $0.0001 par value
(the "Common Stock") of the Company. The Shares to be sold hereunder are shares
not sold in the Company's rights offering which concluded on June 4, 1996 and
in which the Underwriter participated as dealer-manager or underwriter. This
is to confirm the agreement concerning the purchase of the Shares from the
Company by the Underwriter.
1. Representations and Warranties. (a) The Company represents
and warrants to, and agrees with, the Underwriter that:
(i) A registration statement on Form N-2 (File No.
333-02185) with respect to the Shares (A) has been prepared by the Company in
conformity with the requirements of the Securities Act of 1933, as amended (the
"Securities Act"), and the Investment Company Act of 1940, as amended (the
"1940 Act"), and the rules and regulations of the Securities and Exchange
Commission (the "Commission") under the Securities Act and the 1940 Act, (B)
has been filed with the Commission under the Securities Act and (C) has become
effective under the Securities Act. If any post-effective amendment to such
registration statement has been filed with the Commission prior to the
execution and delivery of this Agreement, the most recent such amendment has
been declared effective by the Commission. Copies of such registration
statement as amended to date have been delivered by the Company to you. A
Notification of Election to be Subject to Sections 55 through 65 of the 1940
Act on Form N-54A (the "Election") has been prepared in conformity with Section
54(a) of the 1940 Act and has been filed by the Company with the Commission
under the 1940 Act, and the Election remains in effect. A registration
statement on Form 8-A with respect to the Shares has been prepared by the
Company in conformity with Section 12(g) of the Securities Exchange Act of
1934, as amended
<PAGE> 2
(the "Exchange Act") and the rules and regulations under the Exchange Act and
has been filed with the Commission under the Exchange Act. For purposes of
this Agreement: "Rules and Regulations" means the rules and regulations of the
Commission under the Securities Act, 1940 Act, Exchange Act and the Investment
Advisers Act of 1940, as amended (the "Advisers Act"); "Effective Time" means
the date and the time as of which such registration statement, or the most
recent post-effective amendment thereto, if any, was declared effective by the
Commission; "Effective Date" means the date of the Effective Time; "Preliminary
Prospectus" means each prospectus and related statement of additional
information included in such registration statement, or amendments thereto,
before it became effective under the Securities Act and any prospectus filed
with the Commission by the Company pursuant to Rule 497(a) of the Rules and
Regulations; "Registration Statement" means such registration statement, as
amended at the Effective Time, including all information deemed to be a part
thereof as of the Effective Time pursuant to paragraph (b) of Rule 430A of the
Rules and Regulations; and "Prospectus" means the form of prospectus and
statement of additional information relating to the Shares, as first filed
pursuant to Rule 497 of the Rules and Regulations ("Rule 497") and any
amendment or supplement thereto. The Commission has not issued any order
preventing or suspending the use of any Preliminary Prospectus or the
Prospectus.
(ii) The Registration Statement, the Election and
the Form 8-A registration statement contains, and any post-effective amendment
to the Registration Statement filed with the Commission after the Effective
Time, the Prospectus will contain, all statements which are required by the
Securities Act, the 1940 Act, and the Exchange Act and the Rules and
Regulations; at the time of filing thereof, any Preliminary Prospectus did not,
and on the Effective Date, the Registration Statement did not, and any
post-effective amendment to the Registration Statement filed with the
Commission after the Effective Time, the Prospectus will not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading;
provided that the Company makes no representation or warranty as to information
contained in or omitted from the Registration Statement or the Prospectus in
reliance upon, and in conformity with, written information furnished to the
Company by you, specifically for inclusion therein, but, for this purpose,
tax-related information in the Registration Statement and the Prospectus shall
not be deemed to have been furnished by you. There is no contract or document
required to be described in the Registration Statement or the Prospectus or to
be filed as an exhibit to the Registration Statement which is not described or
filed as required.
- 2 -
<PAGE> 3
(iii) Neither the Company nor any partnership that
it controls, nor any of the Company's subsidiaries (hereinafter, the Company,
such partnerships and subsidiaries are collectively referred to as the
"Company" unless inappropriate in the context) is in violation of its articles
of incorporation, bylaws or other governing documents or is in default under
any agreement, indenture or instrument.
(iv) This Agreement, the Investment Advisory
Agreement (the "Advisory Agreement") between the Company and Allied Capital
Advisers, Inc. ("Allied Advisers"), the Custody Agreement between the Company
and Riggs Bank N.A. (the "Riggs Custody Agreement"), the Custody Agreement
between the Company and the U.S. Small Business Administration (the "SBA
Custody Agreement", the Riggs Custody Agreement and the SBA Custody Agreement
being sometimes referred to herein together as the "Custody Agreements"), and
the Tax Indemnification Agreement between the Company and Allied Capital
Corporation (the "Indemnification Agreement") have each been duly authorized,
executed and delivered by the Company; and this Agreement, the Advisory
Agreement, the Riggs Custody Agreement, the SBA Custody Agreement, and the
Indemnification Agreement each constitutes the valid and binding obligation of
the Company and is enforceable against the Company in accordance with its terms
(a) subject, as to enforcement, to bankruptcy, insolvency, reorganization and
other laws of general applicability relating to or affecting creditors' rights
and to general equity principles, and (b) except for rights to indemnity under
this Agreement and the Advisory Agreement, to the extent that such rights may
be limited by federal or state securities laws or the public policy underlying
such laws. No consent, approval, authorization or order of any court or
governmental agency or body or financial institution is required for the
execution, delivery and performance of this Agreement, the Advisory Agreement,
the Riggs Custody Agreement, the SBA Custody Agreement, or the Indemnification
Agreement by the Company or the consummation by the Company of the transactions
contemplated hereby or thereby, except such as have been obtained and such as
may be required under the Securities Act, the 1940 Act, the Exchange Act, the
rules of the National Association of Securities Dealers, Inc. (the "NASD") or
applicable state securities laws in connection with the purchase and
distribution of the Shares by the Underwriter. The execution, delivery and
performance of this Agreement, the Advisory Agreement, the Riggs Custody
Agreement, the SBA Custody Agreement, and the Indemnification Agreement by the
Company and the consummation by the Company of the transactions contemplated
hereby and thereby will not conflict with, result in the creation or imposition
of any lien, charge, claim or encumbrance upon any property or asset of the
Company pursuant to the terms of, result in a ghbreach or violation by the
Company of any of the terms or provisions of, or constitute a default by the
Company under, any indenture, mortgage, deed of trust, loan agreement, lease or
other agreement or instrument to
- 3 -
<PAGE> 4
which the Company is a party or by which it is bound or by which it or its
property is subject that is material to the Company, the articles of
incorporation, bylaws or other governing documents of the Company, any statute,
rule, administrative regulation, or any judgment, decree, order, rule or
regulation of any court or governmental agency or body having jurisdiction over
the Company or any of its property.
(v) Except as described in or contemplated by the
Registration Statement and the Prospectus, (A) there has not been any material
adverse change in, or adverse development which materially affects, the
condition (financial or other), results of operation, business or prospects of
the Company from the date as of which information is given in the Prospectus,
(B) there have been no transactions entered into by the Company that are
material to the Company other than those in the ordinary course of business and
(C) there has been no dividend or distribution of any kind declared, paid or
made by the Company on any class of its capital stock, other than the dividend
declared by the Company on May 13, 1996 and paid on June 28, 1996 to
stockholders of record of the Company on June 14, 1996.
(vi) Matthews, Carter and Boyce, whose report
appears in the Prospectus, are independent certified public accountants as
required by the Securities Act and the Rules and Regulations. The financial
statements and schedules (including the related notes and supporting schedules)
included in the Registration Statement, any Preliminary Prospectus or the
Prospectus present fairly the financial condition, results of operations and
changes in financial condition of the Company at the dates and for the periods
indicated and have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis throughout the periods
indicated.
(vii) All of the outstanding shares of Common Stock
have been, and the Shares, upon issuance and delivery and payment therefor in
the manner herein described, will be, duly authorized, validly issued, fully
paid and nonassessable, with no personal liability attaching to the ownership
thereof. None of the Shares when delivered will be subject to any lien, claim,
encumbrance, preemptive rights or any other claim of any third party and the
Shares will conform to the description thereof contained in the Registration
Statement and the Prospectus. Neither the filing of the Registration Statement
nor the offering or sale of the Shares as contemplated by this Agreement gives
rise to any rights, other than those which have been waived or satisfied, for
or relating to the registration of any shares of Common Stock or other
securities of the Company.
(viii) The Company has been duly organized and is
validly existing and in good standing under the laws of the State of Maryland,
is duly qualified to do business and is in good
- 4 -
<PAGE> 5
standing as a foreign corporation (and, with respect to any partnership
controlled by the Company, as a foreign partnership) in each jurisdiction in
which the failure to be so qualified would have a material adverse effect on
the Company and has all power and authority necessary to own or hold its
properties and to conduct its business as described in the Prospectus and to
issue and sell the Shares as contemplated by this Agreement.
(ix) Except as described in the Registration
Statement and the Prospectus, there is no litigation or governmental proceeding
to which the Company is a party or to which any property of the Company is
subject or which is pending or, to the knowledge of the Company, threatened
against the Company which might result in any material adverse change in the
condition (financial or other), results of operations, business or prospects of
the Company or which is required to be disclosed in the Registration Statement
and Prospectus.
(x) The Company is not in violation of any law,
ordinance, governmental rule or regulation or court decree to which it may be
subject which violation could reasonably be expected to have a material adverse
effect on the condition (financial or other), results of operation, business or
prospects of the Company.
(xi) The Company has not taken and shall not take,
directly or indirectly, any action designed to cause or result in, or which has
constituted or which might reasonably be expected to constitute, the
stabilization or manipulation of the price of the shares of Common Stock to
facilitate the sale or resale of the Shares.
(xii) Any advertising and sales literature used by
the Company in connection with the public offering and sale of the Shares
complies with the Securities Act and the Rules and Regulations and does not
contain an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading.
(xiii) There are no contracts or other documents
that are required to be filed as exhibits to the Registration Statement by the
Securities Act or by the Rules and Regulations that have not been so filed.
(xiv) The Company has filed, or will by the Closing
Date have filed, all tax returns and reports required to be filed by it by the
Closing Date, or have requested extensions with respect thereto, and such
returns are, or by the Closing Date will be, materially correct and complete.
The Company, to the best of its knowledge, has paid all taxes (which term
includes interest charges and penalties relating to taxes) which it is
- 5 -
<PAGE> 6
required to pay by the Closing Date and adequate provision has been made in the
Company's financial statements for taxes that will be due from the Company but
for which payment is not due from the Company by the Closing Date.
(b) Allied Advisers represents, warrants to and
agrees with the Underwriter that:
(i) Allied Advisers has been duly organized and is
validly existing and in good standing as a corporation under the laws of
Maryland, with full power and authority to own or lease its properties and
conduct its business as described in the Prospectus and is duly qualified to do
business and is in good standing as a foreign corporation in each jurisdiction
in which such qualification is required (except where the failure so to qualify
would not have a material adverse effect on the ability of Allied Advisers to
conduct its business with respect to the Company as described in the
Prospectus), and has all power and authority necessary to perform its
management services with respect to the Company as described in the Prospectus.
(ii) Allied Advisers is duly registered and in good
standing with the Commission under the Advisers Act as an investment adviser.
Allied Advisers is not prohibited by the Advisers Act, or the rules and
regulations under such Act, from acting for the Company under the Advisory
Agreement as contemplated by the Prospectus.
(iii) The description of Allied Advisers in the
Prospectus does not contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make the
statements therein not misleading in light of the circumstances under which
they were made.
(iv) This Agreement and the Advisory Agreement have
each been duly authorized, executed and delivered by Allied Advisers and each
constitutes the valid and binding obligation of Allied Advisers and is
enforceable against Allied Advisers in accordance with its terms. No consent,
approval, authorization or order of any court or governmental agency or body or
financial institution is required for the execution, delivery and performance
of this Agreement or the Advisory Agreement by Allied Advisers or the
consummation by Allied Advisers of the transactions contemplated hereby or
thereby, except such as have been obtained and such as may be required under
the Exchange Act, the 1940 Act and the Advisers Act. The execution, delivery
and performance of this Agreement and the Advisory Agreement by Allied Advisers
and the consummation by Allied Advisers of the transactions contemplated hereby
and thereby will not conflict with, result in the creation or imposition of any
lien, charge, claim or encumbrance upon any property or asset of Allied
- 6 -
<PAGE> 7
Advisers pursuant to the terms of, result in a breach or violation by Allied
Advisers of any of the terms or provisions of, or constitute a default by
Allied Advisers under, any indenture, mortgage, deed of trust, loan agreement,
lease or other agreement or instrument to which Allied Advisers is a party or
to which it is bound or to which it or its property is subject that is material
to Allied Advisers, the corporate charter, bylaws or other governing documents
of Allied Advisers, any statute, rule, administrative regulation, or any
judgment, decree, order, rule or regulation of any court or governmental agency
or body having jurisdiction over Allied Advisers or any of its property.
(v) Except as described in the Registration
Statement and the Prospectus, there is no litigation or governmental proceeding
to which Allied Advisers is a party or to which any property of Allied Advisers
is subject or which is pending or, to the knowledge of Allied Advisers,
threatened against Allied Advisers which might result in any material adverse
change in the condition (financial or other), results of operations, business
or prospects of Allied Advisers or which is required to be disclosed in the
Registration Statement and the Prospectus.
(vi) Except as described in or contemplated by the
Registration Statement or the Prospectus, (A) there has not been any material
adverse change in, or adverse development which materially affects, the
condition (financial or other), results of operation, business or prospects, of
Allied Advisers as of the date of the Prospectus from the information contained
in Allied Advisers's Form 10-K filed with the Commission on March 29, 1996, and
(B) there have been no transactions entered into by Allied Advisers that are
material to Allied Advisers other than those in the ordinary course of business
or that have not been described in such Form 10-K or a Form 8-K filed
subsequent to March 29, 1996.
(vii) Any advertising and sales literature prepared
by Allied Advisers or submitted for review and approved by Allied Advisers and
used by the Company in connection with the public offering and sale of the
Shares complies with the Securities Act and the Rules and Regulations and does
not contain an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading.
2. Purchase of the Shares by the Underwriter. Subject to the
terms and conditions and upon the basis of the representations and warranties
herein set forth, the Company agrees to issue and sell to the Underwriter, and
the Underwriter agrees to purchase at a price of $12.414 per Share the number
of Shares set forth opposite the Underwriter's name in Schedule I
- 7 -
<PAGE> 8
hereto. The Underwriter agrees to offer the Shares to the public as set forth
in the Prospectus.
3. Delivery of and Payment for Shares. Delivery of
certificates for the Shares shall be made at the offices of Simpson Thacher &
Bartlett, 425 Lexington Avenue, New York, New York (or such other places as may
be mutually agreed upon), at 10:00 A.M., New York City time, on the third full
Business Day following the date of this Agreement or on such later date as
shall be determined by you and the Company (the "Closing Date").
Delivery of certificates for the Shares shall be made by or on
behalf of the Company to you, for the account of the Underwriter, against
payment of the purchase price therefor by certified or official bank checks
payable in New York Clearing House funds to the order of and in the respective
amounts owing to the Company or, if the day following the Closing Date is not a
Business Day, by Federal Funds (immediately available funds). The certificates
for the Shares shall be registered in such names and denominations as you shall
have requested at least two full Business Days prior to the Closing Date, and
shall be made available for checking and packaging in New York, New York or
such other location as may be designated by you at least one full Business Day
prior to the Closing Date. Time shall be of the essence, and delivery of
certificates for the Shares at the time and place specified in this Agreement
is a further condition to the obligations of the Underwriter.
4. Covenants. The Company covenants and agrees with the
Underwriter that:
(a) The Company shall comply with the provisions of
and make all requisite filings with the Commission pursuant to Rules 497 and
430A of the Rules and Regulations and shall notify you promptly (in writing, if
requested) of all such filings. The Company shall notify you promptly of any
request by the Commission for any amendment of or supplement to the
Registration Statement or the Prospectus or for additional information; the
Company shall prepare and file with the Commission, promptly upon your request,
any amendments or supplements to the Registration Statement or the Prospectus
which, in your opinion, may be necessary or advisable in connection with the
distribution of the Shares; and the Company shall not file any amendment or
supplement to the Registration Statement or the Prospectus, which filing is not
consented to by you after reasonable notice thereof, such consent not to be
unreasonably withheld or delayed. The Company shall advise you promptly of the
issuance by the Commission or any State or other regulatory body of any stop
order or other order suspending the effectiveness of the Registration
Statement, suspending or preventing the use of any Preliminary Prospectus or
the Prospectus or suspending the qualification of the Shares for offering or
sale in any
- 8 -
<PAGE> 9
jurisdiction, or of the institution of any proceedings for any such purpose;
and the Company shall use its best efforts to prevent the issuance of any stop
order or other such order and, should a stop order or other such order be
issued, to obtain as soon as possible the lifting thereof.
(b) The Company shall furnish to the Underwriter and
counsel for the Underwriter a signed copy of the Registration Statement as
originally filed and each amendment thereto filed with the Commission,
including all consents and exhibits filed therewith, and shall furnish to the
Underwriter such number of conformed copies of the Registration Statement, as
originally filed and each amendment thereto (excluding exhibits other than this
Agreement), the Prospectus and all amendments and supplements to any of such
documents, in each case as soon as available and in such quantities as the
Underwriter may from time to time reasonably request.
(c) Within the time during which the Prospectus
relating to the Shares is required to be delivered under the Securities Act,
the Company shall comply with all requirements imposed upon it by the
Securities Act, as now and hereafter amended, and by the Rules and Regulations,
as from time to time in force, so far as is necessary to permit the continuance
of sales of or dealings in the Shares as contemplated by the provisions hereof
and by the Prospectus. If during such period any event occurs as a result of
which the Prospectus as then amended or supplemented would include an untrue
statement of a material fact or omit to state a material fact necessary to make
the statements therein, in the light of the circumstances then existing, not
misleading, or if during such period it is necessary to amend the Registration
Statement or supplement the Prospectus to comply with the Securities Act, the
Company shall promptly notify you and shall amend the Registration Statement or
supplement the Prospectus (at the expense of the Company) so as to correct such
statement or omission or to effect such compliance.
(d) The Company shall take or cause to be taken all
necessary action and furnish to whomever you may direct such information as may
be required in qualifying the Shares for sale under the laws of such
jurisdictions as you shall designate, and to continue such qualifications in
effect for as long as may be necessary for the distribution of the Shares;
except that in no event shall the Company be obligated in connection therewith
to qualify as a foreign corporation or to execute a general consent to service
of process.
(e) The Company shall make generally available to
its security holders (and shall deliver to the Underwriter), pursuant to Rule
158(a) or (b) under the Securities Act, as soon as practicable but in any event
not later than 45 days after the end
- 9 -
<PAGE> 10
of its fiscal quarter in which the first anniversary date of the Effective Date
occurs, an earnings statement satisfying the requirements of Section 11(a) of
the Securities Act and covering a period of at least 12 consecutive months
beginning after the Effective Date.
(f) The Company shall not take, directly or
indirectly, any action designed to cause or result in, or which might
reasonably be expected to constitute, the stabilization or manipulation of the
price of the shares of Common Stock to facilitate the sale or resale of the
Shares.
(g) The Company shall apply the net proceeds of the
sale of the Shares as set forth in the Prospectus, and shall take such steps as
shall be necessary to ensure that the Company shall continue to qualify as a
"business development company" within the meaning of such term under the 1940
Act, and the rules and regulations thereunder.
(h) Whether or not this Agreement becomes effective
or is terminated or the sale of the Shares to the Underwriter is consummated,
the Company shall pay or cause to be paid (A) all expenses (including stock
transfer taxes) incurred in connection with the delivery to the Underwriter of
the Shares, (B) all fees and expenses (including, without limitation, fees and
expenses of the Company's accountants and counsel, but excluding fees and
expenses of counsel for the Underwriter) in connection with the preparation,
printing, filing, delivery and shipping of the Registration Statement
(including the financial statements therein and all amendments and exhibits
thereto), each Preliminary Prospectus, the Prospectus and any amendments or
supplements to the foregoing, and any advertising or sales literature (other
than the sales materials prepared by the Underwriter for internal use only),
and the printing, delivery and shipping of this Agreement and Blue Sky
Memoranda, (C) all filing fees and fees and disbursements of counsel to the
Underwriter incurred in connection with the qualification of the Shares under
state securities laws as provided in section 4(d) hereof, (D) the filing fee of
the NASD, (E) the costs of quotation of the Shares in the Nasdaq National
Market, (F) the cost of printing certificates representing the Shares, (G) the
cost and charges of any transfer agent or registrar, and (H) all other costs
and expenses incident to the performance of its obligations hereunder for which
provision is not otherwise made in this Section. It is understood, however,
that, except as provided in this Section and Sections 6 and 8 hereof, the
Underwriter shall pay all of its own costs and expenses, including the fees of
its counsel, stock transfer taxes due upon resale of any of the Shares by it
and any advertising expenses incurred in connection with any offers it may
make. If the sale of the Shares provided for herein is not consummated
pursuant to Section 8 hereof by reason of acts of the Company which prevent
- 10 -
<PAGE> 11
this Agreement from becoming effective, or by reason of any failure, refusal or
inability on the part of the Company to perform any agreement on its part to be
performed or because any other condition of the Underwriter's obligations
hereunder is not fulfilled or if the Underwriter shall decline to purchase the
Shares for any reason permitted under this Agreement, the Company shall
reimburse the Underwriter for all reasonable out-of-pocket disbursements
(including fees and disbursements of counsel) incurred by the Underwriter in
connection with any investigation or preparation made by it in respect of the
marketing of the Shares or in contemplation of the performance by it of its
obligations hereunder.
(i) The Company shall continue to take such action
as shall be necessary to cause the Shares to be approved for quotation in the
Nasdaq National Market and to comply with the rules and regulations of the NASD
with respect to such Shares.
(j) During a period of five years from the Effective
Date, the Company shall furnish to the Underwriter copies of all reports or
other communications furnished to shareholders and copies of any reports or
financial statements furnished to or filed with the Commission or any national
securities exchange on which any class of securities of the Company is listed.
5. Conditions of Underwriter's Obligations. The obligations
of the Underwriter hereunder are subject to the accuracy, as of the date hereof
and the Closing Date (as if made on such Closing Date), of the representations
and warranties of the Company and Allied Advisers contained herein, to the
performance by the Company and Allied Advisers of their obligations hereunder
and to the following additional conditions:
(a) The Prospectus shall have been filed with the
Commission in a timely fashion in accordance with Section 4(a) hereof, all
post-effective amendments to the Registration Statement shall have become
effective, all filings required by Rule 497 of the Rules and Regulations have
been made and no such filings have been made without the consent of the
Underwriter, such consent not to be reasonably withheld or delayed; no stop
order suspending the effectiveness of the Registration Statement or any
amendment or supplement thereto shall have been issued; no proceedings for the
issuance of any such order shall have been initiated or threatened; and any
request of the Commission for additional information (to be included in the
Registration Statement or the Prospectus or otherwise) shall have been
disclosed to you and complied with to your satisfaction.
(b) The Underwriter shall not have been advised by
the Company or shall have discovered and disclosed to the Company that the
Registration Statement or the Prospectus, or any amendment or supplement
thereto, contains an untrue statement of
- 11 -
<PAGE> 12
fact which, in your opinion or in the opinion of counsel for the Underwriter,
is material, or omits to state a fact which, in your written opinion or in the
opinion of counsel for the Underwriter, is material and is required to be
stated therein or is necessary to make any statement therein not misleading.
(c) On the Closing Date, there shall have been
furnished to you the opinion (addressed to the Underwriter) of Sutherland,
Asbill & Brennan, counsel for the Company, dated as of the Closing Date and in
form and substance satisfactory to counsel for the Underwriter, to the effect
that:
(i) The Company has been duly organized
and is validly existing as a
corporation (or in the case of a
partnership controlled by the
Company, as a partnership) in good
standing under the laws of the State
of Maryland, with full power and
authority to own or hold its
properties and conduct its business
as described in the Prospectus.
(ii) To the best of such counsel's
knowledge, the Company is not in
violation of its articles of
incorporation, bylaws or other
governing documents, or in material
default under any agreement,
indenture or instrument known to
such counsel.
(iii) All of the outstanding shares of
Common Stock have been, and the
Shares upon issuance and delivery
and payment therefor in the manner
herein described, will be, duly
authorized, validly issued, fully
paid and nonassessable, with no
personal liability attaching to the
ownership thereof; there are no
preemptive or other rights to
subscribe for or to purchase, nor
(except as disclosed in the
Registration Statement and the
Prospectus) any restriction upon the
voting or transfer of, any shares of
Common Stock pursuant to the
Company's articles of incorporation,
bylaws, other governing documents or
any agreement or other instrument
known to such counsel to which the
company is a party or by which it
may be bound; and, to the best of
such counsel's knowledge, neither
the filing of the Registration
Statement nor the offering or sale
of the Shares as contemplated by
this Agreement gives rise to any
rights, other than those which have
been waived or satisfied, for or
relating to the registration of any
shares of Common Stock or
- 12 -
<PAGE> 13
other securities of the Company. The
authorized, issued and outstanding
capitalization of the Company as of
March 31, 1996 is as set forth in
the Prospectus, and the Common Stock
conforms to the description thereof
contained in the Prospectus.
(iv) This Agreement, the Advisory
Agreement, the Custody Agreements,
and the Indemnification Agreement
have each been duly authorized,
executed and delivered by the
Company; and this Agreement
(assuming its due execution and
delivery by you), the Advisory
Agreement, the Custody Agreements,
and the Indemnification Agreement
each constitutes the valid and
binding obligation of the Company
and is enforceable against the
Company in accordance with its terms
(a) subject, as to enforcement, to
bankruptcy, insolvency,
reorganization and other laws of
general applicability relating to or
affecting creditors' rights and to
general equity principles, and (b)
except for rights to indemnity under
this Agreement and the Advisory
Agreement, to the extent that such
rights may be limited by federal or
state securities laws or the public
policy underlying such laws. No
consent, approval, authorization or
order of any court, governmental
agency or body or financial
institution is required for the
execution, delivery and performance
of this Agreement, the Advisory
Agreement, the Custody Agreements,
or the Indemnification Agreement by
the Company or the consummation by
the Company of the transactions
contemplated hereby or thereby,
except such as have been obtained
and such as may be required under
applicable state securities laws in
connection with the purchase and
distribution of the Shares by the
Underwriter. The execution,
delivery and performance of this
Agreement, the Advisory Agreement,
the Custody Agreements, and the
Indemnification Agreement by the
Company and the consummation by the
Company of the transactions
contemplated hereby and thereby will
not conflict with, result in the
creation or imposition of any lien,
charge, claim or encumbrance upon
any property or asset of the Company
pursuant to the terms of, result in
a breach or violation by the Company
of any of
- 13 -
<PAGE> 14
the terms or provisions of, or
constitute a default by the Company
under, any indenture, mortgage, deed
of trust, loan agreement, lease or
other agreement or instrument filed
by the Company with the Commission
or known to such counsel to which
the Company is a party or to which
it is bound or to which it or its
property is subject, the articles of
incorporation, bylaws or other
governing documents of the Company,
any statute, rule, administrative
regulation, or, insofar as such
counsel knows, any judgment, decree,
order, rule or regulation of any
court or governmental agency or body
having jurisdiction over the Company
or any of its property.
(v) The Registration Statement and the
Prospectus (except that no opinion
need be expressed as to the
financial statements or other
financial or performance data
contained therein, including,
without limitation, the form or
content of the "Fees and Expenses"
table in the Prospectus) comply as
to form in all material respects
with the requirements of the
Securities Act and the Rules and
Regulations. The Registration
Statement and all post-effective
amendments thereto have become
effective under the Securities Act
and, to the best of such counsel's
knowledge, no stop order suspending
the effectiveness of the
Registration Statement has been
issued and no proceedings for that
purpose have been instituted or are
pending before or contemplated by
the Commission and all filings
required by Rule 497 of the Rules
and Regulations have been made.
(vi) All summaries in the Prospectus of
statutes, regulations, legal or
governmental proceedings, contracts
and other documents accurately
present the information required to
be shown in order to make the
statements made therein not
misleading; and such counsel does
not know of any contracts or
documents required to be summarized
or described therein or to be filed
as exhibits thereto which are not so
summarized, described or filed, nor
does such counsel know of any
pending or threatened litigation or
any governmental proceeding, statute
or regulation which would affect the
subject
- 14 -
<PAGE> 15
matter of this Agreement or is
required to be described in the
Prospectus which is not so described.
(vii) The information in the Prospectus
under the caption "Tax Status," has
been reviewed by such counsel, is
correct in all respects and does not
omit to state any material matter of
law relating to the taxation of the
Company and its shareholders, and
that if the Company is operated in
accordance with the statements made
in the Prospectus, the Company will
qualify as a regulated investment
company, under Subchapter M of the
Internal Revenue Code of 1986, as
amended.
(viii) The Company is a small business
lending company approved by the
Small Business Administration.
(ix) The Company meets all requirements
to qualify as a "business
development company" as that term is
defined in the 1940 Act.
(x) The Shares are duly authorized for
quotation in the Nasdaq National
Market and a registration statement
has been filed pursuant to Section
12 of the Exchange Act for such
Shares and has been declared
effective.
Such opinion shall also contain a statement that such counsel
has no reason to believe that (i) the Registration Statement, as of its
Effective Date, or any amendment thereto, at the time it became effective,
contained any untrue statement of a material fact or omitted to state any
material fact required to be stated therein or necessary in order to make the
statements therein not misleading, or (ii) the Prospectus or any supplement or
amendment thereto on such Closing Date or at the time such Prospectus or
supplement or amendment thereto was issued contains or contained any untrue
statement of a material fact or omits or omitted to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
(d) On the Closing Date, there shall have been
furnished to you the opinion (addressed to the Underwriter) of Sutherland,
Asbill & Brennan, counsel for Allied Advisers, dated as of the Closing Date and
in form and substance satisfactory to counsel for the Underwriter, to the
effect that:
- 15 -
<PAGE> 16
(i) Allied Advisers has been duly
incorporated and is validly existing
as a corporation in good standing
under the laws of the State of
Maryland, with full power and
authority to own, lease and operate
its properties and conduct its
business, and is duly qualified to
do business and is in good standing
in the District of Columbia.
(ii) This Agreement and the Advisory
Agreement have been duly authorized,
executed and delivered by Allied
Advisers and each complies with all
applicable provisions of the
Advisers Act; this Agreement
(assuming its due execution and
delivery by you), and the Advisory
Agreement each constitutes the valid
and binding obligation of Allied
Advisers and is enforceable against
Allied Advisers in accordance with
its terms (a) subject, as to
enforcement, to bankruptcy,
insolvency, reorganization and other
laws of general applicability
relating to or affecting creditors'
rights and to general equity
principles, and (b) except for
rights to indemnity under this
Agreement and the Advisory
Agreement, to the extent that such
rights may be limited by federal or
state securities laws or the public
policy underlying such laws; the
execution, delivery and performance
of this Agreement and the Advisory
Agreement by Allied Advisers will
not conflict with, or result in the
creation or imposition of any lien,
charge or encumbrance upon any
property or asset of Allied Advisers
pursuant to the terms of, result in
a breach or violation by Allied
Advisers of any of the terms or
provisions of, or constitute a
default by Allied Advisers under,
any agreement, indenture or
instrument filed by the Company or
Allied Advisers with the Commission
or known to such counsel, to which
Allied Advisers is a party or to
which it is bound or to which it or
its property is subject, or result
in a violation of the corporate
charter, bylaws or other governing
documents of Allied Advisers or any
statute, rule, administrative
regulation, or, insofar as such
counsel knows, any judgment, decree,
order, rule or regulation of any
court or governmental agency or body
having jurisdiction over Allied
Advisers or any of its property; and
no consent, approval,
- 16 -
<PAGE> 17
authorization or order of, or
filing or registration with, any
court, governmental agency or body or
financial institution is required
for the execution, delivery and
performance of this Agreement or the
Advisory Agreement by Allied
Advisers, except such as has been
obtained and such as may be required
under applicable state securities
laws.
(iii) Allied Advisers is duly registered
with the Commission under the
Advisers Act as an investment
adviser and is not prohibited by the
Advisers Act, or the rules and
regulations under such act, from
acting for the Company under the
Advisory Agreement as contemplated
by the Prospectus.
(iv) Such counsel does not know of any
litigation or any proceeding pending
or threatened against Allied
Advisers that could affect the
subject matter of this Agreement or
the Advisory Agreement or the
registration or good standing of
Allied Advisers with the Commission,
which is required to be disclosed in
the Prospectus which is not
disclosed and correctly summarized
therein.
(v) To the best of such counsel's
knowledge, Allied Advisers is not in
violation of its corporate charter
or bylaws, or in material default
under any agreement, indenture or
instrument.
(vi) The description of Allied Advisers
in the Registration Statement and
the Prospectus does not contain any
untrue statement of a material fact
or omit to state any material fact
required to be stated therein or
necessary to make the statements
therein not misleading.
(e) There shall have been furnished to you a
certificate, dated the Closing Date and addressed to you, signed by the
Chairman of the Board or the President and by the Chief Financial Officer of
the Company to the effect that: (i) the representations and warranties of the
Company contained in this Agreement are true and correct, as if made at and as
of the Closing Date, and the Company has complied with all the agreements and
satisfied all the conditions on its part to be complied with or satisfied at or
prior to the Closing Date; (ii) to the knowledge of such officers based upon
due inquiry of appropriate personnel of the Commission, no stop order
suspending
- 17 -
<PAGE> 18
the effectiveness of the Registration Statement has been issued, and no
proceeding for that purpose has been initiated or threatened; (iii) the signers
of said certificate have carefully examined the Registration Statement and the
Prospectus, and any amendments or supplements thereto, and such documents (a)
contain all statements and information required to be included therein, and (b)
do not include any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading; and (iv) since the Effective Date there has occurred no
event required to be set forth in an amendment or supplement to the
Registration Statement or the Prospectus which has not been so set forth.
(f) There shall have been furnished to you a
certificate, dated the Closing Date and addressed to you, signed by the
Chairman of the Board or the President of Allied Advisers to the effect that:
(i) the representations and warranties of Allied Advisers contained in this
Agreement are true and correct, as if made at and as of the Closing Date, and
Allied Advisers has complied with all the agreements and satisfied all the
conditions on its part to be complied with or satisfied at or prior to the
Closing Date; (ii) the signer of said certificate has carefully examined the
Registration Statement and the Prospectus, and any amendments or supplements
thereto, and such documents (a) contain all statements and information required
to be included therein concerning Allied Advisers, and (b) do not include any
untrue statement of a material fact or omit to state any material fact required
to be stated therein concerning Allied Advisers or necessary to make such
statements not misleading; and (iii) since the Effective Date there has
occurred no event concerning Allied Advisers required to be set forth in an
amendment or supplement to the Registration Statement or the Prospectus which
has not been so set forth.
(g) Since the Effective Date, the Company shall not
have become a party to or the subject of any litigation which is materially
adverse to the Company, nor shall there have been a material adverse change in
the general affairs, operations, business, prospects, key personnel,
capitalization, financial condition or net worth of the Company, whether or not
arising in the ordinary course of business, which loss, litigation or change,
in your judgment, shall render it impractical or inadvisable to proceed with
the payment for and delivery of the Shares.
(h) On the Closing Date, you shall have received a
letter of Matthews, Carter and Boyce, dated the Closing Date and addressed to
you, confirming that they are independent certified public accountants within
the meaning of the Securities Act and the Rules and Regulations and stating, as
of the date of such letter (or, with respect to matters involving changes or
developments since the respective dates as of which specified
- 18 -
<PAGE> 19
financial information is given in the Prospectus, as of a date not more than
five days prior to the date of such letter), the conclusions and findings of
such firm with respect to the financial information and other matters covered
by its letter delivered to you concurrently with the execution of this
Agreement and confirming the conclusions and findings set forth in such prior
letter.
(i) You shall have been furnished such additional
documents and certificates as you or counsel for the Underwriter may reasonably
request.
(j) The Shares to be purchased on the Closing Date by
the Underwriter shall have been approved for quotation in the Nasdaq National
Market, and Shares of the same class of the Company's common stock are so
quoted.
All such opinions, certificates, letters and documents shall
be in compliance with the provisions hereof only if they are satisfactory in
form and substance to you and to counsel for the Underwriter. The Company
shall furnish to you conformed copies of such opinions, certificates, letters
and other documents in such number as you shall reasonably request. If any of
the conditions specified in this Section 5 shall not have been fulfilled when
and as required by this Agreement, the Agreement and all obligations of the
Underwriter hereunder may be cancelled by you at, or at any time prior to, the
Closing Date. Any such cancellation shall be without liability of the
Underwriter to the Company. Notice of such cancellation shall be given to the
Company in writing, or by telegraph or telephone and confirmed in writing.
6. Indemnification and Contribution. (a) The Company shall
indemnify and hold harmless the Underwriter against any loss, claim, damage or
liability (or any action in respect thereof), joint or several, to which the
Underwriter may become subject, under the Securities Act or otherwise, insofar
as such loss, claim, damage or liability (or action in respect thereof) arises
out of or is based upon (i) any untrue statement or alleged untrue statement of
a material fact contained in the Registration Statement, any Preliminary
Prospectus, the Prospectus or the Registration Statement as amended or
supplemented or in any Blue Sky application or other document executed by the
Company specifically for that purpose or based upon written information
furnished by the Company filed in any state or other jurisdiction in order to
qualify any or all of the Shares under the securities laws thereof (any such
application, document or information being hereinafter referred to as a "Blue
Sky Application"), (ii) the omission or alleged omission to state in the
Registration Statement, any Preliminary Prospectus, the Prospectus or the
Registration Statement as amended or supplemented or in any Blue Sky
Application a material fact required to be stated therein or
- 19 -
<PAGE> 20
necessary to make the statements therein not misleading; or (iii) a breach of a
representation warranty, or covenant made by the Company herein; and shall
reimburse the Underwriter promptly after receipt of invoices from the
Underwriter for any legal or other expenses as may reasonably be incurred by
the Underwriter in connection with investigating, preparing to defend or
defending against or appearing as a third-party witness in connection with any
such loss, claim, damage, liability or action, notwithstanding the possibility
that payments for such expenses might later be held to be improper, in which
case such payments shall be promptly refunded; provided, however, that the
Company shall not be liable under this paragraph 6(a) in any such case to the
extent, but only to the extent, that any such loss, claim, damage, liability or
action arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission made in reliance upon and in
conformity with written information, other than tax-related information,
furnished to the Company by or on behalf of the Underwriter specifically for
use in the preparation of the Registration Statement, any Preliminary
Prospectus, the Prospectus or the Registration Statement as amended or
supplemented, or any Blue Sky Application.
(b) Allied Advisers shall indemnify and hold
harmless the Underwriter against any loss, claim, damage or liability (or any
action in respect thereof), joint or several, to which the Underwriter may
become subject, under the Securities Act or otherwise, insofar as such loss,
claim, damage or liability (or action in respect thereof) arises out of or is
based upon (i) any untrue statement or alleged untrue statement of a material
fact with respect to itself contained in the Registration Statement, any
Preliminary Prospectus, the Prospectus or the Registration Statement as amended
or supplemented or in any document executed by Allied Advisers specifically for
that purpose or based upon written information furnished by Allied Advisers,
(ii) the omission or alleged omission to state in the Registration Statement,
any Preliminary Prospectus, the Prospectus or the Registration Statement as
amended or supplemented a material fact with respect to itself required to be
stated therein or necessary to make the statements therein not misleading, or
(iii) any breach by Allied Advisers of any representation, warranty or covenant
made herein by it; and shall reimburse the Underwriter promptly after receipt
of invoices from the Underwriter for any legal or other expenses as may
reasonably be incurred by the Underwriter in connection with investigating,
preparing to defend or defending against or appearing as a third-party witness
in connection with any such loss, claim, damage, liability or action,
notwithstanding the possibility that payments for such expenses might later be
held to be improper, in which case such payments shall be promptly refunded;
provided, however, that Allied Advisers shall not be liable under this
paragraph 6(b) in any such case to the extent, but only to the extent, that any
- 20 -
<PAGE> 21
such loss, claim, damage, liability or action arises out of or is based upon an
untrue statement or alleged untrue statement or omission or alleged omission
made in reliance upon and in conformity with written information furnished to
Allied Advisers by or on behalf of the Underwriter specifically for use in the
preparation of the Registration Statement, any Preliminary Prospectus, the
Prospectus or the Registration Statement as amended or supplemented, and
provided further that Allied Advisers shall be liable to such indemnified party
in any such case only to the extent that the Company fails to indemnify and
hold harmless such indemnified party pursuant to paragraph 6(a).
(c) The Underwriter shall indemnify and hold
harmless the Company and Allied Advisers against any loss, claim, damage or
liability (or any action in respect thereof) to which the Company may become
subject, under the Securities Act or otherwise, insofar as such loss, claim,
damage or liability (or action in respect thereof) arises out of or is based
upon (i) any untrue statement or alleged untrue statement of a material fact
contained in the Registration Statement, any Preliminary Prospectus, the
Prospectus or the Registration Statement as amended or supplemented, or in any
Blue Sky Application, or (ii) the omission or alleged omission to state in the
Registration Statement, any Preliminary Prospectus, the Prospectus or the
Registration Statement as amended or supplemented, or in any Blue Sky
Application a material fact required to be stated therein or necessary to make
the statements therein not misleading and shall reimburse the Company or Allied
Advisers promptly after receipt of invoices from the Company or Allied Advisers
for any legal or other expenses reasonably incurred by the Company or Allied
Advisers in connection with investigating, preparing to defend or defending
against or appearing as a third-party witness in connection with any such loss,
claim, damage, liability or action notwithstanding the possibility that
payments for such expenses might later be held to be improper, in which case
such payments shall be promptly refunded; provided, however, that such
indemnification or reimbursement shall be available in each such case to the
extent, but only to the extent, that such untrue statement or alleged untrue
statement or omission or alleged omission was made in reliance upon and in
conformity with written information furnished to the Company or Allied Advisers
by or on behalf of the Underwriter specifically for use in the preparation
thereof.
(d) Promptly after receipt by any indemnified party
under subsections (a), (b) or (c) above of notice of any claim or the
commencement of any action, the indemnified party shall, if a claim in respect
thereof is to be made against the indemnifying party under such subsection,
notify the indemnifying party in writing of the claim or the commencement of
that action; provided, however, that the failure so to notify the indemnifying
party shall not relieve it from any liability which it may have
- 21 -
<PAGE> 22
under this Section 6 except to the extent that it has been prejudiced in any
material respect by such failure or from any liability which it may have to an
indemnified party otherwise than under this Section 6. If any such claim or
action shall be brought against any indemnified party, and it shall notify the
indemnifying party thereof, the indemnifying party shall be entitled to
participate therein and, to the extent that it wishes, jointly with any other
similarly notified indemnifying party, to assume the defense thereof with
counsel reasonably satisfactory to the indemnified party. After notice from
the indemnifying party to the indemnified party of its election to assume the
defense of such claim or action, the indemnifying party shall not be liable to
the indemnified party under such subsection for any legal or other expenses
subsequently incurred by the indemnified party in connection with the defense
thereof other than reasonable costs of investigation; except that the
Underwriter shall have the right to employ counsel to represent it if it is
subject to liability arising out of any claim in respect of which indemnity may
be sought by the Underwriter against the Company or Allied Advisers under such
subsection if, in your reasonable judgement, it is advisable for you to be
represented by separate counsel, and in that event the fees and expenses of
such separate counsel shall be paid by the Company or Allied Advisers.
(e) If the indemnification provided for in this
Section 6 is unavailable in whole or in part to hold harmless an indemnified
party under subsections (a), (b) or (c) above, then each indemnifying party
shall, in lieu of indemnifying such indemnified party, contribute to the amount
paid or payable by such indemnified party as a result of the losses, claims,
damages or liabilities referred to in subsections (a), (b) or (c) above (i) in
such proportion as is appropriate to reflect the relative benefits received by
the Company and Allied Advisers on the one hand and the Underwriter on the
other from the offering of the Shares or (ii) if the allocation provided by
clause (i) above is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause (i)
above but also the relative fault of the Company and Allied Advisers on the one
hand and the Underwriter on the other in connection with the statements or
omissions that resulted in such losses, claims, damages or liabilities, or
actions in respect thereof, as well as any other relevant equitable
considerations. The relative benefits received by the Company and Allied
Advisers on the one hand and the Underwriter on the other shall be deemed to be
in the same proportion as the total net proceeds from the offering of the
Shares (before deducting expenses) received by the Company bear to the total
underwriting discounts and commissions received by the Underwriter, in each
case as set forth in the supplement dated July __, 1996 to the Prospectus.
Relative fault shall be determined by reference to, among other things, whether
the
- 22 -
<PAGE> 23
untrue or alleged untrue statement of a material fact or the omission or
alleged omission to state a material fact relates to information supplied by
the Company or Allied Advisers or the Underwriter and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such untrue statement or omission. The Company and Allied Advisers and the
Underwriter agree that it would not be just and equitable if contributions
pursuant to this subsection (e) were to be determined by pro rata allocation or
by any other method of allocation which does not take into account the
equitable considerations referred to in the first sentence of this subsection
(e). The amount paid by an indemnified party as a result of the losses or
claims, damages or liabilities (or actions in respect thereof) referred to in
the first sentence of this subsection (e) shall be deemed to include any legal
or other expenses reasonably incurred by such indemnified party in connection
with investigation, preparing to defend or defending against any action or
claim which is the subject of this subsection (e). Notwithstanding the
provisions of this subsection (e), the Underwriter shall not be required to
contribute any amount in excess of the amount by which the total price at which
the Shares underwritten by it and distributed to the public were offered to the
public exceeds the amount of any damages which the Underwriter has otherwise
been required to pay by reason of such untrue or alleged untrue statement or
omission or alleged omission. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be entitled
to contribution from any person who was not guilty of such fraudulent
misrepresentation. Each party entitled to contribution agrees that, upon the
service of a summons or other initial legal process upon it in any action
instituted against it for which contribution may be sought, it shall promptly
give written notice of such service to the party or parties from whom
contribution may be sought. However, the omission so to notify such party or
parties of any such service shall not relieve such party or parties from any
obligation it or they may have hereunder or otherwise (except as specifically
provided in this subsection (e)).
(f) The obligations of the Company and Allied
Advisers under this Section 6 shall be in addition to any liability which the
Company and Allied Advisers may otherwise have, and shall extend, upon the same
terms and conditions, to each person, if any, who controls the Underwriter
within the meaning of the Securities Act; and the obligations of the
Underwriter under this Section 6 shall be in addition to any liability that the
Underwriter may otherwise have, and shall extend, upon the same terms and
conditions, to each director of the Company and Allied Advisers (including any
person who, with his or her consent, is named in the Registration Statement as
about to become a director of the Company), to each Officer of the Company who
has signed the Registration Statement, to each of the officers of Allied
- 23 -
<PAGE> 24
Advisers and to each person, if any, who controls the Company or Allied
Advisers within the meaning of the Securities Act.
7. Effective Date and Termination. (a) This Agreement
shall become effective at 11:00 A.M., New York City time, on the first full
Business Day following the date hereof or at such earlier time after the
Registration Statement becomes effective as you shall first release the Shares
for sale to the public. You shall notify the Company immediately after you have
taken any action which causes this Agreement to become effective. Until this
Agreement is effective, it may be terminated by the Company by giving notice as
hereinafter provided to you, or by you by giving notice as hereinafter provided
to the Company, except that the provisions of Section 4(h) and Section 6 shall
at all times be effective. For purposes of this Agreement, the release of the
Shares for sale to the public shall be deemed to have been made when you
release, by telegram or otherwise, firm offers of the Shares or release for
publication a newspaper advertisement relating to the Shares, whichever occurs
first.
(b) Until the Closing Date, this Agreement may be
terminated by you by giving notice as hereinafter provided to the Company if
(i) the Company shall have failed, refused or been unable, at or prior to the
Closing Date, to perform any agreement on its part to be performed hereunder,
(ii) any other condition of the Underwriter's obligation hereunder is not
fulfilled, (iii) trading in securities generally on the New York Stock
Exchange, the American Stock Exchange or the Nasdaq National Market shall have
been suspended or minimum prices shall have been established on either of such
exchanges or such system by the Commission or such exchange or other regulatory
body or governmental authority having jurisdiction, (iv) a banking moratorium
is declared by either Federal or New York State authorities, (v) the United
States becomes engaged in hostilities or there is an escalation of hostilities
involving the United States or there is a declaration of a national emergency
or war by the United States, or (vi) there shall have taken place such a
material adverse change in general economic, political or financial conditions,
or the effect of international conditions on the financial markets in the
United States shall be such, as to make it inadvisable or impracticable, in the
judgment of a majority in interest of the Underwriter, to proceed with the
delivery of the Shares. Any termination of this Agreement pursuant to this
Section 8 shall be without liability on the part of the Company or the
Underwriter, except as otherwise provided in Sections 4(h) and 6 hereof.
Any notice referred to above may be given at the
address specified in Section 10 hereof in writing or by facsimile, telegraph or
telephone, and if by facsimile, telegraph or telephone, shall be immediately
confirmed in writing.
- 24 -
<PAGE> 25
8. Survival of Certain Provisions. The agreements contained
in Section 6 hereof and the representations, warranties and agreements of the
Company and Allied Advisers contained in Sections 1 and 4 hereof shall survive
the delivery of the Shares to the Underwriter hereunder and shall remain in
full force and effect, regardless of any termination or cancellation of this
Agreement or any investigations made by or on behalf of any indemnified party.
9. Notices. Except as otherwise provided in the Agreement,
(a) whenever notice is required by the provisions of this Agreement to be given
to the Company or Allied Advisers, such notice shall be in writing or by
facsimile addressed to the Company c/o Allied Advisers, or to Allied Advisers
itself, at 1666 K Street, N.W., Suite 901, Washington, D.C. 20006 Attention:
David Gladstone, facsimile: (202) 659-2053; and (b) whenever notice is required
by the provisions of this Agreement to be given to the Underwriter, such notice
shall be in writing or by facsimile addressed to Lehman Brothers Inc., Three
World Financial Center, New York, New York 10285 Attention: Syndicate
Department, facsimile: (212) 528-6588.
10. Information Furnished by Underwriter. The Underwriter
confirms that the statements set forth in the fourth, fifth and tenth
paragraphs of the supplement dated July __, 1996 to the Prospectus, insofar as
it relates to the distribution of the Shares by the Underwriter, constitute the
written information furnished by or on behalf of the Underwriter referred to in
paragraph (a)(ii) of Section 1 hereof and in paragraphs (a), (b) and (c) of
Section 6 hereof.
11. Parties. This Agreement shall inure to the benefit of
and be binding upon the Underwriter, the Company and Allied Advisers, and their
respective successors. This Agreement and the terms and provisions hereof are
for the sole benefit of only those persons, except that (a) the
representations, warranties, indemnities and agreements of the Company and
Allied Advisers contained in this Agreement shall also be deemed to be for the
benefit of the person or persons, if any, who controls the Underwriter within
the meaning of Section 15 of the Securities Act and (b) the indemnity agreement
of the Underwriter contained in Section 6 hereof shall be deemed to be for the
benefit of directors of the Company (including any individuals identified in
the Registration Statement as Directors of the Company but not yet elected as
such on the date hereof), officers of the Company who signed the Registration
Statement, any person controlling the Company or Allied Advisers and the
Directors of Allied Advisers. Nothing in this Agreement shall be construed to
give any person, other than the persons referred to in this paragraph, any
legal or equitable right, remedy or claim under or in respect of this Agreement
or any provision contained herein.
- 25 -
<PAGE> 26
12. Definition of "Business Day". For purposes of this
Agreement, "Business Day" means any day on which both the New York Stock
Exchange, Inc. and banks in New York are open for business.
13. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York.
14. Counterparts. This Agreement may be signed in one or
more counterparts, each of which shall constitute an original and all of which
together shall constitute one and the same agreement.
- 26 -
<PAGE> 27
Please confirm, by signing and returning to us two
counterparts of this Agreement, that the foregoing correctly sets forth the
Agreement among the Company, Allied Advisers and the Underwriter.
Very truly yours,
ALLIED CAPITAL LENDING CORPORATION
By:
---------------------------------------
Katherine C. Marien
President
ALLIED CAPITAL ADVISERS, INC.
By:
---------------------------------------
Joan Sweeney
President
Confirmed and accepted as of
the date first above mentioned
LEHMAN BROTHERS, INC.
By:
-------------------------------------
Name:
Title:
- 27 -
<PAGE> 28
SCHEDULE I
<TABLE>
<CAPTION>
Underwriter Number of Shares
----------- ----------------
<S> <C>
Lehman Brothers Inc. 174,358
</TABLE>
- 28 -
<PAGE> 1
EXHIBIT n
Matthews, Carter and Boyce
A Professional Corporation
Allied Capital Lending Corporation
Washington, DC 20006
We hereby consent to the use in the Prospectus incorporated by
reference into this Post-Effective Amendment No. 1 to the Registration
Statement on Form N-2 (File No. 333-02185), in the form in which it becomes
effective, of our report dated February 2, 1996 relating to the financial
statements of Allied Capital Lending Corporation for the years ended December
31, 1995, 1994 and 1993, which appear in such Prospectus. We also consent to
the reference to us under the headings "Financial Highlights" and "Reports and
Independent Accountants" in such Prospectus.
/s/ Matthews, Carter and Boyce
McLean, Virginia
July 9, 1996
Certified Public 8200 Greensboro Drive, Suite 1000 Tel: 703-761-4600
Accountants McLean, Virginia 22102-3864 Fax: 703-761-3139
<PAGE> 1
EXHIBIT s.2
POWER OF ATTORNEY
The undersigned Director of Allied Capital Lending Corporation, a
Maryland corporation (the "Company"), hereby constitutes and appoints David
Gladstone, Katherine C. Marien, and Jon A. DeLuca and each of them (with full
power to each of them to act alone), his true and lawful attorney-in-fact and
agent, with full power of substitution to each, for him and on his behalf and
in his name, place, and stead, to execute and file any of the documents
referred to below relating to registration under the Securities Act of 1933, as
amended (the "1933 Act"), of the offer and sale of shares of common stock newly
issued or reissued by the Company. Such documents shall include, but shall not
be limited to, registration statements on any form or forms under the 1933 Act,
and any and all amendments and supplements thereto, with all exhibits and all
instruments necessary or appropriate in connection therewith, each of said
attorneys-in-fact and agents and his or her substitutes being empowered to act
with or without the others or other, and to have full power and authority to do
or cause to be done in the name and on behalf of the undersigned each and every
act and thing requisite and necessary or appropriate with respect thereto to be
done in and about the premises in order to effectuate the same, as fully to all
intents and purposes as the undersigned might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents, or any of
them, may do or cause to be done by virtue thereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand, this
27th day of June, 1996.
/s/ R B Martin
---------------------------
Robin B. Martin
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY UNAUDITED FINANCIAL INFORMATION EXTRACTED FROM
ALLIED CAPITAL LENDING CORPORATION AND SUBSIDIARY'S CONSOLIDATED BALANCE SHEET
AS OF MARCH 31, 1996 AND CONSOLIDATED STATEMENTS OF OPERATIONS, CHANGES IN NET
ASSETS AND CASH FLOWS FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS
INCORPORATED INTO PART A OF THIS POST-EFFECTIVE AMENDMENT NO. 1 TO THE COMPANY'S
REGISTRATION STATEMENT ON FORM N-2 (THE "REGISTRATION STATEMENT") BY REFERENCE
FROM PAGES F-1 THROUGH F-14 OF THE PROSPECTUS INCLUDED IN PRE-EFFECTIVE
AMENDMENT NO. 2 TO THE REGISTRATION STATEMENT, AS FILED WITH THE COMMISSION ON
APRIL 29, 1996 (ACCESSION NO. 0000950133-96-000425).
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<INVESTMENTS-AT-COST> 44,532
<INVESTMENTS-AT-VALUE> 44,356
<RECEIVABLES> 703
<ASSETS-OTHER> 638
<OTHER-ITEMS-ASSETS> 5,467
<TOTAL-ASSETS> 51,164
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 18,199
<TOTAL-LIABILITIES> 18,199
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 33,318
<SHARES-COMMON-STOCK> 4,389
<SHARES-COMMON-PRIOR> 4,385
<ACCUMULATED-NII-CURRENT> (177)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (176)
<NET-ASSETS> 32,965
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 1,591
<OTHER-INCOME> 662
<EXPENSES-NET> 842
<NET-INVESTMENT-INCOME> 1,411
<REALIZED-GAINS-CURRENT> (60)
<APPREC-INCREASE-CURRENT> (21)
<NET-CHANGE-FROM-OPS> 1,330
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 1,315
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 4
<NET-CHANGE-IN-ASSETS> 81
<ACCUMULATED-NII-PRIOR> (213)
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 314
<INTEREST-EXPENSE> 396
<GROSS-EXPENSE> 842
<AVERAGE-NET-ASSETS> 32,925
<PER-SHARE-NAV-BEGIN> 7.50
<PER-SHARE-NII> 0.32
<PER-SHARE-GAIN-APPREC> (0.02)
<PER-SHARE-DIVIDEND> 0.30
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 7.51
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 17,461
<AVG-DEBT-PER-SHARE> 3.98
</TABLE>
