<PAGE> 1
Form 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Quarterly report pursuant to section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period Commission file number:
ended JUNE 30, 1997 0-22832
------------- ------------------------
ALLIED CAPITAL LENDING CORPORATION
--------------------------------------------------------
(exact name of Registrant as specified in its charter)
MARYLAND 52-1081052
- ----------------------- -------------------------
(State or jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
c/o ALLIED CAPITAL ADVISERS, INC.
1666 K STREET, NW
9TH FLOOR
WASHINGTON, DC 20006
-------------------------------------------------
(Address of principal executive offices)
Registrant's telephone number, including area code: (202) 331-1112
--------------
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 12 of 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter periods as the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. YES X NO
--- ----- -- -----
On August 8, 1997 there were 5,150,448 shares outstanding of the Registrant's
common stock, $0.0001 par value.
<PAGE> 2
ALLIED CAPITAL LENDING CORPORATION
FORM 10-Q INDEX
<TABLE>
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheet as of June 30, 1997 and December 31, 1996 ........................................1
Consolidated Statement of Operations - For the Three and Six Months Ended
June 30, 1997 and 1996 ......................................................................................2
Consolidated Statement of Changes in Net Assets - For the Six Months Ended
June 30, 1997 and 1996 ......................................................................................3
Consolidated Statement of Cash Flows - For the Six Months Ended
June 30, 1997 and 1996 ......................................................................................4
Notes to the Consolidated Financial Statements ............................................................. 5
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations ....................................................................................7
PART II. OTHER INFORMATION
Item 1. Legal Proceedings .............................................................................................9
Item 2. Changes in Securities .........................................................................................9
Item 3. Defaults Upon Senior Securities ...............................................................................9
Item 4. Submission of Matters to a Vote of Security Holders ...........................................................9
Item 5. Other Information .............................................................................................9
Item 6. Exhibits and Reports on Form 8-K .............................................................................9
Signatures ...........................................................................................................10
</TABLE>
<PAGE> 3
PART I - Financial Information
Item 1. Financial Statements
ALLIED CAPITAL LENDING CORPORATION
CONSOLIDATED BALANCE SHEET
(in thousands, except number of shares)
<TABLE>
<CAPTION>
June 30, 1997 December 31, 1996
------------- -----------------
(unaudited)
<S> <C> <C>
ASSETS
Investments at value:
Loans (cost: 1997 - $53,437; 1996 - $54,867) . . . . . . . $53,117 $ 54,613
Loans held for sale (cost: 1997 - $2,785; 1996 - $5,444) . 3,032 5,795
------ --------
Total investments . . . . . . . . . . . . . . . . . 56,149 60,408
Cash and cash equivalents . . . . . . . . . . . . . . . . . . 2,636 1,316
Accrued interest receivable . . . . . . . . . . . . . . . . . 857 861
Servicing asset . . . . . . . . . . . . . . . . . . . . . . . 5,615 5,043
Other assets . . . . . . . . . . . . . . . . . . . . . . . . 1,727 774
------ -------
Total assets . . . . . . . . . . . . . . . . . . . . . . $66,984 $ 68,402
====== =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Notes payable . . . . . . . . . . . . . . . . . . . . . . . $22,102 $23,743
Accounts payable and accrued expenses . . . . . . . . . . . 2,495 1,857
Investment advisory fee payable . . . . . . . . . . . . . . 411 421
Dividends and distributions payable . . . . . . . . . . . . - 410
------ -------
Total liabilities . . . . . . . . . . . . . . . . . . . 25,008 26,431
------ ------
Commitments and Contingencies
Shareholders' Equity:
Common stock, $0.0001 par value; 20,000,000 shares
authorized; 5,143,782 and 5,126,905 shares issued and
outstanding at 6/30/97 and 12/31/96 . . . . . . . . . . . . 1 1
Additional paid-in capital . . . . . . . . . . . . . . . . . 42,660 42,403
Net unrealized appreciation (depreciation) on investments . . (73) 97
Distributions in excess of accumulated earnings . . . . . . (612) (530)
------ ------
Total shareholders' equity . . . . . . . . . . . . 41,976 41,971
------ ------
Total liabilities and shareholders' equity . . . . $66,984 $ 68,402
====== =======
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS
1
<PAGE> 4
ALLIED CAPITAL LENDING CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS
(in thousands, except per share amounts)
(unaudited)
<TABLE>
<CAPTION>
For the Three Months Ended For the Six Months Ended
June 30, June 30,
------- -------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Investment Income:
Interest . . . . . . . . . . . . . . . . . . . . . . . . $2,042 $1,668 $4,066 $3,259
Premium income . . . . . . . . . . . . . . . . . . . . . 999 269 1,481 931
----- ----- ----- -----
Total investment income . . . . . . . . . . . . . . . . 3,041 1,937 5,547 4,190
----- ----- ----- -----
Operating Expenses:
Investment advisory fee . . . . . . . . . . . . . . . . . 412 371 858 685
Interest expense . . . . . . . . . . . . . . . . . . . . 605 466 1,125 862
Other operating expenses . . . . . . . . . . . . . . . . 171 209 306 341
----- ----- ----- -----
Total expenses . . . . . . . . . . . . . . . . . . . . 1,188 1,046 2,289 1,888
----- ----- ----- -----
Net investment income . . . . . . . . . . . . . . . . . . . 1,853 891 3,258 2,302
Net realized losses on investments . . . . . . . . . . . . (16) (24) (44) (84)
----- ----- ----- -----
Net investment income before net unrealized
Appreciation (depreciation) on investments . . . . . . . . 1,837 867 3,214 2,218
Net unrealized appreciation (depreciation) on investments . (98) 279 (170) 258
----- ----- ------ -----
Net increase in net assets resulting from operations . . . $1,739 $1,146 $3,044 $2,476
===== ===== ===== =====
Earnings per share . . . . . . . . . . . . . . . . . . . . $ 0.34 $ 0.25 $ 0.59 $ 0.55
===== ===== ===== =====
Weighted average number of shares and share
Equivalents outstanding . . . . . . . . . . . . . . . . . 5,139 4,549 5,143 4,469
===== ===== ===== =====
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS
2
<PAGE> 5
ALLIED CAPITAL LENDING CORPORATION
CONSOLIDATED STATEMENT OF CHANGES IN NET ASSETS
(in thousands, except per share amounts)
(unaudited)
<TABLE>
<CAPTION>
For the Six Months Ended
June 30,
-------
1997 1996
---- ----
<S> <C> <C>
Increase in Net Assets Resulting from Operations:
Net investment income . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,258 $ 2,302
Net realized losses on investments . . . . . . . . . . . . . . . . . . (44) (84)
Net unrealized appreciation (depreciation) on investments . . . . . . . (170) 258
------ ------
Net increase in net assets resulting from operations . . . . . . 3,044 2,476
----- -----
Distributions to Shareholders . . . . . . . . . . . . . . . . . . . . . . (3,296) (2,797)
------ ------
Capital Share Transactions:
Sale of common stock . . . . . . . . . . . . . . . . . . . . . . . . . 100 6,809
Issuance of common stock in lieu of cash distributions . . . . . . . . 157 130
------ -----
Net increase in net assets resulting from capital share
transactions . . . . . . . . . . . . . . . . . . . . . . . . 257 6,939
------ -----
Total increase in net assets . . . . . . . . . . . . . . . . . . . . . . 5 6,618
Net assets at beginning of period . . . . . . . . . . . . . . . . . . . . 41,971 32,884
------ ------
Net assets at end of period . . . . . . . . . . . . . . . . . . . . . . . $41,976 $39,502
====== ======
Net asset value per share . . . . . . . . . . . . . . . . . . . . . . . . $ 8.16 $ 7.99
====== ======
Shares outstanding at end of period . . . . . . . . . . . . . . . . . . . 5,143 4,943
====== ======
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS
3
<PAGE> 6
ALLIED CAPITAL LENDING CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(IN THOUSANDS)
(unaudited)
<TABLE>
<CAPTION>
For the Six Months Ended
June 30,
-------
1997 1996
---- ----
<S> <C> <C>
Cash Flows from Operating Activities:
Net increase in net assets resulting from operations . . . . . . . . . $ 3,044 $ 2,476
Adjustments to reconcile net increase in net assets resulting from
operations to net cash provided by (used in) operating activities:
Premium income . . . . . . . . . . . . . . . . . . . . . . . . . . (1,481) (931)
Amortization of loan discounts and fees . . . . . . . . . . . . . (320) (192)
Net realized losses on investments . . . . . . . . . . . . . . . . 44 84
Net unrealized (appreciation) depreciation on investments . . . . 170 (258)
Changes in assets and liabilities:
Accrued interest receivable . . . . . . . . . . . . . . . . . . 4 (69)
Excess servicing asset . . . . . . . . . . . . . . . . . . . . . (572) (453)
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . (953) (199)
Accounts payable and accrued expenses . . . . . . . . . . . . . 638 (944)
Investment advisory fee payable . . . . . . . . . . . . . . . . (10) 42
------- ------
Net cash provided by (used in) operating activities . . . . . 564 (444)
------- ------
Cash flows from Investing Activities:
Loan originations . . . . . . . . . . . . . . . . . . . . . . . . . . (26,862) (21,619)
Proceeds from the sale of loans . . . . . . . . . . . . . . . . . . . 26,886 11,860
Collection of principal . . . . . . . . . . . . . . . . . . . . . . . 5,810 4,985
------ -------
Net cash used in investing activities . . . . . . . . . . . . 5,834 (4,774)
------ -------
Cash Flows from Financing Activities:
Proceeds from the issuance of common stock . . . . . . . . . . . . . 100 6,809
Dividends and distributions . . . . . . . . . . . . . . . . . . . . (3,537) (3,007)
Net borrowings (repayments) under revolving lines of credit . . . . (1,641) (250)
------- -------
Net cash provided by financing activities . . . . . . . . . . (5,078) 3,552
------- ------
Net increase in cash and cash equivalents . . . . . . . . . . . . . . . . 1,320 (1,666)
Cash and cash equivalents, beginning of period . . . . . . . . . . . . . 1,316 3,020
------ ------
Cash and cash equivalents, end of period . . . . . . . . . . . . . . . . $ 2,636 $ 1,354
======= ======
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS
4
<PAGE> 7
ALLIED CAPITAL LENDING CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1997
(UNAUDITED)
NOTE 1. ORGANIZATION
Effective January 1, 1997, Allied Capital Lending Corporation
(Company) reorganized to provide the Company with greater flexibility
to generate loans and to better match its financing with its
investment opportunities, and to maximize the return on the Company's
loans (Reorganization). The Company formed two subsidiaries, Allied
Capital SBLC Corporation (Allied SBLC) and Allied Capital Credit
Corporation (Allied Credit). Both Allied SBLC and Allied Credit
(Subsidiaries) are Maryland corporations and closed-end management
investment companies that have elected to be regulated as business
development companies (BDCs) under the Investment Company Act of 1940
(1940 Act). Effective January 1, 1997, the Company assigned its small
business lending company (SBLC) license and transferred all Section
7(a) loans and related assets and liabilities to Allied SBLC in return
for 100% of Allied SBLC's common stock. The Company dissolved ACLC
Limited Partnership (Partnership), of which the Company had a 1%
general partnership interest and owned a 98% limited partnership
interest, and purchased the 1% limited partnership interest not owned
by the Company. The Company assumed all of the Partnership's assets
and liabilities upon the dissolution. The consolidated financial
statements of the Company for 1996 include the accounts of the Company
and the Partnership.
NOTE 2. GENERAL
In the opinion of management, the accompanying unaudited consolidated
financial statements of the Company contain all adjustments
(consisting of only normal recurring accruals) necessary to present
fairly the Company's consolidated financial position as of June 30,
1997 and the results of operations and changes in net assets for the
periods indicated. Certain information and footnote disclosures
normally included in the financial statements prepared in accordance
with generally accepted accounting principles have been condensed or
omitted. It is suggested that these financial statements be read in
conjunction with the financial statements and notes thereto included
in the Company's December 31, 1996 Annual Report. The results of
operations for the three and six months ended June 30, 1997 are not
necessarily indicative of the operating results to be expected for the
full year. Certain reclassifications have been made to the 1996
financial statements in order to conform to the 1997 presentation.
In June 1996, SFAS No. 125, "Accounting for Transfers and Servicing of
Financial Assets and Extinguishments of Liabilities" was issued. SFAS
No. 125 provides accounting and reporting standards for transfers and
servicing of financial assets and extinguishments of liabilities based
on a financial-components approach that focuses on control. Under
this approach, after a transfer of financial assets, financial and
servicing assets are recognized if controlled or liabilities are
recognized if incurred. Financial and servicing assets are removed
from the statement of condition when control has been surrendered and
liabilities are removed when extinguished. SFAS No. 125 was effective
and adoptive on January 1, 1997 and will be applied prospectively.
The Company did not experience any material affect on its financial
position from this implementation.
NOTE 3. DIVIDENDS
The Company's board of directors declared and paid two dividends to
shareholders totaling $0.64 per share during the six months ended June
30, 1997. The Company paid quarterly dividends equal to $0.32 per
share each for the three months ended March 31, 1997 and June 30,
1997, respectively. In connection with these dividends, the Company
paid cash of $3,139,000 and distributed new shares of stock to
participants in the dividend reinvestment plan with a value of
$157,000 for a total of $3,296,000.
NOTE 4. NOTES PAYABLE
The Company has a $25,000,000 secured revolving line of credit with a
commercial bank to finance its Section 7(a) loans which expires May
31, 1998. The interest rate associated with this line of credit is
equal to the one-
5
<PAGE> 8
month LIBOR plus 1.6 percent per annum for borrowings secured by the
guaranteed portion of Section 7(a) loans and the one-month LIBOR plus
2.2 percent per annum for borrowings secured by the unguaranteed
portion of Section 7(a) loans. Interest is payable monthly. As of
June 30, 1997, the Company was paying interest rates ranging from
7.29 percent to 7.89 percent per annum on the amounts outstanding
under this line. The line of credit requires an annual facility fee of
$50,000, payable in quarterly installments. As of June 30, 1997, the
Company had outstanding borrowings under this secured line of credit
equal to $18,635,000.
The Company also has a $15,000,000 secured revolving line of credit
with a commercial bank to finance its Section 504 loans and companion
loans to Section 7(a) loans. This line of credit bears interest at a
rate equal to the one-month LIBOR plus 1.6 percent per annum, payable
monthly and expires May 31, 1998. As of June 30, 1997, the Company
was paying interest of 7.29 percent on the amounts outstanding under
this line. The agreement requires an annual facility fee of $30,000,
payable in quarterly installments. As of June 30, 1997, the Company
had outstanding borrowings under this line of credit equal to
$3,467,000.
NOTE 5. EARNINGS PER SHARE
In March 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No.128, "Earnings per
Share" (SFAS 128). SFAS 128 is effective for financial statements for
both interim and annual periods ending after December 15, 1997. SFAS
128 modifies the method of calculation of net income per share and
also requires a reconciliation between basic and diluted per share
amounts. Early adoption of the statement prior to the end of 1997 is
not allowed.
The following table (in thousands, except per share data) presents the
effect of SFAS 128 on the Company's net income per share as if adopted
for current period disclosure:
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
--------------------------- ------------------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net income . . . . . . . . . . . . . . . . . . . $1,739 $1,146 $3,044 $2,476
===== ===== ===== ======
Basic average shares outstanding . . . . . . . . 5,139 $4,549 $5,133 4,469
===== ===== ===== =====
Basic net income per share . . . . . . . . . . . $ 0.34 $0.25 $0.59 $ 0.55
===== ===== ===== =====
Effect of dilutive securities:
Outstanding stock options . . . . . . . . . - - 10 -
----- ----- ----- -----
Diluted average shares outstanding . . . . . . . 5,139 $4,549 $5,143 4,469
===== ===== ====== =====
Diluted net income per share . . . . . . . . . . $ 0.34 $0.25 $0.59 $ 0.55
===== ===== ===== =====
</TABLE>
NOTE 6. COMMITMENTS AND CONTINGENCIES
Commitments. The Company had loan commitments outstanding equal to
$48,611,000 as of June 30, 1997 to invest in various existing and
prospective portfolio companies.
Litigation. The Company is party to certain lawsuits. While the
outcome of these legal proceedings cannot at this time be predicted
with certainty, management does not expect that these actions will
have a material effect upon the consolidated financial position of the
Company.
Note 6. SUBSEQUENT EVENT
On August 14, 1997, the Company announced that it has entered into an
Agreement and Plan of Merger with Allied Capital Corporation, Allied
Capital Corporation II, Allied Capital Commercial Corporation and
Allied Capital Advisers, Inc., pursuant to which Allied Capital
Corporation, Allied Capital Corporation II, Allied Capital Commercial
Corporation and Allied Capital Advisers, Inc. would merge with and
into the Company through a stock for stock exchange. The merger is
subject to the approval by at least two-thirds of the stockholders of
each of the merging companies, as well as subject to certain regulatory
approvals and other customary closing conditions. If all required
approvals are obtained, the Company anticipates the merger would be
effective on December 31, 1997.
6
<PAGE> 9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the financial
statements and notes thereto included elsewhere in this report.
ORGANIZATION
Effective January 1, 1997, Allied Capital Lending Corporation (Company)
reorganized to provide the Company with greater flexibility to generate loans
and to better match its financing with its investment opportunities, and to
maximize the return on the Company's loans (Reorganization). The Company formed
two subsidiaries, Allied Capital SBLC Corporation (Allied SBLC) and Allied
Capital Credit Corporation (Allied Credit). Both Allied SBLC and Allied Credit
(Subsidiaries) are Maryland corporations and closed-end management investment
companies that have elected to be regulated as business development companies
(BDCs) under the 1940 Act. Effective January 1, 1997, the Company assigned its
SBLC license and transferred all Section 7(a) loans and related assets and
liabilities to Allied SBLC in return for 100% of Allied SBLC's common stock.
The Company, dissolved the Partnership and purchased the 1% limited partnership
interest not owned by the Company. The Company assumed all of the
Partnership's assets and liabilities upon the dissolution.
LIQUIDITY AND CAPITAL RESOURCES
The Company requires capital to originate loans, to carry those loans until
sale occurs, and to carry the unsold portion of the principal amount of the
loans to maturity. The primary source available to the Company to fund its
loan originations is its credit facilities.
The Company and the Subsidiaries have two separate secured revolving lines of
credit with available amounts totaling $40 million to finance Section 7(a)
loans, Section 504 loans and companion loans to Section 7(a) loans. The lines
have interest rates ranging from the one-month LIBOR plus 1.6% to the one-month
LIBOR plus 2.2%. Interest is payable monthly, and both lines expire in May
1998. The lines require an annual fee of $80,000 in total. At June 30, 1997,
the Company was paying interest at rates ranging from 7.29% to 7.89% on total
outstanding borrowings of $22.1 million.
Subsequent to June 30, 1997, the Company entered into an additional secured
revolving line of credit with a commercial bank to finance other types of loans
not related to the SBA lending programs in which the Company currently
participates. This new facility has a borrowing capacity of up to $15 million,
an interest rate equal to the one-month LIBOR plus 1.35%, an annual facility
fee of $30,000, and a total commitment fee of $15,000.
Management plans to continue to use leverage to finance the growth of the
Company. However as a BDC, the Company must maintain a 200% asset coverage for
senior securities representing indebtedness, which may limit the Company's
ability to borrow on a consolidated basis. For purposes of the asset coverage
test, all indebtedness of Allied SBLC is not considered senior securities
representing indebtedness; therefore, the Company may be able to increase its
leverage in Allied SBLC beyond the 200% asset coverage limit, subject to market
availability. It is management's belief that the Company will have access to
the capital resources necessary to expand and develop its business. The
Company may seek to obtain funds through additional equity offerings, debt
financings, or loan sales. The Company anticipates that adequate cash will be
available to make new loans, fund its operating expenses, satisfy debt service
obligations and pay dividends throughout 1997.
RESULTS OF OPERATIONS
For the Second Quarter Ended June 30, 1997 and 1996.
The Company originated $16.0 million in new loans during the second quarter of
1997. Net of loan sales, repayments and changes in portfolio valuation, the
Company's total loans to small businesses decreased by $4.3 million to $56.1
million at June 30, 1997 as compared to $60.4 million at December 31, 1996. At
June 30, 1997, loans to small businesses totaled 84% of the Company's total
assets, compared to 88% at December 31, 1996.
For the three months ended June 30, 1997, the net increase in net assets
resulting from operations was $1.7 million, or $0.34 per share, as compared to
$1.1 million, or $0.25 per share, for the same period for 1996. The increase
in earnings per share also reflects a 13% increase in the weighted average
shares and share equivalents outstanding from June 30,
7
<PAGE> 10
1996. The Company issued 723,245 new shares in the second and third quarters
of 1996 through a rights offering to shareholders and through a private sale.
The Company sold $18.9 million in loans during the second quarter of 1997 as
opposed to $3.4 million during the second quarter of 1996. Net premium income
from the sales of the guaranteed portion of the Section 7(a) loans, Section 504
loans and companion loans to Section 7(a) loans was $999,000 in the three
months ended June 30, 1997 as compared to $269,000 for the three months ended
June 30, 1996.
Investment income increased $1.1 million or 57% over the comparative three
months of 1996 to $3.0 million. The outstanding balance of the Company's loan
portfolio for the majority of the second quarter of 1997 was higher than that
of the second quarter of 1996. Average loans outstanding for the second
quarter of 1997 was $59.5 million as compared to $48.8 million for the second
quarter of 1996. As was mentioned above, the Company sold $18.9 million in
Section 7(a) and Section 504 loans at the end of the second quarter of 1997,
and due to the timing of that sale, investment income was not affected.
Investment advisory fees were $412,000 for the three months ended June 30,
1997, an 11% increase over $371,000 for the three months ended June 30, 1996.
This increase is a result of an increase in invested and other assets on which
the advisory fee is based. Interest expense was $605,000 for the three months
ended June 30, 1997 as compared to $466,000 for the same period in 1996. The
Company funds its loan origination activity through borrowings under its credit
facilities. Amounts outstanding under the Company's credit facilities were
$22.1 million at June 30, 1997 compared to $18.7 million at June 30, 1996.
Other operating expenses equaled $171,000 for the three months ended June 30,
1997, a decrease of 18% from $209,000 for the same period of 1996. The
decrease in operating expenses is due to timing of normal services provided by
professional service firms.
For the Six Months Ended June 30, 1997 and 1996
Net increase in net assets resulting from operations was $3.0 million, or $0.59
per share, for the six months ended June 30, 1997, compared to $2.5 million, or
$0.55 per share, for the same period in 1996. The increase in the net increase
in net assets resulting from operations for the first six months of 1997 was
caused by the same factors discussed in the quarter-to-quarter comparison
above.
FACTORS AFFECTING THE COMPANY'S BUSINESS
The Company's business remains largely dependent upon two government-sponsored
SBA-administered loan programs; the Section 7(a) guaranteed loan program and
the Section 504 loan program. The Section 7(a) and Section 504 loan programs
are regulated by the SBA pursuant to laws passed by Congress. There is no
assurance the government appropriations for these programs or for the
operations of the SBA will be continued. In addition, both programs are
subject to changes in laws or regulations at any time that could have an
adverse impact on the Company's operations with regard to the programs.
Statements included in this filing concerning the Company's future prospects
are "forward looking statements" under the Federal securities laws. There can
be no assurance that future results will be achieved and actual results could
differ materially from forecasts and estimates.
8
<PAGE> 11
Part II. OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
The Company is party to certain lawsuits. While the outcome of these
legal proceedings cannot at this time be predicted with certainty,
management does not expect that these actions will have a material
effect upon the consolidated financial position of the Company.
Item 2. CHANGES IN SECURITIES
No material changes have occurred in the securities of the Registrant.
Item 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On May 12, 1997, the Company held its Annual Meeting of Shareholders
in Bethesda, Maryland. Shareholders voted on three matters; the
substance of these matters and the results of the voting of each such
matter are described below.
1. Election of Directors: Shareholders elected a total of nine
directors, which comprised the entire Board, to serve for a
one-year term. Votes were cast as follows:
<TABLE>
<CAPTION>
FOR WITHHELD
<S> <C> <C>
William L. Walton 3,970,239 32,306
George C. Williams 3,971,326 31,219
Katherine C. Marien 3,971,424 31,122
Jon W. Barker 3,971,424 31,122
Eleanor Deane Bierbower 3,971,424 31,122
Robert V. Fleming II 3,971,424 31,122
Anthony T. Garcia 3,971,424 31,122
Arthur H. Keeney III 3,971,424 31,122
Robin B. Martin 3,971,424 31,122
</TABLE>
2. Ratification of the selection of Matthews, Carter & Boyce to
serve as independent accountants for the year ended December 31,
1997:
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN
<S> <C> <C>
3,937,655 10,752 54,136
</TABLE>
3. Amend the Company's Incentive Stock Option Plan to increase the
number of shares available under the plan and add a change of
control provision:
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN
<S> <C> <C>
3,385,366 464,831 101,702
</TABLE>
Item 5. OTHER INFORMATION
Not applicable.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) List of Exhibits
11 Statement of Computation of Earnings Per Share
(b) Reports on Form 8-K
The Company filed no reports on Form 8-K during the quarter ended
June 30, 1997.
9
<PAGE> 12
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunder duly authorized.
ALLIED CAPITAL LENDING CORPORATION
----------------------------------
(Registrant)
------------
Dated: August 14, 1997 /s/ Jon A. DeLuca
--------------- -------------------------------------
Principal and Chief Financial Officer
10
<PAGE> 1
----------------------------------------
ALLIED CAPITAL LENDING CORPORATION
(a Maryland corporation)
-----------------
BYLAWS
-----------------
As adopted by the Sole Director on September 12, 1990, as amended by the
Sole Stockholder on August 8, 1991 and March 24, 1992, and as amended by
the Board of Directors on November 12, 1993, August
12, 1994, November 9, 1995, and May 12, 1997.
<PAGE> 2
<TABLE>
<S> <C>
TABLE OF CONTENTS
ARTICLE I OFFICES..........................................................................................1
Section 1. Office.......................................................................................1
------
Section 2. Additional Offices...........................................................................1
------------------
ARTICLE II MEETINGS OF STOCKHOLDERS.........................................................................1
Section 1. Time and Place...............................................................................1
--------------
Section 2. Annual Meeting...............................................................................1
--------------
Section 3. Notice of Annual Meeting.....................................................................1
------------------------
Section 4. Special Meetings.............................................................................1
----------------
Section 5. Notice of Special Meeting....................................................................2
-------------------------
Section 6. General Powers...............................................................................2
--------------
Section 7. Presiding Officer............................................................................2
-----------------
Section 8. Quorum. Adjournments........................................................................2
---------------------
Section 9. Voting.......................................................................................3
------
Section 10. Action by Consent............................................................................3
----------------
ARTICLE III DIRECTORS........................................................................................3
Section 1. General Powers; Number; Tenure...............................................................3
------------------------------
Section 2. Matters for Which Action of the Entire Board is Required.....................................4
--------------------------------------------------------
Section 3. Vacancies....................................................................................4
---------
Section 4. Removal; Resignation.........................................................................4
--------------------
Section 5. Place of Meetings............................................................................5
-----------------
Section 6. Annual Meeting...............................................................................5
-------------
Section 7. Regular Meetings.............................................................................5
----------------
Section 8. Special Meetings.............................................................................5
----------------
Section 9. Quorum; Adjournments.........................................................................5
--------------------
Section 10. Compensation.................................................................................5
------------
Section 11. Action by Consent............................................................................6
-----------------
Section 12. Meetings by Telephone or Similar Communications..............................................6
-----------------------------------------------
ARTICLE IV COMMITTEES.......................................................................................6
Section 1. Executive Committee..........................................................................6
-------------------
Section 2. Nominating Committee.........................................................................6
--------------------
Section 3. Compensation Committee.......................................................................6
----------------------
Section 4. Audit Committee..............................................................................7
---------------
Section 5. Advisory Committee...........................................................................7
------------------
Section 6. Other Committees.............................................................................7
----------------
Section 7. Procedure; Notice; Meetings..................................................................8
---------------------------
Section 8. Quorum; Vote.................................................................................8
------------
Section 9. Appointments; Vacancies; Changes; Discharges.................................................8
--------------------------------------------
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C> <C>
Section 10. Tenure.......................................................................................8
------
Section 11. Compensation.................................................................................8
------------
Section 12. Action by Consent............................................................................9
-----------------
Section 13. Meetings by Telephone or Similar Communications..............................................9
-----------------------------------------------
ARTICLE V NOTICES..........................................................................................9
Section 1. Form; Delivery...............................................................................9
--------------
Section 2. Waiver.......................................................................................9
------
ARTICLE VI OFFICERS........................................................................................10
Section 1. Designations................................................................................10
------------
Section 2. Term of Office; Removal.....................................................................10
-----------------------
Section 3. Compensation................................................................................10
------------
Section 4. The Chairman of the Board...................................................................10
-------------------------
Section 5. The President...............................................................................11
-------------
Section 6. The Managing Directors......................................................................11
----------------------
Section 7. Principals..................................................................................12
----------
Section 8. Vice Presidents.............................................................................12
---------------
Section 9. The Secretary...............................................................................12
-------------
Section 10. The Assistant Secretary.....................................................................12
-----------------------
Section 11. Associates..................................................................................12
----------
Section 12. The Treasurer...............................................................................12
-------------
Section 13. The Assistant Treasurer.....................................................................13
-----------------------
ARTICLE VII INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES AND
AGENTS..........................................................................................13
Section 1. Generally...................................................................................13
---------
Section 2. Limitation for Disabling Conduct............................................................14
--------------------------------
Section 3. Advisory Committee Members..................................................................15
--------------------------
ARTICLE VIII STOCK CERTIFICATES..............................................................................15
Section 1. Form of Signatures; Statements..............................................................15
------------------------------
Section 2. Registration of Transfer....................................................................16
------------------------
Section 3. Registered Stockholders.....................................................................16
-----------------------
Section 4. Location of Stock Ledger....................................................................17
------------------------
Section 5. Record Date.................................................................................17
-----------
Section 6. Lost, Stolen or Destroyed Certificates......................................................17
--------------------------------------
ARTICLE IX GENERAL PROVISIONS..............................................................................17
Section 1. Dividends...................................................................................17
---------
Section 2. Reserves....................................................................................18
--------
Section 3. Fiscal Year.................................................................................18
----------
Section 4. Seal........................................................................................18
---
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <C>
ARTICLE X AMENDMENTS.............................................................................................18
CERTIFICATE......................................................................................................19
</TABLE>
iii
<PAGE> 5
BYLAWS
ARTICLE I
OFFICES
Section 1. Office. The principal office of the Corporation shall be at:
CSC-Lawyers Incorporating Service Company, 11 East Chase Street, Baltimore,
Maryland 21202, in the City of Baltimore, County of Baltimore, State of
Maryland. The Corporation also shall have an office at 1666 K Street, N.W.,
Washington, D.C. 20006-2803.
Section 2. Additional Offices. The Corporation may also have offices at
such other places, both within and without the State of Maryland, as the
stockholders may from time to time determine or as the business of the
Corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. Time and Place. Meetings of stockholders for any purpose may be
held at such time and place in the United States as the Board of Directors may
fix from time to time and as shall be stated in the notice of the meeting or in
a duly executed waiver of notice thereof.
Section 2. Annual Meeting. Annual meetings of stockholders shall be held
during the month of May in each year on a date and at the time set by the Board
of Directors. At the Annual Meeting, the stockholders shall elect a Board of
Directors and transact such other business as may properly be brought before
the meeting.
Section 3. Notice of Annual Meeting. Written notice of the annual meeting,
stating the place, date and time thereof, shall be given by the Secretary of
the Corporation to each stockholder entitled to vote at such meeting or to
notice thereof not less than 10 (unless a longer period is required by law) nor
more than 90 days prior to the meeting.
Section 4. Special Meetings. Special meetings of the stockholders, for any
purpose or purposes, unless otherwise prescribed by statute or by the Articles
of Incorporation, may be called by the Chairman of the Board or the President
and shall be called by the Chairman of the Board, the President or the
Secretary at the request in writing of a majority of the Board of Directors.
Unless otherwise prescribed by statute or by the Articles of Incorporation, and
except as expressly set forth below, the Secretary shall call a Special Meeting
at the request in writing of stockholders entitled to cast not less than a
majority of all the votes entitled to be cast at such meeting. Such request by
stockholders shall state the purpose or purposes of such meeting and the
matters to be acted on thereat. If the request is made by a majority of the
stockholders
1
<PAGE> 6
entitled to cast votes at a meeting, the Secretary shall inform such
stockholders of the reasonably estimated cost of preparing and mailing such
notice of the meeting, and, upon payment to the Corporation of such costs by
such stockholders, the Secretary shall give notice stating the purpose or
purposes of the meeting, as required by these Bylaws, to all stockholders
entitled to notice of such meeting.
Section 5. Notice of Special Meeting. Written notice of a special meeting,
stating the place, date and time thereof and the purpose or purposes for which
the meeting is called, shall be given to each stockholder entitled to vote at
such meeting or to notice thereof not less than 10 (unless a longer period is
required by law) nor more than 90 days prior to the meeting.
Section 6. General Powers. The business and affairs of the Corporation
shall be managed by its stockholders, which may exercise all powers of the
Corporation and perform all lawful acts and things on behalf of the
Corporation.
Section 7. Presiding Officer. Meetings of stockholders shall be presided
over by the Chairman of the Board or, if he or she is not present, by the
President, or, if he or she is not present, by a Vice President, or, if he or
she is not present, by such person as may have been chosen by the Board of
Directors, or if none of such persons is present, by a chairman to be chosen by
the stockholders owning a majority of the shares of capital stock of the
Corporation issued and outstanding and entitled to vote at the meeting and who
are present in person or represented by proxy. The Secretary of the
Corporation, or, if he or she is not present, an Assistant Secretary, or, if he
or she is not present, such person as may be chosen by the Board of Directors,
or if none of such persons is present, then such person as may be chosen by the
stockholders owning a majority of the shares of capital stock of the
Corporation issued and outstanding and entitled to vote at the meeting and who
are present in person or represented by proxy shall act as secretary of the
meeting.
Section 8. Quorum. Adjournments. The presence in person or by proxy of
stockholders entitled to cast a majority of the votes thereat shall be
necessary to, and shall constitute a quorum for, the transaction of business at
all meetings of the stockholders, except as otherwise provided by statute or by
the Articles of Incorporation. If, however, a quorum shall not be present or
represented at any meeting of the stockholders, the stockholders entitled to
vote thereat, present in person or represented by proxy, shall have the power
to adjourn the meeting from time to time, without notice of the adjourned
meeting if the time and place thereof are announced at the meeting at which the
adjournment is taken, until a quorum shall be present or represented. Even if a
quorum shall be present or represented at any meeting of the stockholders, the
stockholders entitled to vote thereat, present in person or represented by
proxy, shall have the power to adjourn the meeting from time to time for good
cause, without notice of the adjourned meeting if the time and place thereof
are announced at the meeting at which the adjournment is taken, until a date
which is not more than 30 days after the date of the original meeting. At any
such adjourned meeting, at which a quorum shall be present in person or
represented by proxy, any business may be transacted which might have been
transacted at the meeting as originally called.
2
<PAGE> 7
If the adjournment is for more than 30 days, or, if after the adjournment a new
record date is fixed for the adjourned meeting, a notice of the adjourned
meeting shall be given to each stockholder of record entitled to vote at the
meeting or entitled to notice thereof.
Section 9. Voting.
(a) At any meeting of stockholders, every stockholder having the
right to vote shall be entitled to vote in person or by proxy. Except as
otherwise provided by law or the Articles of Incorporation, each stockholder of
record shall be entitled to one vote for each share of capital stock registered
in his, her or its name on the books of the Corporation, on each matter
submitted to a vote at a meeting of stockholders, except that no stockholder
shall be entitled to vote in respect of any shares of capital stock if any
installment payable thereon is overdue and unpaid.
(b) Except as otherwise provided by law or the Articles of
Incorporation, a majority of the votes cast at a meeting of stockholders at
which a quorum is present, shall be sufficient to take or authorize action upon
any matter which may properly come before such meeting.
Section 10. Action by Consent. Any action required or permitted to be
taken by law or the Articles of Incorporation at any meeting of stockholders
may be taken without a meeting, without prior notice and without a vote, if a
written consent, setting forth such action, is signed by all the stockholders
entitled to vote on the subject matter thereof and any other stockholders
entitled to notice of a meeting of stockholders (but not to vote thereat) have
waived in writing any rights which they may have to dissent from such action,
and such consent and waiver are filed with the records of stockholders'
meetings.
ARTICLE III
DIRECTORS
Section 1. General Powers; Number; Tenure. The business and affairs of the
Corporation shall be managed under the direction of its Board of Directors,
which may exercise all powers of the Corporation and perform all lawful acts
and things which are not by law, the Articles of Incorporation or these Bylaws
directed or required to be exercised or performed by, or are conferred upon or
reserved to, the stockholders. The number of directors shall be that provided
in the Articles of Incorpora- tion until increased or decreased pursuant to the
following provisions, but shall never be fewer than three unless otherwise
permitted by law. A majority of the entire Board of Directors may, at any time
and from time to time, increase or decrease the number of directors of the
Corporation as set forth in the Articles of Incorporation, subject to the
foregoing limitation. The tenure of office of a director shall not be affected
by any decrease in
3
<PAGE> 8
the number of directors so made by the Board. The directors shall be elected,
by a majority of all the votes cast at the annual meeting of the stockholders,
except as provided in Section 3 of this Article, and each director elected
shall hold office until the next succeeding annual meeting or until his or her
successor is elected and shall qualify. Directors need not be stockholders.
Section 2. Matters for Which Action of the Entire Board is Required.
Notwithstanding anything to the contrary in these Bylaws, the following actions
shall require the approval by the affirmative vote of a majority of the entire
Board of Directors:
(a) appointing any director to a committee of the Board of Directors
pursuant to Article IV of these Bylaws;
(b) appointing any employee, officer, or director of the Corporation,
or any person who is to become an employee, officer, or director of the
Corporation, to serve as an officer at the level of principal or above; and
(c) altering, amending or repealing these Bylaws or adopting new
bylaws.
Section 3. Vacancies. Any vacancy occurring in the Board of Directors for
any cause other than by reason of an increase in the number of directors may,
unless otherwise provided in these Bylaws, be filled by a majority of the
remaining members of the Board of Directors, although such majority is less
than a quorum. Any vacancy occurring by reason of an increase in the number of
the directors may, unless otherwise provided in these Bylaws, be filled by
action of a majority of the directors constituting the entire Board of
Directors. A director elected by the Board of Directors to fill a vacancy shall
be elected to hold office until the next annual meeting of the stockholders or
until his or her successor is elected and shall qualify. If there are no
directors in office, any officer or stockholder may call a special meeting of
stockholders in accordance with the provisions of the Articles of Incorporation
or these Bylaws, at which meeting such vacancies shall be filled.
Section 4. Removal; Resignation.
(a) Except as otherwise provided by law or the Articles of
Incorporation, at any meeting of stockholders at which a quorum is present, the
stockholders may, by the affirmative vote of the holders of a majority of the
votes entitled to be cast thereon, remove any director or directors from office
with or without cause and may elect a successor or successors to fill any
resulting vacancy or vacancies for the unexpired terms of any removed director
or directors.
(b) Any director may resign at any time by giving written notice to
the Board of Directors, the Chairman of the Board, the President or the
Secretary of the Corporation. Unless otherwise specified in such written
notice, a resignation shall take effect upon delivery
4
<PAGE> 9
thereof to the Board of Directors or the designated officer. It shall not be
necessary for a resignation to be accepted before it becomes effective.
Section 5. Place of Meetings. The Board of Directors may hold meetings,
annual, regular or special, either within or without the State of Maryland.
Section 6. Annual Meeting. The annual meeting of each newly elected Board
of Directors shall be held immediately following the annual meeting of
stockholders, and no notice of such meeting shall be necessary to the newly
elected directors in order legally to constitute the meeting, provided a quorum
shall be present.
Section 7. Regular Meetings. Additional regular meetings of the Board of
Directors may be held without notice, at such time and place as may from time
to time be determined by the Board of Directors.
Section 8. Special Meetings. Special meetings of the Board of Directors
may be called by the Chairman of the Board or the President on at least two
days' notice to each director, if such notice is delivered personally or sent
by messenger, telegram, telecopy, facsimile transmission, or mail. Special
meetings shall be called by the Chairman of the Board, the President or the
Secretary in like manner and on like notice on the written request of two or
more of the number of directors then in office. Except as otherwise provided by
law, the Articles of Incorporation or Article X of these Bylaws, any such
notice need not state the purpose or purposes of such meeting.
Section 9. Quorum; Adjournments. At all meetings of the Board of
Directors, a majority of the number of directors then in office shall
constitute a quorum for the transaction of business, and the act of a majority
of the directors present at any meeting at which there is a quorum shall be the
act of the Board of Directors, except as may be otherwise specifically provided
by law, the Articles of Incorporation or these Bylaws. If a quorum is not
present at any meeting of the Board of Directors, the directors present may
adjourn the meeting from time to time until a quorum shall be present, provided
that an announcement is made at such meeting, and notice is provided to any
directors not present at such meeting, of the time and place of the next
meeting.
Section 10. Compensation. Directors shall be entitled to such compensation
for their services as directors and to such reimbursement for any reasonable
expenses incurred in attending directors' meetings as may from time to time be
fixed by the Board of Directors. The compensation of directors (if any) may be
on such basis as is determined by the Board of Directors. Any director may
waive compensation for any meeting. Any director receiving compensation under
these provisions shall not be barred from serving the Corporation in any other
capacity and receiving compensation and reimbursement for reasonable expenses
for such other services.
Section 11. Action by Consent. Any action required or permitted to be
taken at any meeting of the Board of Directors may be taken without a meeting
if a written consent to such
5
<PAGE> 10
action is signed by all members of the Board of Directors and such written
consent is filed with the minutes of the proceedings of the Board (except for
those instances where the Investment Company Act of 1940 (the "1940 Act")
requires action be taken by the Corporation's Board of Directors in person,
including without limitation the selection of independent auditors and the
approval of an Investment Agreement.).
Section 12. Meetings by Telephone or Similar Communications. The Board of
Directors may participate in a meeting by means of a conference telephone or
similar communications equipment by means of which all directors participating
in the meeting can hear each other at the same time, and participation by such
means shall be conclusively deemed to constitute presence in person at such
meeting (except for those instances where the 1940 Act requires actions be
taken by the Corporations's Board of Directors in person, including without
limitation the selection of independent auditors and the approval of an
Investment Agreement.).
ARTICLE IV
COMMITTEES
Section 1. Executive Committee. The Board of Directors may appoint an
Executive Committee consisting of not fewer than three members, one of whom
shall be designated as Chairman of the Executive Committee. The Chairman of the
Board and the President shall be elected members of the Executive Committee.
The Executive Committee shall have and may exercise those rights, powers and
authority of the Board of Directors as may from time to time be granted to it
by the Board of Directors subject to any limitations imposed by law and may
authorize the seal of the Corporation to be affixed to all papers which may
require the same.
Section 2. Nominating Committee. The Board of Directors shall appoint a
Nominating Committee consisting of not fewer than three members, one of whom
shall be designated as Chairman of the Nominating Committee. A majority of
members of the Nominating Committee shall not be officers of the Corporation.
The Nominating Committee shall have and may exercise those rights, powers and
authority of the Board of Directors as may from time to time be granted to it
by the Board of Directors; provided, however, that in addition to any such
rights, powers or authority, the Nominating Committee shall have the exclusive
right to recommend candidates for election as directors to the Board of
Directors.
Section 3. Compensation Committee. The Board of Directors may appoint from
its membership a Compensation Committee consisting of not fewer than three
members, one of whom shall be designated as Chairman of the Compensation
Committee. None of the members of the Compensation Committee shall be officers
of the Corporation. The Compensation Committee shall have and may exercise
those rights, powers and authority of the Board of Directors as may from time
to time be granted to it by the Board of Directors.
6
<PAGE> 11
Section 4. Audit Committee. The Board of Directors may appoint from its
membership an Audit Committee consisting of not fewer than three members, one
of whom shall be designated as Chairman of the Audit Committee. A majority of
members of the Audit Committee shall not be officers of the Corporation. The
Audit Committee shall have and may exercise those rights, powers and authority
of the Board of Directors as may from time to time be granted to it by the
Board of Directors; provided, however, that in addition to any such rights,
powers or authority, the Audit Committee shall: (i) issue instructions to and
receive reports from outside accounting firms and to serve as the liaison
between the Corporation and the said firms; and (ii) review all potential
conflict-of-interest situations arising in respect of the Corporation's affairs
and involving the Corporation's affiliates or employees, and to make a report,
verbal or written, to the full Board of Directors with recommendations for
their resolutions.
Section 5. Advisory Committee.
(a) The Board of Directors may appoint individuals of its selection
to an Advisory Committee to assist the Board of Directors in the conduct of its
duties and responsibilities. The Advisory Committee may meet in conjunction
with meetings of the Board of Directors and shall serve as advisers and
counselors to the Board of Directors as the members thereof shall determine
best serves the Corporation's interests.
(b) The Board of Directors, by resolutions adopted by a majority of
the whole Board, may appoint an Advisory Committee complying with the terms of
Section 2(a)(i) of the 1940 Act and the regulations promulgated thereunder, to
provide advice and counsel in respect to investment and loan transactions
entered or contemplated by the Corporation or its subsidiaries. The Advisory
Committee may be composed of up to five persons, who shall not be directors,
officers, employees or agents of the Corporation or any subsidiary or
investment adviser thereof. Advisory Committee members shall be entitled to
indemnification under Article VII below. The Advisory Committee and its members
will have no voting power and no authority, as agent or otherwise, to act on
behalf of the Corporation, in respect of any matter; and directors shall be
under no obligation to accept or reject any particular item of advice or
counsel provided thereby. The Advisory Committee may be invited to hold
meetings jointly with meetings of directors. Any one or more members of the
Advisory Committee may be invited to attend meetings of the directors and may
be offered access to the same information and materials otherwise provided only
to directors. The Advisory Committee may render its advice in written or verbal
form, and the same may or may not be recorded.
Section 6. Other Committees. The Board of Directors, by resolutions
adopted by a majority of the entire Board, may appoint a committee or
committees, as it shall deem advisable and impose upon such committee or
committees such functions and duties, and grant such rights, powers and
authority, as the Board of Directors shall prescribe (except the power to
declare dividends or distributions on stock, to issue stock except to the
extent permitted by law, to recommend to stockholders any action requiring
stockholders' approval, to amend these Bylaws or to approve any merger or share
exchange which does not require stockholders' approval).
7
<PAGE> 12
Section 7. Procedure; Notice; Meetings. Each committee shall fix its own
rules of procedure and shall meet at such times and at such place or places as
may be provided by such rules or as the members of such committee shall
provide. Committee meetings may be called by the Chairman of the Board, the
President, the Chairman of the Committee, if any, or any two or more committee
members on at least twenty-four (24) hours notice, if such notice is delivered
personally or sent by messenger, telegram, telecopy, facsimile transmission, or
mail. Each committee shall keep regular minutes of its meetings and deliver
such minutes to the Board of Directors. The Chairman of each committee, or, in
his or her absence, a member of such committee chosen by a majority of the
members of such committee present, shall preside at the meetings of such
committee, and another member thereof, or any other person, chosen by such
committee shall act as Secretary of such committee, or in the capacity of
Secretary for purposes of such meeting.
Section 8. Quorum; Vote. With respect to each committee, a majority of its
members shall constitute a quorum for the transaction of business, and the
affirmative vote of a majority of the members thereof shall be required for any
action of such committee.
Section 9. Appointments; Vacancies; Changes; Discharges. The Board of
Directors shall have the exclusive power at any time, through the approval by
the affirmative vote of a majority of the entire Board of Directors, to appoint
directors to, fill vacancies in, change the membership of, or discharge any
committee.
Section 10. Tenure. Each member of a committee shall continue as a member
thereof until the expiration of his or her term as a director, or his or her
earlier resignation as a member of such committee or as a director, unless
sooner removed as a member of such committee by a vote of a majority of the
entire Board of Directors or as a director in accordance with these Bylaws.
Section 11. Compensation. Members of any committee shall be entitled to
such compensation for their services as members of any such committee and to
such reimbursement for any reasonable expenses incurred in attending committee
meetings as may from time to time be fixed by the Board of Directors. The
compensation (if any) of members of any committee may be on such basis as is
determined by the Board of Directors. Any member may waive compensation for any
meeting. Any committee member receiving compensation under these provisions
shall not be barred from serving the Corporation in any other capacity and from
receiving compensation and reimbursement of reasonable expenses for such other
services.
Section 12. Action by Consent. Any action required or permitted to be
taken at any meeting of any committee of the Board of Directors may be taken
without a meeting if a written consent to such action is signed by all members
of the committee and such written consent is filed with the minutes of its
proceedings.
8
<PAGE> 13
Section 13. Meetings by Telephone or Similar Communications. The members
of any committee which is designated by the Board of Directors may participate
in a meeting of such committee by means of a conference telephone or similar
communications equipment by means of which all members participating in the
meeting can hear each other at the same time, and participation by such means
shall be conclusively deemed to constitute presence in person at such meeting.
ARTICLE V
NOTICES
Section 1. Form; Delivery. Whenever, under the provisions of law, the
Articles of Incorporation or these Bylaws, notice is required to be given to
any director or stockholder, it shall not be construed to mean exclusively
personal notice unless otherwise specifically provided, but such notice may be
given in writing, by mail, addressed to such director or stockholder, provided,
in the case of a stockholder, such notice is addressed to his, her or its post
office address as such address appears on the records of the Corporation, with
postage thereon prepaid. Any such notice shall be deemed to have been given at
the time it is deposited in the United States mail. Notice to a director also
may be given personally or sent by messenger, telegram, telecopy or facsimile
transmission.
Section 2. Waiver. Whenever any notice is required to be given under the
provisions of law, the Articles of Incorporation or these Bylaws, a written
waiver thereof, signed by the person or persons entitled to said notice and
filed with the records of the meeting, whether before or after the time stated
therein, shall be conclusively deemed to be equivalent to such notice. In
addition, any stockholder who attends a meeting of stockholders in person, or
is represented at such meeting by proxy, without protesting at the commencement
of the meeting the lack of notice thereof to him or her, or any director who
attends a meeting of the Board of Directors without protesting at the
commencement of the meeting such lack of notice, shall be conclusively deemed
to have waived notice of such meeting.
ARTICLE VI
OFFICERS
9
<PAGE> 14
Section 1. Designations. From and after the date of adoption of these
Bylaws, the officers of the Corporation shall be a Chairman of the Board,
President, Secretary and Treasurer. The officers of the Corporation also may
include one or more Managing Directors, Principals, Vice Presidents, Associates
and such other officers and/or agents as deemed necessary or appropriate,
provided, however, that a person may hold the position of Associate without
being designated an officer of the Corporation. All officers of the Corporation
shall exercise such powers and perform such duties as shall from time to time
be determined by the Board of Directors and permitted by law or these Bylaws.
Any number of offices may be held by the same person, unless the Articles of
Incorporation or these Bylaws otherwise provide, and no person shall execute,
acknowledge or verify any instrument in more than one capacity, if such
instrument is required by law, the Articles of Incorporation or these Bylaws to
be executed, acknowledged or verified by two or more officers.
Section 2. Term of Office; Removal. The Board of Directors shall choose a
Chairman of the Board, President and one or more Managing Directors. The
Chairman, President and any Managing Director shall have the authority to
appoint a Secretary, Treasurer, and one or more Principals, Vice Presidents
and/or Associates who are officers of the Corporation, and such other officers
and agents as they shall deem necessary or appropriate. The officers of the
Corporation shall hold office until their successors are chosen and shall
qualify or until any such officer's resignation. Any officer elected or
appointed by the Board of Directors may be removed at any time by the
affirmative vote of a majority of the directors then in office when, in their
judgment, the best interests of the Corporation will be served thereby. Any
officer appointed other than by the Board of Directors may be removed by the
Board of Directors or the Chairman of the Board at any time. Such removal by
the Board or by the Chairman shall not prejudice the contractual rights, if
any, of the person so removed. Any vacancy occurring in any office of the
Corporation may be filled for the unexpired portion of the term by the Board of
Directors, where such office was held by an officer elected or appointed by the
Board, or by the Chairman, the President and any Managing Director, where such
office was held by their appointee.
Section 3. Compensation. The salaries of all officers of the Corporation
(if any) shall be fixed from time to time by the Board of Directors and no
officer shall be prevented from receiving such salary by reason of the fact
that he or she is also a director of the Corporation.
Section 4. The Chairman of the Board. The Chairman of the Board shall be
the chief executive officer of the Corporation and shall be responsible for the
overall strategic direction of the Corporation and, subject to the direction of
the Board of Directors, shall perform such executive, supervisory and
management functions and duties as may be assigned to him or her from time to
time by the Board. He or she shall, if present, preside at all meetings of the
stockholders and of the Board of Directors. The Chairman of the Board shall
execute in the corporate name all appropriate deeds, mortgages, bonds,
contracts or other instruments requiring a seal, under the Seal of the
Corporation, except in cases where such execution shall be expressly delegated
to another by the Board of Directors. The Chairman of the Board shall be a
member of the Executive Committee and an ex-officio member of each standing
committee.
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Section 5. The President. The President, subject to the direction of the
Board of Directors and reporting to the Chairman of the Board, shall have
general charge of the business, affairs and property of the Corporation and
general supervision over its officers and agents. In general, he or she shall
perform all duties incident to the office of President, and shall see that all
orders and resolutions of the Board of Directors are carried into effect. In
the absence of the Chairman of the Board, the President shall preside at all
meetings of the stockholders and of the Board of Directors. The President shall
be a member of the Executive Committee and an ex-officio member of each
standing committee. Unless otherwise prescribed by the Board of Directors, the
President shall have full power and authority on behalf of the Corporation to
attend, act and vote at any meeting of stockholders of other corporations in
which the Corporation may hold securities. At such meeting, the President shall
possess and may exercise any and all rights and powers incident to the
ownership of such securities which the Corporation might have possessed and
exercised if it had been present. The President shall execute in the corporate
name all appropriate deeds, mortgages, bonds, contracts or other instruments
requiring a seal of the Corporation, except in cases in which the signing or
execution thereof shall be expressly delegated by the Board of Directors to
some other officer or agent of the Corporation. The Board of Directors may from
time to time confer like powers and authority upon any other person or persons.
Section 6. The Managing Directors. The Managing Directors, subject to the
direction of the Board of Directors and reporting to the Chairman of the Board
and President, shall assist in the general charge of the business of the
Corporation and general supervision over its officers and agents. In the
absence of the Chairman of the Board or President, at the direction of the
Board of Directors, a Managing Director may preside at all meetings of the
stockholders and of the Board of Directors. Unless otherwise prescribed by the
Chairman of the Board or President, the Managing Directors shall have full
power and authority on behalf of the Corporation to attend, act and vote at any
meeting of stockholders of other corporations in which the Corporation may hold
securities. At such meeting, the Managing Director shall possess and may
exercise any and all rights and powers incident to the ownership of such
securities which the Corporation might have possessed and exercised if it had
been present. At the direction of the Chairman of the Board or the President, a
Managing Director may execute in the corporate name all appropriate deeds,
mortgages, bonds, contracts or other instruments requiring a seal of the
Corporation, except in cases in which the signing or execution thereof shall be
expressly delegated by the Board of Directors to some other officer or agent of
the Corporation. The Board of Directors may from time to time confer like
powers and authority upon any other person or persons.
Section 7. Principals. The Principals, if any, shall, in the absence of
the President and all Managing Directors or in the event of the disabilities of
all such persons, perform the duties and exercise the powers of the President
or a Managing Director and shall generally assist the President and any and all
Managing Directors and perform such other duties and have such other powers as
may from time to time be prescribed by the Board of Directors.
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Section 8. Vice Presidents. The Vice Presidents, if any, shall generally
assist the President and any and all Managing Directors and/or the Principals
as directed by such officers and perform such other duties and have such other
powers as may from time to time be prescribed by the Board of Directors.
Section 9. The Secretary. The Secretary shall attend all meetings of the
Board of Directors and meetings of the stockholders and record all votes and
the proceedings of the meetings in a book to be kept for that purpose and shall
perform like duties for the Executive Committee or other committees, if
required. He or she shall give, or cause to be given, notice of all meetings of
stockholders and special meetings of the Board of Directors, and shall perform
such other duties as may from time to time be prescribed by the Board of
Directors, Chairman of the Board or the President, under whose supervision he
or she shall act; provided, however, that in addition to any such duties, the
Secretary shall: (i) provide each director with a copy of the Bylaws of the
Corporation upon his or her election as a director; and (ii) upon any amendment
to these Bylaws, provide each director with a copy of the Bylaws, as amended,
promptly after such Bylaws have been approved by the Board of Directors. The
Secretary shall have custody of the seal of the Corporation, and he or she, or
an Assistant Secretary, shall have authority to affix the same to any
instrument requiring it, and, when so affixed, the seal may be attested by his
or her signature or by the signature of such Assistant Secretary. The Board of
Directors may give general authority to any other officer to affix the seal of
the Corporation and to attest the affixing thereof by his or her signature.
Section 10. The Assistant Secretary. The Assistant Secretary, if any (or,
in the event there be more than one, the Assistant Secretaries in the order
designated, or, in the absence of any designation, in the order of their
election), shall, in the absence of the Secretary or in the event of his or her
disability, perform the duties and exercise the powers of the Secretary and
shall perform such other duties and have such other powers as may from time to
time be prescribed by the Board of Directors.
Section 11. Associates. The Associates who are designated officers of the
Corporation, if any, shall assist the President, any and all Managing
Directors, Principals, and Vice Presidents of the Corporation as directed by
such officers and perform such other duties and have such other powers as may
from time to time be prescribed by the Board of Directors.
Section 12. The Treasurer. The Treasurer shall have the custody of the
corporate funds and other valuable effects, including securities, and shall
keep full and accurate accounts of receipts and disbursements in books
belonging to the Corporation and shall deposit all moneys and other valuable
effects in the name and to the credit of the Corporation in such depositories
as may from time to time be designated by the Board of Directors. He or she
shall disburse the funds of the Corporation as may be ordered by the Board of
Directors, taking proper vouchers for such disbursements, and shall render to
the Chairman of the Board, the President and the Board of Directors, at regular
meetings of the Board of Directors, or whenever the Board of Directors
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may require it, an account of all his or her transactions as Treasurer and of
the financial condition of the Corporation.
Section 13. The Assistant Treasurer. The Assistant Treasurer, if any (or
in the event there shall be more than one, the Assistant Treasurers in the
order designated, or, in the absence of any designation, in the order of their
election), shall, in the absence of the Treasurer or in the event of his or her
disability, perform the duties and exercise the powers of the Treasurer and
shall perform such other duties and have such other powers as may from time to
time be prescribed by the Board of Directors.
ARTICLE VII
INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES AND AGENTS
Section 1. Generally. Reference is made to Section 2-418 (and any other
relevant provisions) of the Corporations and Associations Article of the
Annotated Code of Maryland (1993), as amended. Particular reference is made to
the class of persons (hereinafter called "Indemnitees") who may be indemnified
by a Maryland corporation pursuant to the provisions of such Section 2-418,
namely, any entity (including the Corporation's investment adviser) or person
(or the heirs, executors or administrators of such person) who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative
or investigative, by reason of the fact that such person is or was a director,
officer, employee or agent of such corporation, or is or was serving at the
request of such corporation as a director, manager, partner, officer, trustee,
employee, agent or any similar title of another corporation, partnership, joint
venture, trust or other enterprise or employee benefit plan.
(a) The Corporation shall (and is hereby obligated to) indemnify the
Indemnitees, and each of them, in each and every situation where the
Corporation is obligated to make such indemnification pursuant to the aforesaid
statutory provisions.
(b) The Corporation shall indemnify the Indemnitees, and each of
them, in each and every situation where, under the aforesaid statutory
provisions, the Corporation is not obligated, but is nevertheless permitted or
empowered, to make such indemnification, if the Board of Directors determines
that such Indemnitee acted in good faith and in a manner such Indemnitee
reasonably believed to be in or not opposed to the best interests of the
Corporation, and, in the case of any criminal action or proceeding, that such
Indemnitee had no reasonable cause to believe that such Indemnitee's conduct
was unlawful.
Section 2. Limitation for Disabling Conduct.
(a) Notwithstanding anything to the contrary in Section 1 hereof,
the Corporation may not limit any liability, or indemnify any director or
officer of the Corporation
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against any liability, to the Corporation or its stockholders to which such
director or officer might otherwise be subject by reason of "disabling
conduct," as hereinafter defined. Accordingly, each determination required by
Section 1(b) hereof with respect to a director or officer of the Corporation
shall include a determination that the liability for which such indemnification
is sought did not arise by reason of such person's disabling conduct. Such
determination may be based on:
(i) a final decision on the merits by a court or other body
before whom the action, suit or proceeding was brought that the person to be
indemnified was not liable by reason of disabling conduct, or
(ii) in the absence of such a decision, a reasonable
determination, based on a review of the facts, that the person to be
indemnified was not liable by reason of such person's disabling conduct by: (A)
the vote of a majority of a quorum of directors who are disinterested,
non-party directors; or (B) an independent legal counsel in a written opinion.
In making such determination, such disinterested, non-party directors or
independent legal counsel, as the case may be, may deem the dismissal for
insufficiency of evidence of any disabling conduct of either a court action or
an administrative proceeding against a person to be indemnified to provide
reasonable assurance that such person was not liable by reason of disabling
conduct.
(b) For the purpose of this Section:
(i) "disabling conduct" of a director or officer shall mean such
person's willful misfeasance, bad faith, gross negligence or reckless disregard
of the duties involved in the conduct of the office or any other conduct
prohibited under Section 17(h) of the 1940 Act or any other applicable
securities laws;
(ii) "disinterested, non-party director" shall mean a director
of the Corporation who is neither an "interested person" of the Corporation as
defined in Section 2(a)(19) of the 1940 Act nor a party to the action, suit or
proceeding in connection with which indemnification is sought;
(iii) "independent legal counsel" shall mean a member of the Bar
of the State of Maryland who is not, and not at least two (2) years prior to
his or her engagement to render the opinion in question has not been, employed
or retained by the Corporation, by any investment adviser to the principal
underwriter for the Corporation, or by any person affiliated with any of the
foregoing; and
(iv) "the Corporation" shall include, in addition to the
resulting Corporation, any constituent Corporation (including any constituent
of a constituent) absorbed in a consolidation or merger which, if its separate
existence had continued, would have had power and authority to indemnify its
directors, officers, employees or agents.
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(c) The Corporation may purchase insurance to cover the payment of
costs incurred in performing the Corporation's obligations under Section 1
hereof, but it is understood that no insurance may be obtained for the purpose
of indemnifying any disabling conduct, as defined in Section 2(b) hereof.
(d) The Corporation may advance legal fees and other expenses
pursuant to the indemnification rights set forth in Section 1 hereof so long
as, in addition to the other requirements therefor, the Corporation either:
(i) obtains security for the advance from the Indemnitee;
(ii) obtains insurance against losses arising by reason of
lawful advances; or
(iii) it shall be determined, pursuant to the means set forth in
Section 2 (a)(ii) hereof, that there is reason to believe that the Indemnitee
ultimately will be found entitled to indemnification.
Section 3. Advisory Committee Members. The Corporation shall indemnify any
person appointed to any Advisory Committee pursuant to Article IV, Section 11
hereof (or the heirs, executors, or administrators of such person) who was or
is a party or is threatened to be made a party to any threatened, pending, or
completed action, suit or proceeding, whether civil, criminal, administrative
or investigative, by reason of the fact that such person is or was a member of
the Advisory Committee of this Corporation, if the Board of Directors
determines that such person acted in good faith and in a manner such person
reasonably believed to be in or not opposed to the best interest of the
Corporation, and in the case of any criminal action or proceeding, that such
person had no reasonable cause to believe that such person's conduct was
unlawful.
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ARTICLE VIII
STOCK CERTIFICATES
Section 1. Form of Signatures; Statements.
(a) Every stockholder in the Corporation shall be entitled to have a
certificate, signed by the Chairman of the Board or the President or a Managing
Director or a Principal and countersigned by the Treasurer or an Assistant
Treasurer or the Secretary or an Assistant Secretary of the Corporation,
exhibiting the number and class (and series, if any) of shares owned by him,
her or it, and bearing the seal of the Corporation. Such signatures and seal
may be facsimile transmission. In case any officer who has signed, or whose
facsimile signature was placed on, a certificate shall have ceased to be such
officer before such certificate is issued, it may nevertheless be issued by the
Corporation with the same effect as if he or she were such officer at the date
of its issue.
(b) Every certificate representing stock issued by the Corporation,
if it is authorized to issue stock of more than one class, shall set forth upon
the face or back of the certificate, a full statement or summary of the
designations and any preferences, conversion and other rights, voting powers,
restrictions, limitations as to dividends, qualifications, and terms and
conditions of redemptions of the stock of each class which the Corporation is
authorized to issue and, if the Corporation is authorized to issue any
preferred or special class of stock in series, the differences in the relative
rights and preferences between the shares of each series to the extent they
have been set and the authority of the Board of Directors to set the relative
rights and preferences of subsequent series. In lieu of such full statement or
summary, there may be set forth upon the face or back of each certificate a
statement that the Corporation will furnish to the stockholder, upon request
and without charge, a full statement of such information.
(c) Every certificate representing shares which are restricted as to
transferability by the Corporation shall either (i) set forth on the face or
back of the certificate a full statement of such restriction or (ii) state that
the Corporation will furnish to the stockholder, upon request and without
charge, information about the restriction.
Section 2. Registration of Transfer. Upon surrender to the Corporation or
any transfer agent of the Corporation of a certificate for shares duly endorsed
or accompanied by proper evidence of succession, assignment or authority to
transfer, it shall be the duty of the Corporation or its transfer agent to
issue a new certificate to the person entitled thereto, to cancel the old
certificate and to record the transaction upon its books.
Section 3. Registered Stockholders.
(a) Except as otherwise provided by law, the Corporation shall be
entitled to recognize the exclusive right of a person who is registered on its
books as the owner of shares of
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its capital stock to receive dividends or other distributions, to vote as such
owner, and to hold liable for calls and assessments a person who is registered
on its books as the owner of shares of its capital stock. The Corporation shall
not be bound to recognize any equitable or legal claim to or interest in such
shares on the part of any other person except that the Board of Directors may
adopt by resolution a procedure by which a stockholder may certify in writing
to the Corporation that any shares of its capital stock registered in the name
of such stockholder are held for the account of a specified person other than
such stockholder are held for the account of a specified person other than such
stockholder.
(b) If a stockholder desires that notices and/or dividends shall be
sent to a name or address other than the name or address appearing on the stock
ledger maintained by the Corporation (or by the transfer agent or registrar, if
any), such stockholder shall have the duty to notify the Corporation (or the
transfer agent or registrar, if any), in writing, of such desire. Such written
notice shall specify the alternate name or address to be used.
Section 4. Location of Stock Ledger. A copy of the Corporation's stock
ledger containing (i) the name and address of each stockholder, and (ii) the
number and shares of stock of each class which the stockholder holds shall be
maintained at the Corporation's office located at 1666 K Street, N.W.,
Washington, DC 20006-2803.
Section 5. Record Date. In order that the Corporation may determine the
stockholders of record who are entitled to notice of or to vote at any meeting
of stockholders or any adjournment thereof, or entitled to receive payment of
any dividend or the allotment of any rights, or to make a determination with
respect to stockholders of record for any other proper purpose, the Board of
Directors may, in advance, fix a date as the record date for any such
determination or meeting. Such date shall not be more than 90 nor less than 10
days before the date of any such meeting, nor more than 90 days prior to the
date any other determination is made with respect to stockholders. A
determination of stockholders of record entitled to notice of or to vote at a
meeting of stockholders shall apply to any adjournment of the meeting taken
pursuant to Section 8 of Article III; provided, however, that the Board of
Directors may fix a new record date for the adjourned meeting.
Section 6. Lost, Stolen or Destroyed Certificates. The Board of Directors
may direct that a new certificate be issued in place of any certificate
theretofore issued by the Corporation which is claimed to have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the person
claiming the certificate to be lost, stolen or destroyed. When authorizing such
issuance of a new certificate, the Board of Directors may, in its discretion
and as a condition precedent to the issuance thereof, require the owner of such
lost, stolen or destroyed certificate to advertise the same in such manner as
it shall require and/or to give the Corporation a bond in such sum or other
security in such form, as it may direct as indemnity against any claim that may
be made against the Corporation with respect to the certificate claimed to have
been lost, stolen or destroyed.
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ARTICLE IX
GENERAL PROVISIONS
Section 1. Dividends. Except as otherwise provided by law or the Articles
of Incorporation, dividends upon the outstanding capital stock of the
Corporation may be declared by the Board of Directors at any annual, regular or
special meeting, and may be paid in cash, in property or in shares of the
Corporation's capital stock.
Section 2. Reserves. The Board of Directors shall have full power, subject
to the provisions of law and the Articles of Incorporation, to determine
whether any, and, if so, what part, of the funds legally available for the
payment of dividends shall be declared as dividends and paid to the
stockholders of the Corporation. The Board of Directors, in its sole
discretion, may fix a sum which may be set aside or reserved over and above the
paid-in capital of the Corporation for working capital or as a reserve for any
proper purpose, and may, from time to time, increase, diminish or vary such
fund or funds.
Section 3. Fiscal Year. The fiscal year of the Corporation shall be as
determined from time to time by the Board of Directors.
Section 4. Seal. The corporate seal shall have inscribed thereon the
name of the Corporation, the year of its incorporation and the words "Corporate
Seal" and "Maryland."
ARTICLE X
AMENDMENTS
The Board of Directors shall have the power to make, alter, amend and
repeal these Bylaws, and to adopt new bylaws, by an affirmative vote of a
majority of the entire Board of Directors, provided that notice of the proposal
to make, alter, amend or repeal these Bylaws, or to adopt new bylaws, was
included in the notice of the meeting of the Board of Directors at which such
action takes place.
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CERTIFICATE
We, KATHERINE C. MARIEN and TRICIA BENZ DANIELS, President and Secretary,
respectively, of ALLIED CAPITAL LENDING CORPORATION (the "Corporation"), a
Maryland corporation, DO HEREBY CERTIFY that the foregoing is a true and
correct copy of the Corporation's Bylaws as amended and in effect the date
hereof.
IN WITNESS WHEREOF, we have hereunto set our hands and affixed the
corporate seal of the Corporation this 12th day of May, 1997.
/s/ KATHERINE C. MARIEN
------------------------------
Katherine C. Marien, President
/s/ TRICIA BENZ DANIELS
------------------------------
Tricia Benz Daniels, Secretary
[Corporate Seal]
19
<PAGE> 1
CREDIT AGREEMENT
Dated as of July 11, 1997
ALLIED CAPITAL LENDING CORPORATION, a Maryland corporation (the
"Company"), RIGGS BANK N.A., as the initial lender hereunder, and any
subsequent lenders that become parties to this Agreement (the "Lenders"), and
RIGGS BANK N.A., as Agent, agree as follows (with certain terms used herein
being defined in Article 10 below):
ARTICLE 1
CREDIT FACILITY
Section 1.1 Loan Commitments. Upon the terms and subject to the
conditions of this Agreement, each Lender agrees to make, from time to time
during the period from the Effective Date through the Maturity Date, one or
more Loans to the Company in an aggregate unpaid principal amount not
exceeding, at any time, such Lender's Commitment at such time; provided that,
the aggregate unpaid principal amount of all Loans, including those then to be
made, shall not exceed the Borrowing Base at such time. The initial Commitment
on the Agreement Date is in the amount of $15,000,000 and is established by
Riggs. The Agent agrees that it shall use all reasonable efforts to cause
additional Lenders, acceptable to the Agent and the Company, to provide
additional Commitments in an aggregate amount of $27,000,000.
Section 1.2 Manner of Borrowing. (a) The Company shall give the
Agent written notice (which shall be irrevocable) no later than 10:00 a.m.
(Washington, D.C. time) on the day that is one Business Day prior to the
requested date for the making of Loans. Upon receipt of any such notice, the
Agent shall promptly deliver a copy hereof to each Lender
<PAGE> 2
and promptly notify each Lender of the contents thereof and of the amount of
each Loan to be made by such Lender on the requested date specified therein.
(b) Not later than 1:00 p.m. (Washington, D.C. time) on
each requested date for the making of Loans, each Lender shall, if it has
received timely notice from the Agent of the request for Loans, and if the
conditions specified in Article 2 have been satisfied, make available to the
Agent, in Dollars in funds immediately available to the Agent the Loans to be
made by such Lender on such date. Any Lender's failure to make any Loan to be
made by it on the requested date therefor shall not relieve any other Lender of
its obligation to make any Loan to be made by such other Lender on such date,
but such other Lenders shall not be liable for such failure.
(c) Unless the Agent shall have received notice from a
Lender prior to 1:00 p.m. (Washington, D.C. time) on the requested date for the
making of any Loans that such Lender will not make available to the Agent the
Loans requested to be made by such Lender on such date, the Agent may assume
that such Lender has made such Loans available to the Agent on such date in
accordance with Section 1.2(b), and the Agent in its sole discretion may, in
reliance upon such assumption, make available to the Company on such date a
corresponding amount on behalf of such Lender. If and to the extent such
Lender shall not make available to the Agent the Loans requested to be made by
such Lender on such date and the Agent has made available to the Company a
corresponding amount on behalf of such Lender, such Lender shall, on demand,
pay to the Agent such corresponding amount together with interest thereon, at
the Federal Funds Rate, for each day from the date such amount was made
available by the Agent to the Company until the date such amount is repaid to
the Agent. If such Lender does not pay such corresponding amount promptly upon
the Agent's demand therefor, the Agent shall promptly notify the Company and
the Company shall, as promptly as practicable, but in any event within 30
Business Days of such notification, repay such corresponding amount to the
Agent together with accrued interest thereon at the applicable rate provided in
Section 1.3(a).
(d) All Loans made available to the Agent in accordance
with Section 1.2(b) shall be disbursed by the Agent not later than 2:00 p.m.
(Washington, D.C. time) on the requested date therefor in Dollars in funds
immediately available to the
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Company by credit to an account of the Company with the Agent or by wire
transfer as otherwise specified in the applicable notice.
Section 1.3 Interest. (a) Rate. Each Loan shall bear interest
on the outstanding principal amount thereof until due at a rate per annum equal
to LIBOR plus 1.35%, adjusted monthly on each LIBOR Calculation Date to reflect
LIBOR then in effect. If all or any part of a Loan or any other amount due and
payable under the Credit Documents is not paid when due (whether at maturity,
by reason of notice of repayment or acceleration or otherwise), such unpaid
amount shall, to the maximum extent permitted by Applicable Law, bear interest
for each day during the period from the date such amount became so due until it
shall be paid in full (whether before or after judgment) at a rate per annum
equal to the applicable Post-Default Rate.
(b) Payment. Interest shall be payable in arrears on the
first Business Day of each calendar month. Any interest accruing at the
Post-Default Rate shall be payable on demand.
(c) Maximum Interest Rate. Nothing contained in the
Credit Documents shall require the Company at any time to pay interest at a
rate exceeding the Maximum Permissible Rate. If interest payable by the
Company on any date would exceed the maximum amount permitted by the Maximum
Permissible Rate, such interest payment automatically shall be reduced to such
maximum permitted amount, and interest for any subsequent period, to the extent
less than the maximum amount permitted for such period by the Maximum
Permissible Rate, shall be increased by the unpaid amount of such reduction.
In the event that any Lender shall ever receive, collect or apply as interest,
any sum in excess of interest at a rate exceeding the Maximum Permissible Rate,
such excess amount shall be applied to the reduction of the unpaid principal
balance of the Note held by such Lender, and if such Note has been paid in
full, any remaining excess shall be paid to the Company. In determining
whether or not the interest paid or payable, under any specific contingency,
exceeds interest at a rate exceeding the Maximum Permissible Rate, the Company
and each Lender shall, to the maximum extent permitted under Applicable Law:
(1) characterize any nonprincipal payment as an expense or fee rather than as
interest,
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(2) exclude voluntary prepayments and the effects thereof, and (3) "spread" the
total amount of interest throughout the entire original contemplated term of
the applicable Note; provided that if a Note is paid and performed in full
prior to the end of the full contemplated term thereof, and if the interest
received for the actual period of existence thereof exceeds the amount of
interest calculated at the Maximum Permissible Rate, the Lender holding such
Note shall refund to the Company the amount of such excess to the extent
necessary to avoid any civil or criminal penalties being imposed on such Lender
or such Lender's being obligated to repay to the Company all or any part of the
payments received by such Lender on such Note.
Section 1.4 Substitute Rate. In the event that conditions in the
London interbank market change so as to make it impractical in the judgment of
any Lender to make or maintain Loans based on LIBOR, whether because one-month
Dollar deposits are not available to such Lender in the London interbank
market, or otherwise, such Lender shall give notice thereof to the Agent and
the Company. During the 30 Business Days following the receipt of such notice,
the Agent, the Lenders and the Company shall negotiate in good faith with a
view toward modifying this Agreement to provide a substitute basis for
determining the interest rate on the Loans which is financially a substantial
equivalent of the basis provided for herein. If, within such period of 30
Business Days, the parties shall agree in writing upon such substitute basis,
then such substitute basis shall be retroactive to, and effective from, the
date of the aforesaid notice. If, within such period, the parties shall fail
to agree in writing upon such substitute basis, the Company agrees that Loans
shall bear interest at a rate equal to the Prime Rate, adjusted daily when and
as the Prime Rate is changed (such rate shall be referred to herein as the
"Substitute Rate").
Section 1.5 Taxes. All payments with respect to Loans
(including, without limitation, payments of principal and interest) are payable
free and clear of any and all present and future taxes, levies, imposts,
duties, deductions, withholdings, fees, liabilities and similar charges (the
"Taxes") incurred by a Lender in connection with obtaining funds in the London
interbank market to make or maintain Loans. If, as a result of any change in
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applicable law or regulation or in the interpretation thereof by any
Governmental Authority charged with the administration thereof, or the
introduction of any law or regulation, any such Taxes are required to be
withheld or deducted from any amount payable to a Lender with respect to a
Loan, the amount payable to such Lender shall be increased to the amount which,
after deduction from such increased amount of all Taxes required to be withheld
or deducted therefrom, will yield to such Lender the amount stated to be
payable with respect thereto provided, however, that in no event shall the
Company be required to pay more interest than would have been charged if the
Substitute Rate were charged and in the event that the application of this
Section 1.5 would result in such greater charge, this Agreement will be deemed
amended as of the date of such application to provide for interest to be paid
to such Lender at the Substitute Rate. If any of the Taxes specified in this
Section 1.5 are paid by a Lender, the Company shall, upon demand of such
Lender, reimburse such Lender for such payments, together with any interest,
penalties and expenses (calculated as if such payments constituted overdue
amounts of principal) from the date such payment or payments are made to the
date of reimbursement by the Company, unless precluded by the application of
the limitations set forth above.
Section 1.6 Additional Costs. In the event that at any time any
Lender shall be required to maintain reserves against "Eurocurrency
Liabilities" under Regulation D of the Board of Governors of the Federal
Reserve System or in the event that there shall occur any change in applicable
law or regulation or in the interpretation thereof by any Governmental
Authority charged with the administration thereof or the introduction of any
law or regulation subjects a Lender to any tax of any kind whatsoever with
respect to its Loans or its Note, or changes the basis of taxation of payments
to such Lender of principal of or interest payable with respect to any Loan
hereunder (except for changes in the rate of tax based solely on the overall
net income of such Lender) or imposes, modifies or deems applicable any
reserve, special deposit, capital ratio or similar requirement against assets
held by or deposits in or for the account of, or loans by, such Lender or
imposes on such Lender, directly or indirectly, any other conditions affecting
the Loans or the Notes of such Lender or the cost of Dollar deposits obtained
by such Lender in the London interbank market, and the result of
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any of the foregoing is to increase the cost to such Lender of making or
maintaining Loans based on LIBOR, then the Company shall pay to such Lender
from time to time upon its demand the additional amount or amounts (a
certificate of an officer of such Lender setting forth the calculation of such
costs shall be conclusive and binding, absent manifest error), necessary to
compensate such Lender for such additional costs provided, however, that in no
event shall the Company be required to pay more interest than would have been
charged if the Substitute Rate were charged and in the event that the
application of this Section 1.6 would result in such greater charge, this
Agreement will be deemed amended as of the date of such application to provide
for interest to be paid at the Substitute Rate.
Section 1.7 Repayment. The Loans shall mature and become due and
payable, and shall be repaid by the Company in full on the Maturity Date.
Section 1.8 Prepayments. (a) Optional Prepayments. The Company
may, at any time and from time to time, prepay the Loans in whole or in part,
without premium or penalty.
(b) Borrowing Base Mandatory Prepayments. If on any date
the aggregate unpaid principal amount of the Loans exceeds the Borrowing Base
at such time, the Company shall, within three Business Days following demand by
the Agent, prepay the Loans in an amount equal to the amount of such excess.
Each such payment required by this Section 1.8(b) shall be due and payable
before 10:00 a.m. (Washington, D.C. time) on the date which is three Business
Days after the date on which demand is made by the Agent. The Agent shall make
the foregoing demands for payment of such excess if directed to do so by the
Majority Lenders.
(c) Additional Collateral. If, but only if, at such time
as the Company shall be required to prepay Loans under Section 1.8(b), no
Potential Default or Event of Default exists, in lieu of prepaying Loans, the
Company may add Eligible Mortgage Loans to the Borrowing Base, such that, after
giving effect thereto, the Company shall be in compliance with the requirements
of Section 1.8(b).
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Section 1.9 Reduction of Commitments. The Company may
permanently reduce the Commitments by giving the Agent written notice (which
shall be irrevocable) thereof no later than 10:00 a.m. (Washington, D.C. time)
on the thirtieth Business Day before the requested date of such reduction,
except that, (a) no partial reduction of the Commitments shall be in an
aggregate amount less than $1,000,000 and (b) no reduction may reduce the
Commitments to an amount less than the aggregate amount of Loans outstanding.
Upon receipt of any such notice, the Agent shall promptly notify each Lender of
the contents thereof and the amount to which such Lender's Commitment is to be
reduced.
Section 1.10 Fees. (a) Facility Fees. The Company shall pay to
the Agent for the account of each Lender a facility fee on the amount of each
Lender's Commitment for each day from the Agreement Date through the Maturity
Date at a rate per annum of 0.20%, payable quarterly in advance on the first
Business Day of each calendar quarter, beginning on October 1, 1997. On the
date hereof, Riggs is the only Lender and is entitled to the payment of such
fee with respect to its $15,000,000 Commitment. On the date of this Agreement,
the Company shall pay to Riggs a prorated portion of such fee for the period
beginning on the Agreement Date through September 30, 1997. No subsequent
Lender shall be entitled to such fee until it becomes an Additional Lender,
approved by the Company, pursuant to Section 9.15 with a Commitment in an
amount approved by the Company.
(b) Upfront Fee. The Company shall pay to the Agent for
the account of each Lender a commitment fee on the amount of each Lender's
Commitment, and any increase thereto, equal to 0.10% of each such Lender's
Commitment. The Company shall pay such fee to Riggs on the date of this
Agreement. No subsequent Lender shall be entitled to such fee until it becomes
an Additional Lender approved by the Company, pursuant to Section 9.15 with a
Commitment in an amount approved by the Company.
Section 1.11 Computation of Interest and Fees. Interest and the
facility fee shall be computed on the basis of a year of 365 days and paid for
the actual number of days elapsed. Interest and fees for any period shall be
calculated from and including the first day thereof to but excluding the last
day thereof. Notwithstanding the foregoing, interest accrued by
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reference to LIBOR shall be computed on the basis of a year of 360 days and
paid for the actual number of days elapsed.
Section 1.12 Evidence of Indebtedness. The obligation of the
Company to repay the Loans made by each Lender with interest in accordance with
the terms of this Agreement shall be evidenced by this Agreement, the records
of such Lender, and a single Note payable to the order of such Lender. The
face amount of the Note held by each Lender shall be the amount of such
Lender's Commitment, but at no time shall the aggregate principal amount of
Loans outstanding thereunder exceed such Lender's Commitment. The records of
each Lender shall be prima facie evidence (absent manifest error) of such
Lender's Loans and accrued interest thereon and of all payments made in respect
thereof.
Section 1.13 Payments. (a) Time, Place and Manner. All payments
due under the Credit Documents shall be made to the Agent at its office at 808
17th Street, N.W., Washington, D.C. 20006, or to such other address within the
United States of America as the Agent may designate by notice to the Company.
A payment shall not be deemed to have been made on any day unless such payment
has been received by the Agent, at the required place of payment, in Dollars in
funds immediately available to the Agent at such office, no later than 12:00
noon (Washington, D.C. time) on such day.
(b) No Reductions. All payments due to the Agent or any
Lender under the Credit Documents, and all other terms, conditions, covenants
and agreements to be observed and performed by the Company thereunder, shall be
made, observed or performed by the Company without any reduction or deduction
whatsoever, including any reduction or deduction for any set-off, recoupment,
counterclaim (whether sounding in tort, contract or otherwise) or Tax, except
for any withholding or deduction for Taxes required to be withheld or deducted
under Applicable Law.
(c) Authorization to Charge Accounts. The Company hereby
authorizes the Agent and each Lender, upon the occurrence of an Event of
Default, if and to the extent any amount payable by the Company under the
Credit Documents (whether payable to such Lender or to any other Person that is
the Agent or a Lender) is not otherwise paid when due,
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to charge such amount against any or all of the accounts of the Company (other
than the Company's SBA imprest account or other escrow or trustee accounts)
with such Person or any of its Affiliates (whether maintained at a branch or
office located within or without the United States), with the Company remaining
liable for any deficiency.
(d) Extension of Payment Dates. Whenever any payment to
the Agent or any Lender under the Credit Documents would otherwise be due
(except by reason of acceleration) on a day that is not a Business Day, such
payment shall instead be due on the next succeeding Business Day. If the date
any payment under the Credit Documents is due is extended (whether by operation
of any Credit Document, Applicable Law or otherwise), such payment shall bear
interest for such extended time at the rate of interest applicable hereunder.
Section 1.14 Distribution of Payments by the Agent. (a) The
Agent shall promptly distribute to each Lender its ratable share of each
payment received by the Agent under the Credit Documents for the account of the
Lenders by credit to an account of such Lender with the Agent or by wire
transfer to an account of such Lender at an office of any other commercial bank
located in the United States (as directed by such Lender). If the Agent
receives a payment by 12:00 noon (Washington, D.C. time) on a Business Day, it
shall use reasonable efforts to make ratable distributions of such payment to
the Lenders on the same Business Day. If the Agent receives a payment after
12:00 noon (Washington, D.C. time) on a Business Day, it shall use reasonable
efforts to make ratable distributions of such payment to the Lenders on the
next succeeding Business Day.
(b) Unless the Agent receives notice from the Company
prior to the date on which any payment is due to the Lenders under the Credit
Documents that the Company will not make such payment in full, the Agent may,
at its option, assume that the Company made such payment in full to the Agent
on such date, and the Agent in its sole discretion may, in reliance upon such
assumption, cause to be distributed to each Lender on such due date a
corresponding amount with respect to the amount then due such Lender. If and
to the extent the Company shall not make such payment in full to the Agent and
the Agent has distributed to any Lender a corresponding amount, such Lender
shall, on demand, repay to
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the Agent the amount so distributed together with interest thereon, at the
Federal Funds Rate, for each day from the date such amount is distributed to
such Lender until the date such Lender repays such amount to the Agent.
Section 1.15 Pro Rata Treatment. Except to the extent otherwise
expressly provided herein, (a) Loans shall be made by the Lenders pro rata in
accordance with their respective Commitments, (b) each reduction in the
Commitments shall be made pro rata in accordance with the respective amounts
thereof and (c) each payment of the principal of or interest on the Loans or of
fees shall be made for the account of the Lenders pro rata in accordance with
their respective amounts thereof then due and payable. The Agent shall give
each Lender prompt notice of any reduction of such Lender's Pro Rata Share and
the effective date thereof.
ARTICLE 2
CONDITIONS TO LOANS
Section 2.1 Conditions to Initial Loans. The obligation of each
Lender to make its initial Loan is subject to the determination of each Lender,
in its sole and absolute discretion, that each of the following conditions has
been fulfilled:
(a) The Company shall deliver to the Agent, in form and
substance satisfactory to the Agent and its counsel, each of the following
(with sufficient copies for each of the Lenders):
(1) A duly executed original of this Agreement;
(2) Duly executed originals of the Security
Agreement;
(3) Duly executed originals of each of the Notes;
(4) Duly executed originals of all financing
statements and other documents, instruments and agreements deemed
necessary or appropriate by the Agent, in its reasonable discretion,
to obtain for the Agent on behalf of the Lenders a
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perfected Lien upon the Collateral, which shall be subject to no other
Lien, whether prior to, on a parity with, or junior to, such Lien;
(5) Such credit applications, financial
statements, authorizations and such information concerning the
Company, any Subsidiary and their respective businesses, operations
and conditions (financial and otherwise) as any Lender may reasonably
request;
(6) Certified copies of resolutions of the Board
of Directors of the Company approving the execution and delivery of
the Credit Documents, the performance of the Obligations thereunder
and the consummation of the transactions contemplated thereby;
(7) A certificate of the Secretary or an
Assistant Secretary of the Company certifying the names and true
signatures of the officers of the Company authorized to execute and
deliver the Credit Documents to which the Company is a party;
(8) A copy of the Articles of Incorporation of
the Company certified by the Secretary of State of the state of
organization of the Company as of a recent date;
(9) A copy of the Bylaws of the Company certified
by the Secretary or an Assistant Secretary of the Company as of the
date of this Agreement as being accurate and complete;
(10) A certificate of the Secretary of State of
the State of Maryland, certifying as of a recent date that the Company
is in good standing;
(11) An opinion of counsel for the Company and
covering such matters as the Agent may reasonably request;
(12) A duly completed Borrowing Base Certificate
dated and setting forth a calculation of the Borrowing Base as of the
date of the initial Loans;
(13) A copy of the investment management agreement
between the Company and Allied Capital Advisers, Inc.; and
(14) A copy of the Custody Agreement and a duly
executed original of a letter agreement or bailee agreement, in form
and substance acceptable to the
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Agent, among the Agent, the Company and the Custodian pursuant to
which the Custodian agrees to segregate the Collateral and hold the
Collateral as bailee for the Agent as the secured party under the
Security Agreement.
(b) All acts and conditions (including, without
limitation, the obtaining of any necessary regulatory approvals and the making
of any required filings, recordings or registrations) required to be done and
performed and to have happened precedent to the execution, delivery and
performance of the Credit Documents and to constitute the same legal, valid and
binding obligations, enforceable in accordance with their respective terms,
shall have been done and performed and shall have happened in due and strict
compliance with all Applicable Laws.
(c) All documentation, including, without limitation,
documentation for corporate and legal proceedings in connection with the
transactions contemplated by the Credit Documents shall be satisfactory in form
and substance to the Agent and its counsel.
(d) All fees for which the Agent is entitled to be
reimbursed under Section 9.8(b) to the extent then billed, shall have been paid
prior to (or will be paid concurrently with) the making of the first Loan
hereunder.
(e) The Agent shall have completed an audit of the
Collateral, if applicable, the results of which must be acceptable to the
Agent.
Section 2.2 Conditions to Each Loan. The obligation of each
Lender to make each Loan requested to be made by it, including its initial
Loan, is subject to the following conditions:
(a) The Company shall deliver to the Agent a notice of
borrowing with respect to such Loan complying with the requirement of Section
1.2;
(b) The representations and warranties of the Company
contained in the Credit Documents shall be accurate and complete in all
material respects as if made on and as of the date of such Loan (except as to
any representation or warranty which speaks to a specific date in which case
such representation and warranty shall be accurate and complete in all material
respects as of such specific date);
(c) There shall not exist an Event of Default or a
Potential Default;
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(d) Following the funding of the requested Loan: (1) the
aggregate principal amount of Loans outstanding advanced by any Lender will not
exceed its Commitment at such time, and (2) the aggregate principal amount of
Loans outstanding will not exceed the Borrowing Base as of the date of such
Loan;
(e) The Required Documents for the Mortgage Loans
constituting the Collateral shall have been received by the Agent and
segregated by the Custodian in accordance with the Bailee Agreement (this
condition will be satisfied upon receipt by the Agent of certified copies of
the Required Documents, provided that the original Mortgage Note, endorsed to
the order of the Agent, a copy of the deed of trust or mortgage, together with
the recording receipt or other satisfactory evidence of recordation, and a copy
of the assignment, together with the recording receipt or other satisfactory
evidence of recordation, or the original assignment, in recordable form, from
the Company to the Agent, are delivered to the Agent within 5 Business Days of
the making of the applicable Loan);
(f) The Agent shall have received a fully completed
Borrowing Base Certificate in accordance with Section 4.2(a) with respect to
the existing Eligible Mortgage Loans and a new Borrowing Base Certificate
covering any additional Eligible Mortgage Loans to be included in the Borrowing
Base; and
(g) Such Loan will not contravene any Applicable Law
applicable to such Lender. By making a notice of borrowing pursuant to Section
1.2(a) to the Agent hereunder, the Company shall be deemed to have represented
and warranted the accuracy and completeness of the statements set forth in
Sections 2.2(b) through 2.2(e).
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
In order to induce the Agent and each Lender to enter into this Agreement and
to induce each Lender to make the Loans requested to be made by it, the Company
represents and warrants as follows:
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Section 3.1 Organization; Power; Qualification. The Company is a
corporation duly organized, validly existing and in good standing under the
laws of the jurisdiction of its incorporation, has the corporate power and
authority to own its properties and to carry on its businesses as now being and
hereafter proposed to be conducted and is duly qualified and in good standing
as a foreign corporation, and is authorized to do business, in all
jurisdictions in which the character of its properties or the nature of its
businesses requires such qualification or authorization, except for
qualifications and authorizations the lack of which, singly or in the
aggregate, has not had and does not have a significant possibility of having a
Materially Adverse Effect on the Company or the Collateral, taken as a whole.
Section 3.2 Subsidiaries. On the Effective Date, the Company has
no Subsidiaries other than Allied Capital SBLC Corporation, a Maryland
corporation ("SBLC"), and Allied Capital Credit Corporation, a Maryland
corporation ("ACCC").
Section 3.3 Authorization; Enforceability; Required Consents;
Absence of Conflicts. The Company has the power, and has taken all necessary
action (including any necessary stockholder action) to authorize it to execute,
deliver and perform in accordance with their respective terms the Credit
Documents and to borrow up to $27,000,000 hereunder. This Agreement has been,
and each of the other Credit Documents when delivered to the Agent will have
been, duly executed and delivered by the Company and is, or when so delivered
will be, a legal, valid and binding obligation of the Company, enforceable
against the Company in accordance with its terms. The execution, delivery and
performance in accordance with their respective terms by the Company of the
Credit Documents, and each borrowing hereunder, whether or not in the amount of
the unused Commitments, do not and (absent any change in any Applicable Law or
applicable Contract) will not (a) require any Governmental Approval (other than
the filing of financing statements contemplated by the Security Agreement) or
any other consent or approval, including any consent or approval of the
stockholders of the Company, or (b) violate, conflict with, result in a breach
of, constitute a default under, or result in or require the creation of any
Lien (other than the Lien created by the Security Agreement) upon any assets of
the Company or
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any Subsidiary under, (1) any Contract to which the Company or any Subsidiary
is a party or by which the Company or any Subsidiary or any of its properties
may be bound or (2) any Applicable Law.
Section 3.4 Taxes. The Company and each Subsidiary has (a) filed
all Tax returns required to have been filed by it under Applicable Law, (b)
paid all Taxes that are shown on such returns as being due and payable by it or
have been assessed against it, except for Taxes with respect to which the
failure to pay does not contravene Section 4.3, and (c) to the extent required
by GAAP or rules and regulations of the Internal Revenue Service, reserved
against all Taxes that are payable by it but are not yet due or that are due
and payable by it or have been assessed against it but have not yet been paid.
Section 3.5 Litigation. Except as set forth on Exhibit 3.5,
there are not, in any court or before any arbitrator of any kind or before or
by any governmental or non-governmental body, any actions, suits or proceedings
pending or threatened (nor, to the knowledge of the Company is there any basis
therefor) against or in any other way relating to or affecting (a) the Company
or any Subsidiary or any of its businesses or properties, (b) any Credit
Document, or (c) the Collateral, except actions, suits or proceedings that (1)
do not, singly or in the aggregate, have a significant possibility (taking into
account the likelihood of an adverse determination) of having a Materially
Adverse Effect on the Company, and (2) if adversely determined, would not,
singly or in the aggregate, have a Materially Adverse Effect on the Collateral
taken as a whole.
Section 3.6 No Adverse Change or Event. Since the Statement
Date, no change in the business, assets, Liabilities, financial condition,
results of operations or business prospects of the Company has occurred, and no
event has occurred or failed to occur, that has had or that has a significant
possibility of having, either alone or in conjunction with all other such
changes, events and failures, a Materially Adverse Effect on the Company or the
Collateral, taken as a whole.
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Section 3.7 Accuracy of Information. No information, exhibit or
report furnished in writing by the Company or any Subsidiary to the Agent or to
any Lender in connection with the negotiation of or compliance with, the Loan
Documents contains any material misstatement of fact or omits to state a
material fact or any fact necessary to make the statements contained therein
not misleading.
Section 3.8 Security Interest. The Lien created, or purported to
be created, by the Security Agreement constitutes and will constitute a
perfected Lien in the Collateral, and such Collateral is not and will not be
subject to any other Liens whether prior to, on a parity with, or junior to
such Lien.
Section 3.9 Financial Condition. The financial statements, dated
the Statement Date, copies of which have heretofore been furnished to each
Lender, are complete and correct and present fairly, in accordance with GAAP,
the financial condition of the Company at such dates and the results of its
operations and changes in financial position for the fiscal periods then ended.
Section 3.10 Investment Company Act. Each of the Company, SBLC
and ACCC is an "investment company" within the meaning of the Investment
Company Act of 1940, as amended, and is a "regulated investment company" under
Subchapter M of the Code, and is in compliance with all rules and regulations
issued pursuant thereto, after giving effect to the transactions contemplated
by this Agreement.
Section 3.11 Use of Proceeds. The proceeds of all Loans shall be
used by the Company solely for financing the acquisition or origination by the
Company of Mortgage Loans. No part of the proceeds of any Loan made hereunder
will be used, directly or indirectly, for "purchasing" or "carrying" "margin
stock" as so defined or for any purpose which violates, or which would be
inconsistent with, the provisions of the Regulations of the Board of Governors
of the Federal Reserve System.
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ARTICLE 4
AFFIRMATIVE COVENANTS
The Company hereby covenants and agrees with the Agent and each Lender
that, as long as any Obligations remain unpaid, or any Commitments remain
outstanding, the Company shall, and shall cause each of its Subsidiaries to:
Section 4.1 Financial Statements. Furnish to the Agent and each
Lender:
(a) Within 120 days after the last day of each fiscal
year of the Company, (1) consolidated balance sheet and statements of
operations, changes in net assets and cash flows as of the end of such fiscal
year of the Company and its Subsidiaries, which statements shall be complete
and correct and present fairly in accordance with GAAP the consolidated
financial position of the Company and its Subsidiaries as at the end of such
fiscal year and the consolidated results of operations, changes in net assets
and cash flows for such year, and (2) consolidating balance sheet and statement
of operations as of the end of such fiscal year of the Company and its
Subsidiaries which agree to the consolidated balance sheet and statement of
operations in Section 4.1(a)(1). The consolidated financial statements shall
be accompanied by an unqualified report of a firm of independent certified
public accountants reasonably acceptable to the Majority Lenders and including
therewith a copy of any management letter from such certified public
accountants;
(b) Within 45 days after the last day of each calendar
quarter, (1) consolidated balance sheet and statements of operations, changes
in net assets and cash flows for such quarter as of the end of such quarter of
the Company and its Subsidiaries accompanied in each case by a Covenant
Compliance Certificate of the chief financial officer of the Company, stating
that such financial statements are complete and correct and present fairly in
accordance with GAAP the consolidated financial position of the Company and its
Subsidiaries as at the end of such quarter, and the consolidated results of
operations, changes in net assets and cash flows for such quarter and for the
elapsed portion of the fiscal year subject only to normal year-end auditing
adjustments and demonstrating in detail satisfactory to the Agent the Company's
compliance with the Financial Covenants as of and at the end of
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such quarter, and (2) consolidating balance sheet and statement of operations
as of the end of the quarter of the Company and its Subsidiaries which agree to
the consolidated balance sheet and statement of operations in Section
4.1(b)(1).
Section 4.2 Certificates; Reports: Other Information. Furnish to
the Agent (who shall promptly furnish a copy thereof to each of the Lenders):
(a) Within 15 days after the last day of each calendar
month, a Borrowing Base Certificate setting forth the Borrowing Base as of the
end of such month;
(b) Within 15 days after the last day of each calendar
month, an Eligible Mortgage Loan report, in the form of Exhibit 4.2 hereto;
(c) Within 15 days after the last day of each calendar
month, a delinquency report listing all Eligible Mortgage Loans on the books of
the Company showing the payment status of each such loan, and otherwise in form
and substance reasonably satisfactory to the Agent;
(d) Copies of all reports filed with the Securities and
Exchange Commission and all reports and proxy materials sent to shareholders of
the Company, promptly after the filing or sending thereof; and
(e) Promptly, such additional financial and other
information regarding the Company or the Collateral, as the Agent or any
Lender, through the Agent, may from time to time reasonably request, including
any Information that the Agent may require concerning the Obligors and the
Properties.
Section 4.3 Payment of Indebtedness. Pay, discharge or otherwise
satisfy at or before maturity or before it becomes delinquent, defaulted or
accelerated, as the case may be, all its Indebtedness, except Indebtedness
being contested in good faith by appropriate proceedings and for which
provision is made to the reasonable satisfaction of the Agent for the payment
thereof in the event the Company or such Subsidiary, as the case may be, is
found to be obligated to pay such Indebtedness and which Indebtedness is
thereupon promptly paid by the Company or such Subsidiary and except where
non-compliance with this
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Section 4.3 is not likely to have a Materially Adverse Effect on the Company,
any Credit Documents or the Collateral.
Section 4.4 Maintenance of Existence and Properties. Maintain
its corporate existence and obtain and maintain all rights, privileges,
licenses, approvals, franchises, properties and assets necessary or desirable
in the normal conduct of its business, including its qualification as a
regulated investment company under Subchapter M of the Code, except where the
failure to so comply is not likely to have a Materially Adverse Effect on the
Company, any Credit Document or the Collateral.
Section 4.5 Inspection of Property; Valuations; Books and
Records: Audits.
(a) Keep proper books of record and account in which
full, true and correct entries in conformity with GAAP and all Applicable Laws
shall be made of all dealings and transactions in relation to its business and
activities;
(b) Not less frequently that once during each calendar
year, determine the Value of each Property securing an Eligible Mortgage Loan
in accordance with the Approved Valuation Method, and provide copies thereof to
the Agent upon its request; and
(c) Permit (1) representatives of the Agent and any
Lender with a Commitment of $10,000,000 or more to (i) visit and inspect any of
its assets and examine and make abstracts from any of its books and records
during normal business hours and as often as may reasonably be desired by the
Agent or any such Lender and, in the case of any such Lenders not accompanied
by the Agent, upon reasonable written notice to the Company, and (ii) discuss
the business, operations, properties and financial and other condition of the
Company and any of its Subsidiaries with officers and employees of such
Persons, and with their independent certified public accountants, and (2)
representatives of the Agent to conduct periodic audits of the Eligible
Mortgage Loans that are included within the Borrowing Base at any time.
Section 4.6 Notices. Promptly give written notice to the Agent
(which shall promptly transmit such notice to each of the Lenders) of:
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(a) The occurrence of any Potential Default or Event of
Default known to responsible management personnel of the Company and the
proposed method of cure thereof;
(b) Any litigation or proceeding affecting the Company or
any of its Subsidiaries or any Credit Document, or the Collateral which could
have a Materially Adverse Effect on the Company, or on the Collateral; and
(c) The occurrence or non-occurrence of any fact or
circumstance that causes a Mortgage Loan included in the Borrowing Base to
cease to be an Eligible Mortgage Loan.
Section 4.7 Credit Documents. Comply with and observe all terms
and conditions of the Credit Documents.
Section 4.8 Insurance. Obtain and maintain insurance with
responsible companies in such amounts and against such risks as are usually
carried by corporations engaged in similar businesses similarly situated,
including, without limitation, errors and omissions coverage and fidelity
coverage in form and substance acceptable to the Agent, and furnish the Agent
on request full information as to all such insurance.
Section 4.9 Investment Company Act. The Company will maintain
compliance with the Investment Company Act of 1940, as amended, and the
requirements of Subchapter M of the Code in order to maintain its status as a
"regulated investment company."
ARTICLE 5
NEGATIVE COVENANTS
The Company hereby agrees that, as long as any Obligations remain
unpaid or any Commitments remain outstanding, the Company shall not, and shall
not permit any of its Subsidiaries to, at any time, directly or indirectly;
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Section 5.1 Liens. Create, incur, assume or suffer to exist, any
Lien upon the Collateral except as contemplated by the Security Agreement or
create, incur, assume or suffer to exist any Lien upon any of its other
property and assets, except:
(a) Liens or charges for current Taxes, assessments or
other governmental charges which are not delinquent or which remain payable
without penalty, or the validity of which are contested in good faith by
appropriate proceedings upon stay of execution of the enforcement thereof,
provided the Company shall have set aside on its books and shall maintain
adequate reserves for the payment of same in conformity with GAAP;
(b) Liens securing the claim of a materialman, mechanic,
carrier, warehouseman or landlord for labor, materials, supplies or rentals
incurred in the ordinary course of business, but only if payment thereof shall
not at the time be required to be made in accordance with Section 4.3;
(c) Liens, deposits or pledges made to secure statutory
obligations, surety or appeal bonds, or bonds for the release of attachments or
for stay of execution, or to secure the performance of bids, tenders, contracts
(other than for the payment of borrowed money), leases or for purposes of like
general nature in the ordinary course of the Company's or a Subsidiary's, as
the case may be, business;
(d) Liens arising in connection with purchase money
indebtedness, conditional sale agreements, capital leases or other title
retention agreements incurred in connection with the acquisition of furniture,
fixtures, equipment or leasehold improvements in the ordinary course of
business, provided that such Liens and capital leases are limited to the
property purchased or leased;
(e) Liens on assets other than the Collateral to secure
Indebtedness permitted by Section 5.2(b); and
(f) Liens on assets other than Collateral securing
Indebtedness not to exceed $2,000,000 in the aggregate at any one time
outstanding.
Section 5.2 Indebtedness. Create, incur, assume or suffer to
exist, or otherwise become or be liable in respect of any Indebtedness for
borrowed money (including capitalized lease obligations) except:
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(a) The Obligations and Indebtedness outstanding under
the Credit Documents;
(b) Other Indebtedness of the Company incurred in the
ordinary course of business to purchase, acquire or carry Mortgage Loans and
real estate assets and investments, if, at the time of, and both before and
after giving effect to, the incurrence of such Indebtedness, no Event of
Default or Potential Default should have occurred and be continuing;
(c) Purchase money Indebtedness and capitalized lease
obligations described in Section 5.1(d); and
(d) Other Indebtedness of the Company incurred in the
ordinary course of business for general corporate purposes not to exceed
$2,000,000 in the aggregate at any one time outstanding.
Section 5.3 Consolidation and Merger; Change of Business.
Liquidate or dissolve or enter into any consolidation, merger, partnership,
joint venture, syndicate or other combination or make any material change in
the nature of its business as presently conducted.
Section 5.4 Acquisitions. Purchase or acquire or incur liability
for the purchase or acquisition of any or all of the assets or business of any
Person, other than Mortgage Loans and real estate assets and investments
acquired in the ordinary course of business and other acquisitions not to
exceed $1,000,000 in the aggregate during the term of this Agreement.
Section 5.5 Payment of Dividends. If a Dividend Block Default
has occurred and is continuing, declare or pay any dividends upon any shares of
the Company's stock now or hereafter outstanding or make any distribution of
assets to its stockholders as such, whether in cash, property, or securities,
except such payments or distributions necessary to maintain compliance with the
requirements of Subchapter M of the Code in order to maintain its status as a
"regulated investment company" and to avoid imposition of a tax or similar
payments.
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Section 5.6 Purchase or Retirement of Stock. Acquire, purchase,
redeem or retire any shares of its capital stock now or hereafter outstanding
except as provided in the dividend reinvestment plan of the Company.
Section 5.7 Investments: Advances. Make or commit to make any
advance, loan or extension of credit or capital contribution to, or purchase
any stocks, bonds, notes, debentures or other securities of, or make any other
investment in, any Person; provided, however, that the Company shall be
permitted to make (a) investments in Money Market Investments, (b) advances in
the ordinary course of business to employees for travel and related expenses,
(c) loans to employees to exercise stock options granted by the Company
pursuant to the Company's stock option plan in an aggregate amount not to
exceed $7,500,000 at any time outstanding, and (d) Mortgage Loans and
investments in real estate assets in the ordinary course of business.
Section 5.8 Sale of Assets. Sell, lease, assign, transfer or
otherwise dispose of any of its assets (other than obsolete or worn out
property), whether now owned or hereafter acquired, other than in the ordinary
course of business as presently conducted or in connection with financing and
securitization activities and at fair market value.
Section 5.9 Maximum Leverage Ratio. The Company will maintain at
all times a ratio of Total Liabilities to Shareholders' Equity of not greater
than 1.75 to 1.
Section 5.10 Interest Coverage Ratio. For each 12-month period
ending on the last day of each calendar quarter (each, a "Test Period"), permit
its ratio of Adjusted EBITDA to Total Interest Expense of the Company and its
Subsidiaries, on a consolidated basis, to be less than 1.5 to 1.
Section 5.11 Pro Forma Debt Service Coverage Ratio. For each Test
Period, permit its ratio of Adjusted EBITDA to its Pro Forma Debt Service to be
less than 1.25 to 1.
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Section 5.12 Transactions with Affiliates. Purchase, acquire or
lease any property from, or sell, transfer or lease any property to, lend or
advance any money to, borrow any money from, guarantee any obligation of,
acquire any stock, obligations or securities of, or enter into any merger or
consolidation agreement, or any management or similar fee agreement with, any
Affiliate, or enter into any other transaction or arrangement or make any
payment to (including, without limitation, on account of any management fees,
services charges or tax sharing charges) or otherwise deal with, in the
ordinary course of business or otherwise, any Affiliate other than on a basis
no less favorable to the Company than would at the time be obtainable for a
comparable transaction in an arm's-length dealing with an unrelated third
Person, except that the Company may continue to retain Allied Capital Advisers,
Inc. as its investment manager and conduct such transactions as are described
in the investment management agreement in effect on the date hereof.
ARTICLE 6
DEFAULT
Section 6.1 Events of Default. Upon the occurrence of any of the
following events (an "Event of Default"):
(a) The Company shall fail to pay principal or interest
on any Loan or any fee payable under this Agreement on the date when due or
fail to make any payment required under Section 1.8 on the date when due and,
in the case of the payment of interest or fees, such failure shall continue for
five days; or
(b) Any representation or warranty made or deemed made by
the Company in any Credit Document shall be inaccurate or incomplete in any
material respect on or as of the date made or deemed made; or
(c) The Company shall fail to maintain its corporate
existence or shall default in the observance or performance of any Financial
Covenant; or
(d) The Company shall fail to observe or perform any
other term or provision contained in any Credit Document and such failure shall
continue for thirty (30) days after written notice from the Agent to the
Company; or
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(e) If there is a declared default or acceleration as a
result of default of any Indebtedness of the Company or any of its Subsidiaries
for money borrowed in the aggregate principal amount of $2,500,000 or more; or
(f) (1) The Company or any of its Subsidiaries shall
commence any case, proceeding or other action (i) under any existing or future
law of any jurisdiction, domestic or foreign, relating to bankruptcy,
insolvency, reorganization or relief of debtors, seeking to have an order for
relief entered with respect to it, or seeking to adjudicate it a bankrupt or
insolvent, or seeking reorganization, arrangement, adjustment, winding-up,
liquidation, dissolution, composition or other relief with respect to it or its
debts, or (ii) seeking appointment of a receiver, trustee, custodian or other
similar official for it or for all or any substantial part of its assets, or
the Company or any of its Subsidiaries shall make a general assignment for the
benefit of its creditors, or (2) there shall be commenced against the Company
or any of its Subsidiaries any case, proceeding or other action of a nature
referred to in clause (1) above which (i) results in the entry of an order for
relief or any such adjudication or appointment, or (ii) remains undismissed,
undischarged or unbonded for a period of sixty (60) days, or (3) there shall be
commenced against the Company or any of its Subsidiaries any case, proceeding
or other action seeking issuance of a warrant of attachment, execution,
distraint or similar process against all or substantially all of its assets
which results in the entry of an order for any such relief which shall not have
been vacated, discharged, stayed, satisfied or bonded pending appeal within
sixty (60) days from the entry thereof, or (4) the board of directors of the
Company or any Subsidiary of the Company shall authorize the commencement of
any case, proceeding or other action contemplated by clause (1) above, or (5)
the Company or any of its Subsidiaries shall generally not, or shall be unable
to, or shall admit in writing its inability to pay its debts as they become
due; or
(g) (1) The Company shall engage in any "prohibited transaction"
(as defined in Section 406 of ERISA or Section 4975 of the Code) involving any
Plan, (2) any "accumulated funding deficiency" (as defined in Section 302 of
ERISA), whether or not waived, shall exist with respect to any Plan, (3) a
Reportable Event shall occur with respect to, or proceedings shall commence to
have a trustee appointed, or a trustee shall be appointed, to administer or to
terminate, any Single Employer Plan, which Reportable Event
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or institution of proceedings is, in the reasonable opinion of the Agent or the
Majority Lenders, likely to result in the termination of such Plan for purposes
of Title IV of ERISA, and, in the case of a Reportable Event, the continuance
of such Reportable Event unremedied for ten days after notice of such
Reportable Event pursuant to Section 4043(a), (c) or (d) of ERISA is given or
the continuance of such proceedings for ten days after commencement thereof, as
the case may be, (4) any Single Employer Plan shall terminate for purposes of
Title IV of ERISA, (5) any withdrawal liability to a Multiemployer Plan shall
be incurred by the Company or any of its ERISA Affiliates, or (6) any other
event or condition shall occur or exist; and in each case in clauses (1)
through (6) above, such event or condition, together with all other such events
or conditions, if any, is likely to subject the Company to any tax, penalty or
other liabilities in an amount in the aggregate in excess of $1,000,000; or
(h) One or more judgments or decrees in an aggregate amount in
excess of $1,000,000 (exclusive of any amount covered by insurance or
indemnities and the insurer or indemnitor is reasonably acceptable to the Agent
as to creditworthiness and as to which amount such insurer or indemnitor has
acknowledged liability in writing) shall be entered against the Company or any
of its Subsidiaries and all such judgments or decrees shall not have been
vacated, discharged, stayed, satisfied or bonded pending appeal within thirty
(30) days from the entry thereof; or
(i) If Allied Capital Advisers, Inc. ceases to be employed as the
investment manager for the Company or delegates its duties or assigns its
rights as investment manager to any other Person, unless another such
investment manager reasonably satisfactory to the Agent and the Lenders is
employed by the Company.
Section 6.2 Remedies Upon Event of Default. (a) Automatically
upon the occurrence of an Event of Default under Section 6.1(f), (b)
automatically upon the written demand of the Majority Lenders if an Event of
Default occurs under Section 6.1(a) and within 60 days thereafter such Event of
Default is not cured or waived by all Lenders, and (c) upon the occurrence of
any other Event of Default, at the option of the Majority Lenders, each
Lender's obligation to make Loans hereunder shall terminate and the principal
balance of outstanding Loans and interest accrued but unpaid thereon shall
become immediately due
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and payable, upon written demand from the Agent, but without presentment to the
Company, which is expressly waived by the Company, and the Majority Lenders may
direct the Agent to take all action with respect to the Collateral contemplated
by the Credit Documents and to exercise any and all remedies available
thereunder, at law, in equity or otherwise.
ARTICLE 7
ADDITIONAL CREDIT FACILITY PROVISIONS
Section 7.1 The Company acknowledges and agrees that Riggs shall
not have any liability to the Company if prospective Additional Lenders do not
become parties to this Agreement because it does not contain Increased Costs
Terms. The Company agrees that if it incurs Indebtedness on terms comparable
to the terms contained in this Agreement and if the documents governing such
Indebtedness contain Increased Costs Terms, the Company shall execute an
amendment to this Agreement pursuant to which comparable Increased Costs Terms
are incorporated herein.
ARTICLE 8
THE AGENT
Section 8.1 Appointment of Agent. Each Lender hereby irrevocably
designates and appoints the Agent as the agent for such Lender under the Credit
Documents (and as a representative of the Lenders, within the meaning of
Section 9-105(m) of the Uniform Commercial Code) and each such Lender hereby
irrevocably authorizes the Agent as the agent for such Lender, to take such
action on its behalf under the provisions of the Credit Documents and to
exercise such powers and perform such duties as are expressly delegated to the
Agent by the terms of the Credit Documents, together with such other powers as
are reasonably incidental thereto. In addition, the Agent shall take such
action as it may be directed to take from time to time by the Majority Lenders.
Notwithstanding any provision to the contrary elsewhere in the Credit
Documents, the Agent shall not (a) have any duties or responsibilities except
those expressly set forth therein, and no implied covenants, functions,
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responsibilities, duties, obligations or liabilities shall be read into the
Credit Documents or otherwise exist against the Agent, (b) be required under
any circumstances to take any action that, in its judgment, (1) is contrary to
any provision of the Credit Documents or Applicable Law, or (2) would expose it
to any liability or expense against which it has not been indemnified to its
satisfaction, or (c) by reason of its serving as the Agent, be a trustee or
other fiduciary for any Lender or other Person.
Section 8.2 Delegation of Duties. The Agent may execute any of
its duties under the Credit Documents by or through agents or attorneys-in-fact
and shall be entitled to advice of counsel concerning all matters pertaining to
such duties. The Agent shall not be responsible for the negligence or
misconduct of any agents or attorneys-in-fact selected by it with reasonable
care.
Section 8.3 Exculpatory Provisions. Neither the Agent nor any of
its officers, directors, employees, agents, counsel, attorneys-in-fact or
Affiliates shall be (a) liable to any Lender or the Company for any action
taken or omitted to be taken by it or such Person under or in connection with
the Credit Documents (except for its or such Person's own gross negligence or
willful misconduct), or (b) responsible in any manner to any of the Lenders, or
the Company for: (1) any recitals, statements, representations or warranties
made by the Company or any officer thereof contained in the Credit Documents or
in any certificate, report, statement or other document referred to or provided
for in, or received by the Agent under or in connection with, the Credit
Documents, or for the value, validity, effectiveness, genuineness,
enforceability, collectibility or sufficiency of the Credit Documents or for
any failure of the Company to perform its obligations thereunder or (2) any
action taken or omitted to be taken by the Agent with respect to the Collateral
in accordance with written instructions given as permitted under the Credit
Documents or (3) determining whether Mortgage Loans are Eligible Mortgage Loans
or (4) assuring compliance of the Credit Documents and the transactions
contemplated by the Credit Documents with any law or regulation binding on such
Person, it being expressly acknowledged, agreed and understood that each such
Person has obtained independent advice satisfactory to it in all such respects.
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The Agent shall not be under any obligation to any Lender to ascertain or to
inquire as to the observance or performance of any of the agreements contained
in, or conditions of, the Credit Documents (other than agreements required to
be complied with by the Agent thereunder and subject to the standards of care
set forth herein with respect thereto) or to inspect the properties, books or
records of the Company.
Section 8.4 Reliance by Agent. The Agent shall be entitled to
rely, and shall be fully protected in relying, upon any note, writing,
resolution, notice, consent, certification, affidavit, letter, cablegram,
telegram, telecopy, telex or teletype message, statement, order or other
document or conversation believed by it to be genuine and correct and to have
been signed, sent or made by the proper Person or Persons and upon advice and
statements of legal counsel (including, without limitation, counsel to the
Company), independent accountants and other experts selected by the Agent. The
Agent may deem and treat the payee of any Note as the owner thereof for all
purposes unless a written notice of assignment, negotiation or transfer thereof
shall have been filed with the Agent. The Agent shall be fully justified in
failing or refusing to take any action under the Credit Documents unless it
shall first receive such advice or concurrence of the Majority Lenders (or all
Lenders, as required under the Credit Documents) and it shall first be
indemnified to its satisfaction by the Lenders against any and all liability
and expense which may be incurred by it by reason of taking or continuing to
take any action (other than liability or expense arising out of the Agent's
gross negligence or willful misconduct). The Agent shall in all cases be fully
protected in acting, or in refraining from acting, under the Credit Documents
in accordance with a request of the Majority Lenders (or all Lenders, if
applicable) absent gross negligence and willful misconduct on the part of the
Agent in the method in which it acts or refrains from acting in accordance
therewith, and such request and any action taken or failure to act pursuant
thereto shall be binding upon all the Lenders.
Section 8.5 Notice of Default. The Agent shall not be deemed to
have knowledge or notice of the occurrence of any Event of Default or Potential
Default hereunder unless the Agent has received notice from a Lender or the
Company referring to the Credit Documents,
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describing such Event of Default or Potential Default and stating that such
notice is a "notice of default." In the event that the Agent receives such a
notice, the Agent shall give prompt written notice thereof to the Lenders.
Section 8.6 Non-Reliance on Agent and Other Lenders. Each Lender
expressly acknowledges that neither the Agent nor any of its officers,
directors, employees, agents, attorneys-in-fact or Affiliates has made any
representations or warranties to it and that no act by the Agent hereafter
taken, including any review of the affairs of the Company shall be deemed to
constitute any representation or warranty by the Agent to any Lender. Each
Lender represents to the Agent that it has, independently and without reliance
upon the Agent or any other Lender or its counsel, and based on such documents
and information as it has deemed appropriate made its own appraisal of and
investigation into the business, operations, property, financial and other
condition and creditworthiness of the Company and made its own decision to
extend credit hereunder and enter into the Credit Documents. Each Lender also
represents that it will, independently and without reliance upon the Agent or
any other Lender, and based on such documents, information and legal advice
(including, without limitation, advice of counsel to it) as it shall deem
appropriate at the time, continue to make its own credit analysis, appraisals
and decisions in entering into the Credit Documents and taking or not taking
action thereunder, and to make such investigation as it deems necessary to
inform itself as to the business, operations, property, financial and other
condition and creditworthiness of the Company. Except for notices, reports and
other documents expressly required to be furnished to the Lenders by the Agent
hereunder, and except for financial statements, documents and other information
received by the Agent from the Company pursuant to this Agreement, which the
Agent agrees to distribute promptly to the Lenders, the Agent shall not have
any duty or responsibility to provide any Lender with any legal advice or
credit or other information concerning the business, operations, property,
financial and other condition or creditworthiness of the Company which may come
into the possession of the Agent or any of its officers, directors, employees,
agents, attorneys-in-fact or Affiliates.
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Section 8.7 Indemnification. Each Lender agrees to indemnify the
Agent (to the extent not reimbursed by the Company hereunder), ratably on the
basis of its Pro Rata Shares, for any and all liabilities, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements of any
kind and nature whatsoever that may be imposed on, incurred by or asserted
against the Agent (including the costs and expenses that the Company is
obligated to pay hereunder) in any way relating to or arising out of the Credit
Documents or any other documents contemplated thereby or referred to therein or
the transactions contemplated thereby or the enforcement of any of the terms
thereof or of any such other documents, provided that no Lender shall be liable
for any of the foregoing to the extent they arise from gross negligence,
willful misconduct or knowing violations of law by the Agent.
Section 8.8 Agent in Its Individual Capacity. The Agent and its
Affiliates may make loans to, accept deposits from and generally engage in any
kind of business with the Company or its Affiliates as though the Agent were
not an Agent hereunder. With respect to such Loans made or renewed by it and
any Note issued to it hereunder, the Agent shall have the same rights and
powers under the Credit Documents as any Lender hereunder and may exercise the
same as though it were not the Agent, and the terms "Lender" and "Lenders"
shall include the Agent in its individual capacity.
Section 8.9 Successor Agent. The Agent may resign as such under
the Credit Documents upon ninety (90) days' prior written notice to the other
parties hereto. In addition, in the event the Agent fails to perform its
obligations under the Credit Documents in any material manner and fails to
correct its performance within thirty (30) days of written notice of such
failure of performance given by not less than the Majority Lenders, then such
Agent may be removed upon thirty (30) days' notice given by not less than the
Majority Lenders. If the Agent shall resign or, if the Agent shall be so
removed, then, on or before the effective date of such resignation or removal,
the Majority Lenders shall appoint a successor agent reasonably acceptable to
the Company or, if the Majority Lenders are unable to agree on the appointment
of a successor agent, the Agent shall appoint a successor agent for the
Lenders, which successor agent shall be reasonably acceptable to the Company,
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whereupon such successor agent shall succeed to the rights, powers and duties
of the Agent, and the term "Agent," as applicable, shall mean such successor
agent effective upon its appointment, and the former Agent's rights, powers and
duties shall be terminated without any other or further act or deed on the part
of such former Agent or any of the parties to this Agreement or any of the
other Credit Documents or successors thereto. After the Agent's resignation or
removal hereunder, the provisions of this Section 8.9 shall inure to its
benefit as to any actions taken or omitted to be taken by it while it was Agent
under the Credit Documents.
Section 8.10 Sharing of Set-Offs. If any Lender (a "benefitted
Lender") shall at any time receive any payment of all or part of the
Obligations held by it or receive any collateral in respect thereof (whether
voluntarily or involuntarily, by set-off or otherwise) in a greater proportion
than any such payment to and collateral received by any other Lender, if any,
in respect of such other Lender's portion of the Obligations, or interest
thereon, such benefitted Lender shall purchase for cash from the other Lenders
such portion of each such other Lender's Obligations, or shall provide such
other Lenders with the benefits of such collateral, or the proceeds thereof, as
shall be necessary to cause such benefitted Lender to share the excess payment
or benefits of such collateral or proceeds ratably with each of the Lenders,
provided, however, that if all or any portion of such excess payment or
benefits is thereafter recovered from such benefitted Lender, such purchase
shall be rescinded, and the purchase price and benefits returned, to the extent
of such recovery but without interest (unless the purchasing Lender is required
to pay interest on the amount recovered to the Person recovering such amount,
in which case the selling Lender shall be required to pay interest at a like
rate). The Company agrees that each Lender so purchasing a portion of another
Lender's Obligations may exercise all rights of payment (including, without
limitation, rights of set-off) with respect to such portion as fully as if such
Lender were the direct holder of such portion.
Section 8.11 Delivery of Notices and Documents by Agent. The
Agent agrees that whenever it is required by this Agreement to provide notices
or documents to the other
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Lenders promptly, it shall use reasonable efforts to do so within five Business
Days after such obligation arises, and in any event within ten Business Days
after such obligation arises.
Section 8.12 Inspection of Required Documents. The Agent agrees
that it shall permit any Lender to inspect, during normal business hours and
upon at least two Business Days' prior written notice to the Agent from such
Lender, the Required Documents in the Agent's possession.
ARTICLE 9
MISCELLANEOUS
Section 9.1 Notices and Deliveries.
(a) Manner of Delivery. All notices, communications and
materials (including all Information) to be given or delivered pursuant to the
Credit Documents shall be given or delivered in writing (which shall include
telex and telecopy transmissions).
(b) Addresses. All notices, communications and materials
to be given or delivered pursuant to the Credit Documents shall be given or
delivered at the following respective addresses and, telecopier and telephone
numbers and to the attention of the following individuals or departments:
(1) if to the Company, at:
Allied Capital Lending Corporation
1666 K Street, N.W.
Suite 901
Washington, D.C. 20006
Telecopier No.: (202) 452-1192
Telephone No.: (202) 331-1112
Attention: Katherine C. Marien
President
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with a copy of any Event of Default notice to:
Anthony H. Rickert, Esq.
Piper & Marbury L.L.P.
1200 19th Street, N.W.
Washington, D.C. 20036-2430
(2) if to the Agent or Riggs:
Riggs Bank N.A.
808 17th Street, N.W.
10th floor
Washington, D.C. 20006
Telecopier No.: (202) 835-5105
Telephone No.: (202) 835-5977
Attention: Mr. David H. Olson
Vice President
(3) if to any Lender, to it at the address, telecopier or
telephone number and to the attention of the
individual or department, set forth below such
Lender's name on the signature pages hereto or, in
the case of a Lender that becomes a Lender pursuant
to an assignment, set forth under the heading "Notice
Address" in the notice of assignment given to the
Company and the Agent with respect to such
assignment;
or at such other address or telex, telecopier or telephone number or to the
attention of such other individual or department as the party to which such
information pertains may hereafter specify for the purpose in a notice
specifically captioned "Notice of Change of Address" given to (i) if the party
to which such information pertains is the Company, the Agent and each Lender,
(ii) if the party to which such information pertains is the Agent, the Company
and the Agent.
(c) Effectiveness. Each notice and communication and any
material to be given or delivered pursuant to the Credit Documents shall be
deemed so given or delivered (1) if sent by registered or certified mail,
postage repaid, return receipt requested, on the third Business Day after such
notice, communication or material, addressed as above provided, is delivered to
a United States post office and a receipt therefor is issued thereby, (2) if
sent by any other means of physical delivery, when such notice, communication
or
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material is delivered to the appropriate address as above provided, (3) if sent
by telex, when such notice, communication or material is transmitted to the
appropriate number determined as above provided in this Section 9.1 and the
appropriate answer-back is received, and (4) if sent by telecopier, when such
notice, communication or material is transmitted to the appropriate telecopier
number as above provided and is received at such number.
(d) Reasonable Notice. Any requirement under Applicable
Law of reasonable notice by the Agent or the Lenders to the Company of any
event in connection with, or in any way related to, the Credit Documents or the
exercise by the Agent or the Lenders of any of their rights thereunder shall be
met if notice of such event is given to the Company in the manner prescribed
above at least 10 days before (1) the date of such event or (2) the date after
which such event will occur.
Section 9.2 Amendments. Neither this Agreement nor any of the
other Credit Documents may be amended or terms or provisions hereof or thereof
waived unless such amendment or waiver is in writing and signed by the Majority
Lenders and the Company, provided, however, that without the prior written
consent of one hundred percent (100%) of the Lenders and the Company, no
amendment or waiver shall:
(a) Waive or amend any term or provision of Sections
1.8(b), Section 1.8(c), Article 2, Sections 8.7, 8.10, 9.8, 9.13 or this
Section 9.2;
(b) Waive or amend the definitions of Eligible Mortgage
Loan or Borrowing Base;
(c) Reduce the principal of, or rate of interest on, the
Loans or reduce any fees payable hereunder or extend the required payment dates
of any of the Obligations, or reduce or forgive any payment of interest, or
release or discharge any liability of the Company under the Notes;
(d) Except as expressly contemplated by Section 9.13,
modify the Commitment of any Lender or increase the aggregate amount of the
Commitments to an amount in excess of $27,000,000;
(e) Modify the definition of "Majority Lenders" or "Pro
Rata Share";
(f) Extend the Maturity Date;
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(g) Release any Collateral except as expressly permitted
under the Credit Documents; or
(h) Modify any provision in the Credit Documents which
expressly requires consent of one hundred percent (100%) of the Lenders. In
addition, no amendment or waiver shall, unless agreed to in writing by the
affected Agent, modify the rights or duties of the Agent. It is expressly
agreed and understood that the failure by the required Lenders to elect to
accelerate amounts outstanding hereunder and/or to terminate the obligation of
the Lenders to make Loans hereunder shall not constitute an amendment or waiver
of any term or provision of this Agreement.
Section 9.3 Cumulative Rights: No Waiver. The rights, powers and
remedies of the Agent and the Lenders under the Credit Documents are cumulative
and in addition to all rights, powers and remedies provided under any and all
agreements among the Company and the Agent and the Lenders relating hereto, at
law, in equity or otherwise. Any delay or failure by the Agent or the Lenders
to exercise any right, power or remedy shall not constitute a waiver thereof by
the Agent and the Lenders, and no single or partial exercise by the Agent and
the Lenders of any right, power or remedy shall preclude other or further
exercise thereof or any exercise of any other rights, powers or remedies.
Section 9.4 Entire Agreement. This Agreement, the Notes and the
other Credit Documents embody the entire agreement among the Company, the Agent
and the Lenders relating to the subject matter thereof and supersede all prior
agreements, representations and understandings, if any, relating to the subject
matter hereof.
Section 9.5 Survival. All representations, warranties, covenants
and agreements on the part of the Company contained in the Credit Documents
shall survive the termination of this Agreement and shall be effective until
the Obligations are paid and performed in full or longer as expressly provided
herein.
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Section 9.6 GOVERNING LAW. THIS AGREEMENT, THE NOTES AND THE
OTHER CREDIT DOCUMENTS (INCLUDING MATTERS RELATING TO THE MAXIMUM PERMISSIBLE
RATE) SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAW OF THE
DISTRICT OF COLUMBIA (WITHOUT GIVING EFFECT TO ITS CHOICE OF LAW PRINCIPLES).
Section 9.7 Counterparts. This Agreement may be signed in any
number of counterparts, each of which shall be an original, with the same
effect as if the signatures thereto were upon the same instrument.
Section 9.8 Expenses; Indemnification. Whether or not any Loans
are made hereunder, the Company shall:
(a) pay or reimburse the Agent and each Lender for all
transfer, documentary, stamp and similar taxes, and all recording and filing
fees and taxes (other than Lender Taxes), payable in connection with, arising
out of, or in any way related to, the execution, delivery and performance of
the Credit Documents or the making of the Loans;
(b) pay or reimburse the Agent for all reasonable
out-of-pocket costs and expenses (including reasonable fees and disbursements
of legal counsel, appraisers, accountants and other experts employed or
retained by the Agent, which employment or retention must be approved by the
Company if no Potential Default or Event of Default has occurred and is
continuing) incurred by the Agent in connection with, arising out of, or in any
way related to (1) the negotiation, preparation, execution (but not
syndication) and delivery of (i) the Credit Documents and (ii) whether or not
executed, any waiver, amendment or consent thereunder or thereto, (2)
consulting with respect to any matter in any way arising out of, related to, or
connected with, the Credit Documents, including (i) the protection or
preservation of the Collateral, (ii) the protection, preservation, exercise or
enforcement of any of the rights of the Agent or the Lenders in, under or
related to the Collateral or the Credit Documents or (iii) the performance of
any of the obligations of the Agent or the Lenders under or related to the
Credit Documents, (3) protecting or preserving the Collateral or (4)
protecting, preserving, exercising or enforcing any of the rights of the
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Agent or the Lenders in, under or related to the Collateral or the Credit
Documents, including defending the Lien of the Agent in the Collateral as a
valid, perfected, first priority security interest in the Collateral; provided
that the obligation to make payments or reimbursements under clauses (2), (3)
and (4) of this Section 9.8(b) shall apply only if a Potential Default or Event
of Default has occurred and is continuing;
(c) pay or reimburse the Agent for all costs and expenses
associated with audits of the Collateral and verification of conformance and
compliance with the terms of the Credit Documents by agents or representatives
employed or retained by the Agent, which employment or retention is hereby
approved by the Company. The Company's obligation to make payments or
reimbursements under this Section 9.8(c) shall apply whether or not a Potential
Default or Event of Default has occurred and is continuing; however, if no
Potential Default or Event of Default has occurred and is continuing, the
Company's obligation to make payments or reimbursements under this Section
9.8(c) shall not exceed $15,000 per year.
(d) pay or reimburse each Lender for all reasonable out-of-pocket
costs and expenses (including reasonable fees and disbursements of legal
counsel and other experts employed or retained by such Person) incurred by such
Person in connection with, arising out of, or in any way related to protecting,
preserving, exercising or enforcing during an Event of Default any of its
rights in, under or related to the Collateral or the Credit Documents; and
(e) indemnify and hold each Indemnified Person harmless from and
against all losses (including judgments, penalties and fines) suffered, and pay
or reimburse each Indemnified Person for all reasonable out-of-pocket costs and
expenses (including reasonable fees and disbursements of legal counsel and
other experts employed or retained by such Indemnified Person) incurred, by
such Indemnified Person in connection with, arising out of, or in any way
related to (1) any Credit Document Related Claim, including the prosecution or
defense thereof and any litigation or proceeding with respect thereto (whether
or not, in the case of any such litigation or proceeding, such Indemnified
Person is a party thereto), or (2) any investigation, governmental or
otherwise, arising out of, related to, or in any way connected with, the Credit
Documents or the relationships established thereunder, except that
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<PAGE> 39
the foregoing indemnity shall not be applicable to any loss suffered by any
Indemnified Person to the extent such loss is determined by a judgment of a
court that is binding on the Company and such Indemnified Person, final and not
subject to review on appeal, to be the result of acts or omissions on the part
of such Indemnified Person constituting (w) gross negligence, (x) willful
misconduct, (y) knowing violations of law or (z) in the case of claims by the
Company against such Indemnified Person, such Indemnified Person's failure to
observe any other standard applicable to it under any of the other provisions
of the Credit Documents or Applicable Law.
Section 9.9 Severability of Provisions. Any provision of the
Credit Documents that is prohibited or unenforceable in any jurisdiction shall,
as to such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions thereof or
affecting the validity or enforceability of such provision in any other
jurisdiction. To the extent permitted by Applicable Law, the Company hereby
waives any provision of Applicable Law that renders any provision of the Credit
Documents prohibited or unenforceable in any respect.
Section 9.10 Successors and Assigns. Subject to Section 9.11, all
of the provisions of this Agreement shall be binding upon and inure to the
benefit of the parties hereto and its successors and assigns.
Section 9.11 No Assignment. The Company may not assign its rights
or obligations under this Agreement without the prior written consent of one
hundred percent (100%) of the Lenders.
Section 9.12 Participations by Lenders. Any Lender may at any
time sell to one or more financial institutions (each of such financial
institutions being herein called a "Participant") participating interests in
any of the Obligations held by such Lender and its commitments hereunder,
provided, however, that:
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(a) No participation contemplated by this Section 9.12
shall relieve such Lender from its obligations hereunder or under any other
Credit Document;
(b) Such Lender shall remain solely responsible for the
performance of such obligations;
(c) The Company, the Agent, the Collateral Agent and the
other Lenders shall continue to deal solely and directly with such Lender in
connection with such Lender's rights and obligations under the Credit
Documents; and
(d) The participation agreement between such Lender and
the Participant shall provide that the sole voting rights of the Participant
are with respect to those items on which such Lender's vote is required under
Section 9.2.
Section 9.13 Assignments by Existing Lenders. Any Lender, with
the prior written consent of the Agent and the Company, may at any time agree
to assign a portion of such Lender's Commitment to another Person (a
"Transferee Lender") provided that, after giving effect to such assignment,
such Lender must continue to hold a Commitment of not less than $1,000,000. In
such event the Lender and the Transferee Lender shall so notify the Agent and
the Company of the date on which such assignment is to be effective. On such
effective date:
(a) The Agent shall deliver to the Company and each of
the Lenders a Commitment Schedule as of such effective date, reflecting the
Commitments of the Lenders after giving effect to such assignment.
(b) The Agent, the assigning Lender and the Transferee
Lender shall execute and deliver an assignment agreement, in form and substance
acceptable to the Agent, which shall constitute an amendment to this Agreement
to the extent necessary to reflect such transfer.
(c) Upon request by any Lender following an assignment
made in accordance with this Section 9.13, the Company shall issue, in exchange
for the existing Notes held by such Lender, new Notes to the assignor and
assignee reflecting the assignment.
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Section 9.14 Waiver of Jury Trial. THE AGENT, EACH LENDER
(COLLECTIVELY FOR PURPOSES OF THIS SECTION 9.14, THE "LENDER") AND THE COMPANY
HEREBY (a) COVENANT AND AGREE NOT TO ELECT A TRIAL BY JURY OF ANY ISSUE TRIABLE
OF RIGHT BY A JURY, AND (b) WAIVE TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO
WHICH THE LENDER AND THE COMPANY MAY BE PARTIES, IN EACH CASE ARISING OUT OF,
IN CONNECTION WITH OR IN ANY WAY PERTAINING TO ANY LOAN OR TO ANY CREDIT
DOCUMENT RELATED CLAIM. IT IS UNDERSTOOD AND AGREED THAT THIS WAIVER
CONSTITUTES A WAIVER OF TRIAL BY JURY OF ALL CLAIMS AGAINST ALL PARTIES TO SUCH
ACTIONS OR PROCEEDINGS, INCLUDING CLAIMS AGAINST PARTIES WHO ARE NOT PARTIES TO
THIS AGREEMENT. THIS WAIVER OF JURY TRIAL IS SEPARATELY GIVEN, KNOWINGLY,
WILLINGLY AND VOLUNTARILY MADE BY THE COMPANY AND THE LENDER, AND THE COMPANY
AND THE LENDER HEREBY AGREE THAT NO REPRESENTATIONS OF FACT OR OPINION HAVE
BEEN MADE BY ANY INDIVIDUAL TO INDUCE THIS WAIVER OF TRIAL BY JURY OR TO IN ANY
WAY MODIFY OR NULLIFY ITS EFFECT. THE LENDER IS HEREBY AUTHORIZED TO SUBMIT
THIS AGREEMENT TO ANY COURT HAVING JURISDICTION OVER THE SUBJECT MATTER, THE
COMPANY AND THE LENDER, SO AS TO SERVE AS CONCLUSIVE EVIDENCE OF SUCH WAIVER OF
RIGHT TO TRIAL BY JURY. THE COMPANY REPRESENTS AND WARRANTS THAT IT HAS BEEN
REPRESENTED IN THE SIGNING OF THIS AGREEMENT AND IN THE MAKING OF THIS WAIVER
BY INDEPENDENT LEGAL COUNSEL, SELECTED OF ITS OWN FREE WILL, AND THAT IT HAS
HAD THE OPPORTUNITY TO DISCUSS THIS WAIVER WITH SUCH COUNSEL.
Section 9.15 Additional Lenders. Any Person that is acceptable to
the Agent and the Company may become an additional Lender under this Agreement
(an "Additional Lender"). On the date on which the Additional Lender becomes a
Lender hereunder:
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(a) The Agent shall deliver to the Company and each of
the other Lenders a Commitment Schedule as of such date reflecting the
Commitments of all of the Lenders, including the Additional Lender.
(b) The Agent, the Company and the Additional Lender
shall execute an agreement, in form and substance acceptable to the Agent,
which shall constitute an amendment to this Agreement to the extent necessary
to reflect the addition of the Additional Lender as a party to this Agreement.
(c) Upon receipt by the Agent and the Company of such
agreement, the Company shall issue to the Additional Lender a Note in the
amount of such Additional Lender's Commitment.
Section 9.16 Disclosure of Information; Confidentiality. Any
Lender may, in connection with any assignment, proposed assignment,
participation or proposed participation pursuant to this Agreement, disclose to
the assignee, participant, proposed assignee or proposed participant, any
information relating to the Company or the Collateral furnished to such Lender
by or on behalf of the Company; provided, that prior to any such disclosure,
such Lender shall obtain the consent of the Company to disclose confidential
information relating to the Company and each such assignee, proposed assignee,
participant or proposed participant shall agree with the Company or such Lender
(which in the case of an agreement with only such Lender, the Company shall be
recognized as a third party beneficiary thereof) to preserve the
confidentiality of any confidential information relating to the Company
received from such Lender.
ARTICLE 10
DEFINITIONS
Section 10.1 Defined Terms. For the purposes of this Agreement:
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"Adjusted EBITDA" means, for any period with respect to the Company
and its Subsidiaries on a consolidated basis, Net Income plus Total Interest
Expense, taxes, depreciation and amortization determined in accordance with
GAAP.
"Affiliate" means, with respect to a Person, any other Person that,
directly or indirectly through one or more intermediaries, controls, or is
controlled by, or is under common control with, such first Person; unless
otherwise specified, "Affiliate" means an Affiliate of the Company.
"Agent" means Riggs Bank N.A., as agent for the Lenders under this
Agreement, and any successor Agent appointed pursuant to Section 8.9.
"Agreement" means this Agreement, including all schedules, annexes and
exhibits hereto.
"Agreement Date" means the date set forth as such on the first page
hereof.
"Applicable Law" means, anything in Section 9.6 to the contrary
notwithstanding, (a) all applicable common law and principles of equity and (b)
all applicable provisions of all (1) constitutions, statutes, rules,
regulations and orders of governmental bodies, including tax treaties, (2)
Governmental Approvals and (3) orders, decisions, judgments and decrees of all
courts (whether at law or in equity or admiralty) and arbitrators.
"Applicable Reserve Deduction" is an amount that is to be deducted
from, or allocated as a reserve against, the gross revenues of the applicable
Obligors for maintenance and replacements determined by the type of Property as
follows:
<TABLE>
<S> <C>
Hotel with a National Franchise 4% of gross revenues per year
Non-Franchise Hotel/Motel 3% of gross revenues per year
Office/Condominium 45 cents per square foot per year
</TABLE>
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<TABLE>
<S> <C>
Industrial 10 cents per square foot per year
Mobile Home Pads $30 per year
Warehouses 10 cents per square foot per year
Retail 20 cents per square foot per year
Assisted Living $250 per bed per year
Nursing Home $400 per bed per year
</TABLE>
"Appraisal" means a written statement as to the market value of the
Property securing a Mortgage Loan.
"Appraisal Laws and Regulations" means Title XI of the Financial
Institutions Reform, Recovery and Enforcement Act of 1989, the Federal Deposit
Insurance Corporation Improvement Act of 1991 and regulations promulgated
thereunder, including 12 CFR Chapter I, Part 34, Subpart C; 12 CFR Chapter II,
Subchapter A, Part 225, Subpart G and 12 CFR Chapter III, Subchapter B, Part
323.
"Approved Valuation Method" means the valuation method used by the
Company to determine the Value of a Property, which method must be consistent
with customary practices in the commercial real estate industry and must be
reasonably acceptable to the Agent and the Majority Lenders.
"Bailee Agreement" means the agreement among the Agent, the Custodian
and the Company referred to in Section 2.1(a)(14).
"Benefit Plan" of any Person, means, at any time, any employee benefit
plan (including a Multiemployer Benefit Plan), the funding requirements of
which (under Section 302 of ERISA or Section 412 of the Code) are, or at any
time within six years immediately preceding the time in question were, in whole
or in part, the responsibility of such Person.
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"Borrowing Base" means, at any date, the lesser of (a) 80% of the
Current Cost Basis of all Mortgage Notes owned by the Company, delivered to and
held by the Agent as collateral security for the Obligations, and evidencing
Eligible Mortgage Loans, or (b) 80% of the aggregate Values of each Property
securing each such Eligible Mortgage Loan as determined by the Company's most
recent valuation pursuant to Section 4.5(b).
"Borrowing Base Certificate" means a certificate in the form of
Schedule 1.
"Business Day" means any day other than a Saturday, Sunday or other
day on which banks in Washington, D.C. are authorized or obligated to close.
"Code" means the Internal Revenue Code of 1986, as amended.
"Collateral" has the meaning ascribed to that term in the Security
Agreement. Whenever this Agreement refers to a Materially Adverse Effect with
respect to the Collateral, such reference shall be to the Collateral taken as a
whole.
"Commitment" of any Lender means (a) the amount set forth opposite
such Lender's name under the heading "Commitment" on the signature pages to
this Agreement, Commitment Schedule or, in the case of a Lender that becomes a
Lender pursuant to Section 9.13 or 9.15, the amount of such Lender's Commitment
set forth in the applicable additional lender agreement or assignment
agreement, in either case, as the same may be reduced from time to time
pursuant to Section 1.9, or reduced from time to time pursuant to assignments
in accordance with Section 9.13, or (b) as the context may require, the
obligation of such Lender to make Loans in an aggregate unpaid principal amount
not exceeding such amount.
"Commitment Schedule" means a document setting forth the names,
addresses and Commitments of each Lender.
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"Company" means Allied Capital Lending Corporation, a Maryland
corporation.
"Contract" means (a) any agreement (whether bi-lateral or unilateral
or executory or non-executory and whether a Person entitled to rights
thereunder is so entitled directly or as a third-party beneficiary), including
an indenture, lease or license, (b) any deed or other instrument of conveyance,
(c) any certificate of incorporation or charter and (d) any by-law.
"Covenant Compliance Certificate" means a certificate in the form of
Schedule 2.
"Credit Document Related Claim" means any claim (whether civil,
criminal or administrative and whether arising under Applicable Law, including
any "environmental" or similar law, under Contract or otherwise) in any way
arising out of, related to, or connected with, the Credit Documents, the
relationships established thereunder or any actions or conduct thereunder or
with respect thereto, whether such claim arises or is asserted before or after
the Effective Date or before or after the Repayment Date.
"Credit Documents" means this Agreement, the Security Agreement, the
Notes and each other document, instrument and agreement executed by the Company
in connection herewith, as any of the same may be amended, extended or replaced
from time to time.
"Current Cost Basis" means, at any time with respect to any Mortgage
Loan, the purchase price paid for such Mortgage Loan by the Company, or the
principal amount initially disbursed if originated by the Company, less any
principal payments received by the Company with respect thereto (without regard
to any portion thereof applied to the amortization of any mortgage discount in
accordance with GAAP).
"Custodian" means Riggs acting through its trust department as
custodian under the Custody Agreement.
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"Custody Agreement" means, individually and collectively, each custody
agreement between the Company and the Custodian pursuant to which the Custodian
holds Mortgage Loan Documents.
"Debt Coverage Ratio" means, at any time, for all Obligors under any
Mortgage Loan the ratio, for the most recently ended fiscal year of the
applicable Obligors, of Net Operating Income for such fiscal year to principal
and interest payments due with respect to such Eligible Mortgage Loan and all
other Indebtedness of such Obligors during such period.
"Dividend Block Default" means (a) a failure of the Company to make
any payment due under the Credit Documents and the expiration of all applicable
grace periods with respect thereto, or (b) the breach of a Financial Covenant
and the failure of the Company to cure such breach within 30 days' after
written notice has been given to the Company by the Agent.
"Dollars" and the sign "$" mean lawful money of the United States of
America.
"Effective Date" means the date on which each of the conditions set
forth in Section 2.1 are satisfied.
"Eligible Mortgage Loan" means a Mortgage Loan with respect to which
each of the following statements shall be accurate and complete at all times:
(a) Such Mortgage Loan is a binding and valid obligation
of each Obligor thereon, in full force and effect and enforceable in
accordance with its terms;
(b) Such Mortgage Loan and the related Mortgage Note are
genuine in all respects as appearing on the face of such Mortgage Note
and as represented in the books and records of the Company and all
information set forth therein is true and correct;
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(c) Such Mortgage Loan is free of any default of any
party thereto (including the Company), other than as expressly
permitted pursuant to subparagraph (d) below, and is free of any
counterclaims, offsets and defenses;
(d) No payment under such Mortgage Loan is more than 45
days past due the payment due date set forth in the underlying
Mortgage Note nor has any payment been more than 45 days past due
during the most recently ended 12-month period, except as may
otherwise be approved by the Agent and all of the Lenders; provided
that if payments were timely made by the Obligor to the prior holder
of the Mortgage Note and such prior holder did not apply such payments
to the Mortgage Note, such payments shall not be considered to be past
due;
(e) Such Mortgage Loan is free and clear of all Liens,
except in favor of the Agent for the benefit of the Lenders;
(f) The Property securing such Mortgage Loan is insured
against loss or damage by fire and all other hazards normally included
within standard extended coverage in accordance with the provisions of
the underlying Mortgage Loan Documents with the Company named as a
loss payee thereon;
(g) The Mortgage Loan Documents for such Mortgage Loan
create a first Lien against the Property securing such Mortgage Loan
and such Property is free and clear of all other Liens, subject only
to (1) the Lien of current real property taxes and assessments not yet
due and payable; (2) a second Lien against such Property in favor of
another lender (provided that the Debt Coverage Ratio set forth in
subparagraph (o) below is maintained at all times); (3) covenants,
conditions and restrictions, rights of way, easements and other
matters of the public record, as of the date of recording, as are
acceptable to mortgage lending institutions generally and specifically
referred to in a lender's title insurance policy or attorney's title
opinion delivered to the originator of the Mortgage Loan and which do
not materially adversely affect the value of the Property; and (4)
other matters to which like properties are commonly subject which do
not materially interfere with the benefits of the security intended to
be provided by the Mortgage Loan Documents or the use, enjoyment,
value or marketability of the related Property;
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(h) The Property securing such Mortgage Loan is the
subject of an Appraisal that complied with all applicable Appraisal
Laws and Regulations in effect and applicable to the Agent on the date
on which such Mortgage Loan was originated;
(i) The Current Cost Basis of such Mortgage Loan does not
exceed 80% of the current Value of the Property securing such Mortgage
Loan as determined by the Company's most recent valuation pursuant to
Section 4.5(b);
(j) The Property securing such Mortgage Loan is
acceptable to the Agent, after taking into account customary
underwriting criteria employed by major financial institutions making
commercial real estate loans;
(k) The applicable Mortgage Loan Documents are in form
and substance acceptable to the Agent and include, without limitation,
provisions that (1) require the Obligors to provide current financial
information to the holder of the Mortgage Loan, (2) permit such holder
to inspect the Property, and (3) require the Obligors to maintain
reasonable and customary insurance on the Property;
(l) The Current Cost Basis for each such Mortgage Loan
does not exceed $1,500,000;
(m) If such Mortgage Loan is purchased by the Company
rather than originated by the Company, it has been outstanding for
more than 12 months;
(n) The payments due with respect to such Mortgage Loan
are in an amount that would be sufficient to cause such Mortgage Loan
to be amortized in full over a period not to exceed twenty-five (25)
years from the date of origination and such Mortgage Loan shall have a
maturity date with a balloon payment that is no later than 7 years
from the date of its origination;
(o) The Debt Coverage Ratio for the Obligors of the
applicable Mortgage Loan for the most recently ended fiscal year of
such Obligors is at least 120%, provided that if financial statements
or other information obtained by the Company during the course of an
Obligor's current fiscal year establish that the Debt Coverage Ratio
for such applicable Property for the current fiscal year will not be
120%, the Company shall notify the Agent and the applicable Mortgage
Loan will cease to be an Eligible Mortgage Loan;
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(p) The applicable Property securing such Mortgage Loan
must be occupied by the applicable Obligor;
(q) All Required Documents are delivered to the Agent;
(r) The applicable Obligor must have been operating in
its current line of business for at least one year;
(s) Each Mortgage Note must bear interest based on a
floating rate of interest; and
(t) Such Mortgage Loan is fully funded at its
origination; provided, however, that a Mortgage Loan may have a
provision allowing a renovation and repair holdback reserve, which
reserve may not exceed 15% of the face amount of the Mortgage Note,
and which reserve is held in an escrow account maintained by the
Company to be disbursed in accordance with conditions satisfactory to
the Agent.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
the same may from time to time be supplemented or amended.
"ERISA Affiliate" means, with respect to any Person, any other Person,
including a Subsidiary or other Affiliate of such first Person, that is a
member of any group of organizations within the meaning of Code Sections
414(b), (c), (m) or (o) of which such first Person is a member.
"Event of Default" means any of the events specified in Section 6.1.
"Federal Funds Rate" means, for any day, the weighted average of the
rates on overnight Federal funds transactions with members of the Federal
Reserve System arranged by Federal funds brokers, as published for such day
(or, if such day is not a Business Day, for the next preceding Business Day) by
the Federal Reserve Bank of New York or, if such rate is not so published for
any day that is a Business Day, the average of quotations for such day on such
transactions received by the Agent from three Federal funds brokers of
recognized standing selected by such bank.
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"Financial Covenants" means the covenants set forth in Sections 5.9,
5.10 and 5.11.
"GAAP" means generally accepted accounting principles in the United
States of America in effect from time to time.
"Governmental Approval" means any authorization, consent, approval,
license or exemption of, registration or filing with, or report or notice to,
any governmental unit.
"Governmental Authority" means any nation or government, any state or
other political subdivision thereof or any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government.
"Increased Costs Terms" means terms in a note, loan agreement or
similar instrument or agreement pursuant to which a borrower is required to
compensate a lender for additional costs or losses it incurs as a result of a
Regulatory Change or a requirement to maintain increased capital.
"Indebtedness" of any Person means all items of indebtedness which, in
accordance with GAAP and practices thereof, would be included in determining
liabilities as shown on the liability side of a statement of condition of such
Person as of the date as of which indebtedness is to be determined, including,
without limitation, (a) indebtedness or liability for borrowed money; (b)
obligations evidenced by bonds, debentures, notes or other similar instruments;
(c) obligations for the deferred purchase price of property or services
(including trade obligations); (d) obligations as lessee under capital leases;
(e) current liabilities in respect of unfunded vested benefits under Plans
covered by ERISA, and regulations promulgated thereunder; (f) obligations under
letters of credit; (g) obligations under acceptance facilities; (h) all
guaranties, endorsements (other than for collection or deposit in the ordinary
course of business), and other contingent obligations to purchase, to provide
funds for payment, to supply funds to invest in any Person, or otherwise to
assure a creditor
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against loss; and (i) obligations secured by any Lien, whether or not the
obligations have been assumed.
"Indemnified Person" means any Person that is, or at any time was, the
Agent, a Lender, an Affiliate of any such Person or a director, officer,
employee or agent of any such Person.
"Information" means data, certificates, reports, statements (including
financial statements), opinions of counsel, documents and other information.
"Lender" means (a) Riggs in its capacity as a Lender and (b) each
Person that becomes a Lender pursuant to the provisions of Section 9.13 or
Section 9.15.
"Lender Tax" means any income or franchise tax imposed upon (a) any
Lender by any jurisdiction (or political subdivision thereof) in which such
Lender is located, or (b) the Agent by the jurisdiction (or political
subdivision thereof) in which the Agent is located.
"Liability" of any Person means (in each case, whether with full or
limited recourse) any Indebtedness, liability, obligation, covenant or duty of
or binding upon, or any term or condition to be observed by or binding upon,
such Person or any of its assets, of any kind, nature or description, direct or
indirect, absolute or contingent, due or not due, contractual or tortious,
liquidated or unliquidated, whether arising under Contract, Applicable Law, or
otherwise, whether now existing or hereafter arising, and whether for the
payment of money or the performance or non-performance of any act.
"LIBOR" means the rate per annum (rounded upwards, if necessary, to
the next higher 1/100 of 1%) which is equal to the London Interbank Offered
Rate for one-month Dollar deposits as reported to the Agent on an On-Line
Information System at approximately 10:00 a.m. (Washington, D.C. time) on each
LIBOR Calculation Date. If for any reason on any LIBOR Calculation Date the
Agent is unable to access an On-Line Information Service
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<PAGE> 53
or LIBOR is not reported by an On-Line Information Service, then LIBOR shall be
the London Interbank Offered Rate for one-month Dollar Deposits as reported in
The Wall Street Journal on such LIBOR Calculation Date. The Company
acknowledges and agrees that the determination by the Agent of LIBOR shall be
final and binding on the Company in the absence of manifest error.
"LIBOR Calculation Date" means the first Business Day of each calendar
month.
"Lien" means any security interest, mortgage, pledge, lien, claim on
property, charge or encumbrance (including any conditional sale or other title
retention agreement), any lease in the nature thereof, and the filing of or
agreement to give any financing statement under the Uniform Commercial Code of
any jurisdiction (other than precautionary filings under Section 9-408 of the
Uniform Commercial Code).
"Loan" means an amount advanced by a Lender pursuant to Section 1.1.
"Majority Lenders" means, at any time, Lenders holding not less than
66-2/3% of the aggregate amount of the Commitments.
"Materially Adverse Effect" means, (a) with respect to any Person, any
materially adverse effect on such Person's business, assets, Liabilities,
financial condition, results of operations or business prospects, (b) with
respect to a group of Persons "taken as a whole," any materially adverse effect
on such Persons' business, asset, liabilities, financial conditions, results of
operations or business prospects taken as a whole or where appropriate on a
consolidated basis in accordance with GAAP, (c) with respect to any Credit
Document, any adverse effect, whether or not material, on the binding nature,
validity or enforceability thereof as an obligation of the Company and (d) with
respect to any Collateral, or any category of Collateral, pledged by the
Company, an adverse effect, whether or not material, on the validity,
perfection, priority or enforceability of the Security Interest therein created
or purported to be created by the Security Agreement.
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<PAGE> 54
"Maturity Date" means May 31, 1999, which may be extended at the sole
discretion of the Agent and the Lenders.
"Maximum Permissible Rate" means, with respect to interest payable on
any amount, the rate of interest on such amount that, if exceeded, could, under
Applicable Law, result in (a) civil or criminal penalties being imposed on the
payee or (b) the payee's being unable to enforce payment of (or, if collected,
to retain) all or any part of such amount or the interest payable thereon.
"Money Market Investment" means (a) any security issued or directly
and fully guaranteed or insured by the United States government or any agency
or instrumentality thereof having a remaining maturity of not more than one
year, (b) any certificate of deposit, eurodollar time deposit and bankers'
acceptance with remaining maturity of not more than six months, any overnight
bank deposit, and any demand deposit account, in each case with any Lender or
with any United States commercial bank having capital and surplus in excess of
$500,000,000 and rated B or better by Thomson Bankwatch Inc., or (c) any
repurchase obligation with a term of not more than seven days for underlying
securities of the types described in clauses (a) and (b) above entered into
with any financial institution meeting the qualifications specified in clause
(b) above, and (d) any commercial paper issued by any Lender or the parent
corporation of any Lender and any other commercial paper rated A-l by Standard
& Poor's Corporation or Prime-1 by Moody's Investors Service, Inc. and in any
case having a remaining maturity of not more than two hundred seventy days.
"Mortgage Loan" means a commercial real estate secured loan that is
purchased or originated by the Company.
"Mortgage Loan Documents" means, with respect to a Mortgage Loan, the
applicable Mortgage Note and any other document or instrument that evidences,
secures, guaranties, governs or otherwise relates to such Mortgage Loan,
including, without limitation each deed of trust, mortgage, assignment,
security agreement, guaranty, financing statement, title
54
<PAGE> 55
insurance policy, survey, appraisal, environmental audit and legal opinion
executed or delivered in connection therewith.
"Mortgage Note" means, with respect to a Mortgage Loan, the original
promissory note that evidences the obligation of the applicable Obligor to
repay the principal amount of such Mortgage Loan together with interest
thereon, or a copy thereof with a duly completed lost-note affidavit from the
seller of such Mortgage Loan.
"Multiemployer Plans" means, as to the Company or any of its ERISA
Affiliates a Plan of such Person which is multiemployer plan as defined in
Section 4001(a)(3) of ERISA.
"Net Income" means income after deduction of all expenses, taxes and
other proper charges, determined in accordance with GAAP, including realized
gains and losses, and shall exclude all unrealized gains or losses on
investments.
"Net Operating Income" means, for all Obligors with respect to any
Mortgage Loan for any period, the gross revenues of such Obligors, less the
Applicable Reserve Deduction, less all ordinary and customary operating
expenses, other than interest, amortization and depreciation, as determined in
accordance with GAAP.
"Note" means any promissory note from the Company in the form of
Exhibit A.
"Obligations" means any and all Loans, debts, obligations and other
Liabilities of the Company to the Lenders (whether now existing or hereafter
arising or voluntary or involuntary and whether or not jointly owed with
others, direct or indirect, absolute or contingent or liquidated or
unliquidated) under or arising out of the Credit Documents.
"Obligor" means the Person or Persons obligated to pay the
indebtedness which is the subject of a Mortgage Loan, including any guarantor
of such indebtedness or any endorser of a Mortgage Note.
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<PAGE> 56
"On-Line Information Service" means a text line or other on-line
information service provided to the Agent by any of Reuters Information
Services, Inc., Knight-Ridder Financial/Americas, Dow Jones Telerate, Inc. or
Bloomberg Financial Markets News Services, or any comparable reporting service
selected by the Agent.
"Participant" has the meaning given such term in Section 9.12.
"PBGC" means the Pension Benefit Guaranty Corporation.
"Person" means any individual, sole proprietorship, corporation,
partnership, trust, unincorporated organization, mutual company, joint stock
company, estate, union, employee organization, government or any agency or
political subdivision thereof or, for the purpose of the definition of "ERISA
Affiliate", any trade or business.
"Post-Default Rate" means the rate otherwise applicable under Section
1.3(a) plus 2%.
"Potential Default" means an event that, but for the mere lapse of
time or the giving of notice, would constitute an Event of Default.
"Prime Rate" means the rate of interest reported in The Wall Street
Journal newspaper in its "Money Rates" column as the "Prime Rate." If The Wall
Street Journal shall cease to publish the "Prime Rate," then "Prime Rate" shall
mean the average of the prime rates announced by each of the largest five banks
in New York, New York from time to time as its prime rates of interest. The
Prime Rate (determined by either method) is not necessarily the lowest rate of
interest charged by any Lender on loans to its customers.
"Proceeds" means whatever is receivable or received when Collateral
(as defined in the Security Agreement) is sold, collected, exchanged or
otherwise disposed of, whether such
56
<PAGE> 57
disposition is voluntary or involuntary includes all rights to payment,
including return premiums respect to any insurance relating thereto.
"Pro Forma Debt Service" means the aggregate amount of Total Interest
Expense plus payments of principal scheduled to be paid on all Indebtedness of
the Company and its Subsidiaries, on a consolidated basis, over the 12-month
period following a Test Period (other than balloon payments of principal
arising out of credit facilities due within such period). Interest to be paid
on Indebtedness of the Company that is based on a floating rate or index shall
be calculated by the Company at the rate in effect at the date of calculation,
which calculation shall be subject to the approval of the Agent.
"Property" means the real property, including the improvements
thereon, and the personal property (tangible and intangible) which purport to
secure a Mortgage Loan.
"Pro Rata Share" means with respect to any Lender at any time the
percentage of the aggregate amount of the Commitments at such time that is
represented by such Lender's Commitment at such time.
"Regulatory Change" means any Applicable Law, interpretation,
directive, request or guideline (whether or not having the force of law), or
any change therein or in the administration or enforcement thereof, that
becomes effective or is implemented or first required or expected to be
complied with after the Effective Date, whether the same is (a) the result of
an enactment by a government or any agency or political subdivision thereof, a
determination of a court or regulatory authority, or otherwise or (b) enacted,
adopted, issued or proposed before or after the Effective Date, including any
such that imposes, increases or modifies any Tax, reserve requirement,
insurance charge, special deposit requirement, assessment or capital adequacy
requirement, but excluding any such change that imposes, increases or modifies
any Lender Tax.
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<PAGE> 58
"Repayment Date" means the later of (i) the termination of the
Commitments (whether as a result of the occurrence of the Maturity Date,
reduction to zero pursuant to Section 1.9 or termination pursuant to Section
6.2) and (ii) the payment in full of the Loans and all other amounts payable or
accrued hereunder.
"Reportable Event" means, with respect to any Benefit Plan of any
Person, (a) the occurrence of any of the events set forth in ERISA Sections
4043(b) (other than a Reportable Event as to which the provision of thirty (30)
days' notice to the PBGC is waived under applicable regulations), 4068(f) or
4063(a) or the regulations thereunder with respect to such Benefit Plan, (b)
any event requiring such Person or any of its ERISA Affiliates to provide
security to such Benefit Plan under Code Section 401(a)(29) or (c) any failure
to make a payment required by Code Section 412(m) with respect to such Benefit
Plan.
"Required Document" means for any Mortgage Loan (a) the original
Mortgage Note, endorsed to the order of the Agent, (b) copies of all Mortgage
Loan Documents and any amendments thereto, (c) current financial statements of
the Obligors, or, if current financial statements are not available, other
financial information concerning the applicable Property and Obligors
acceptable to the Agent, (d) information acceptable to the Agent supporting the
current valuation of the applicable Property, using a methodology acceptable to
the Agent, (e) a copy of the Appraisal for the applicable Property, and (f) an
assignment, in recordable form, from the Company to the Agent for the ratable
benefit of the Lender of the Mortgage Note and the other Mortgage Loan
Documents.
"Riggs" means Riggs Bank N.A., in its capacity as a Lender.
"Security Agreement" means the Security and Collateral Agency
Agreement of even date herewith, between the Company and the Agent.
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<PAGE> 59
"Shareholders' Equity" means, at any date with respect to the Company
and its Subsidiaries on a consolidated basis, shareholders' equity as
determined in accordance with GAAP.
"Single Employer Plan" means, as to the Company or any of its ERISA
Affiliates, any Benefit Plan of such Person which is not a Multiemployer Plan.
"Statement Date" means December 31, 1996.
"Subsidiary" means, with respect to any Person, any other Person (a)
securities of which having ordinary voting power to elect a majority of the
board of directors (or other persons having similar functions) or (b) other
ownership interests of which ordinarily constituting a majority voting
interest, are at the time, directly or indirectly, owned or controlled by such
first Person, or by one or more of its Subsidiaries, or by such first Person
and one or more of its Subsidiaries; unless otherwise specified, "Subsidiary"
means a Subsidiary of the Company.
"Tax" means any Federal, State or foreign tax, assessment or other
governmental charge or levy (including any withholding tax) upon a Person or
upon its assets, revenues, income or profits.
"Total Interest Expense" means, for any period with respect to any
Person, the aggregate amount of interest incurred during such period on all
Indebtedness of such Person outstanding during all or any part of such period,
including any fees incurred in connection with such Indebtedness.
"Total Liabilities" means total liabilities of the Company and its
Subsidiaries on a consolidated basis determined in accordance with GAAP.
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<PAGE> 60
"Uniform Commercial Code" means the Uniform Commercial Code as in
effect from time to time in the District of Columbia.
"Value" means, for any Property, the current market value of such
Property as determined in accordance with the Approved Valuation Method.
Section 10.2 Other Interpretive Provisions. (a) Except as
otherwise specified herein, all references herein (1) to any Person shall be
deemed to include such Person's successors and assigns, (2) to any Applicable
Law defined or referred to herein shall be deemed references to such Applicable
Law or any successor Applicable Law as the same may have been or may be amended
or supplemented from time to time and (3) to any Credit Document or Contract
defined or referred to herein shall be deemed references to such Credit
Document or Contract (and, in the case of any Note or any other instrument, any
instrument issued in substitution therefor) as the terms thereof may have been
or may be amended, supplemented, waived or otherwise modified from time to
time.
(b) When used in this Agreement, the words "herein,"
"hereof" and "hereunder" and words of similar import shall refer to this
Agreement as a whole and not to any provision of this Agreement, and the words
"Article," "Section," "Annex," "Schedule" and "Exhibit" shall refer to Articles
and Sections of, and Annexes, Schedules and Exhibits to, this Agreement unless
otherwise specified.
(c) Whenever the context so requires, the neuter gender
includes the masculine or feminine, the masculine gender includes the feminine,
and the singular number includes the plural, and vice versa.
(d) Any item or list of items set forth following the
word "including," "include" or "includes" is set forth only for the purpose of
indicating that, regardless of whatever other items are in the category in
which such item or items are "included," such item or items are in such
category, and shall not be construed as indicating that the items in the
category in which such item or items are "included" are limited to such items
or to items similar to such items.
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<PAGE> 61
(e) Each authorization in favor of the Agent, the Lenders
or any other Person granted by or pursuant to this Agreement shall be deemed to
be irrevocable and coupled with an interest.
(f) Except as otherwise specified herein, all references
herein to the Agent, any Lender or the Company shall be deemed to refer to such
Person however designated in Credit Documents, so that (1) a reference to
rights or duties of the Agent under the Credit Documents shall be deemed to
include the rights or duties of such Person as a secured party under the
Security Agreement, (2) a reference to costs incurred by a Lender in connection
with the Credit Documents shall be deemed to include costs incurred by such
Person as a Lender or as a secured party under the Security Agreement and (3) a
reference to the obligations of the Company under the Credit Documents shall be
deemed to include the obligations of such Person as the Company under the
Security Agreement.
Section 10.3 Accounting Matters. (a) Unless otherwise specified
herein, all accounting determinations hereunder and all computations utilized
by the Company in complying with the covenants contained herein shall be made,
all accounting terms used herein shall be interpreted, and all financial
statements required to be delivered hereunder shall be prepared, in accordance
with GAAP.
(b) If any changes in GAAP from those used in the
preparation of the financial statements dated the Statement Date are hereafter
required or permitted and are adopted by the Company with the agreement of its
independent certified public accountants and such changes result or could
result (for any present or future period) in a change in the method of
calculation of any of the financial covenants, standards or terms in or
relating to such covenants, the parties hereto agree to enter into discussions
with a view to amending such provisions so as to equitably reflect such changes
with the desired result that the criteria for evaluating the financial
condition of the Company and its Subsidiaries shall be the same after such
changes as if such changes had not been made, provided, that no change to GAAP
that would affect or could affect (for any present or future period) the method
of calculation of any of said financial covenants, standards or terms shall be
given effect in such
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<PAGE> 62
calculations until such provisions are amended, in a manner satisfactory to the
Company and the Agent and the Majority Lenders, to so reflect such change to
GAAP.
Section 10.4 Captions. Captions to Articles, Sections and
subsections of, and Annexes, Schedules and Exhibits to, this Agreement are
included for convenience of reference only and shall not constitute a part of
this Agreement for any other purpose or in any way affect the meaning or
construction of any provision of this Agreement.
Section 10.5 Interpretation of Related Documents. Except as
otherwise specified therein, the terms and provisions in the Notes,
certificates, opinions and other documents delivered in connection herewith
shall be interpreted in accordance with the provisions of this Article 10.
[SIGNATURES ON FOLLOWING PAGE]
62
<PAGE> 63
IN WITNESS WHEREOF, the parties thereto have caused this
Agreement to be executed by their duly authorized officers all as of the
Agreement Date.
COMPANY:
-------
ALLIED CAPITAL LENDING
CORPORATION, a Maryland corporation
By: /s/ Katherine C. Marien
-------------------------------------
Name: Katherine C. Marien
----------------------------------
Title: President
----------------------------------
AGENT:
-----
RIGGS BANK N.A.
By: /s/ David H. Olson
------------------------------------
Name: David H. Olson
---------------------------------
Title: Vice President
---------------------------------
LENDER:
------
Commitment:
- ----------
$15,000,000 RIGGS BANK N.A.
By: /s/ David H. Olson
-----------------------------------
Name: David H. Olson
---------------------------------
Title: Vice President
--------------------------------
63
<PAGE> 64
LISTING OF SCHEDULES AND EXHIBITS
Schedule 1 - Borrowing Base Certificate
Schedule 2 - Covenant Compliance Certificate
Exhibit A - Form of Note
Exhibit 3.5 - Litigation
Exhibit 4.2 - Form of Eligible Mortgage Loan Report
<PAGE> 65
SCHEDULE 1
BORROWING BASE CERTIFICATE
TO: The Lenders and the Agent under
the Credit Agreement described below
This Borrowing Base Certificate is furnished pursuant to the Credit
Agreement, dated July 11, 1997, among Allied Capital Lending Corporation and
Riggs Bank N.A., as Agent, and the Lenders that are parties thereto (the
"Credit Agreement"). Terms defined in the Credit Agreement shall have the same
defined meanings when such terms are used herein.
The undersigned hereby certifies that:
(a) I am the duly elected ______________________________ of the Company.
(b) I have no knowledge of the existence of any condition or event which
constitutes a Potential Default or an Event of Default.
(c) The following accurately states the current total of pledged Eligible
Mortgage Loans and the Borrowing Base.
(d) The current Borrowing Base is not less than the Loans outstanding
after giving effect to any new Loans to be made.
(e) The foregoing certifications, together with the following
computations, are made and delivered as of the date set forth below.
10.6 Computations for Borrowing Base
1. Current Cost Basis of all Eligible $
Mortgage Loans owned by the Company and ---------
pledged to the Agent
2. Aggregate Values of the Properties $
securing the Eligible Mortgage Loans on ---------
Line 1
3. 80% of Line 1 $
---------
4. 80% of Line 2 $
---------
<PAGE> 66
5. Borrowing Base $
(lesser of Line 3 and Line 4) ---------
6. Total Loans $
---------
7. Availability (Line 5 minus Line 6) $
---------
Dated as of ___________________, 19____.
ALLIED CAPITAL LENDING CORPORATION
By:
------------------------------
Name:
---------------------------
Title:
--------------------------
<PAGE> 67
SCHEDULE 2
COVENANT COMPLIANCE CERTIFICATE
TO: Riggs Bank N.A., as Agent, and the Lenders under the Credit
Agreement referred to below
This is the Covenant Compliance Certificate referred to in Section
4.1(b) of the Credit Agreement, dated as of July 11, 1997, among Allied Capital
Lending Corporation, Riggs Bank N.A., and the Lenders parties thereto (the
"Credit Agreement"). Terms defined in the Credit Agreement shall have the same
defined meanings when such terms are used herein.
Attached hereto are the financial statements of the Company for the
fiscal quarter or fiscal year, as applicable, ended on ____________________,
19___. I hereby certify that:
1. I am the chief financial officer of the Company.
2. I have carefully read the attached financial statements and they (i)
are complete, true and correct statements to the best of my knowledge
and belief, (ii) were prepared in conformity with GAAP applied on a
basis consistent with that of the preceding year, subject only to
year-end audit adjustments, and fairly present the financial positions
of the Company and the results of its operations for the periods
covered thereby.
3. To the best of my knowledge, each and every covenant in the Agreement
has been performed and observed and no Potential Default or Event of
Default has occurred.
Attached are calculations of the Financial Covenants as of __________, 19____.
Dated ________________, 19____.
-----------------------
Name:
-----------------
Title:
----------------
<PAGE> 68
EXHIBIT A
FORM OF NOTE
U.S. $ , 19
------------------ --------------- ---
FOR VALUE RECEIVED, the undersigned, ALLIED CAPITAL LENDING
CORPORATION, a Maryland corporation (the "Company"), HEREBY PROMISES TO PAY to
the order of ______________________________________, a __________________ (the
"Lender"), on the Maturity Date, the principal sum of U.S.
________________________ AND ___/00 DOLLARS ($______________) or, if less, the
aggregate principal amount of the Loans made by the Lender to the Company
pursuant to the Credit Agreement referred to below and outstanding on the
Maturity Date.
The Company promises to pay interest on the unpaid principal amount of
each Loan from the date of such Loan until such principal amount is paid in
full, at such interest rates, and payable at such times, as are specified in
the Credit Agreement.
Both principal and interest are payable in lawful money of the United
States of America to RIGGS BANK N.A., as Agent (the "Agent"), at 808 17th
Street, N.W., Washington, D.C. 20006, in same day funds, without defense,
offset or counterclaim.
This Note is one of the Notes referred to in, and is entitled to the
benefits of, the Credit Agreement, dated as of July 11, 1997 (as amended,
modified or supplemented from time to time, the "Credit Agreement") between the
Company, the Lender, certain other lenders parties thereto, and the Agent as
agent for the Lender and such other lenders, and the other Credit Documents
referred to therein and entered into pursuant thereto. The Credit Agreement,
among other things, (a) provides for the making of Loans by the Lender to the
Company from time to time in an aggregate amount not to exceed at any time
outstanding the U.S. dollar amount first above mentioned, the indebtedness of
the Company resulting from each such Loan being evidenced by this Note, and (b)
contains provisions for acceleration of the maturity hereof upon the happening
of certain stated events and also for prepayments on account of principal
hereof prior to the maturity hereof upon the terms and conditions therein
specified.
The Company hereby waives presentment, demand, notice of dishonor,
protest and all other demands and notices (other than demands and notices with
respect to an Event of Default) in connection with the delivery, acceptance,
performance and enforcement of this Note.
<PAGE> 69
Terms defined in the Credit Agreement shall have the same defined
meanings when such terms are used herein.
This Note shall be governed by and construed in accordance with the
laws of the District of Columbia, without reference to conflict of laws
principles.
IN WITNESS WHEREOF, the Company has caused this Note to be executed by
its duly authorized representative as of the day and year first above written.
ALLIED CAPITAL LENDING
CORPORATION, a Maryland corporation
By:
-----------------------------
Name:
---------------------------
Title:
--------------------------
<PAGE> 70
EXHIBIT 3.5
LITIGATION
<PAGE> 71
EXHIBIT 4.2
ELIGIBLE MORTGAGE LOAN REPORT
Mortgage Original Current
Note Mortgage Cost Property
Loan # Obligor Date Note Amount Basis Value Status*
- ------ ------- ---- ----------- ----- ----- -------
* E = Eligible Mortgage Loan
I = Pledged Mortgage Loan that has ceased to be an Eligible Mortgage Loan
I certify that the foregoing is a complete and accurate listing of all
Mortgage Loans and Mortgage Notes pledged to Riggs Bank N.A.
Dated: , 19 .
----------------- ----
By:
-------------------------------
Name:
-----------------------------
<PAGE> 72
NOTE
U.S. $15,000,000.00 July 11, 1997
FOR VALUE RECEIVED, the undersigned, ALLIED CAPITAL LENDING
CORPORATION, a Maryland corporation (the "Company"), HEREBY PROMISES TO PAY to
the order of RIGGS BANK N.A., a national banking association (the "Lender"), on
the Maturity Date, the principal sum of U.S. FIFTEEN MILLION AND NO/00 DOLLARS
($15,000,000.00) or, if less, the aggregate principal amount of the Loans made
by the Lender to the Company pursuant to the Credit Agreement referred to below
and outstanding on the Maturity Date.
The Company promises to pay interest on the unpaid principal amount of
each Loan from the date of such Loan until such principal amount is paid in
full, at such interest rates, and payable at such times, as are specified in
the Credit Agreement.
Both principal and interest are payable in lawful money of the United
States of America to RIGGS BANK N.A., as Agent (the "Agent"), at 808 17th
Street, N.W., Washington, D.C. 20006, in same day funds, without defense,
offset or counterclaim.
This Note is one of the Notes referred to in, and is entitled to the
benefits of, the Credit Agreement, dated as of July 11, 1997 (as amended,
modified or supplemented from time to time, the "Credit Agreement") between the
Company, the Lender, certain other lenders parties thereto, and the Agent as
agent for the Lender and such other lenders, and the other Credit Documents
referred to therein and entered into pursuant thereto. The Credit Agreement,
among other things, (a) provides for the making of Loans by the Lender to the
Company from time to time in an aggregate amount not to exceed at any time
outstanding the U.S. dollar amount first above mentioned, the indebtedness of
the Company resulting from each such Loan being evidenced by this Note, and (b)
contains provisions for acceleration of the maturity hereof upon the happening
of certain stated events and also for prepayments on account of principal
hereof prior to the maturity hereof upon the terms and conditions therein
specified.
The Company hereby waives presentment, demand, notice of dishonor,
protest and all other demands and notices (other than demands and notices with
respect to an Event of Default) in connection with the delivery, acceptance,
performance and enforcement of this Note.
<PAGE> 73
Terms defined in the Credit Agreement shall have the same defined
meanings when such terms are used herein.
This Note shall be governed by and construed in accordance with the
laws of the District of Columbia, without reference to conflict of laws
principles.
IN WITNESS WHEREOF, the Company has caused this Note to be executed by
its duly authorized representative as of the day and year first above written.
ALLIED CAPITAL LENDING
CORPORATION, a Maryland corporation
By: /s/ Katherine C. Marien
-------------------------------
Name: Katherine C. Marien
----------------------------
Title: President
---------------------------
2
<PAGE> 1
LINE OF CREDIT,
SECURITY AND PLEDGE AGREEMENT
THIS LINE OF CREDIT, SECURITY AND PLEDGE AGREEMENT, dated as of the
1st day of January, 1997, is made by and between ALLIED CAPITAL SBLC
CORPORATION, a Maryland corporation (the "Borrower"), and RIGGS BANK N.A., a
national banking association (the "Bank"). The Bank has agreed to extend
credit to the Borrower and the Borrower has agreed to obtain credit from the
Bank on the terms and conditions set forth in this Agreement. Accordingly, for
good and valuable consideration, the receipt and sufficiency of which are
acknowledged, the Bank and the Borrower agree as follows:
ARTICLE 1
DEFINITIONS AND ACCOUNTING TERMS
SECTION 1.01. DEFINITIONS. As used in this Agreement, the following
terms shall have the meanings assigned to them below, which meanings shall be
equally applicable to the singular and plural forms of the terms defined.
"Adjusted EBITDA" means, for any period with respect to any Person,
Net Income plus Total Interest Expense, taxes, depreciation and amortization
determined in accordance with GAAP.
"Affiliate" means with respect to any Person, any other Person which,
directly or indirectly, through one or more intermediaries, controls or is
controlled by, or is under common control with, such specified Person. The
term "control" means the possession, directly or indirectly, of the power to
direct or cause the direction of management and policies of a Person, whether
through ownership of common stock, by contract or otherwise.
"Agreement" means this Line of Credit, Security and Pledge Agreement,
as the same may be amended, modified or supplemented from time to time.
"Allied" means Allied Capital Lending Corporation, a Maryland
corporation.
"Business Day" means any day other than a Saturday, Sunday or other
day on which commercial banks are authorized or required to close under the
laws of the District of Columbia.
"Collateral" means all of Borrower's S.B.A. Guaranteed Loans, and all
UCC Collateral, and Deeds of Trust relating to such S.B.A. Guaranteed Loans,
and the proceeds of any them, and any payments received by Borrower related to
any of the foregoing, including all income related to the servicing of S.B.A.
Guaranteed Loans, all whether now existing or hereafter arising.
"Deed of Trust" means a deed of trust or mortgage on real property.
"Default" means any event which with the giving of notice, the lapse
of time, or both, would constitute an Event of Default.
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"Eligible S.B.A. Guaranteed Loan" means an S.B.A. Guaranteed Loan
which (i) has been made by the Borrower, (ii) for which there is in effect an
S.B.A. Guaranty between 70% and 90% of the amount of such Loan, (iii) conforms
to the requirements of the S.B.A. Guaranty Authorization, (iv) is not more than
60 days past due, (v) for which the original S.B.A. Guaranteed Note is in the
possession of the Bank or its nominee or bailee, (vi) if any Loan is made
hereunder with respect to the Unguaranteed Portion thereof, is secured by a
first Deed of Trust on real property located in the United States and on the
improvements thereon or a first priority security interest on machinery and
equipment located in the United States, and (vii) is acceptable to the Bank in
its sole discretion.
"Event of Default" means any of the events specified as an "Event of
Default" under this Agreement, provided that any requirement for the giving of
notice, the lapse of time, or both, or any other condition, has been satisfied.
"Facility Loan" or "Facility Loans" means individually, any loan, and
collectively, all of the loans to be made to the Borrower by the Bank pursuant
to Section 2.01 (a) of this Agreement.
"Facility Maximum Amount" means the lesser of (i) twenty-five million
and no/100 dollars ($25,000,000.00), less the aggregate outstanding amount of
the Sub-Facility Loans, or (ii) the principal amount of the Guaranteed Portion.
The Facility Maximum Amount may be reduced by the Borrower pursuant to Section
2.01 (g) hereof.
"Facility Note" means a promissory note, in form and substance
satisfactory to the Bank, in the original principal amount of $25,000,000.00,
and evidencing the obligation of the Borrower to pay the principal amount of
the Facility Loans, together with interest on the Loans, as the same may be
amended, modified or supplemented from time to time. The term "Facility Note"
also shall include any promissory note executed and delivered by the Borrower
in connection with an extension of the Termination Date with respect to the
Facility Loans, an increase in the Facility Maximum Amount or any other
amendment to this Agreement.
"GAAP" means generally accepted accounting principles consistently
applied.
"Guaranteed Portion" means the amount of an Eligible S.B.A. Guaranteed
Loan multiplied by the percentage amount of the S.B.A. Guaranty applicable
thereto.
"Guaranty" means the guaranty agreement from Allied unconditionally
guaranteeing to the Bank the full repayment of the Loans and all other
obligations of the Borrower hereunder, as the same may be amended, modified or
supplemented from time to time.
"Indebtedness" means (i) indebtedness or liability for borrowed money;
(ii) obligations evidenced by bonds, debentures, notes, or other similar
instruments; (iii) obligations for the deferred purchase price of property or
services (including trade obligations); (iv) obligations as lessee under
capital leases; (v) current liabilities in respect of unfunded vested benefits
under Plans covered by the Employee Retirement Income
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Security Act of 1974 as amended, and regulations promulgated thereunder; (vi)
obligations under letters of credit; (vii) obligations under acceptance
facilities; (viii) all guaranties, endorsements (other than for collection or
deposit in the ordinary course of business), and other contingent obligations
to purchase, to provide funds for payment, to supply funds to invest in any
Person, or otherwise to assure a creditor against loss; and (ix) obligations
secured by any Lien, whether or not the obligations have been assumed.
"Investments" means all debt or equity securities or share,
participation, or other interest in any Person, which is, or is of a type,
dealt in or traded on financial markets, or which is recognized in any area in
which it is issued or dealt in as a medium for investment.
"Lien" means any mortgage, deed of trust, pledge, security interest,
hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or
other), or preference, priority, or other security agreement or preferential
arrangement, charge, or encumbrance of any kind or nature whatsoever
(including, without limitation, any conditional sale or other title retention
agreement, any financing lease having substantially the same economic effect as
any of the foregoing, and the filing of any financing statement under the
Uniform Commercial Code or comparable law of any jurisdiction to evidence any
of the foregoing).
"Loan Documents" means this Agreement, the Notes, the Guaranty, and
any other document now or hereafter executed or delivered in connection with
the Obligations in evidence thereof or as security therefor, including, without
limitation, any life insurance assignment, pledge agreement, security
agreement, deed of trust, mortgage, promissory note or subordination agreement.
"Loan" or "Loans" means individually, any Facility Loan or
Sub-Facility Loan, and collectively, all of the Facility Loans and Sub-Facility
Loans.
"Maximum Program Amount" means (i) with respect to an S.B.A.
Guaranteed Loan, the maximum loan amount permitted by the S.B.A. under its
section 7(a) program at the time such Loan is made, and (ii) with respect to
the Guaranteed Portion of an S.B.A. Guaranteed Loan, the maximum amount which
the S.B.A. will guarantee under its section 7(a) program at the time it issues
its S.B.A. Guaranty; provided, however, that no increase in the Maximum
Program Amount with respect to either (i) or (ii) above shall become effective
for purposes hereof without the written consent of the Bank.
"Net Income" means income after deduction of all expenses, taxes and
other proper charges, including realized gains and losses,determined in
accordance with GAAP and shall exclude all unrealized gains or losses on
Investments.
"Note" and "Notes" means individually, either of the Facility Note or
Sub-Facility Note, and collectively, both of the Facility Note and Sub-Facility
Note.
"Obligations" means the Loans, the Notes, all Indebtedness and
obligations of the Borrower under this Agreement and the other Loan Documents,
as well as all other
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Indebtedness of the Borrower to the Bank, now existing or hereafter arising, of
every kind and description, whether or not evidenced by notes or other
instruments, and whether such Indebtedness is direct or indirect, fixed or
contingent, liquidated or unliquidated, due or to become due, secured or
unsecured, joint, several or joint and several, related or unrelated to the
Loans, similar or dissimilar to the Indebtedness arising out of this Agreement,
of the same or a different class of Indebtedness as the Indebtedness arising
out of this Agreement, including, without limitation, any overdrafts in any
deposit account maintained by the Borrower with the Bank, all obligations of
the Borrower with respect to letters of credit issued by the Bank for the
account of the Borrower, any Indebtedness of the Borrower that is assigned to
the Bank and any Indebtedness of the Borrower to any assignee of this
Agreement.
"Person" means an individual, partnership, corporation, business
trust, joint stock company, trust, unincorporated association, joint venture,
governmental authority or other entity of whatever nature.
"Pro Forma Debt Service" means, for any period with respect to any
Person, estimated Total Interest Expense plus scheduled principal payments for
the next four calendar quarters.
"S.B.A." means the Small Business Administration.
"S.B.A. Guaranty" means an effective, in force, guaranty of an S.B.A.
Guaranteed Loan issued by the S.B.A. under its section 7(a) program in the form
of S.B.A. Form 529B.
"S.B.A. Guaranty Authorization" means, as to each S.B.A. Guaranteed
Loan, an original signed copy received by the Borrower of the Authorization and
Loan Agreement (Guaranty Loan).
"S.B.A. Guaranteed Loan" means a loan made by the Borrower evidenced
by an S.B.A. Guaranteed Note, and guaranteed by an S.B.A. Guaranty.
"S.B.A. Guaranteed Loan Borrower" means, collectively, as to each
S.B.A. Guaranteed Loan or S.B.A. Guaranteed Note, all persons who are obligated
thereon or thereunder.
"S.B.A. Guaranteed Note" means a note, bond or other evidence of an
S.B.A. Guaranteed Loan.
"Shareholders' Equity" means, at any date with respect to any Person,
shareholder's equity as computed in accordance with GAAP and reported in the
financial statements of such Person delivered to the Bank.
"Sub-Facility Loan" or "Sub-Facility Loans" means individually, any
loan, and collectively, all of the loans to be made to the Borrower by the Bank
pursuant to Section 2.01 (b) of this Agreement.
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"Sub-Facility Maximum Amount" means the lesser of (i) twelve million,
five hundred thousand and no/100 dollars ($12,500,000.00), or (ii) fifty
percent (50%) of the principal amount of Unguaranteed Portion. The
Sub-Facility Maximum Amount may be reduced by the Borrower pursuant to Section
2.01 (g) hereof.
"Sub-Facility Note" means a promissory note, in form and substance
satisfactory to the Bank, in the original principal amount of $12,500,000.00,
and evidencing the obligation of the Borrower to pay the principal amount of
the Sub-Facility Loans, together with interest on the Loans, as the same may be
amended, modified or supplemented from time to time. The term "Sub-Facility
Note" also shall include any promissory note executed and delivered by the
Borrower in connection with an extension of the Termination Date with respect
to the Sub-Facility Loans, an increase in the Sub-Facility Maximum Amount or
any other amendment to this Agreement.
"Subsidiary" means an entity of which shares of stock or other
ownership interests having ordinary voting power to elect a majority of the
board of directors or other managers of such entity are at the time owned, or
the management of which is otherwise controlled, directly or indirectly,
through one or more intermediaries, or both, by any Person.
"Termination Date" means May 31, 1998, and any extension or extensions
thereof granted by the Bank in writing in its sole discretion.
"Total Interest Expense" means, for any period with respect to any
Person, the aggregate amount of interest incurred during such period on all
Indebtedness of such Person outstanding during all or any part of such period,
including any fees incurred in connection with such Indebtedness.
"Total Liabilities" means, with respect to any Person, the aggregate
amount of all liabilities of such Person (including tax and other proper
accruals), computed in accordance with GAAP.
"Unguaranteed Portion" means the amount of an Eligible S.B.A.
Guaranteed Loan less the Guaranteed Portion.
"UCC" means the Uniform Commercial Code as adopted in the District of
Columbia, and all amendments thereto.
"UCC Collateral" means collectively and includes all of the following,
whether now owned or hereafter acquired by the Borrower: any item or property
included within the definition of "accounts," "chattel paper," "documents,"
"general intangibles," or "instruments" set forth in the UCC; provided, however
that if the related Guaranteed Portion has been purchased by a Person who is
not an affiliate of the Borrower and the Loan made in relation to such
Guaranteed Portion has been repaid, then such Guaranteed Portion and such items
and property limited exclusively to such Guaranteed Portion shall not be
considered UCC Collateral for purposes of this Agreement.
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SECTION 1.02. ACCOUNTING TERMS. All accounting terms used herein
which are not otherwise expressly defined in this Agreement shall have the
meanings respectively given to them in accordance with GAAP in effect on the
date of this Agreement. Except as otherwise provided herein, all financial
computations made pursuant to this Agreement shall be made in accordance with
GAAP and all balance sheets and other financial statements shall be prepared in
accordance with GAAP. Except as otherwise provided herein, whenever reference
is made in any provision of this Agreement to a "Consolidated" balance sheet or
other financial statement or financial computation with respect to Allied, such
terms shall mean a balance sheet or other financial statement or financial
computation of Allied and its Subsidiaries on a consolidated basis.
ARTICLE 2
LOANS
SECTION 2.01. AMOUNT AND BORROWING PROCEDURE.
(a) Subject to the terms and conditions of this Agreement, the
Borrower may, from time to time, until the Termination Date, request Loans from
the Bank with respect to the Guaranteed Portion as provided herein (and the
Bank may, in its sole discretion, and with no obligation so to do, agree to
make any such Loan) in an aggregate principal amount not to exceed at any one
time outstanding the Facility Maximum Amount; provided, however, in no event
shall the principal amount attributable to any single Guaranteed Portion exceed
the Maximum Program Amount. Up to the Facility Maximum Amount, the Borrower
may borrow, repay without penalty and re-borrow under this subsection from the
date of this Agreement until the Termination Date.
(b) Subject to the terms and conditions of this Agreement, the
Borrower may, from time to time, until the Termination Date, request Loans from
the Bank with respect to the Unguaranteed Portion as provided herein (and the
Bank may, in its sole discretion, and with no obligation so to do, agree to
make any such Loan) in an aggregate principal amount not to exceed at any one
time outstanding the Sub-Facility Maximum Amount; provided, however, in no
event shall the principal amount attributable to any single Unguaranteed
Portion exceed the lesser of (y) fifty percent (50%) of such Unguaranteed
Portion, or (z) one-eighth (1/8) of the Maximum Program Amount. Up to the
Sub-Facility Maximum Amount, the Borrower may borrow, repay without penalty and
re-borrow under this subsection from the date of this Agreement until the
Termination Date.
(c) The proceeds of each Loan shall be used for Borrower's general
corporate obligations, the making of Eligible S.B.A. Guaranteed Loans, and for
no other purpose.
(d) The unpaid principal balance of the Loans shall bear interest as
provided in the Notes.
(e) The obligation of the Borrower to repay the Loans, together with
interest thereon, shall be evidenced by the Notes. The unpaid principal
balance of the Notes shall be payable on the Termination Date together with all
interest accrued and unpaid.
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(f) Each Loan with respect to the Guaranteed Portion shall be
repaid in full within one hundred fifty (150) days after it is advanced or, if
the related Eligible S.B.A. Guaranteed Loan is a construction loan, within one
hundred fifty (150) days following the expiration of the construction period,
which construction period shall not exceed two hundred seventy (270) days. If
no related Loan with respect to the Unguaranteed Portion has been made or is
outstanding, upon receipt of the foregoing repayment the Bank will, at the
request of Borrower, return to the Borrower all original documents related to
the Eligible S.B.A. Guaranteed Loan as designated by Borrower.
(g) The Borrower may terminate or reduce either credit facility
provided for in Section 2.01(a) and (b) of this Agreement in whole or in part
by giving at least 15 Business Days' prior written notice of such termination
or reduction to the Bank. The termination or reduction of the credit facility
provided for in Section 2.01(a) or (b) of this Agreement shall not affect the
rights of the Bank with respect to any Obligations arising prior or subsequent
to such termination or reduction and the provisions of this Agreement shall
remain in full force and effect until the Obligations have been fully and
completely paid and discharged.
(h) The Borrower and the Bank from time to time may agree to extend
the Termination Date or increase the amount of credit to be provided under this
Agreement, or both. During any such periods of extension, the remaining terms
and conditions of this Agreement shall remain in full force and effect, and the
Borrower shall execute and deliver any amendments or modifications to the Loan
Documents as the Bank may require in connection with any such extension or
increase. Nothing in this Section 2.01(h) shall obligate the Bank to grant
such extensions or to increase the amount of credit provided under this
Agreement.
SECTION 2.02. FACILITY FEE. The Borrower agrees to pay to the Bank in
consideration of the Loans, on the first Business Day of January, April, July
and October of each year, commencing with the date hereof, a facility fee of
two-tenths of one percent (0.20%) per annum of the sum of the aggregate
principal amount of the committed credit facilities provided for in Section
2.01(a) and (b) of this Agreement.
SECTION 2.03. PAYMENTS AND COMPUTATIONS. All payments due under this
Agreement (including any payment or prepayment of principal, interest, fees and
other charges) or with respect to the Notes or the Loans shall be made in
lawful money of the United States of America, in immediately available funds,
to the Bank at its office at 808 17th Street, N.W., Washington, D.C. 20006, or
at such other place as the Bank may designate, and shall be applied first to
accrued fees, next to accrued late charges, next to accrued interest and then
to principal. If any payment of principal, interest or fees is due on a day
which is not a Business Day, then the due date will be extended to the next
succeeding full Business Day and interest and fees will be payable with respect
to the extension. If any payment of principal, interest or fees is not made
within ten days of its due date, the Borrower agrees to pay to the Bank a late
charge equal to 5% of the amount of the payment. Upon the occurrence of an
Event of Default and during the continuation of such Event of Default, interest
shall accrue on the Loans at a per annum rate as provided in the Notes for such
event. The Bank may, but shall not be obligated to, debit the amount of
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any payment due under this Agreement to any deposit account of the Borrower
maintained with the Bank.
SECTION 2.04. LOAN ADVANCE PROCEDURES. The Borrower may at any time
or from time to time request a Loan provided that after such amount is loaned
the aggregate amount of all Loans shall not exceed the Maximum Amount. Such
request shall state the date in which the Loan is to be made which shall be not
less than one (1) Business Day after the receipt of such request by Bank and
shall identify the proposed collateral applicable thereto with a degree of
specificity acceptable to the Bank and shall be accompanied by the S.B.A.
Guaranty Authorization and an assignment thereof and copies of such other
documents relating to such S.B.A. Guaranteed Loan as the Bank shall reasonably
request. Such request may be made orally, but must be confirmed in writing
prior to the closing of such Loan.
SECTION 2.05. SUBSTITUTION OF LOANS. Provided that no Event of
Default has occurred and is continuing, Borrower may substitute for any
Eligible S.B.A. Guaranteed Loan, an S.B.A. Guaranteed Loan satisfying the
requirements of an Eligible S.B.A. Guaranteed Loan and of equal or greater
value at any time or from time to time.
SECTION 2.06. USE OF PROCEEDS. The proceeds of the Loans hereunder
shall be used by the Borrower for Borrower's general corporate obligations and
the making of Eligible S.B.A. Guaranteed Loans. The Borrower will not,
directly or indirectly, use any part of such proceeds for the purpose of
purchasing or carrying any margin stock within the meaning of Regulation U of
the Board of Governors of the Federal Reserve System or to extend credit to any
Person for the purpose of purchasing or carrying any such margin stock, or for
any purpose which violates, or is inconsistent with, Regulation X of such Board
of Governors.
ARTICLE 3
CONDITIONS PRECEDENT
The making of the Loans shall be subject to the following conditions:
SECTION 3.01. CONDITIONS PRECEDENT TO INITIAL LOAN. The obligation of
the Bank to make the initial Loan to the Borrower is subject to the condition
precedent that the Bank shall have received on or before the day of such Loan
each of the following, in form and substance satisfactory to the Bank and its
counsel:
(a) NOTES. The Notes duly executed by the Borrower;
(b) GUARANTY. The Guaranty duly executed by Allied;
(c) EVIDENCE OF ALL CORPORATE ACTION BY THE BORROWER. Certified
copies of all corporate action taken by the Borrower, including resolutions of
its Board of Directors, authorizing the execution, delivery, and performance of
the Loan Documents to which it is a party and each other document to be
delivered pursuant to this Agreement;
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(d) INCUMBENCY AND SIGNATURE CERTIFICATE OF THE BORROWER. A
certificate (dated as of the date of this Agreement) of the Secretary of the
Borrower certifying the names and true signatures of the officers of the
Borrower authorized to sign the Loan Documents to which it is a party and the
other documents to be delivered by the Borrower under this Agreement; and
(e) OPINION OF COUNSEL FOR THE BORROWER. A favorable opinion of
counsel for the Borrower as to such matters as the Bank may reasonably request.
SECTION 3.02. CONDITIONS PRECEDENT TO ALL LOANS. The obligation of
the Bank to make each Loan (including the initial Loan) shall be subject to the
further conditions precedent that on the date of such Loan:
(a) STATEMENTS TRUE. The following statements shall be true and
the Borrower's request for a Loan shall be deemed a statement by such Borrower
dated the date of such Loan, that:
(i) The representations and warranties contained in
Article 4 of this Agreement are correct on and as of
the date of such Loan as though made on and as of
such date; and
(ii) No Default or Event of Default has occurred and is
continuing, or would result from such Loan; and
(b) OTHER DOCUMENTS. The Bank shall have received such other
approvals, opinions, or documents as the Bank may reasonably request.
(c) REQUEST FOR LOAN. Bank shall have received a request for a
Loan in form acceptable to Bank and such other documents as the Banks may
reasonably request to include but not be limited to:
(i) A statement of the purpose for which the Loan will be
used and a description of the S.B.A. Guaranteed Loan to be
funded with the proceed of such Loans, if applicable; and
(ii) (A) The original of each S.B.A. Guaranteed Note which is
being pledged at the time the Loan is made, if any, (B) an
original of the S.B.A. Guaranty Authorization related to each
such S.B.A. Guaranteed Note, (C) such other documents or
instruments relating to such Eligible S.B.A. Guaranteed Loan
as the Bank may reasonably request (provided, however, that
the failure of the Bank to request any document or instrument
at the time of or prior to the delivery of a Note to it shall
not limit its right to request such document or instrument at
a later time).
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ARTICLE 4
COVENANTS, REPRESENTATIONS AND OTHER TERMS REGARDING COLLATERAL
SECTION 4.01. SECURITY INTEREST, PLEDGE. The Borrower grants to the
Bank, its successors and assigns, a security interest in the Collateral, all
additions and accessions thereto and replacements thereof, all proceeds and
products thereof, all books of account and records relating to the Collateral,
including all computer software relating thereto, pledges to the Bank each
Eligible S.B.A. Guaranteed Loan and the S.B.A. Guaranteed Note and all other
instruments related thereto, and assigns to the Bank any rights it may have to
collateral therefor or under any guarantee or commitment related thereto, all
of which shall secure the Obligations.
SECTION 4.02. DEFENSE OF COLLATERAL. The Borrower, at its expense,
will defend the Collateral against any claims or demands adverse to the Bank's
security interest and will promptly pay, when due, all taxes or assessments
levied against the Borrower on the Collateral.
SECTION 4.03. INFORMATION REGARDING COLLATERAL. The Borrower shall
provide the Bank such information as the Bank may from time to time reasonably
request with respect to the Collateral, including, without limitation,
statements describing, designating, identifying and evaluating all Collateral.
SECTION 4.04. PERFECTION OF SECURITY INTEREST. The Borrower shall
perform any and all steps in all relevant or appropriate jurisdictions as may
be necessary or reasonably requested by the Bank to perfect, maintain and
protect the Bank's security interest in the Collateral or which the Bank
otherwise determines to be prudent or advisable. The Borrower shall pay the
taxes and costs of, or incidental to, any recording or filing of any financing
statements concerning the Collateral. The Borrower agrees that a carbon,
photographic, photostatic or other reproduction of this Agreement or of a
financing statement is sufficient as a financing statement.
SECTION 4.05. LIMITATIONS ON OBLIGATIONS. It is expressly agreed by
the Borrower that, notwithstanding any other provision of this Agreement, the
Borrower shall remain liable to observe and perform all the conditions and
obligations to be observed and performed by the Borrower in accordance with and
pursuant to the terms and provisions of each Eligible S.B.A. Guaranteed Loan,
S.B.A. Guaranty and S.B.A. Guaranty Authorization. The Bank shall not have any
obligation or liability under any Eligible S.B.A. Guaranteed Loan, S.B.A.
Guaranty and S.B.A. Guaranty Authorization or any other document, instrument or
agreement related to any Eligible S.B.A. Guaranteed Loan by reason of or
arising out of this Agreement or the assignment of such Eligible S.B.A.
Guaranteed Loan to the Bank or the receipt by the Bank of any payment relating
to such Eligible S.B.A. Guaranteed Loan pursuant to this Agreement, nor shall
the Bank be required or obligated in any manner to perform or fulfill any of
the obligations of the Borrower under or pursuant to any Eligible S.B.A.
Guaranteed Loan, S.B.A. Guaranty and S.B.A. Guaranty Authorization or to make
any payment, or to make any inquiry as to the nature or the sufficiency of any
payment received by it or the sufficiency of any performance by any party under
any such
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Eligible S.B.A. Guaranteed Loan, S.B.A. Guaranty and S.B.A. Guaranty
Authorization or to present or file any claim, or to take any action to collect
or enforce any performance or the payment of any amounts which may have been
assigned to it or to which it may be entitled at any time or times.
SECTION 4.06. INDEMNIFICATION. In any suit, proceeding or action
brought by or against the Bank relating to the Collateral, the Borrower will
save, indemnify and keep the Bank harmless from and against all expense, loss
or damage suffered by reason of any defense, setoff, counterclaim, recoupment
or reduction of liability whatsoever of any obligor thereunder, arising out of
a breach by the Borrower of any obligation thereunder or arising out of any
other agreement, Indebtedness or liability at any time owing to or in favor of
such obligor or its successors from the Borrower, and all such obligations of
the Borrower shall be and remain enforceable against and only against the
Borrower and shall not be enforceable against the Bank. The foregoing
obligation of the Borrower to indemnify the Bank shall not extend to any suit,
proceeding or action arising out of the Bank's gross negligence or willful
misconduct.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants that:
SECTION 5.01. INCORPORATION, GOOD STANDING AND DUE QUALIFICATION. The
Borrower has no Subsidiaries. The Borrower (a) is a corporation duly
organized, validly existing, and in good standing under the laws of the
jurisdiction of its incorporation; (b) has the corporate power and authority to
own its assets and to transact the business in which it is now engaged or in
which it is proposed to be engaged; and (c) is duly qualified as a foreign
corporation and in good standing under the laws of each other jurisdiction in
which such qualification is required, except in such instances which would not,
in any one case or in the aggregate, materially and adversely affect the
financial condition, operations, properties or business of the Borrower.
SECTION 5.02. CORPORATE POWER AND AUTHORITY. The execution, delivery
and performance by the Borrower of the Loan Documents to which each is a party
have been duly authorized by all necessary corporate action and do not and will
not (a) require any consent or approval of, or filing or registration with, any
governmental agency or authority or the stockholders of such corporation; (b)
contravene such corporation's charter or bylaws; (c) result in a breach of or
constitute a default under any agreement or instrument to which such
corporation is a party or by which it or its properties may be bound or
affected; (d) result in, or require, the creation or imposition of any lien
upon or with respect to any of the properties now owned or hereafter acquired
by such corporation; or (e) cause such corporation to be in default under any
law, rule, regulation, order, writ, judgment, injunction, decree, determination
or award applicable to such corporation.
SECTION 5.03. LEGALLY ENFORCEABLE AGREEMENT. This Agreement is, and
each of the other Loan Documents when delivered under this Agreement will be,
legal, valid and
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binding obligations of the Borrower enforceable against the Borrower in
accordance with their respective terms.
SECTION 5.04. FINANCIAL STATEMENTS. The most recent financial
statements of the Borrower which have been furnished to the Bank in connection
with this Agreement are complete and correct and fairly present the financial
condition of the Borrower as at the dates of such statements. Since the dates
of such statements, there has been no material adverse change in the condition
(financial or otherwise), business or operations of the Borrower.
SECTION 5.05. LITIGATION. There is no pending or threatened action or
proceeding against or affecting the Borrower, before any court, governmental
agency or arbitrator, which may, in any one case or in the aggregate,
materially adversely affect the financial condition, operations, properties or
business of the Borrower.
SECTION 5.06. OTHER AGREEMENTS. The Borrower is not a party to any
indenture, loan, or credit agreement, or to any lease or other agreement or
instrument, or subject to any charter or corporate restriction, which has a
material adverse effect on the business, properties, assets, operations, or
conditions, financial or otherwise, of the Borrower, or the ability of the
Borrower to carry out its obligations under the Loan Documents to which it is a
party. The Borrower is not in default in any respect in the performance,
observance, or fulfillment of any of the obligations, covenants, or conditions
contained in any agreement or instrument material to its business to which it
is a party, except in such instances which would not, in any one case or in the
aggregate, materially and adversely affect the financial condition, operations,
properties or business of the Borrower.
SECTION 5.07. NO DEFAULTS ON OUTSTANDING JUDGMENTS OR ORDERS. The
Borrower has satisfied all judgments and is not in default with respect to any
judgment, writ, injunction, decree, rule, or regulation of any court,
arbitrator, or federal, state, municipal, or other governmental authority,
commission, board, bureau, agency or instrumentality, domestic or foreign.
SECTION 5.08. OWNERSHIP AND LIENS. The Borrower has title to, or
valid leasehold interests in, all of its properties and assets, real and
personal, including the properties and assets and leasehold interests reflected
in the financial statements referred to in Section 5.04 (other than any
properties or assets disposed of in the ordinary course of business), and none
of the properties and assets owned by the Borrower and none of its leasehold
interests is subject to any Lien, except such as may be permitted pursuant to
Section 7.01 of this Agreement.
SECTION 5.09. OPERATION OF BUSINESS. The Borrower possesses all
licenses, permits, franchises, patents, copyrights, trademarks, and trade
names, or rights thereto, to conduct its respective businesses substantially as
now conducted and as presently proposed to be conducted, and is not in
violation of any valid rights of others with respect to any of the foregoing,
except in such instances which would not, in any one case or in the aggregate,
materially and adversely affect the financial condition, operations, properties
or business of the Borrower.
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SECTION 5.10. TAXES. The Borrower has filed all tax returns (federal,
state, and local) required to be filed and has paid all taxes, assessments, and
governmental charges and levies thereon to be due, including interest and
penalties.
SECTION 5.11. ENVIRONMENT. The Borrower has not received notice of,
nor knows of, or suspects facts which might constitute, any violations of any
federal, state, or local environmental, health, or safety laws, codes or
ordinances, and any rules or regulations promulgated thereunder with respect to
its businesses, operations, assets, equipment, property, leaseholds, or other
facilities.
ARTICLE 6
AFFIRMATIVE COVENANTS
The Borrower covenants and agrees that:
SECTION 6.01. MAINTENANCE OF EXISTENCE. The Borrower will preserve and
maintain, its corporate existence and good standing in the jurisdiction of its
incorporation, and qualify and remain qualified as a foreign corporation in
each jurisdiction in which such qualification is required, except if the
failure to so qualify would have, in any one case or in the aggregate, a
material and adverse effect on the financial condition, operations, properties
or business of the Borrower.
SECTION 6.02. COMPLIANCE WITH RELATED AGREEMENTS. The Borrower shall
comply with the terms of each S.B.A. Guaranty and S.B.A. Guaranty Authorization
which relates to an Eligible S.B.A. Guaranteed Loan.
SECTION 6.03. RIGHT OF INSPECTION. At any reasonable time and from
time to time, the Borrower will permit the Bank or any agent or representative
of the Bank to audit and verify the Collateral, examine and make copies of and
abstracts from the records and books of account of, and visit the properties
of, the Borrower, and to discuss the affairs, finances and accounts of the
Borrower with any of its officers and directors and the Borrower's independent
accountants.
SECTION 6.04. MAINTENANCE OF RECORDS. The Borrower will keep adequate
records and books of account, in which complete entries will be made in
accordance with GAAP, reflecting all financial transactions of the Borrower.
The principal records and books of account, including these concerning the
Collateral, shall be kept at the chief executive office of the Borrower's
investment advisor at 1666 K Street, N.W., 9th Floor, Washington, D.C. 20006.
The Borrower will not move such records and books of account or change such
chief executive office or the name under which it does business without (a)
giving the Bank at least 30 days' prior written notice, and (b) executing and
delivering financing statements satisfactory to the Bank prior to such move or
change.
SECTION 6.05. MAINTENANCE OF PROPERTIES. The Borrower will maintain,
keep, and preserve all of its properties (tangible and intangible) necessary or
useful in the proper
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conduct of its business in good working order and condition, ordinary wear and
tear excepted.
SECTION 6.06. CONDUCT OF BUSINESS. The Borrower will continue to
engage in an efficient and economical manner in a business of the same general
type as conducted by it on the date of this Agreement.
SECTION 6.07. COMPLIANCE WITH LAWS. The Borrower will comply in all
respects with all applicable laws, rules, regulations and orders (including,
without limitation, the Employee Retirement Income Security Act, as amended
from time to time), such compliance to include, without limitation, paying,
before the same become delinquent, all duly imposed taxes, assessments and
governmental charges imposed upon it or upon its property.
SECTION 6.08. MAINTENANCE OF INSURANCE. The Borrower will maintain
insurance with financially sound and reputable insurance companies or
associations in such amounts and covering such risks as are usually carried by
companies engaged in the same or a similar business and similarly situated.
SECTION 6.09. REPORTING REQUIREMENTS. The Borrower will furnish to the
Bank:
(a) QUARTERLY FINANCIAL STATEMENTS. As soon as available and, in any
event, within 45 days after the end of each of the quarters of each fiscal year
of the Borrower (i) unaudited consolidated financial statements consisting of a
balance sheet of the Borrower, as of the end of such quarter and statements of
operations, changes in net assets, and cash flows of the Borrower for the
period commencing at the end of the previous fiscal year and ending with the
end of such quarter, all in reasonable detail and stating in comparative form
the respective consolidated figures for the corresponding date and period in
the previous fiscal year and all prepared in accordance with GAAP, and (ii) a
certificate detailing a calculation of each of the ratios and amounts referred
to in the financial covenants of the Borrower set forth in Article 8 hereof.
Such financial statements and certificate shall be certified to be accurate by
the chief financial officer of the Borrower (subject to year-end adjustments);
(b) ANNUAL FINANCIAL STATEMENTS. As soon as available and, in any
event, within 120 days after the end of each fiscal year of the Borrower
audited consolidated financial statements consisting of a balance sheet of the
Borrower as of the end of such fiscal year, statements of operations, changes
in net assets, and cash flows of the Borrower for such fiscal year, all in
reasonable detail and stating in comparative form the respective consolidated
figures for the corresponding date and period in the prior fiscal year and all
prepared in accordance with GAAP. The consolidated financial statements shall
be accompanied by an opinion thereon acceptable to the Bank of an independent
certified public accounting firm selected by the Borrower and acceptable to the
Bank;
(c) MANAGEMENT LETTERS. Promptly upon receipt thereof, copies of any
reports submitted to the Borrower by independent certified public accountants
in connection with an audit of the financial statements of the Borrower made by
such accountants;
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(d) NOTICE OF LITIGATION. Promptly after the commencement thereof,
notice of all actions, suits and proceedings before any court or governmental
department, commission, board, bureau, agency or instrumentality, domestic or
foreign, affecting the Borrower, which, if determined adversely to the Borrower
could have a material adverse effect on the financial condition, properties or
operations of the Borrower;
(e) NOTICE OF DEFAULTS AND EVENTS OF DEFAULT. As soon as possible and,
in any event, within 15 days after the occurrence of each Default and Event of
Default, a written notice setting forth the details of such Default or Event of
Default and the action which is proposed to be taken by the Borrower with
respect thereto;
(f) PROXY STATEMENTS, ETC. Promptly after the sending or filing
thereof, copies of all proxy statements, financial statements and reports which
the Borrower sends to its stockholders, and copies of all regular, periodic and
special reports, and all material registration statements which the Borrower
files with the Securities and Exchange Commission or any governmental authority
which may be substituted therefor, or with any national securities exchange;
(g) GENERAL INFORMATION. Such other information respecting the
condition or operations, financial or otherwise, of the Borrower or any
Affiliate as the Bank may from time to time reasonably request.
(h) OPINION ON ASSIGNMENTS. In the event that the Bank determines in
good faith that it is necessary or advisable to obtain a legal opinion on the
effectiveness or priority of any assignment or transfer of a Deed of Trust
securing any Eligible S.B.A. Guaranteed Loan or the procedures necessary or
advisable to assure the effectiveness or priority of an assignment or transfer
of Deeds of Trust in jurisdictions where the collateral for an Eligible S.B.A.
Guaranteed Loan is located, Borrower shall obtain such an opinion addressed to
the Bank from counsel acceptable to Bank within 15 days of its receipt of a
request to do so.
SECTION 6.10. ENVIRONMENT. The Borrower will be and remain in
compliance with the provisions of all federal, state, and local environmental,
health, and safety laws, codes and ordinances, and all rules and regulations
issued thereunder.
SECTION 6.11. INVESTMENT ADVISER. Allied Capital Advisers, Inc. will
remain the investment adviser for the Borrower.
ARTICLE 7
NEGATIVE COVENANTS
The Borrower agrees that, without first obtaining the prior written consent of
the Bank:
SECTION 7.01. LIENS. The Borrower will not create, incur, assume or
permit to exist any Lien upon or with respect to any of its properties or
assets, now owned or hereafter acquired, except: (a) Liens in favor of the
Bank; (b) Liens which are incidental to the conduct of the business of the
Borrower, are not incurred in connection with the obtaining
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of credit and do not materially impair the value or use of assets of the
Borrower; (c) Liens on equipment in existence on the date of this Agreement and
disclosed in writing to the Bank.
SECTION 7.02. INDEBTEDNESS. The Borrower will not create, incur,
assume or permit to exist any Indebtedness except (a) the Obligations; (b)
Indebtedness in existence on the date of this Agreement; (c) Indebtedness of
the Borrower subordinated to the Obligations on terms satisfactory to the Bank;
(d) ordinary trade accounts payable.
SECTION 7.03. MERGERS, ETC. The Borrower will not merge or consolidate
with any Person.
SECTION 7.04. SALE AND LEASEBACK. The Borrower will not sell, transfer
or otherwise dispose of any real or personal property to any Person and
thereafter, in connection therewith, directly or indirectly, lease back the
same or similar property.
SECTION 7.05. SALE OF ASSETS. The Borrower will not sell, lease,
assign, transfer or otherwise dispose of any of its now owned or hereafter
acquired assets except: (a) for assets disposed of in the ordinary course of
business and (b) the sale or other disposition of assets no longer used or
useful in the conduct of its business and provided, that nothing herein shall
be construed as prohibiting the sale or other transfer of any promissory note
held by Borrower other than a promissory note which is not at the time of such
sale included in the Collateral.
SECTION 7.06. GUARANTIES, ETC. The Borrower will not assume,
guarantee, endorse or otherwise be or become directly or contingently
responsible or liable (including, but not limited to, any liability arising out
of any agreement to purchase any obligation, stock, assets, goods or services,
or to supply or advance any funds, assets, goods or services, or to maintain or
cause such Person to maintain a minimum working capital or net worth or
otherwise to assure the creditors of any Person against loss) for obligations
of any Person, or permit any such guaranties or liabilities to exist, except
(a) guaranties by endorsement of negotiable instruments for deposit or
collection or similar transactions in the ordinary course of business, and (b)
guaranties in existence on the date of this Agreement and disclosed in writing
to the Bank.
SECTION 7.07. ACQUISITIONS. The Borrower will not purchase or acquire
(a) all or substantially all of the assets of any Person, or (b) any capital
stock of or ownership interest in any other Person.
SECTION 7.08. TRANSACTIONS WITH AFFILIATES. The Borrower will not
enter into any transaction, including, without limitation, the purchase, sale
or exchange of property or the rendering of any service, with any Affiliate,
except in the ordinary course of and pursuant to the reasonable requirements of
the Borrower's business and upon fair and reasonable terms no less favorable to
the Borrower than would be applicable in a comparable arm's-length transaction
with a Person not an Affiliate (provided that the investment advisory agreement
between Borrower and Allied Capital Advisers, Inc. shall not be deemed to
violate this provision).
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ARTICLE 8
FINANCIAL COVENANTS
So long as any Note shall remain unpaid or the Bank shall have any
Commitment under this Agreement:
SECTION 8.01. MAXIMUM LEVERAGE RATIOS. Borrower will cause Allied to
maintain at all times a ratio of its Consolidated Total Liabilities to its
Consolidated Shareholders' Equity of not greater than 1.75 to 1. Borrower will
maintain at all times a ratio of its Total Liabilities to its Shareholders'
Equity of not greater than 3.5 to 1.
SECTION 8.02. CONSOLIDATED MINIMUM INTEREST COVERAGE RATIO. Borrower
will cause Allied to maintain at all times a ratio of its Consolidated Adjusted
EBITDA to its Consolidated Total Interest Expense of not less than 1.5 to 1 for
the previous four quarters as of the end of each calendar quarter.
SECTION 8.03. CONSOLIDATED PRO FORMA DEBT SERVICE RATIO. Borrower
will cause Allied to maintain at all times a ratio of its Consolidated Adjusted
EBITDA for the previous four quarters to its Consolidated Pro Forma Debt
Service of not less than 1.25 to 1 as of the end of each calendar quarter.
ARTICLE 9
DEFAULT
SECTION 9.01. EVENTS OF DEFAULT. Each of the following shall
constitute an Event of Default under this Agreement:
(a) Failure of the Borrower to pay any Obligation to the Bank,
including, without limitation, the principal of or interest on any Note or any
of the Loans, when the same shall become due and payable, whether at maturity,
as a result of the Bank's demand for payment or otherwise, and such failure
shall continue for a period of 5 days; or
(b) If the Borrower refuses to permit the Bank to inspect, examine,
verify or audit the Collateral in accordance with the provisions of this
Agreement; or
(c) Failure of the Borrower to perform or observe any covenant set
forth in this Agreement (except any such failure resulting in the occurrence of
another Event of Default described in this section), or to perform or observe
any other term, condition, covenant, warranty, agreement or other provision
contained in this Agreement within 30 days after receipt of notice from the
Bank specifying such failure; or
(d) Discovery that any representation or warranty by the Borrower in
this Agreement or any statement or representation made in any certificate,
report or opinion
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<PAGE> 18
delivered pursuant to this Agreement or in connection with any Loan under this
Agreement was materially untrue in any material respect provided, however, the
Bank shall take no action based on a default under this paragraph unless the
Borrower shall have been provided a reasonable opportunity to render such
misrepresentation or untruth immaterial; or
(e) If, as a result of default, any other obligation of the Borrower
for the payment of any debt in excess of $500,000.00 becomes or is declared to
be due and payable prior to the expressed maturity thereof, unless and to the
extent that the declaration is being contested in good faith in a court of
appropriate jurisdiction; or
(f) The Borrower makes an assignment for the benefit of creditors,
files a petition in bankruptcy, petitions or applies to any tribunal for any
receiver or any trustee of the Borrower or any substantial part of its
property, or commences any proceeding relating to the Borrower under any
reorganization, arrangement, readjustments of debt, dissolution or liquidation
law or statute of any jurisdiction, whether now or hereafter in effect; or
(g) If, within 30 days after the filing of a bankruptcy petition or
the commencement of any proceeding against the Borrower seeking any
reorganization, arrangement, composition, readjustment, liquidation,
dissolution or similar relief under any present or future statute, law or
regulation, the proceeding shall not have been dismissed, or, if, within 30
days after the appointment, without the consent or acquiescence of the
Borrower, of any trustee, receiver or liquidator of the Borrower or of all or
any substantial part of the properties of the Borrower, the appointment shall
not have been vacated; or
(h) Any judgment against the Borrower in excess of $250,000.00 or any
attachment in excess of $250,000.00 against any property of the Borrower that
remains unpaid, undischarged, unbonded or undismissed for a period of 30 days,
unless and to the extent that the judgment or attachment is appealed in good
faith in a court of higher jurisdiction and the appeal remains pending; or
(i) Twenty-one (21) days or more shall elapse from the date of
shipment or delivery of any S.B.A. Guaranteed Note which evidences an Eligible
S.B.A. Guaranteed Loan for the purpose of the sale of such Note or the
Guaranteed Portion thereof without the Banks' having received repayment of the
related Loan; or
(j) The occurrence of an event of default (and the expiration of any
applicable cure period) under any other Loan Document.
SECTION 9.02. REMEDIES UPON DEFAULT. Upon the occurrence of an Event
of Default, the following provisions shall be applicable:
(a) The Bank may, at its option, terminate its obligation to make
Loans under this Agreement and declare all Obligations, whether incurred prior
to, contemporaneous with or subsequent to the date of this Agreement, and
whether represented in writing or otherwise, immediately due and payable and
may exercise all of it rights and remedies against the Borrower and any
Collateral.
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(b) The Bank may foreclose its lien and security interest in the
Collateral in any way permitted by law (or regulation applicable to such
collateral including any S.B.A. regulation) and shall have, without limitation,
the remedies of a secured party under the UCC. The Bank may enter the
Borrower's premises without legal process but upon prior notice during business
hours and without incurring liability to the Borrower and remove the Collateral
to such place or places as the Bank may deem advisable, or the Bank may require
the Borrower to assemble the collateral and make the Collateral available to
the Bank at a convenient place and, with or without having the Collateral at
the time or place of sale, the Bank may sell or otherwise dispose of all or any
part of the Collateral whether in its then condition or after further
preparation or processing, either at public or private sale or at any broker's
board, in lots or in bulk, for cash or for credit, at any time or place, in one
or more sales and upon such terms and conditions as the Bank may elect. The
Bank shall give not less than 30 Business Days' prior written notice to the
Borrower of the time and place of any public sale of the Collateral or the time
after which the Collateral may be sold in a private sale, which the Borrower
agrees constitutes commercially reasonable notice. At any such sale the Bank
may be the purchaser, subject to the applicable provisions of the UCC.
Notwithstanding the foregoing, any sale of an S.B.A. Guaranteed Note must be
approved by and be on terms and conditions acceptable to the S.B.A.
(c) Communicate with and notify the S.B.A. Guaranteed Loan Borrowers
of Borrower's assignments hereunder, and note any such assignment on Borrower's
records; and
(d) Take over the exclusive right to collect the Collateral at the
sole expense of the Borrower, without any obligation to preserve rights against
prior parties. For any acts done or not done incident to such collection or
liquidation, the Bank shall not be liable in any manner. The Bank shall have
the right to settle, compromise, or adjust Collateral and the claims or rights
of Borrower thereunder and accept return of the real estate involved, and in
turn sell and dispose of all said real estate without notice to or approval of
Borrower. The Bank may employ agents and attorneys to collect or liquidate any
Collateral, and the Bank shall not be liable for such Collateral or defaults of
any such agents and attorneys; and
(e) Open any mail addressed to Borrower in connection with any
Collateral or any Loan hereunder, and as attorney in fact for Borrower, sign
the Borrower's name to any receipts, checks, notes, agreements, assignments or
other instruments or letters, in order to collect, sell or liquidate the
Collateral; and
(f) The proceeds from any sale of the Collateral by the Bank shall
first be applied to any costs and expenses in securing possession of the
Collateral and to any expenses in connection with the sale. The net proceeds
will be applied toward the payment of the Obligations. Application of the net
proceeds as to particular Obligations or as to principal or interest shall be
in the Bank's absolute discretion. Any deficiency will be paid to the Bank
forthwith upon demand, and any surplus will be paid to the Borrower if the
Borrower is not otherwise indebted to the Bank.
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(g) To the extent that the Obligations are now or hereafter secured by
property other than the Collateral described herein or by the guarantee,
endorsement or property of any other Person, the Bank shall have the right to
proceed against such other property, guarantee or endorsement upon the
occurrence of an Event of Default, and the Bank shall have the right, in its
sole discretion, to determine which rights, security, liens, security interests
or remedies the Bank shall at any time pursue, relinquish, subordinate, modify
or take any other action with respect thereto, without in any way modifying or
affecting any of them or any of the Bank's rights hereunder.
(h) The Bank is hereby authorized at any time or from time to time,
without notice to the Borrower (any such notice being expressly waived by the
Borrower), to setoff and apply any deposit (general or special, time or demand,
provisional or final) at any time held, including any certificate of deposit,
and other indebtedness at any time owed by the Bank, whether or not any such
deposit or indebtedness is then due, to or for the credit of account of the
Borrower against any and all of the Obligations.
(i) THE BORROWER, HAVING KNOWLEDGE THAT IT MAY BE ENTITLED TO NOTICE
AND A HEARING PRIOR TO REPOSSESSION OF THE COLLATERAL, WAIVES ANY RIGHT THAT IT
MAY HAVE UNDER EXISTING OR FUTURE LAW TO ANY HEARING THAT MAY BE HELD RELATING
TO FORECLOSURE OR ANY OTHER SUCH ACTS, AND TO ANY NOTICE THAT MAY BE REQUIRED
TO BE GIVEN BY THE Bank PRIOR TO SUCH HEARING. THE BORROWER EXPRESSLY WAIVES
ITS RIGHT TO A TRIAL BY JURY WITH RESPECT TO ANY LITIGATION RELATING TO THIS
AGREEMENT OR ANY OTHER LOAN DOCUMENT.
(j) The Bank may itself perform or comply, or otherwise cause
performance or compliance, with the obligations of the Borrower contained in
this Agreement, including, without limitation, the obligations of the Borrower
to defend and insure the Collateral. The reasonable expenses of the Bank
incurred in connection with such performance or compliance shall be payable by
the Borrower to the Bank on demand and shall constitute Obligations.
ARTICLE 10
MISCELLANEOUS
SECTION 10.01. COLLECTION COSTS. The Borrower shall pay all of the
reasonable costs and expenses incurred by the Bank in connection with the
enforcement of this Agreement and the other Loan Documents, including, without
limitation, reasonable attorneys' fees and expenses.
SECTION 10.02. MODIFICATION AND WAIVER. Except for the other documents
expressly referred to in this Agreement, this Agreement contains the entire
agreement between the parties and supersedes all prior agreements between the
Bank and the Borrower concerning the line of credit and the Loans hereunder.
No modification or waiver of any provision of any Note or this Agreement and no
consent by the Bank to any departure
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therefrom by the Borrower shall be effective unless such modification or waiver
shall be in writing and signed by an officer of the Bank with a title of vice
president or any higher office, and the same shall then be effective only for
the period and on the conditions and for the specific instances and purposes
specified in such writing. No notice to or demand on the Borrower in any case
shall entitle the Borrower to any other or further notice or demand in similar
or other circumstances. No failure or delay by the Bank in exercising any
right, power or privilege hereunder shall operate as a waiver thereof; nor
shall any single or partial exercise thereof preclude any other or further
exercise thereof or the exercise of any other right, power or privilege. The
rights and remedies of the Bank contained in this Agreement are cumulative and
not exclusive of any rights or remedies otherwise provided by law.
SECTION 10.03. NOTICES. All notices, requests, demands or other
communications provided for in this Agreement shall be in writing and shall be
delivered by hand, sent prepaid by Federal Express (or a comparable overnight
delivery service) or sent by the United States mail, certified, postage
prepaid, return receipt requested, to the Bank, at 808 17th Street, N.W.,
Washington, D.C. 20006 Attention: Commercial Lending, or to the Borrower at
1666 K Street, N.W., 9th Floor, Washington, D.C. 20006, Attention: Chief
Financial Officer. Any notice, request, demand or other communication
delivered or sent in the foregoing manner shall be deemed given or made (as the
case may be) upon the earliest of (a) the date it is actually received, (b) on
the business day after the day on which it is properly delivered to Federal
Express (or a comparable overnight delivery service), or (c) on the third
business day after the day on which it is deposited in the United States mail.
The Borrower or the Bank may change its address by notifying the other party of
the new address in any manner permitted by this Section.
SECTION 10.04. CAPTIONS. The captions of the various sections and
paragraphs of this Agreement have been inserted only for the purposes of
convenience; such captions are not a part of this Agreement and shall not be
deemed in any manner to modify, explain, enlarge or restrict any of the
provisions of this Agreement.
SECTION 10.05. SURVIVAL OF AGREEMENTS. All agreements, representations
and warranties made herein shall survive the delivery of this Agreement and the
making and renewal of the Loans hereunder.
SECTION 10.06. FEES AND EXPENSES. Whether or not any Loans are made
hereunder, the Borrower shall pay on demand all reasonable out-of-pocket costs
and expenses incurred by the Bank in connection with the preparation,
negotiation, execution, delivery, filing, recording and administration of any
of the documents and instruments executed or delivered in connection herewith,
including, without limitation, the reasonable fees and expenses of counsel to
the Bank (including, the reasonable fees of salaried counsel employed by the
Bank or its affiliates), and local counsel who may be retained by the Bank,
with respect to such documents and any amendments thereof or of this Agreement
and any amendment hereof and with respect to advising the Bank as to its rights
and responsibilities hereunder or thereunder, provided, however, that the Bank
shall use its reasonable efforts to notify the Borrower prior to incurring any
costs or expenses chargeable to Borrower under this section, unless the Bank
shall have determined in good
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faith, but at its sole and unfettered discretion, that a delay or such notice
may impair or adversely impact the rights, remedies, claims or other interest
of the Bank or the collectibility of the Loans.
SECTION 10.07. USE OF DEFINED TERMS. All terms defined in this
Agreement shall have the defined meanings when used in certificates, reports or
other documents made or delivered pursuant to this Agreement, unless the
context shall otherwise require.
SECTION 10.08. SUCCESSORS AND ASSIGNS. This Agreement shall inure to
the benefit of and bind the respective parties hereto and their successors and
assigns; provided, however, that the Borrower may not assign its rights
hereunder without the prior written consent of the Bank.
SECTION 10.09. INTERPRETATION. This Agreement and the rights and
obligations of the parties hereunder shall be construed and interpreted in
accordance with the laws of the District of Columbia, without reference to
conflicts of law principles.
IN WITNESS WHEREOF, the Borrower and the Bank have caused this
Agreement to be signed by their duly authorized representatives all as of the
day and year first above written.
ALLIED CAPITAL SBLC CORPORATION, a RIGGS BANK N.A., a national banking
Maryland corporation association
BY: /s/ Katherine C. Marien By: /s/ David H. Olson
------------------------ -----------------------------
Name: Katherine C. Marien Name: David H. Olson
Title: President -----------------------------
Title: Vice President
-----------------------------
22
<PAGE> 1
PROMISSORY NOTE
$25,000,000.00 January 1, 1997
ALLIED CAPITAL SBLC CORPORATION, a corporation organized under the
laws of Maryland (the "Borrower"), for value received, hereby promises to pay
to the order of RIGGS BANK N.A. (the "Bank") at its office, 800 17th Street,
N.W., Washington, D.C. 20006, in lawful money of the United States and in
immediately available funds the principal sum of Twenty Five Million and no/100
Dollars ($25,000,000.00) or, if less, the aggregate unpaid principal amount of
all loans advanced or re-advanced by the Bank to the Borrower hereunder.
1. Payment of Principal and Interest; Prepayment; Etc.
(a) Principal Payments. The principal amount of each loan
hereunder shall be due and payable on the Termination Date (as defined in the
Credit Agreement, hereinafter defined).
(b) Interest Rate; Interest Payments. Except as otherwise
provided hereinafter, each borrowing under this Note shall bear interest on the
unpaid principal amount of such borrowing from time to time at a rate per annum
equal to LIBOR plus one and six tenths percent (1.6%) (the "LIBOR Rate"). Each
change in the LIBOR Rate hereunder shall be effective without notice to the
Borrower on the first Business Day of each calendar month. Interest shall be
payable on the first of each calendar month commencing on the first such date
after each borrowing hereunder and at the Termination Date or earlier maturity
hereof. NOTICE: Under no circumstances will the interest rate on this Note be
more than the maximum rate allowed by applicable law. As used herein:
"LIBOR" means, with respect to any calendar month or portion thereof
during which any loan hereunder is outstanding, the rate per annum
(rounded upwards, if necessary, to the next higher 1/100 of 1%) which
is the average of interbank offered rates for U.S. dollar deposits in
the London interbank market for a period of one month, as reported to
the Bank on an On-Line Information Service at approximately 10:00 a.m.
(Washington, D.C. time)(the "Index") on the first Business Day of each
calendar month. If for any reason on such Business Day the Bank is
unable to access the Index or LIBOR is not reported by the Index, then
LIBOR shall be the London interbank offered rate for U.S. dollars
deposits for a period of one month as reported in The Wall Street
Journal on such Business Day. If LIBOR is not available, the Bank
shall use the most comparable rate at its sole discretion or may use
the average of the rates for the next shortest and next longest
maturities. The Borrower acknowledges and agrees that the
determination by the Bank of LIBOR shall be conclusive and binding on
the Borrower in the absence of manifest error. LIBOR is not
necessarily the rate at which the Bank offers or receives U.S. dollar
deposits in the London interbank market or elsewhere, and is not
necessarily the lowest rate charged by the Bank on loans.
<PAGE> 2
"Business Day" means any day except a Saturday, Sunday or other day on
which commercial banks in the District of Columbia are generally
authorized to close.
"On-Line Information Service" means a textline or other on-line
information service provided to the Bank by any of Reuters Information
Services, Inc., Knight-Ridder Financial/Americas, Dow Jones Telerate,
Inc. or Bloomberg Financial Markets News Services.
(c) Post-Maturity Interest. After maturity, whether by
acceleration or otherwise, this Note shall bear interest payable on demand at a
variable rate per annum equal to 2% in excess of the LIBOR Rate. To the extent
permitted by law, any payment of interest on this Note not made when due shall
bear interest from the date when due until payment is made payable on demand,
at a rate per annum equal to 2% in excess of the LIBOR Rate.
(d) Prepayment. This Note may be prepaid in whole at any
time or in part from time to time without premium or penalty. This Note shall
immediately be prepaid to the extent that the principal amount hereof at any
time exceeds the Maximum Amount (as defined in the Credit Agreement).
(e) Advances; Evidence of Amounts Due. This Note is held by
the Bank as a master note against which loans may be advanced in lesser
amount(s) than the principal amount. The Borrower shall give the Bank a
written or telexed request or a telephonic request (to be promptly confirmed in
writing) no later than 1:00 p.m. (Washington, D.C. time) at least one Business
Day before the day of the desired borrowing, specifying: (i) the Business Day
of the desired borrowing, and (ii) the amount of such borrowing. The Bank
shall, promptly upon request, notify the Borrower telephonically of the LIBOR
Rate. The Borrower shall be liable only for so much of the principal amount as
shall be equal to the total of the amounts advanced or re-advanced against this
Note to or for the Borrower by the Bank from time to time, less all payments
made by or for the Borrower and applied by the Bank to principal. The Borrower
shall also be liable for interest on each such advance or re-advance as shown
on the Bank's books and records, provided that the rate of such interest is in
accordance with the applicable rate or rates specified in this Note. The
Borrower acknowledges that a statement signed by an officer of the Bank setting
forth the amount of principal and interest owed hereon as reflected in such
books and records shall be presumptive evidence of the facts stated therein and
shall, absent manifest error, be conclusive and binding. Any statement of
account delivered to the Borrower shall be deemed correct and accepted unless a
written statement of exceptions thereto is delivered to the Bank within thirty
(30) days after mailing of such statement of account. In making any advance or
re-advance hereunder, the Bank shall be entitled to rely upon any notice of
borrowing or other instructions, whether oral, written or by any form of
telecommunication, purporting to be made by a person designated to the Bank by
the Borrower as an Authorized Representative of the Borrower, and deposit of
the proceeds of an advance or re-advance hereunder in a deposit account in the
name of the Borrower or the remittance of any proceeds to persons designated in
such instructions shall conclusively establish that such loan was duly made
hereunder.
2
<PAGE> 3
(f) Payments Due on Non-Business Days. If any installment of
principal on this Note becomes due and payable on a day which is not a Business
Day, the maturity thereof shall be extended to the next succeeding Business
Day, and interest shall be payable thereon at the rate herein specified during
such extension. If any payment of interest on any loan evidenced by this Note
becomes due and payable on a day which is not a Business Day, such payment
shall be made on the next succeeding Business Day, together with interest
accrued during such extension.
2. Use of Loans. The loans made hereunder shall be used for the
purpose of carrying on a business or commercial activity within the meaning of
the District of Columbia Code Sections 28-3301(d)(1)(B).
3. Events of Default, Remedies. The occurrence of any Event of
Default under the Credit Agreement shall constitute an Event of Default
hereunder. Upon the occurrence of an Event of Default, the Bank is entitled to
exercise the remedies set forth in the Credit Agreement.
4. Expenses. The Borrower agrees to pay all reasonable out-of-pocket
charges and expenses incurred by the Bank, including the reasonable fees and
expenses of its legal counsel (including the cost of the Bank's in-house
counsel as determined by the Bank) in connection with the negotiation,
preparation and execution of this Note and any amendments, waivers,
modifications or supplements hereto, and the enforcement of any provision of
this Note or any amendment, waiver, modification or supplement hereto and the
collection of this Note.
5. Additional Costs. In the event that at any time the Bank shall be
required to maintain reserves against "Eurocurrency Liabilities" under
Regulation D of the Board of Governors of the Federal Reserve System or in the
event that there shall occur any change in applicable law or regulation or in
the interpretation thereof by any governmental authority charged with the
administration thereof or the introduction of any law or regulation subjects
the Bank to any tax or governmental charge of any kind whatsoever with respect
to this Note, loans hereunder or U.S. dollar deposits held by the Bank, or
changes the basis of taxation of payments to the Bank of principal of or
interest payable with respect to this Note (except for changes in the rate of
tax based solely on the overall net income of the Bank) or imposes, modifies or
deems applicable any reserve, special deposit, capital ratio or similar
requirement against assets held by or deposits in or for the account of, or
loans by, the Bank or imposes on the Bank, directly or indirectly, any other
conditions affecting this Note or the cost of U.S. dollar deposits obtained by
the Bank in the domestic market or the London interbank market, and the result
of any of the foregoing is to increase the cost to the Bank of making or
maintaining loans hereunder, then the Bank shall notify the Borrower in writing
of the additional amount or amounts necessary to compensate the Bank for such
additional costs. A certificate of an officer of the Bank setting forth the
calculation of such costs shall be conclusive and binding, absent manifest
error. In the event the Borrower is unwilling to pay such additional costs,
during the thirty days following the receipt of such notice, the Bank and the
Borrower shall
3
<PAGE> 4
negotiate in good faith with a view toward modifying this Note to provide a
substitute basis for the interest rate provided above which is financially a
substantial equivalent of such rate. If, within such thirty-day period, the
Bank and the Borrower shall agree in writing upon such substitute rate, then
such substitute rate shall be retroactive to, and effective from, the date of
the aforesaid notice. If, within such thirty-day period, the Bank and the
Borrower shall fail to agree in writing upon such substitute rate, the Borrower
agrees that this Note shall bear interest retroactive to, and effective from,
the date of the aforesaid notice at a rate equal to the rate reported by The
Wall Street Journal in its column "Money Rates" as the prime rate (the "Prime
Rate"). If more than one rate or a range of rates is reported, the Prime Rate
shall be the higher or highest such rate. In the event The Wall Street Journal
fails to report a prime rate, the Prime Rate shall mean that rate announced
from time to time by the Bank as its prime rate of interest. The Prime Rate,
determined in either manner, is not necessarily the lowest rate charged by the
Bank on loans.
6. Right of Setoff. Unless this Note be paid at its maturity, or
when otherwise due, as herein provided, the Bank shall have all setoff rights
provided by law.
7. Waivers and Consents. Except as otherwise expressly set forth
herein, the Borrower and all endorsers, guarantors, and sureties of this Note
(collectively the "Obligors") severally (a) waive all applicable exemption
rights, whether under the laws of the District of Columbia or otherwise, and
also waive, presentment for payment, protest, notice of protest, and diligence
in collecting this Note, (b) agree to the release of any party primarily or
secondarily liable hereon and agree that it will not be necessary for any
holder hereof, in order to enforce payment of this Note by any party, to first
institute suit against any other Obligor, and (c) consent to any one or more
extensions or postponements of time of payment of this Note on any terms or any
other indulgences with respect thereto. THE RIGHT OF THE BORROWER AND ANY
OBLIGOR TO TRIAL BY JURY IN ANY SUIT, ACTION OR PROCEEDING IN CONNECTION
HEREWITH, IS HEREBY EXPRESSLY WAIVED.
8. Governing Law, Jurisdiction, Notice, Etc. This Note is deemed to
be a contract under the laws of the District of Columbia (except for the
conflict of law provisions thereof) and shall be governed by, and construed in
accordance with, the laws of such jurisdiction. Wherever possible each
provision of this Note shall be interpreted in such manner as to be effective
and valid under applicable law, but if any provision of this Note shall be
prohibited by or invalid under such law, such provision shall be ineffective to
the extent of such prohibition or invalidity, without invalidating the
remainder of such provision or the remaining provisions of this Note. If any
action arising out of this Note is commenced in any District of Columbia or
Federal court located in the District of Columbia, each party signatory hereto
hereby consents to the jurisdiction of any such court in any such action and to
the laying of venue in the District of Columbia. Any process in such action
shall be duly served if mailed by registered mail, postage prepaid, to the
Borrower at its address given herein or its last known business address, or if
otherwise served in acceptance with law. Any other notice or demand hereunder
may be made by hand
4
<PAGE> 5
delivery or certified or registered mail, return receipt requested, to such
address, with the same effect as if delivered in person.
9. Incorporated Provisions. This Note is the Facility Note referred
to in a Line of Credit, Security and Pledge Agreement dated as of the date
hereof, between the Borrower and the Bank (the "Credit Agreement"), is subject
to payment and acceleration upon the terms specified therein, and hereby
incorporates by reference all of the provisions thereof.
ALLIED CAPITAL SBLC CORPORATION
By: /s/ Katherine C. Marien
-------------------------
Name: Katherine C. Marien
Title: President
<PAGE> 1
PROMISSORY NOTE
$12,500,000.00 January 1, 1997
ALLIED CAPITAL SBLC CORPORATION, a corporation organized under the
laws of Maryland (the "Borrower"), for value received, hereby promises to pay
to the order of RIGGS BANK N.A. (the "Bank") at its office, 800 17th Street,
N.W., Washington, D.C. 20006, in lawful money of the United States and in
immediately available funds the principal sum of Twelve Million Five Hundred
Thousand and no/100 Dollars ($12,500,000.00) or, if less, the aggregate unpaid
principal amount of all loans advanced or re-advanced by the Bank to the
Borrower hereunder.
1. Payment of Principal and Interest; Prepayment; Etc.
(a) Principal Payments. The principal amount of each loan
hereunder shall be due and payable on the Termination Date (as defined in the
Credit Agreement, hereinafter defined).
(b) Interest Rate; Interest Payments. Except as otherwise
provided hereinafter, each borrowing under this Note shall bear interest on the
unpaid principal amount of such borrowing from time to time at a rate per annum
equal to LIBOR plus two and two tenths percent (2.2%) (the "LIBOR Rate"). Each
change in the LIBOR Rate hereunder shall be effective without notice to the
Borrower on the first Business Day of each calendar month. Interest shall be
payable on the first of each calendar month commencing on the first such date
after each borrowing hereunder and at the Termination Date or earlier maturity
hereof. NOTICE: Under no circumstances will the interest rate on this Note be
more than the maximum rate allowed by applicable law. As used herein:
"LIBOR" means, with respect to any calendar month or portion thereof
during which any loan hereunder is outstanding, the rate per annum
(rounded upwards, if necessary, to the next higher 1/100 of 1%) which
is the average of interbank offered rates for U.S. dollar deposits in
the London interbank market for a period of one month, as reported to
the Bank on an On-Line Information Service at approximately 10:00 a.m.
(Washington, D.C. time)(the "Index") on the first Business Day of each
calendar month. If for any reason on such Business Day the Bank is
unable to access the Index or LIBOR is not reported by the Index, then
LIBOR shall be the London interbank offered rate for U.S. dollars
deposits for a period of one month as reported in The Wall Street
Journal on such Business Day. If LIBOR is not available, the Bank
shall use the most comparable rate at its sole discretion or may use
the average of the rates for the next shortest and next longest
maturities. The Borrower acknowledges and agrees that the
determination by the Bank of LIBOR shall be conclusive and binding on
the Borrower in the absence of manifest error. LIBOR is not
necessarily the rate at which the Bank offers or receives U.S. dollar
deposits in the London interbank market or elsewhere, and is not
necessarily the lowest rate charged by the Bank on loans.
<PAGE> 2
"Business Day" means any day except a Saturday, Sunday or other day on
which commercial banks in the District of Columbia are generally
authorized to close.
"On-Line Information Service" means a textline or other on-line
information service provided to the Bank by any of Reuters Information
Services, Inc., Knight-Ridder Financial/Americas, Dow Jones Telerate,
Inc. or Bloomberg Financial Markets News Services.
(c) Post-Maturity Interest. After maturity, whether by
acceleration or otherwise, this Note shall bear interest payable on demand at a
variable rate per annum equal to 2% in excess of the LIBOR Rate. To the extent
permitted by law, any payment of interest on this Note not made when due shall
bear interest from the date when due until payment is made payable on demand,
at a rate per annum equal to 2% in excess of the LIBOR Rate.
(d) Prepayment. This Note may be prepaid in whole at any
time or in part from time to time without premium or penalty. This Note shall
immediately be prepaid to the extent that the principal amount hereof at any
time exceeds the Maximum Amount (as defined in the Credit Agreement).
(e) Advances; Evidence of Amounts Due. This Note is held by
the Bank as a master note against which loans may be advanced in lesser
amount(s) than the principal amount. The Borrower shall give the Bank a
written or telexed request or a telephonic request (to be promptly confirmed in
writing) no later than 1:00 p.m. (Washington, D.C. time) at least one Business
Day before the day of the desired borrowing, specifying: (i) the Business Day
of the desired borrowing, and (ii) the amount of such borrowing. The Bank
shall, promptly upon request, notify the Borrower telephonically of the LIBOR
Rate. The Borrower shall be liable only for so much of the principal amount as
shall be equal to the total of the amounts advanced or re-advanced against this
Note to or for the Borrower by the Bank from time to time, less all payments
made by or for the Borrower and applied by the Bank to principal. The Borrower
shall also be liable for interest on each such advance or re-advance as shown
on the Bank's books and records, provided that the rate of such interest is in
accordance with the applicable rate or rates specified in this Note. The
Borrower acknowledges that a statement signed by an officer of the Bank setting
forth the amount of principal and interest owed hereon as reflected in such
books and records shall be presumptive evidence of the facts stated therein and
shall, absent manifest error, be conclusive and binding. Any statement of
account delivered to the Borrower shall be deemed correct and accepted unless a
written statement of exceptions thereto is delivered to the Bank within thirty
(30) days after mailing of such statement of account. In making any advance or
re-advance hereunder, the Bank shall be entitled to rely upon any notice of
borrowing or other instructions, whether oral, written or by any form of
telecommunication, purporting to be made by a person designated to the Bank by
the Borrower as an Authorized Representative of the Borrower, and deposit of
the proceeds of an advance or re-advance hereunder in a deposit account in the
name of the Borrower or the remittance of any proceeds to persons designated in
such instructions shall conclusively establish that such loan was duly made
hereunder.
2
<PAGE> 3
(f) Payments Due on Non-Business Days. If any installment of
principal on this Note becomes due and payable on a day which is not a Business
Day, the maturity thereof shall be extended to the next succeeding Business
Day, and interest shall be payable thereon at the rate herein specified during
such extension. If any payment of interest on any loan evidenced by this Note
becomes due and payable on a day which is not a Business Day, such payment
shall be made on the next succeeding Business Day, together with interest
accrued during such extension.
2. Use of Loans. The loans made hereunder shall be used for the
purpose of carrying on a business or commercial activity within the meaning of
the District of Columbia Code Sections 28-3301(d)(1)(B).
3. Events of Default, Remedies. The occurrence of any Event of
Default under the Credit Agreement shall constitute an Event of Default
hereunder. Upon the occurrence of an Event of Default, the Bank is entitled to
exercise the remedies set forth in the Credit Agreement.
4. Expenses. The Borrower agrees to pay all reasonable out-of-pocket
charges and expenses incurred by the Bank, including the reasonable fees and
expenses of its legal counsel (including the cost of the Bank's in-house
counsel as determined by the Bank) in connection with the negotiation,
preparation and execution of this Note and any amendments, waivers,
modifications or supplements hereto, and the enforcement of any provision of
this Note or any amendment, waiver, modification or supplement hereto and the
collection of this Note.
5. Additional Costs. In the event that at any time the Bank shall be
required to maintain reserves against "Eurocurrency Liabilities" under
Regulation D of the Board of Governors of the Federal Reserve System or in the
event that there shall occur any change in applicable law or regulation or in
the interpretation thereof by any governmental authority charged with the
administration thereof or the introduction of any law or regulation subjects
the Bank to any tax or governmental charge of any kind whatsoever with respect
to this Note, loans hereunder or U.S. dollar deposits held by the Bank, or
changes the basis of taxation of payments to the Bank of principal of or
interest payable with respect to this Note (except for changes in the rate of
tax based solely on the overall net income of the Bank) or imposes, modifies or
deems applicable any reserve, special deposit, capital ratio or similar
requirement against assets held by or deposits in or for the account of, or
loans by, the Bank or imposes on the Bank, directly or indirectly, any other
conditions affecting this Note or the cost of U.S. dollar deposits obtained by
the Bank in the domestic market or the London interbank market, and the result
of any of the foregoing is to increase the cost to the Bank of making or
maintaining loans hereunder, then the Bank shall notify the Borrower in writing
of the additional amount or amounts necessary to compensate the Bank for such
additional costs. A certificate of an officer of the Bank setting forth the
calculation of such costs shall be conclusive and binding, absent manifest
error. In the event the Borrower is unwilling to pay such additional costs,
during the thirty days following the receipt of such notice, the Bank and the
Borrower shall
3
<PAGE> 4
negotiate in good faith with a view toward modifying this Note to provide a
substitute basis for the interest rate provided above which is financially a
substantial equivalent of such rate. If, within such thirty-day period, the
Bank and the Borrower shall agree in writing upon such substitute rate, then
such substitute rate shall be retroactive to, and effective from, the date of
the aforesaid notice. If, within such thirty-day period, the Bank and the
Borrower shall fail to agree in writing upon such substitute rate, the Borrower
agrees that this Note shall bear interest retroactive to, and effective from,
the date of the aforesaid notice at a rate equal to the rate reported by The
Wall Street Journal in its column "Money Rates" as the prime rate (the "Prime
Rate"). If more than one rate or a range of rates is reported, the Prime Rate
shall be the higher or highest such rate. In the event The Wall Street Journal
fails to report a prime rate, the Prime Rate shall mean that rate announced
from time to time by the Bank as its prime rate of interest. The Prime Rate,
determined in either manner, is not necessarily the lowest rate charged by the
Bank on loans.
6. Right of Setoff. Unless this Note be paid at its maturity, or
when otherwise due, as herein provided, the Bank shall have all setoff rights
provided by law.
7. Waivers and Consents. Except as otherwise expressly set forth
herein, the Borrower and all endorsers, guarantors, and sureties of this Note
(collectively the "Obligors") severally (a) waive all applicable exemption
rights, whether under the laws of the District of Columbia or otherwise, and
also waive, presentment for payment, protest, notice of protest, and diligence
in collecting this Note, (b) agree to the release of any party primarily or
secondarily liable hereon and agree that it will not be necessary for any
holder hereof, in order to enforce payment of this Note by any party, to first
institute suit against any other Obligor, and (c) consent to any one or more
extensions or postponements of time of payment of this Note on any terms or any
other indulgences with respect thereto. THE RIGHT OF THE BORROWER AND ANY
OBLIGOR TO TRIAL BY JURY IN ANY SUIT, ACTION OR PROCEEDING IN CONNECTION
HEREWITH, IS HEREBY EXPRESSLY WAIVED.
8. Governing Law, Jurisdiction, Notice, Etc. This Note is deemed to
be a contract under the laws of the District of Columbia (except for the
conflict of law provisions thereof) and shall be governed by, and construed in
accordance with, the laws of such jurisdiction. Wherever possible each
provision of this Note shall be interpreted in such manner as to be effective
and valid under applicable law, but if any provision of this Note shall be
prohibited by or invalid under such law, such provision shall be ineffective to
the extent of such prohibition or invalidity, without invalidating the
remainder of such provision or the remaining provisions of this Note. If any
action arising out of this Note is commenced in any District of Columbia or
Federal court located in the District of Columbia, each party signatory hereto
hereby consents to the jurisdiction of any such court in any such action and to
the laying of venue in the District of Columbia. Any process in such action
shall be duly served if mailed by registered mail, postage prepaid, to the
Borrower at its address given herein or its last known business address, or if
otherwise served in acceptance with law. Any other notice or demand hereunder
may be made by hand
4
<PAGE> 5
delivery or certified or registered mail, return receipt requested, to such
address, with the same effect as if delivered in person.
9. Incorporated Provisions. This Note is the Sub-Facility Note
referred to in a Line of Credit, Security and Pledge Agreement dated as of the
date hereof, between the Borrower and the Bank (the "Credit Agreement"), is
subject to payment and acceleration upon the terms specified therein, and
hereby incorporates by reference all of the provisions thereof.
ALLIED CAPITAL SBLC CORPORATION
By: /s/ Katherine C. Marien
-------------------------
Name: Katherine C. Marien
Title: President
<PAGE> 1
REPLACEMENT PROMISSORY NOTE
$15,000,000.00 March 19, 1997
ALLIED CAPITAL CREDIT CORPORATION and ALLIED CAPITAL LENDING
CORPORATION, each a corporation organized under the laws of Maryland
(collectively, the "Borrower"), for value received, each hereby promises to pay
to the order of RIGGS BANK N.A. (the "Bank") at its office, 800 17th Street,
N.W., Washington, D.C. 20006, in lawful money of the United States and in
immediately available funds the principal sum of Fifteen Million and no/100
Dollars ($15,000,000.00) or, if less, the aggregate unpaid principal amount of
all loans advanced or re-advanced by the Bank to the Borrower hereunder.
1. Payment of Principal and Interest; Prepayment; Etc.
(a) Principal Payments. The principal amount of each loan
hereunder shall be due and payable on the Termination Date (as defined in the
Credit Agreement, hereinafter defined).
(b) Interest Rate; Interest Payments. Except as otherwise
provided hereinafter, each borrowing under this Note shall bear interest on the
unpaid principal amount of such borrowing from time to time at a rate per annum
equal to LIBOR plus one and six tenths percent (1.6%) (the "LIBOR Rate"). Each
change in the LIBOR Rate hereunder shall be effective without notice to the
Borrower on the first Business Day of each calendar month. Interest shall be
payable on the first of each calendar month commencing on the first such date
after each borrowing hereunder and at the Termination Date or earlier maturity
hereof. NOTICE: Under no circumstances will the interest rate on this Note be
more than the maximum rate allowed by applicable law. As used herein:
"LIBOR" means, with respect to any calendar month or portion thereof
during which any loan hereunder is outstanding, the rate per annum
(rounded upwards, if necessary, to the next higher 1/100 of 1%) which
is the average of interbank offered rates for U.S. dollar deposits in
the London interbank market for a period of one month, as reported to
the Bank on an On-Line Information Service at approximately 10:00 a.m.
(Washington, D.C. time)(the "Index") on the first Business Day of each
calendar month. If for any reason on such Business Day the Bank is
unable to access the Index or LIBOR is not reported by the Index, then
LIBOR shall be the London interbank offered rate for U.S. dollars
deposits for a period of one month as reported in The Wall Street
Journal on such Business Day. If LIBOR is not available, the Bank
shall use the most comparable rate at its sole discretion or may use
the average of the rates for the next shortest and next longest
maturities. The Borrower acknowledges and agrees that the
determination by the Bank of LIBOR shall be conclusive and binding on
the Borrower in the absence of manifest error. LIBOR is not
necessarily the rate at which the Bank offers or receives U.S. dollar
deposits in the London interbank market or elsewhere, and is not
necessarily the lowest rate charged by the Bank on loans.
"Business Day" means any day except a Saturday, Sunday or other day on
which commercial banks in the District of Columbia are generally
authorized to close.
<PAGE> 2
"On-Line Information Service" means a textline or other on-line
information service provided to the Bank by any of Reuters Information
Services, Inc., Knight-Ridder Financial/Americas, Dow Jones Telerate,
Inc. or Bloomberg Financial Markets News Services.
(c) Post-Maturity Interest. After maturity, whether by
acceleration or otherwise, this Note shall bear interest payable on demand at a
variable rate per annum equal to 2% in excess of the LIBOR Rate. To the extent
permitted by law, any payment of interest on this Note not made when due shall
bear interest from the date when due until payment is made payable on demand,
at a rate per annum equal to 2% in excess of the LIBOR Rate.
(d) Prepayment. This Note may be prepaid in whole at any
time or in part from time to time without premium or penalty. This Note shall
immediately be prepaid to the extent that the principal amount hereof at any
time exceeds the Maximum Amount (as defined in the Credit Agreement).
(e) Advances; Evidence of Amounts Due. This Note is held by
the Bank as a master note against which loans may be advanced in lesser
amount(s) than the principal amount. The Borrower shall give the Bank a
written or telexed request or a telephonic request (to be promptly confirmed in
writing) no later than 1:00 p.m. (Washington, D.C. time) at least one Business
Day before the day of the desired borrowing, specifying: (i) the Business Day
of the desired borrowing, and (ii) the amount of such borrowing. The Bank
shall, promptly upon request, notify the Borrower telephonically of the LIBOR
Rate. The Borrower shall be liable only for so much of the principal amount as
shall be equal to the total of the amounts advanced or re-advanced against this
Note to or for the Borrower by the Bank from time to time, less all payments
made by or for the Borrower and applied by the Bank to principal. The Borrower
shall also be liable for interest on each such advance or re-advance as shown
on the Bank's books and records, provided that the rate of such interest is in
accordance with the applicable rate or rates specified in this Note. The
Borrower acknowledges that a statement signed by an officer of the Bank setting
forth the amount of principal and interest owed hereon as reflected in such
books and records shall be presumptive evidence of the facts stated therein and
shall, absent manifest error, be conclusive and binding. Any statement of
account delivered to the Borrower shall be deemed correct and accepted unless a
written statement of exceptions thereto is delivered to the Bank within thirty
(30) days after mailing of such statement of account. In making any advance or
re-advance hereunder, the Bank shall be entitled to rely upon any notice of
borrowing or other instructions, whether oral, written or by any form of
telecommunication, purporting to be made by a person designated to the Bank by
the Borrower as an Authorized Representative of the Borrower, and deposit of
the proceeds of an advance or re-advance hereunder in a deposit account in the
name of the Borrower or the remittance of any proceeds to persons designated in
such instructions shall conclusively establish that such loan was duly made
hereunder.
(f) Payments Due on Non-Business Days. If any installment of
principal on this Note becomes due and payable on a day which is not a Business
Day, the maturity thereof shall be extended to the next succeeding Business
Day, and interest shall be payable thereon at the rate herein specified during
such extension. If any payment of interest on any loan evidenced by
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<PAGE> 3
this Note becomes due and payable on a day which is not a Business Day, such
payment shall be made on the next succeeding Business Day, together with
interest accrued during such extension.
2. Use of Loans. The loans made hereunder shall be used for the
purpose of carrying on a business or commercial activity within the meaning of
the District of Columbia Code Sections 28-3301(d)(1)(B).
3. Events of Default, Remedies. The occurrence of any Event of
Default under the Credit Agreement shall constitute an Event of Default
hereunder. Upon the occurrence of an Event of Default, the Bank is entitled to
exercise the remedies set forth in the Credit Agreement.
4. Expenses. The Borrower agrees to pay all reasonable out-of-pocket
charges and expenses incurred by the Bank, including the reasonable fees and
expenses of its legal counsel (including the cost of the Bank's in-house
counsel as determined by the Bank) in connection with the negotiation,
preparation and execution of this Note and any amendments, waivers,
modifications or supplements hereto, and the enforcement of any provision of
this Note or any amendment, waiver, modification or supplement hereto and the
collection of this Note.
5. Additional Costs. In the event that at any time the Bank shall be
required to maintain reserves against "Eurocurrency Liabilities" under
Regulation D of the Board of Governors of the Federal Reserve System or in the
event that there shall occur any change in applicable law or regulation or in
the interpretation thereof by any governmental authority charged with the
administration thereof or the introduction of any law or regulation subjects
the Bank to any tax or governmental charge of any kind whatsoever with respect
to this Note, loans hereunder or U.S. dollar deposits held by the Bank, or
changes the basis of taxation of payments to the Bank of principal of or
interest payable with respect to this Note (except for changes in the rate of
tax based solely on the overall net income of the Bank) or imposes, modifies or
deems applicable any reserve, special deposit, capital ratio or similar
requirement against assets held by or deposits in or for the account of, or
loans by, the Bank or imposes on the Bank, directly or indirectly, any other
conditions affecting this Note or the cost of U.S. dollar deposits obtained by
the Bank in the domestic market or the London interbank market, and the result
of any of the foregoing is to increase the cost to the Bank of making or
maintaining loans hereunder, then the Bank shall notify the Borrower in writing
of the additional amount or amounts necessary to compensate the Bank for such
additional costs. A certificate of an officer of the Bank setting forth the
calculation of such costs shall be conclusive and binding, absent manifest
error. In the event the Borrower is unwilling to pay such additional costs,
during the thirty days following the receipt of such notice, the Bank and the
Borrower shall negotiate in good faith with a view toward modifying this Note
to provide a substitute basis for the interest rate provided above which is
financially a substantial equivalent of such rate. If, within such thirty-day
period, the Bank and the Borrower shall agree in writing upon such substitute
rate, then such substitute rate shall be retroactive to, and effective from,
the date of the aforesaid notice. If, within such thirty-day period, the Bank
and the Borrower shall fail to agree in writing upon such substitute rate, the
Borrower agrees that this Note shall bear interest retroactive to, and
effective from, the date of the aforesaid notice at a rate equal to the rate
reported by The Wall Street Journal in its column "Money Rates" as the prime
rate (the "Prime Rate"). If more than one rate or a range of rates is
reported, the Prime Rate shall be the higher or highest such rate. In the
event The Wall Street Journal fails to report a prime rate, the
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<PAGE> 4
Prime Rate shall mean that rate announced from time to time by the Bank as its
prime rate of interest. The Prime Rate, determined in either manner, is not
necessarily the lowest rate charged by the Bank on loans.
6. Right of Setoff. Unless this Note be paid at its maturity, or
when otherwise due, as herein provided, the Bank shall have all setoff rights
provided by law.
7. Waivers and Consents. Except as otherwise expressly set forth
herein, the Borrower and all endorsers, guarantors, and sureties of this Note
(collectively the "Obligors") severally (a) waive all applicable exemption
rights, whether under the laws of the District of Columbia or otherwise, and
also waive, presentment for payment, protest, notice of protest, and diligence
in collecting this Note, (b) agree to the release of any party primarily or
secondarily liable hereon and agree that it will not be necessary for any
holder hereof, in order to enforce payment of this Note by any party, to first
institute suit against any other Obligor, and (c) consent to any one or more
extensions or postponements of time of payment of this Note on any terms or any
other indulgences with respect thereto. THE RIGHT OF THE BORROWER AND ANY
OBLIGOR TO TRIAL BY JURY IN ANY SUIT, ACTION OR PROCEEDING IN CONNECTION
HEREWITH, IS HEREBY EXPRESSLY WAIVED.
8. Governing Law, Jurisdiction, Notice, Etc. This Note is deemed to
be a contract under the laws of the District of Columbia (except for the
conflict of law provisions thereof) and shall be governed by, and construed in
accordance with, the laws of such jurisdiction. Wherever possible each
provision of this Note shall be interpreted in such manner as to be effective
and valid under applicable law, but if any provision of this Note shall be
prohibited by or invalid under such law, such provision shall be ineffective to
the extent of such prohibition or invalidity, without invalidating the
remainder of such provision or the remaining provisions of this Note. If any
action arising out of this Note is commenced in any District of Columbia or
Federal court located in the District of Columbia, each party signatory hereto
hereby consents to the jurisdiction of any such court in any such action and to
the laying of venue in the District of Columbia. Any process in such action
shall be duly served if mailed by registered mail, postage prepaid, to the
Borrower at its address given herein or its last known business address, or if
otherwise served in acceptance with law. Any other notice or demand hereunder
may be made by hand delivery or certified or registered mail, return receipt
requested, to such address, with the same effect as if delivered in person.
9. Multiple Parties. Should this Note be signed by more than one
party, all of the obligations herein contained shall be the joint and several
obligations of each party.
10. Prior Note. This Note is given in replacement of, and shall
supersede, that certain Promissory Note dated January 1, 1997 executed by
Allied Capital Credit Corporation in favor of the Bank in the original
principal amount of $ 15,000,000.00.
11. Incorporated Provisions. This Note is the Note referred to in
that certain Line of Credit, Security and Pledge Agreement dated as of January
1, 1997, between the Allied Capital Credit Corporation and the Bank, as amended
by First Amendment to Line of Credit, Security and Pledge Agreement dated as of
March 31, 1997 between Borrower and the Bank (collectively the
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<PAGE> 5
"Credit Agreement"), is subject to payment and acceleration upon the terms
specified therein, and hereby incorporates by reference all of the provisions
thereof.
ALLIED CAPITAL CREDIT CORPORATION
By:/s/ Katherine C. Marien
------------------------------
Name: Katherine C. Marien
Title: President
ALLIED CAPITAL LENDING CORPORATION
By:/s/ Katherine C. Marien
------------------------------
Name: Katherine C. Marien
Title: President
5
<PAGE> 6
FIRST AMENDMENT TO LINE OF CREDIT,
SECURITY AND PLEDGE AGREEMENT
This First Amendment to Line of Credit, Security and Pledge Agreement
("Amendment") dated as of March 19, 1997 is entered into by ALLIED CAPITAL SBLC
CORPORATION (the "Borrower") and RIGGS BANK N.A. (the "Lender").
WHEREAS, the Borrower and the Lender entered into that certain Line of
Credit, Security and Pledge Agreement dated January 1, 1997 (the "Agreement");
and
WHEREAS, the Borrower has requested that Lender release the Guarantor
and modify certain financial covenants of Borrower and Allied under the
Agreement; and
WHEREAS, the Borrower and the Lender wish to amend the Agreement as
provided herein to evidence the foregoing;
WHEREAS, capitalized terms not otherwise defined herein shall be used
herein as defined in the Agreement.
NOW THEREFORE, the Lender and the Borrower agree as follows:
1. The Agreement is hereby amended by deleting the definition of
"Guarantor" and all references to Guarantor. Lender hereby releases Allied
from its Unconditional Guaranty dated January 1, 1997 relating to the Loan.
2. The Agreement is hereby amended by deleting the definition of
"Shareholders' Equity" in its entirety and substituting the following in its
place:
"Shareholders' Equity" means, at any date with respect to any
Person, shareholders' equity as computed in accordance with GAAP and
reported in the financial statements of such Person delivered to the
Bank; provided, however, that with respect to the Borrower,
shareholders' equity shall include advances from Allied.
3. The Agreement is hereby amended by deleting the definition of
"Total Interest Expense" in its entirety and substituting the following in its
place:
"Total Interest Expense" means, for any period with respect to
any Person, the aggregate amount of interest incurred during such period on all
Indebtedness of such Person outstanding during all or any part of such period,
including any fees incurred in connection with such Indebtedness.
4. The Agreement is hereby amended by deleting Section 8.01 in its
entirety and substituting the following in its place:
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<PAGE> 7
SECTION 8.01. MAXIMUM LEVERAGE RATIOS. Borrower will cause
Allied to maintain at all times a ratio of its Consolidated Total Liabilities
to its Consolidated Shareholders' Equity of not greater than 1.75 to 1.
Borrower will maintain at all times a ratio of its Total Liabilities to its
Shareholders' Equity of not greater than 1.5 to 1.
5. The Agreement is hereby amended by deleting Section 8.02 in its
entirety and substituting the following in its place:
SECTION 8.02. MINIMUM INTEREST COVERAGE RATIOS. Borrower will
cause Allied to maintain at all times a ratio of its Consolidated
Adjusted EBITDA to its Consolidated Total Interest Expense of not less
than 1.5 to 1 for the previous four quarters as of the end of each
calendar quarter. Borrower will maintain at all times a ratio of
Adjusted EBITDA to its Total Interest Expense of not less than 1.5 to
1 for the previous four quarters as of the end of each calendar
quarter.
6. The Agreement is hereby amended by deleting Section 8.03 in its
entirety and substituting the following in its place:
SECTION 8.03. PRO FORMA DEBT SERVICE RATIOS. Borrower will
cause Allied to maintain at all times a ratio of its Consolidated
Adjusted EBITDA for the previous four quarters to its Consolidated Pro
Forma Debt Service of not less than 1.25 to 1 as of the end of each
calendar quarter. Borrower will maintain at all times a ratio of
Adjusted EBITDA for the previous four quarters to its Pro Forma Debt
Service of not less than 1.25 to 1 as of the end of each calendar
quarter.
7. The Agreement is hereby amended by adding a new Section 8.04
reading in its entirety as follows:
SECTION 8.04. MINIMUM SHAREHOLDERS' EQUITY. Borrower will
maintain at all times a minimum Shareholders' Equity as computed in
accordance with GAAP of not less than Ten Million Dollars
($10,000,000.00).
8. Borrower hereby reaffirms the Agreement as amended hereby and
agrees that in all respects except as explicitly modified by the terms of this
Amendment that the Agreement shall remain in full force and effect.
9. In consideration of the Amendment contained herein, Borrower
represents, warrants and agrees that (i) there are no claims, defenses or
set-offs with respect to the Agreement, any Loan or any Note, or with respect
to the indebtedness evidenced or secured thereby or with respect to the
collection or enforcement of any of them or with respect to the collateral,
(and to the extent any claim, set-off or defense exists they are each hereby
waived and relinquished in their entirety), (ii) no Event of Default, as
defined in the Agreement, the Note or any other Loan Document, and no event
which with the lapse of time or the giving of notice or both would constitute
such an Event of Default, has occurred; (iii) Lender has made no
representations or commitments, oral or written, or undertaken any obligations
other than as expressly set forth in
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<PAGE> 8
the Agreement, the Loan Documents and this Amendment, (iv) except as otherwise
previously disclosed in writing to the Lender, each of the representations and
warranties contained in the Agreement are true and correct as of the date
hereof and shall be deemed to be restated and remade as of the date of this
Amendment as if set out herein in their entirety; and (v) the making, delivery
and performance by the Borrower of this Amendment and all instruments,
documents and notes executed contemporaneously herewith, have been duly
authorized by all necessary corporate action, and constitute the valid and
binding obligations of the Borrower enforceable in accordance with their terms.
10. All capitalized terms not otherwise defined in this Amendment
shall have the meanings ascribed thereto in the Agreement. Each and every of
the terms and provisions of this Amendment shall be binding upon and shall
inure to the benefit of the parties hereto and their respective heirs,
successors, personal representatives and assigns.
BORROWER EXPRESSLY REPRESENTS AND WARRANTS TO HOLDER THAT IT (A) HAS
READ EACH AND EVERY PROVISION OF THIS INSTRUMENT; (B) HAS BEEN GIVEN THE
OPPORTUNITY TO HAVE THIS INSTRUMENT REVIEWED BY COMPETENT LEGAL COUNSEL OF ITS
OWN CHOOSING; AND (C) UNDERSTANDS, AGREES TO AND ACCEPTS THE PROVISIONS HEREOF.
IN WITNESS WHEREOF, the Borrower and the Lender have executed this
Amendment as of the date first above written.
ALLIED CAPITAL SBLC CORPORATION
By: /s/ Katherine C. Marien
------------------------------
Name: Katherine C. Marien
Title: President
RIGGS BANK N.A.
By: /s/ David H. Olson
------------------------------
Name: David H. Olson
Title: Vice President
3
<PAGE> 1
SECOND AMENDMENT TO LINE OF CREDIT,
SECURITY AND PLEDGE AGREEMENT
This Second Amendment to Line of Credit, Security and Pledge Agreement
("Amendment") dated as of April 16, 1997 is entered into by ALLIED CAPITAL SBLC
CORPORATION (the "Borrower") and RIGGS BANK N.A. (the "Lender").
WHEREAS, the Borrower and the Lender entered into that certain Line of
Credit, Security and Pledge Agreement dated January 1, 1997, as amended by that
certain First Amendment to Line of Credit, Security and Pledge Agreement dated
as of March 19, 1997 (collectively, the "Agreement"); and
WHEREAS, the Borrower has requested that Lender further amend the
Agreement and Lender is willing to do so under the terms herein contained;
WHEREAS, capitalized terms not otherwise defined herein shall be used
herein as defined in the Agreement.
NOW THEREFORE, the Lender and the Borrower agree as follows:
1. The Agreement is hereby amended by deleting Section 2.01 (c) in
its entirety and substituting the following in its place:
(c) The proceeds of each Loan shall be used for the making of
Eligible S.B.A. Guaranteed Loans, and for no other purpose.
2. The Agreement is hereby amended by deleting Section 2.06 in its
entirety and substituting the following in its place:
SECTION 2.06. USE OF PROCEEDS. The proceeds of the Loans
hereunder shall be used by the Borrower for the making of
Eligible S.B.A. Guaranteed Loans. The Borrower will not,
directly or indirectly, use any part of such proceeds for the
purpose of purchasing or carrying any margin stock within the
meaning of Regulation U of the Board of Governors of the
Federal Reserve System or to extend credit to any Person for
the purpose of purchasing or carrying any such margin stock,
or for any purpose which violates, or is inconsistent with,
Regulation X of such Board of Governors.
3. The Agreement is hereby amended by deleting Section 7.08 in its
entirety and substituting the following in its place:
SECTION 7.08. TRANSACTIONS WITH AFFILIATES. The Borrower will
not (a) enter into any transaction, including, without
limitation, the purchase, sale or exchange of property or the
rendering of any service, with any Affiliate, except in the
ordinary course of and pursuant to the reasonable requirements
of the Borrower's business and upon fair and reasonable
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<PAGE> 2
terms no less favorable to the Borrower than would be
applicable in a comparable arm's-length transaction with a
Person not an Affiliate (provided that the investment advisory
agreement between Borrower and Allied Capital Advisers, Inc.
shall not be deemed to violate this provision), or (b) after
and during the continuance of a Default hereunder, repay any
Indebtedness owed, or declare or pay any dividend or make any
capital distribution, to Allied.
4. Borrower hereby reaffirms the Agreement as amended hereby and
agrees that in all respects except as explicitly modified by the terms of this
Amendment that the Agreement shall remain in full force and effect.
5. In consideration of the Amendment contained herein, Borrower
represents, warrants and agrees that (i) there are no claims, defenses or
set-offs with respect to the Agreement, any Loan or any Note, or with respect
to the indebtedness evidenced or secured thereby or with respect to the
collection or enforcement of any of them or with respect to the collateral,
(and to the extent any claim, set-off or defense exists they are each hereby
waived and relinquished in their entirety), (ii) no Event of Default, as
defined in the Agreement, the Note or any other Loan Document, and no event
which with the lapse of time or the giving of notice or both would constitute
such an Event of Default, has occurred; (iii) Lender has made no
representations or commitments, oral or written, or undertaken any obligations
other than as expressly set forth in the Agreement, the Loan Documents and this
Amendment, (iv) except as otherwise previously disclosed in writing to the
Lender, each of the representations and warranties contained in the Agreement
are true and correct as of the date hereof and shall be deemed to be restated
and remade as of the date of this Amendment as if set out herein in their
entirety; and (v) the making, delivery and performance by the Borrower of this
Amendment and all instruments, documents and notes executed contemporaneously
herewith, have been duly authorized by all necessary corporate action, and
constitute the valid and binding obligations of the Borrower enforceable in
accordance with their terms.
6. All capitalized terms not otherwise defined in this Amendment
shall have the meanings ascribed thereto in the Agreement. Each and every of
the terms and provisions of this Amendment shall be binding upon and shall
inure to the benefit of the parties hereto and their respective heirs,
successors, personal representatives and assigns.
BORROWER EXPRESSLY REPRESENTS AND WARRANTS TO HOLDER THAT IT (A) HAS
READ EACH AND EVERY PROVISION OF THIS INSTRUMENT; (B) HAS BEEN GIVEN THE
OPPORTUNITY TO HAVE THIS INSTRUMENT REVIEWED BY COMPETENT LEGAL COUNSEL OF ITS
OWN CHOOSING; AND (C) UNDERSTANDS, AGREES TO AND ACCEPTS THE PROVISIONS HEREOF.
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<PAGE> 3
IN WITNESS WHEREOF, the Borrower and the Lender have executed this
Amendment as of the date first above written.
ALLIED CAPITAL SBLC CORPORATION
By: /s/ Katherine C. Marien
--------------------------------
Name: Katherine C. Marien
Title: President
RIGGS BANK N.A.
By: /s/ David H. Olson
--------------------------------------
Name: David H. Olson
Title: Vice President
3
<PAGE> 1
LINE OF CREDIT,
SECURITY AND PLEDGE AGREEMENT
THIS LINE OF CREDIT, SECURITY AND PLEDGE AGREEMENT, dated as of the
1st day of January, 1997, is made by and between ALLIED CAPITAL CREDIT
CORPORATION, a Maryland corporation (the "Borrower"), and RIGGS BANK N.A., a
national banking association (the "Bank").
The Bank has agreed to extend credit to the Borrower and the Borrower
has agreed to obtain credit from the Bank on the terms and conditions set forth
in this Agreement. Accordingly, for good and valuable consideration, the
receipt and sufficiency of which are acknowledged, the Bank and the Borrower
agree as follows:
ARTICLE 1
DEFINITIONS AND ACCOUNTING TERMS
SECTION 1.01. DEFINITIONS. As used in this Agreement, the following
terms shall have the meanings assigned to them below, which meanings shall be
equally applicable to the singular and plural forms of the terms defined.
"Adjusted EBITDA" means, for any period with respect to any Person,
Net Income plus Total Interest Expense, taxes, depreciation and amortization
determined in accordance with GAAP.
"Affiliate" means with respect to any Person, any other Person which,
directly or indirectly, through one or more intermediaries, controls or is
controlled by, or is under common control with, such specified Person. The
term "control" means the possession, directly or indirectly, of the power to
direct or cause the direction of management and policies of a Person, whether
through ownership of common stock, by contract or otherwise.
"Agreement" means this Line of Credit, Security and Pledge Agreement,
as the same may be amended, modified or supplemented from time to time.
"Allied" means Allied Capital Lending Corporation, a Maryland
corporation.
"Borrowing Base Application and Compliance Certificate" means a
certificate in the form of Exhibit "A" hereto, with appropriate insertions, to
be executed and delivered by the Borrower from time to time pursuant to
Sections 3.02 (c) (iii) and 6.09 (c) hereof.
"Business Day" means any day other than a Saturday, Sunday or other
day on which commercial banks are authorized or required to close under the
laws of the District of Columbia.
"Collateral" means any Third-Party Loan for which the original
Third-Party Note evidencing such loan has been delivered to the Bank, all
accounts, chattel paper, documents, general intangibles and instruments
relating to such loan, and all proceeds of the foregoing.
<PAGE> 2
"Default" means any event which with the giving of notice, the lapse
of time, or both, would constitute an Event of Default.
"Eligible Third-Party Loan" means a Third-Party Loan (i) for which the
original Third-Party Note is in the possession of the Bank, (ii) which, if not
a construction loan, is fully funded, (iii) which is not more than 60 days past
due, (iv) for which, if a Second Mortgage 504 Loan, there is in effect an
S.B.A. Authorization and Debenture Guaranty, and (iv) which is acceptable to
the Bank in its sole discretion.
"Event of Default" means any of the events specified as an "Event of
Default" under this Agreement, provided that any requirement for the giving of
notice, the lapse of time, or both, or any other condition, has been satisfied.
"GAAP" means generally accepted accounting principles consistently
applied.
"Guaranty" means the guaranty agreement from Allied unconditionally
guaranteeing to the Bank the full repayment of the Loans and all other
obligations of the Borrower hereunder, as the same may be amended, modified or
supplemented from time to time.
"Indebtedness" means (i) indebtedness or liability for borrowed money;
(ii) obligations evidenced by bonds, debentures, notes, or other similar
instruments; (iii) obligations for the deferred purchase price of property or
services (including trade obligations); (iv) obligations as lessee under
capital leases; (v) current liabilities in respect of unfunded vested benefits
under Plans covered by the Employee Retirement Income Security Act of 1974 as
amended, and regulations promulgated thereunder; (vi) obligations under letters
of credit; (vii) obligations under acceptance facilities; (viii) all
guaranties, endorsements (other than for collection or deposit in the ordinary
course of business), and other contingent obligations to purchase, to provide
funds for payment, to supply funds to invest in any Person, or otherwise to
assure a creditor against loss; and (ix) obligations secured by any Lien,
whether or not the obligations have been assumed.
"Investments" means all debt or equity securities or share,
participation, or other interest in any Person, which is, or is of a type,
dealt in or traded on financial markets, or which is recognized in any area in
which it is issued or dealt in as a medium for investment.
"Lien" means any mortgage, deed of trust, pledge, security interest,
hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or
other), or preference, priority, or other security agreement or preferential
arrangement, charge, or encumbrance of any kind or nature whatsoever
(including, without limitation, any conditional sale or other title retention
agreement, any financing lease having substantially the same economic effect as
any of the foregoing, and the filing of any financing statement under the
Uniform Commercial Code or comparable law of any jurisdiction to evidence any
of the foregoing).
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<PAGE> 3
"Loan Documents" means this Agreement, the Note, the Guaranty and any
other document now or hereafter executed or delivered in connection with the
Obligations in evidence thereof or as security therefor, including, without
limitation, any life insurance assignment, pledge agreement, security
agreement, deed of trust, mortgage, promissory note or subordination agreement.
"Loan" or "Loans" means individually, any loan, and collectively, all
of the loans to be made to the Borrower by the Bank pursuant to this Agreement.
"Maximum Amount" means the lesser of (i) fifteen million and no/100
dollars ($15,000,000.00), or (ii) the sum of ninety percent (90%) of the
principal amount of Second Mortgage 504 Loans, plus eighty percent (80%) of the
principal amount of First Mortgage 504 Loans and Companion Loans; provided,
however, that during the time that any such loan is a construction loan, the
foregoing percentage(s) shall be reduced to fifty percent (50%) and the
aggregate principal amount at any time outstanding with respect to such
construction loans shall not exceed Seven Million Five Hundred Thousand and
no/100 dollars ($7,500,000.00). The Maximum Amount may be reduced by the
Borrower pursuant to Section 2.01 (d) hereof.
"Net Income" means income after deduction of all expenses, taxes and
other proper charges, determined in accordance with GAAP, including realized
gains and losses, and shall exclude all unrealized gains or losses on
Investments.
"Note" means a promissory note, in form and substance satisfactory to
the Bank, in the original principal amount of $15,000,000.00, and evidencing
the obligation of the Borrower to pay the principal amount of the Loans,
together with interest on the Loans, as the same may be amended, modified or
supplemented from time to time. The term "Note" also shall include any
promissory note executed and delivered by the Borrower in connection with an
extension of the Termination Date, an increase in the Maximum Amount or any
other amendment to this Agreement.
"Obligations" means the Loans, the Note, all Indebtedness and
obligations of the Borrower under this Agreement and the other Loan Documents,
as well as all other Indebtedness of the Borrower to the Bank, now existing or
hereafter arising, of every kind and description, whether or not evidenced by
notes or other instruments, and whether such Indebtedness is direct or
indirect, fixed or contingent, liquidated or unliquidated, due or to become
due, secured or unsecured, joint, several or joint and several, related or
unrelated to the Loans, similar or dissimilar to the Indebtedness arising out
of this Agreement, of the same or a different class of Indebtedness as the
Indebtedness arising out of this Agreement, including, without limitation, any
overdrafts in any deposit account maintained by the Borrower with the Bank, all
obligations of the Borrower with respect to letters of credit issued by the
Bank for the account of the Borrower, any Indebtedness of the Borrower that is
assigned to the Bank and any Indebtedness of the Borrower to any assignee of
this Agreement.
3
<PAGE> 4
"Person" means an individual, partnership, corporation, business
trust, joint stock company, trust, unincorporated association, joint venture,
governmental authority or other entity of whatever nature.
"Pro Forma Debt Service" means, for any period with respect to any
Person, estimated Total Interest Expense plus scheduled principal payments for
the next four calendar quarters.
"S.B.A." means the Small Business Administration.
"S.B.A. Authorization and Debenture Guaranty" means an effective, in
force, authorization and debenture guaranty issued by the S.B.A. to a certified
development company and relating to a Second Mortgage 504 Loan.
"Shareholders' Equity" means, at any date with respect to any Person,
shareholder's equity as computed in accordance with GAAP and reported in the
financial statements of such Person delivered to the Bank.
"Subsidiary" means an entity of which shares of stock or other
ownership interests having ordinary voting power to elect a majority of the
board of directors or other managers of such entity are at the time owned, or
the management of which is otherwise controlled, directly or indirectly,
through one or more intermediaries, or both, by any Person.
"Termination Date" means May 31, 1998, and any extension or extensions
thereof granted by the Bank in its sole discretion.
"Third-Party Loan" means a loan made by the Borrower, evidenced by a
Third-Party Note, guaranteed by an S.B.A. Authorization and Debenture
Guaranty, if applicable, and constituting (i) an unguaranteed first mortgage
loan under the S.B.A.'s section 504 program ("First Mortgage 504 Loan"), or
(ii) a fully-guaranteed second mortgage loan under the S.B.A.'s section 504
program, ("Second Mortgage 504 Loan"), or (ii) an unguaranteed first mortgage
loan made as a companion loan senior to a second mortgage loan under the
S.B.A.'s section 7(a) program ("Companion Loan").
"Third-Party Note" means a note, bond or other evidence of a
Third-Party Loan.
"Total Interest Expense" means, for any period with respect to any
Person, the aggregate amount of interest incurred during such period on all
Indebtedness of such Person outstanding during all or any part of such period,
including any fees incurred in connection with such Indebtedness.
"Total Liabilities" means, with respect to any Person, the aggregate
amount of all liabilities of such Person (including tax and other proper
accruals), computed in accordance with GAAP.
4
<PAGE> 5
"UCC" means the Uniform Commercial Code as adopted in the District of
Columbia, and all amendments thereto.
SECTION 1.02. ACCOUNTING TERMS. All accounting terms used herein
which are not otherwise expressly defined in this Agreement shall have the
meanings respectively given to them in accordance with GAAP in effect on the
date of this Agreement. Except as otherwise provided herein, all financial
computations made pursuant to this Agreement shall be made in accordance with
GAAP and all balance sheets and other financial statements shall be prepared in
accordance with GAAP. Except as otherwise provided herein, whenever reference
is made in any provision of this Agreement to a "Consolidated" balance sheet or
other financial statement or financial computation with respect to Allied, such
terms shall mean a balance sheet or other financial statement or financial
computation of Allied and its Subsidiaries on a consolidated basis.
ARTICLE 2
LOANS
SECTION 2.01. AMOUNT AND BORROWING PROCEDURE.
(a) Subject to the terms and conditions of this Agreement, the
Borrower may, from time to time, until the Termination Date, request Loans from
the Bank as provided herein (and the Bank may, in its sole discretion, and with
no obligation so to do, agree to make any such Loan) in an aggregate principal
amount not to exceed at any one time outstanding the Maximum Amount. Up to the
Maximum Amount, the Borrower may borrow, repay without penalty and re-borrow
hereunder from the date of this Agreement until the Termination Date.
(b) The obligation of the Borrower to repay the Loans, together with
interest thereon as provided in the Note, shall be evidenced by the Note and
guaranteed by the Guaranty. The unpaid principal balance of the Note shall be
payable on the Termination Date together with all interest accrued and unpaid.
(c) Each Loan shall be repaid in full within one hundred fifty (150)
days after it is advanced or, if the related Eligible Third-Party Loan is a
construction loan, within one hundred fifty (150) days following the expiration
of the construction period, which construction period shall not exceed two
hundred seventy (270) days.
(d) The Borrower may terminate or reduce the credit facility provided
for in Section 2.01(a) of this Agreement in whole or in part by giving at least
15 Business Days' prior written notice of such termination or reduction to the
Bank. The termination or reduction of the credit facility provided for in
Section 2.01(a) of this Agreement shall not affect the rights of the Bank with
respect to any Obligations arising prior or subsequent to such termination or
reduction and the provisions of this Agreement shall remain in full force and
effect until the Obligations have been fully and completely paid and
discharged.
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(e) The Borrower and the Bank from time to time may agree to extend
the Termination Date or increase the amount of credit to be provided under this
Agreement, or both. During any such periods of extension, the remaining terms
and conditions of this Agreement shall remain in full force and effect, and the
Borrower shall execute and deliver any amendments or modifications to the Loan
Documents as the Bank may require in connection with any such extension or
increase. Nothing in this Section 2.01(e) shall obligate the Bank to grant
such extensions or to increase the amount of credit provided under this
Agreement.
SECTION 2.02. FACILITY FEE. The Borrower agrees to pay to the Bank in
consideration of the Loans, on the first Business Day of January, April, July
and October of each year, commencing with the date hereof, a facility fee of
two-tenths of one percent (0.20%) per annum of the sum of the aggregate
principal amount of the committed credit facility provided for in Section
2.01(a) of this Agreement.
SECTION 2.03. PAYMENTS AND COMPUTATIONS. All payments due under this
Agreement (including any payment or prepayment of principal, interest, fees and
other charges) or with respect to the Note or the Loans shall be made in lawful
money of the United States of America, in immediately available funds, to the
Bank at its office at 808 17th Street, N.W., Washington, D.C. 20006, or at such
other place as the Bank may designate, and shall be applied first to accrued
fees, next to accrued late charges, next to accrued interest and then to
principal. If any payment of principal, interest or fees is due on a day which
is not Business Day, then the due date will be extended to the next succeeding
full Business Day and interest and fees will be payable with respect to the
extension. If any payment of principal, interest or fees is not made within
ten days of its due date, the Borrower agrees to pay to the Bank a late charge
equal to 5% of the amount of the payment. Upon the occurrence of an Event of
Default and during the continuation of such Event of Default, interest shall
accrue on the Loans at a per annum rate as provided in the Note for such event.
The Bank may, but shall not be obligated to, debit the amount of any payment
due under this Agreement to any deposit account of the Borrower maintained with
the Bank.
SECTION 2.04. LOAN ADVANCE PROCEDURES. The Borrower may at any time
or from time to time request a Loan provided that after such amount is loaned
the aggregate amount of all Loans shall not exceed the Maximum Amount. Such
request shall state the date in which the Loan is to be made which shall be not
less than one (1) Business Day after the receipt of such request by Bank and
shall satisfy the requirements of Section 3.02 (c) hereof. Such request may be
made orally, but must be confirmed in writing prior to the closing of such
Loan.
SECTION 2.05. USE OF PROCEEDS. The proceeds of the Loans hereunder
shall be used by the Borrower for funding an Eligible Third-Party Loan made by
Borrower essentially contemporaneously with such Loan, and for general
corporate purposes. The Borrower will not, directly or indirectly, use any
part of such proceeds for the purpose of purchasing or carrying any margin
stock within the meaning of Regulation U of the Board of Governors of the
Federal Reserve System or to extend credit to any Person for the purpose of
purchasing or carrying any such margin stock, or for any purpose which
violates, or is inconsistent with, Regulation X of such Board of Governors.
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ARTICLE 3
CONDITIONS PRECEDENT
The making of the Loans shall be subject to the following conditions:
SECTION 3.01. CONDITIONS PRECEDENT TO INITIAL LOAN. The obligation of
the Bank to make the initial Loan to the Borrower is subject to the condition
precedent that the Bank shall have received on or before the day of such Loan
each of the following, in form and substance satisfactory to the Bank and its
counsel:
(a) NOTE. The Note duly executed by the Borrower;
(b) GUARANTY. The Guaranty duly executed by Allied;
(c) EVIDENCE OF ALL CORPORATE ACTION BY THE BORROWER. Certified
copies of all corporate action taken by the Borrower, including resolutions of
its Board of Directors, authorizing the execution, delivery, and performance of
the Loan Documents to which it is a party and each other document to be
delivered pursuant to this Agreement;
(d) INCUMBENCY AND SIGNATURE CERTIFICATE OF THE BORROWER. A
certificate (dated as of the date of this Agreement) of the Secretary of the
Borrower certifying the names and true signatures of the officers of the
Borrower authorized to sign the Loan Documents to which it is a party and the
other documents to be delivered by the Borrower under this Agreement; and
(e) OPINION OF COUNSEL FOR THE BORROWER. A favorable opinion of
counsel for the Borrower as to such matters as the Bank may reasonably request.
SECTION 3.02. CONDITIONS PRECEDENT TO ALL LOANS. The obligation of
the Bank to make each Loan (including the initial Loan) shall be subject to the
further conditions precedent that on the date of such Loan:
(a) STATEMENTS TRUE. The following statements shall be true and
the Borrower's request for a Loan shall be deemed a statement by such Borrower
dated the date of such Loan, that:
(i) The representations and warranties contained in
Article 4 of this Agreement are correct on and as of
the date of such Loan as though made on and as of
such date; and
(ii) No Default or Event of Default has occurred and is
continuing, or would result from such Loan; and
(b) OTHER DOCUMENTS. The Bank shall have received such other
approvals, opinions, or documents as the Bank may reasonably request.
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(c) REQUEST FOR LOAN. Bank shall have received a request for a
Loan in form acceptable to Bank and such other documents as the Banks may
reasonably request to include but not be limited to:
(i) A description of the Third-Party Loan to be funded with
the proceeds of such Loan or a description of corporate use of
proceeds;
(ii) (A) The original of each Third-Party Note which is being
pledged at the time the Loan is made, (B) a certified copy of
the S.B.A. Authorization and Debenture Guaranty related to
each such Third-Party Note, if applicable, (C) such other
documents or instruments relating to such Eligible Third-Party
Loan as the Bank may reasonably request (provided, however,
that the failure of the Bank to request any document or
instrument at the time of or prior to the delivery of a Note
to it shall not limit its right to request such document or
instrument at a later time); and
(iii) A current Borrowing Base Application and Compliance
Certificate acceptable to the Bank and demonstrating that the
Loan, when advanced, will not cause the outstanding amount of
all Loans to exceed the Maximum Amount.
ARTICLE 4
COVENANTS, REPRESENTATIONS AND OTHER TERMS REGARDING COLLATERAL
SECTION 4.01. SECURITY INTEREST, PLEDGE. The Borrower grants to the
Bank, its successors and assigns, a security interest in the Collateral, all
additions and accessions thereto and replacements thereof, all proceeds and
products thereof, all books of account and records relating to the Collateral,
including all computer software relating thereto, pledges to the Bank each
Eligible Third-Party Loan and the Third-Party Note and all other instruments
related thereto, and assigns to the Bank any rights it may have to collateral
therefor or under any guarantee or commitment related thereto, all of which
shall secure the Obligations.
SECTION 4.02. DEFENSE OF COLLATERAL. The Borrower, at its expense,
will defend the Collateral against any claims or demands adverse to the Bank's
security interest and will promptly pay, when due, all taxes or assessments
levied against the Borrower on the Collateral.
SECTION 4.03. INFORMATION REGARDING COLLATERAL. The Borrower shall
provide the Bank such information as the Bank may from time to time reasonably
request with respect to the Collateral, including, without limitation,
statements describing, designating, identifying and evaluating all Collateral.
SECTION 4.04. PERFECTION OF SECURITY INTEREST. The Borrower shall
perform any and all steps in all relevant or appropriate jurisdictions as may
be necessary or reasonably
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requested by the Bank to perfect, maintain and protect the Bank's security
interest in the Collateral or which the Bank otherwise determines to be prudent
or advisable. The Borrower shall pay the taxes and costs of, or incidental to,
any recording or filing of any financing statements concerning the Collateral.
The Borrower agrees that a carbon, photographic, photostatic or other
reproduction of this Agreement or of a financing statement is sufficient as a
financing statement.
SECTION 4.05. LIMITATIONS ON OBLIGATIONS. It is expressly agreed by
the Borrower that, notwithstanding any other provision of this Agreement, the
Borrower shall remain liable to observe and perform all the conditions and
obligations to be observed and performed by the Borrower in accordance with and
pursuant to the terms and provisions of each Eligible Third-Party Loan, and
S.B.A. Authorization and Debenture Guaranty. The Bank shall not have any
obligation or liability under any Eligible Third-Party Loan, and S.B.A.
Authorization and Debenture Guaranty or any other document, instrument or
agreement related to any Eligible Third-Party Loan by reason of or arising out
of this Agreement or the assignment of such Eligible Third-Party Loan to the
Bank or the receipt by the Bank of any payment relating to such Eligible
Third-Party Loan pursuant to this Agreement, nor shall the Bank be required or
obligated in any manner to perform or fulfill any of the obligations of the
Borrower under or pursuant to any Eligible Third-Party Loan, and S.B.A.
Authorization and Debenture Guaranty or to make any payment, or to make any
inquiry as to the nature or the sufficiency of any payment received by it or
the sufficiency of any performance by any party under any such Eligible
Third-Party Loan, and S.B.A. Authorization and Debenture Guaranty or to present
or file any claim, or to take any action to collect or enforce any performance
or the payment of any amounts which may have been assigned to it or to which it
may be entitled at any time or times.
SECTION 4.06. INDEMNIFICATION. In any suit, proceeding or action
brought by or against the Bank relating to the Collateral, the Borrower will
save, indemnify and keep the Bank harmless from and against all expense, loss
or damage suffered by reason of any defense, setoff, counterclaim, recoupment
or reduction of liability whatsoever of any obligor thereunder, arising out of
a breach by the Borrower of any obligation thereunder or arising out of any
other agreement, Indebtedness or liability at any time owing to or in favor of
such obligor or its successors from the Borrower, and all such obligations of
the Borrower shall be and remain enforceable against and only against the
Borrower and shall not be enforceable against the Bank. The foregoing
obligation of the Borrower to indemnify the Bank shall not extend to any suit,
proceeding or action arising out of the Bank's gross negligence or willful
misconduct.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants that:
SECTION 5.01. INCORPORATION, GOOD STANDING AND DUE QUALIFICATION. The
Borrower has no Subsidiaries. The Borrower (a) is a corporation duly
organized, validly existing, and in good standing under the laws of the
jurisdiction of its incorporation; (b) has the
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corporate power and authority to own its assets and to transact the business in
which it is now engaged or in which it is proposed to be engaged; and (c) is
duly qualified as a foreign corporation and in good standing under the laws of
each other jurisdiction in which such qualification is required, except in such
instances which would not, in any one case or in the aggregate, materially and
adversely affect the financial condition, operations, properties or business of
the Borrower. Allied is a corporation duly organized, validly existing, and in
good standing under the laws of the jurisdiction of its incorporation.
SECTION 5.02. CORPORATE POWER AND AUTHORITY. The execution, delivery
and performance by the Borrower of the Loan Documents to which each is a party
have been duly authorized by all necessary corporate action and do not and will
not (a) require any consent or approval of, or filing or registration with, any
governmental agency or authority or the stockholders of such corporation; (b)
contravene such corporation's charter or bylaws; (c) result in a breach of or
constitute a default under any agreement or instrument to which such
corporation is a party or by which it or its properties may be bound or
affected; (d) result in, or require, the creation or imposition of any lien
upon or with respect to any of the properties now owned or hereafter acquired
by such corporation; or (e) cause such corporation to be in default under any
law, rule, regulation, order, writ, judgment, injunction, decree, determination
or award applicable to such corporation.
SECTION 5.03. LEGALLY ENFORCEABLE AGREEMENT. This Agreement is, and
each of the other Loan Documents when delivered under this Agreement will be,
legal, valid and binding obligations of the Borrower or Allied, as the case may
be, enforceable against the Borrower or Allied, as the case may be, in
accordance with their respective terms.
SECTION 5.04. FINANCIAL STATEMENTS. The most recent financial
statements of the Borrower which have been furnished to the Bank in connection
with this Agreement are complete and correct and fairly present the financial
condition of the Borrower as at the dates of such statements. Since the dates
of such statements, there has been no material adverse change in the condition
(financial or otherwise), business or operations of the Borrower.
SECTION 5.05. LITIGATION. There is no pending or threatened action or
proceeding against or affecting the Borrower, before any court, governmental
agency or arbitrator, which may, in any one case or in the aggregate,
materially adversely affect the financial condition, operations, properties or
business of the Borrower.
SECTION 5.06. OTHER AGREEMENTS. The Borrower is not a party to any
indenture, loan, or credit agreement, or to any lease or other agreement or
instrument, or subject to any charter or corporate restriction, which has a
material adverse effect on the business, properties, assets, operations, or
conditions, financial or otherwise, of the Borrower, or the ability of the
Borrower to carry out its obligations under the Loan Documents to which it is a
party. The Borrower is not in default in any respect in the performance,
observance, or fulfillment of any of the obligations, covenants, or conditions
contained in any agreement or instrument material to its business to which it
is a party, except in such instances which would not, in any one case or in the
aggregate, materially and adversely affect the financial condition, operations,
properties or business of the Borrower.
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SECTION 5.07. NO DEFAULTS ON OUTSTANDING JUDGMENTS OR ORDERS. The
Borrower has satisfied all judgments and is not in default with respect to any
judgment, writ, injunction, decree, rule, or regulation of any court,
arbitrator, or federal, state, municipal, or other governmental authority,
commission, board, bureau, agency or instrumentality, domestic or foreign.
SECTION 5.08. OWNERSHIP AND LIENS. The Borrower has title to, or
valid leasehold interests in, all of its properties and assets, real and
personal, including the properties and assets and leasehold interests reflected
in the financial statements referred to in Section 5.04 (other than any
properties or assets disposed of in the ordinary course of business), and none
of the properties and assets owned by the Borrower and none of its leasehold
interests is subject to any Lien, except such as may be permitted pursuant to
Section 7.01 of this Agreement.
SECTION 5.09. OPERATION OF BUSINESS. The Borrower possesses all
licenses, permits, franchises, patents, copyrights, trademarks, and trade
names, or rights thereto, to conduct its respective businesses substantially as
now conducted and as presently proposed to be conducted, and is not in
violation of any valid rights of others with respect to any of the foregoing,
except in such instances which would not, in any one case or in the aggregate,
materially and adversely affect the financial condition, operations, properties
or business of the Borrower.
SECTION 5.10. TAXES. The Borrower has filed all tax returns (federal,
state, and local) required to be filed and has paid all taxes, assessments, and
governmental charges and levies thereon to be due, including interest and
penalties.
SECTION 5.11. ENVIRONMENT. The Borrower has not received notice of,
nor knows of, or suspects facts which might constitute, any violations of any
federal, state, or local environmental, health, or safety laws, codes or
ordinances, and any rules or regulations promulgated thereunder with respect to
its businesses, operations, assets, equipment, property, leaseholds, or other
facilities.
ARTICLE 6
AFFIRMATIVE COVENANTS
The Borrower covenants and agrees that:
SECTION 6.01. MAINTENANCE OF EXISTENCE. The Borrower will preserve and
maintain, its corporate existence and good standing in the jurisdiction of its
incorporation, and qualify and remain qualified as a foreign corporation in
each jurisdiction in which such qualification is required, except if the
failure to so qualify would have, in any one case or in the aggregate, a
material and adverse effect on the financial condition, operations, properties
or business of the Borrower.
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SECTION 6.02. COMPLIANCE WITH RELATED AGREEMENTS. The Borrower shall
comply with the terms of each S.B.A. Authorization and Debenture Guaranty which
relates to an Eligible Third-Party Loan.
SECTION 6.03. RIGHT OF INSPECTION. At any reasonable time and from
time to time, the Borrower will permit the Bank or any agent or representative
of the Bank to audit and verify the Collateral, examine and make copies of and
abstracts from the records and books of account of, and visit the properties
of, the Borrower, and to discuss the affairs, finances and accounts of the
Borrower with any of its officers and directors and the Borrower's independent
accountants.
SECTION 6.04. MAINTENANCE OF RECORDS. The Borrower will keep adequate
records and books of account, in which complete entries will be made in
accordance with GAAP, reflecting all financial transactions of the Borrower.
The principal records and books of account, including these concerning the
Collateral, shall be kept at the chief executive office of the Borrower's
investment advisor at 1666 K Street, N.W., 9th Floor, Washington, D.C. 20006.
The Borrower will not move such records and books of account or change such
chief executive office or the name under which it does business without (a)
giving the Bank at least 30 days' prior written notice, and (b) executing and
delivering financing statements satisfactory to the Bank prior to such move or
change.
SECTION 6.05. MAINTENANCE OF PROPERTIES. The Borrower will maintain,
keep, and preserve all of its properties (tangible and intangible) necessary or
useful in the proper conduct of its business in good working order and
condition, ordinary wear and tear excepted.
SECTION 6.06. CONDUCT OF BUSINESS. The Borrower will continue to
engage in an efficient and economical manner in a business of the same general
type as conducted by it on the date of this Agreement.
SECTION 6.07. COMPLIANCE WITH LAWS. The Borrower will comply in all
respects with all applicable laws, rules, regulations and orders (including,
without limitation, the Employee Retirement Income Security Act, as amended
from time to time), such compliance to include, without limitation, paying,
before the same become delinquent, all duly imposed taxes, assessments and
governmental charges imposed upon it or upon its property.
SECTION 6.08. MAINTENANCE OF INSURANCE. The Borrower will maintain
insurance with financially sound and reputable insurance companies or
associations in such amounts and covering such risks as are usually carried by
companies engaged in the same or a similar business and similarly situated.
SECTION 6.09. REPORTING REQUIREMENTS. The Borrower will furnish to the
Bank:
(a) QUARTERLY FINANCIAL STATEMENTS. As soon as available and, in any
event, within 45 days after the end of each of the quarters of each fiscal year
of the Borrower (i) unaudited consolidated financial statements consisting of a
balance sheet of the Borrower,
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as of the end of such quarter and statements of operations, changes in net
assets, and cash flows of the Borrower for the period commencing at the end of
the previous fiscal year and ending with the end of such quarter, all in
reasonable detail and stating in comparative form the respective consolidated
figures for the corresponding date and period in the previous fiscal year and
all prepared in accordance with GAAP, and (ii) a certificate detailing a
calculation of each of the ratios and amounts referred to in the financial
covenants of the Borrower set forth in Article 8 hereof. Such financial
statements and certificate shall be certified to be accurate by the chief
financial officer of the Borrower (subject to year-end adjustments);
(b) ANNUAL FINANCIAL STATEMENTS. As soon as available and, in any
event, within 120 days after the end of each fiscal year of the Borrower
audited consolidated financial statements consisting of a balance sheet of the
Borrower as of the end of such fiscal year, statements of operations, changes
in net assets, and cash flows of the Borrower for such fiscal year, all in
reasonable detail and stating in comparative form the respective consolidated
figures for the corresponding date and period in the prior fiscal year and all
prepared in accordance with GAAP. The consolidated financial statements shall
be accompanied by an opinion thereon acceptable to the Bank of an independent
certified public accounting firm selected by the Borrower and acceptable to the
Bank;
(c) QUARTERLY BORROWING BASE COMPLIANCE CERTIFICATE. As soon as
available and, in any event, within 45 days after the end of each of the
quarters of each fiscal year of the Borrower, a Borrowing Base Application and
Compliance Certificate as of the end of such quarter;
(d) MANAGEMENT LETTERS. Promptly upon receipt thereof, copies of any
reports submitted to the Borrower by independent certified public accountants
in connection with an audit of the financial statements of the Borrower made by
such accountants;
(e) NOTICE OF LITIGATION. Promptly after the commencement thereof,
notice of all actions, suits and proceedings before any court or governmental
department, commission, board, bureau, agency or instrumentality, domestic or
foreign, affecting the Borrower, which, if determined adversely to the Borrower
could have a material adverse effect on the financial condition, properties or
operations of the Borrower;
(f) NOTICE OF DEFAULTS AND EVENTS OF DEFAULT. As soon as possible and,
in any event, within 15 days after the occurrence of each Default and Event of
Default, a written notice setting forth the details of such Default or Event of
Default and the action which is proposed to be taken by the Borrower with
respect thereto;
(g) PROXY STATEMENTS, ETC. Promptly after the sending or filing
thereof, copies of all proxy statements, financial statements and reports which
the Borrower sends to its stockholders, and copies of all regular, periodic and
special reports, and all material registration statements which the Borrower
files with the Securities and Exchange Commission or any governmental authority
which may be substituted therefor, or with any national securities exchange;
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(h) GENERAL INFORMATION. Such other information respecting the
condition or operations, financial or otherwise, of the Borrower or any
Affiliate as the Bank may from time to time reasonably request;
(i) OPINION ON ASSIGNMENTS. In the event that the Bank determines in
good faith that it is necessary or advisable to obtain a legal opinion on the
effectiveness or priority of any assignment or transfer of a deed of trust or
mortgage securing any Eligible Third-Party Loan or the procedures necessary or
advisable to assure the effectiveness or priority of an assignment or transfer
of deeds of trust or mortgages in jurisdictions where the collateral for an
Eligible Third-Party Loan is located, Borrower shall obtain such an opinion
addressed to the Bank from counsel acceptable to Bank within 15 days of its
receipt of a request to do so.
SECTION 6.10. ENVIRONMENT. The Borrower will be and remain in
compliance with the provisions of all federal, state, and local environmental,
health, and safety laws, codes and ordinances, and all rules and regulations
issued thereunder.
SECTION 6.11. INVESTMENT ADVISER. Allied Capital Advisers, Inc. will
remain the investment adviser for Allied.
ARTICLE 7
NEGATIVE COVENANTS
The Borrower agrees that, without first obtaining the prior written consent of
the Bank:
SECTION 7.01. LIENS. The Borrower will not create, incur, assume or
permit to exist any Lien upon or with respect to any of its properties or
assets, now owned or hereafter acquired, except: (a) Liens in favor of the
Bank; (b) Liens which are incidental to the conduct of the business of the
Borrower, are not incurred in connection with the obtaining of credit and do
not materially impair the value or use of assets of the Borrower; (c) Liens on
equipment in existence on the date of this Agreement and disclosed in writing
to the Bank, and (d) Liens on promissory notes owned by Borrower which are
pledged as collateral for loans or advance of funds to the Borrower by the
pledge of such note contemporaneously with the loan by Borrower represented by
such note.
SECTION 7.02. INDEBTEDNESS. The Borrower will not create, incur,
assume or permit to exist any Indebtedness except (a) the Obligations; (b)
Indebtedness in existence on the date of this Agreement; (c) Indebtedness of
the Borrower subordinated to the Obligations on terms satisfactory to the Bank;
(d) ordinary trade accounts payable; and (e) Indebtedness of Borrower not to
exceed $40,000,000 secured by a pledge of a Promissory Note or other Lien which
is permitted by Section 7.01 (d) of this Agreement.
SECTION 7.03. MERGERS, ETC. The Borrower will not merge or consolidate
with any Person and will not acquire or form any Subsidiary.
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SECTION 7.04. SALE AND LEASEBACK. The Borrower will not sell, transfer
or otherwise dispose of any real or personal property to any Person and
thereafter, in connection therewith, directly or indirectly, lease back the
same or similar property.
SECTION 7.05. SALE OF ASSETS. The Borrower will not sell, lease,
assign, transfer or otherwise dispose of any of its now owned or hereafter
acquired assets except: (a) for assets disposed of in the ordinary course of
business and (b) the sale or other disposition of assets no longer used or
useful in the conduct of its business; provided that nothing herein shall be
construed as prohibiting the sale or other transfer of any promissory note held
by Borrower which is not at the time of such sale included in the Collateral.
SECTION 7.06. GUARANTIES, ETC. The Borrower will not assume,
guarantee, endorse or otherwise be or become directly or contingently
responsible or liable (including, but not limited to, any liability arising out
of any agreement to purchase any obligation, stock, assets, goods or services,
or to supply or advance any funds, assets, goods or services, or to maintain or
cause any Person to maintain a minimum working capital or net worth or
otherwise to assure the creditors of any Person against loss) for obligations
of any Person, or permit any such guaranties or liabilities to exist, except
guaranties by endorsement of negotiable instruments for deposit or collection
or similar transactions in the ordinary course of business.
SECTION 7.07. ACQUISITIONS. The Borrower will not purchase or acquire
(a) all or substantially all of the assets of any Person, or (b) any capital
stock of or ownership interest in any other Person.
SECTION 7.08. TRANSACTIONS WITH AFFILIATES. The Borrower will not
enter into any transaction, including, without limitation, the purchase, sale
or exchange of property or the rendering of any service, with any Affiliate,
except in the ordinary course of and pursuant to the reasonable requirements of
the Borrower's business and upon fair and reasonable terms no less favorable to
the Borrower than would be applicable in a comparable arm's-length transaction
with a Person not an Affiliate (provided that the investment advisory agreement
between Allied and Allied Capital Advisers, Inc. shall not be deemed to violate
this provision).
ARTICLE 8
FINANCIAL COVENANTS
So long as the Note shall remain unpaid or the Bank shall have any
Commitment under this Agreement:
SECTION 8.01. MAXIMUM LEVERAGE RATIOS. Borrower will cause Allied to
maintain at all times a ratio of its Consolidated Total Liabilities to its
Consolidated Shareholders' Equity of not greater than 1.75 to 1. Borrower will
maintain at all times a ratio of its Total Liabilities to its Shareholders'
Equity of not greater than 1 to 1.
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SECTION 8.02. CONSOLIDATED MINIMUM INTEREST COVERAGE RATIO. Borrower
will cause Allied to maintain at all times a ratio of its Consolidated Adjusted
EBITDA to its Consolidated Total Interest Expense of not less than 1.5 to 1 for
the previous four quarters as of the end of each calendar quarter.
SECTION 8.03. CONSOLIDATED PRO FORMA DEBT SERVICE RATIO. Borrower
will cause Allied to maintain at all times a ratio of its Consolidated Adjusted
EBITDA for the previous four quarters to its Consolidated Pro Forma Debt
Service of not less than 1.25 to 1 as of the end of each calendar quarter.
ARTICLE 9
DEFAULT
SECTION 9.01. EVENTS OF DEFAULT. Each of the following shall
constitute an Event of Default under this Agreement:
(a) Failure of the Borrower to pay any Obligation to the Bank,
including, without limitation, the principal of or interest on the Note or any
of the Loans, when the same shall become due and payable, whether at maturity,
as a result of the Bank's demand for payment or otherwise, and such failure
shall continue for a period of 5 days; or
(b) If the Borrower refuses to permit the Bank to inspect, examine,
verify or audit the Collateral in accordance with the provisions of this
Agreement; or
(c) Failure of the Borrower to perform or observe any covenant set
forth in this Agreement (except any such failure resulting in the occurrence of
another Event of Default described in this section), or to perform or observe
any other term, condition, covenant, warranty, agreement or other provision
contained in this Agreement within 30 days after receipt of notice from the
Bank specifying such failure; or
(d) Discovery that any representation or warranty by the Borrower in
this Agreement or any statement or representation made in any certificate,
report or opinion delivered pursuant to this Agreement or in connection with
any Loan under this Agreement was materially untrue in any material respect
provided, however, the Bank shall take no action based on a default under this
paragraph unless the Borrower shall have been provided a reasonable opportunity
to render such misrepresentation or untruth immaterial; or
(e) If, as a result of default, any other obligation of the Borrower
or Allied on a consolidated basis for the payment of any debt in excess of
$500,000 becomes or is declared to be due and payable prior to the expressed
maturity thereof, unless and to the extent that the declaration is being
contested in good faith in a court of appropriate jurisdiction; or
(f) The Borrower makes an assignment for the benefit of creditors,
files a petition in bankruptcy, petitions or applies to any tribunal for any
receiver or any trustee of the Borrower
16
<PAGE> 17
or any substantial part of its property, or commences any proceeding relating
to the Borrower under any reorganization, arrangement, readjustments of debt,
dissolution or liquidation law or statute of any jurisdiction, whether now or
hereafter in effect; or
(g) If, within 30 days after the filing of a bankruptcy petition or
the commencement of any proceeding against the Borrower seeking any
reorganization, arrangement, composition, readjustment, liquidation,
dissolution or similar relief under any present or future statute, law or
regulation, the proceeding shall not have been dismissed, or, if, within 30
days after the appointment, without the consent or acquiescence of the
Borrower, of any trustee, receiver or liquidator of the Borrower or of all or
any substantial part of the properties of the Borrower, the appointment shall
not have been vacated; or
(h) Any judgment against the Borrower or Allied on a consolidated
basis in excess of $250,000 or any attachment in excess of $250,000 against any
property of the Borrower or Allied on a consolidated basis that remains unpaid,
undischarged, unbonded or undismissed for a period of 30 days, unless and to
the extent that the judgment or attachment is appealed in good faith in a court
of higher jurisdiction and the appeal remains pending; or
(i) The occurrence of an event of default (and the expiration of any
applicable cure period) under any other Loan Document.
SECTION 9.02. REMEDIES UPON DEFAULT. Upon the occurrence of an Event
of Default, the following provisions shall be applicable:
(a) The Bank may, at its option, terminate its obligation to make
Loans under this Agreement and declare all Obligations, whether incurred prior
to, contemporaneous with or subsequent to the date of this Agreement, and
whether represented in writing or otherwise, immediately due and payable and
may exercise all of it rights and remedies against the Borrower and any
Collateral.
(b) The Bank may foreclose its lien and security interest in the
Collateral in any way permitted by law, and shall have, without limitation, the
remedies of a secured party under the UCC. The Bank may enter the Borrower's
premises without legal process but upon prior notice during business hours and
without incurring liability to the Borrower and remove the Collateral to such
place or places as the Bank may deem advisable, or the Bank may require the
Borrower to assemble the collateral and make the Collateral available to the
Bank at a convenient place and, with or without having the Collateral at the
time or place of sale, the Bank may sell or otherwise dispose of all or any
part of the Collateral whether in its then condition or after further
preparation or processing, either at public or private sale or at any broker's
board, in lots or in bulk, for cash or for credit, at any time or place, in one
or more sales and upon such terms and conditions as the Bank may elect. The
Bank shall give not less than 30 Business Days' prior written notice to the
Borrower of the time and place of any public sale of the Collateral or the time
after which the Collateral may be sold in a private sale, which the Borrower
agrees constitutes commercially reasonable notice. At any such sale the Bank
may be the purchaser, subject to the applicable provisions of the UCC.
17
<PAGE> 18
(c) Communicate with and notify any party obligated under an Eligible
Third-Party Loan of Borrower's assignments hereunder, and note any such
assignment on Borrower's records; and
(d) Take over the exclusive right to collect the Collateral at the
sole expense of the Borrower, without any obligation to preserve rights against
prior parties. For any acts done or not done incident to such collection or
liquidation, the Bank shall not be liable in any manner. The Bank shall have
the right to settle, compromise, or adjust Collateral and the claims or rights
of Borrower thereunder and accept return of the real estate involved, and in
turn sell and dispose of all said real estate without notice to or approval of
Borrower. The Bank may employ agents and attorneys to collect or liquidate any
Collateral, and the Bank shall not be liable for such Collateral or defaults of
any such agents and attorneys; and
(e) Open any mail addressed to Borrower in connection with any
Collateral or any Loan hereunder, and as attorney in fact for Borrower, sign
the Borrower's name to any receipts, checks, notes, agreements, assignments or
other instruments or letters, in order to collect, sell or liquidate the
Collateral; and
(f) The proceeds from any sale of the Collateral by the Bank shall
first be applied to any costs and expenses in securing possession of the
Collateral and to any expenses in connection with the sale. The net proceeds
will be applied toward the payment of the Obligations. Application of the net
proceeds as to particular Obligations or as to principal or interest shall be
in the Bank's absolute discretion. Any deficiency will be paid to the Bank
forthwith upon demand, and any surplus will be paid to the Borrower if the
Borrower is not otherwise indebted to the Bank.
(g) To the extent that the Obligations are now or hereafter secured by
property other than the Collateral described herein or by the guarantee,
endorsement or property of any other Person, the Bank shall have the right to
proceed against such other property, guarantee or endorsement upon the
occurrence of an Event of Default, and the Bank shall have the right, in its
sole discretion, to determine which rights, security, liens, security interests
or remedies the Bank shall at any time pursue, relinquish, subordinate, modify
or take any other action with respect thereto, without in any way modifying or
affecting any of them or any of the Bank's rights hereunder.
(h) The Bank is hereby authorized at any time or from time to time,
without notice to the Borrower (any such notice being expressly waived by the
Borrower), to setoff and apply any deposit (general or special, time or demand,
provisional or final) at any time held, including any certificate of deposit,
and other indebtedness at any time owed by the Bank, whether or not any such
deposit or indebtedness is then due, to or for the credit of account of the
Borrower against any and all of the Obligations.
(i) THE BORROWER, HAVING KNOWLEDGE THAT IT MAY BE ENTITLED TO NOTICE
AND A HEARING PRIOR TO REPOSSESSION OF THE COLLATERAL, WAIVES ANY RIGHT THAT IT
MAY HAVE UNDER EXISTING OR FUTURE LAW TO ANY HEARING
18
<PAGE> 19
THAT MAY BE HELD RELATING TO FORECLOSURE OR ANY OTHER SUCH ACTS, AND TO ANY
NOTICE THAT MAY BE REQUIRED TO BE GIVEN BY THE Bank PRIOR TO SUCH HEARING. THE
BORROWER EXPRESSLY WAIVES ITS RIGHT TO A TRIAL BY JURY WITH RESPECT TO ANY
LITIGATION RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT.
(j) The Bank may itself perform or comply, or otherwise cause
performance or compliance, with the obligations of the Borrower contained in
this Agreement, including, without limitation, the obligations of the Borrower
to defend and insure the Collateral. The reasonable expenses of the Bank
incurred in connection with such performance or compliance shall be payable by
the Borrower to the Bank on demand and shall constitute Obligations.
ARTICLE 10
MISCELLANEOUS
SECTION 10.01. COLLECTION COSTS. The Borrower shall pay all of the
reasonable costs and expenses incurred by the Bank in connection with the
enforcement of this Agreement and the other Loan Documents, including, without
limitation, reasonable attorneys' fees and expenses.
SECTION 10.02. MODIFICATION AND WAIVER. Except for the other documents
expressly referred to in this Agreement, this Agreement contains the entire
agreement between the parties and supersedes all prior agreements between the
Bank and the Borrower concerning the line of credit and the Loans hereunder.
No modification or waiver of any provision of the Note or this Agreement and no
consent by the Bank to any departure therefrom by the Borrower shall be
effective unless such modification or waiver shall be in writing and signed by
an officer of the Bank with a title of vice president or any higher office, and
the same shall then be effective only for the period and on the conditions and
for the specific instances and purposes specified in such writing. No notice
to or demand on the Borrower in any case shall entitle the Borrower to any
other or further notice or demand in similar or other circumstances. No
failure or delay by the Bank in exercising any right, power or privilege
hereunder shall operate as a waiver thereof; nor shall any single or partial
exercise thereof preclude any other or further exercise thereof or the exercise
of any other right, power or privilege. The rights and remedies of the Bank
contained in this Agreement are cumulative and not exclusive of any rights or
remedies otherwise provided by law.
SECTION 10.03. NOTICES. All notices, requests, demands or other
communications provided for in this Agreement shall be in writing and shall be
delivered by hand, sent prepaid by Federal Express (or a comparable overnight
delivery service) or sent by the United States mail, certified, postage
prepaid, return receipt requested, to the Bank, at 808 17th Street, N.W.,
Washington, D.C. 20006 Attention: Commercial Lending, or to the Borrower at
1666 K Street, N.W., 9th Floor, Washington, D.C. 20006, Attention: Chief
Financial Officer. Any notice, request, demand or other communication
delivered or sent in the foregoing manner
19
<PAGE> 20
shall be deemed given or made (as the case may be) upon the earliest of (a) the
date it is actually received, (b) on the business day after the day on which it
is properly delivered to Federal Express (or a comparable overnight delivery
service), or (c) on the third business day after the day on which it is
deposited in the United States mail. The Borrower or the Bank may change its
address by notifying the other party of the new address in any manner permitted
by this Section.
SECTION 10.04. CAPTIONS. The captions of the various sections and
paragraphs of this Agreement have been inserted only for the purposes of
convenience; such captions are not a part of this Agreement and shall not be
deemed in any manner to modify, explain, enlarge or restrict any of the
provisions of this Agreement.
SECTION 10.05. SURVIVAL OF AGREEMENTS. All agreements, representations
and warranties made herein shall survive the delivery of this Agreement and the
making and renewal of the Loans hereunder.
SECTION 10.06. FEES AND EXPENSES. Whether or not any Loans are made
hereunder, the Borrower shall pay on demand all reasonable out-of-pocket costs
and expenses incurred by the Bank in connection with the preparation,
negotiation, execution, delivery, filing, recording and administration of any
of the documents and instruments executed or delivered in connection herewith,
including, without limitation, the reasonable fees and expenses of counsel to
the Bank (including, the reasonable fees of salaried counsel employed by the
Bank or its affiliates), and local counsel who may be retained by the Bank,
with respect to such documents and any amendments thereof or of this Agreement
and any amendment hereof and with respect to advising the Bank as to its rights
and responsibilities hereunder or thereunder, provided, however, that the Bank
shall use its reasonable efforts to notify the Borrower prior to incurring any
costs or expenses chargeable to Borrower under this section, unless the Bank
shall have determined in good faith, but at its sole and unfettered discretion,
that a delay or such notice may impair or adversely impact the rights,
remedies, claims or other interest of the Bank or the collectibility of the
Loans.
SECTION 10.07. USE OF DEFINED TERMS. All terms defined in this
Agreement shall have the defined meanings when used in certificates, reports or
other documents made or delivered pursuant to this Agreement, unless the
context shall otherwise require.
SECTION 10.08. SUCCESSORS AND ASSIGNS. This Agreement shall inure to
the benefit of and bind the respective parties hereto and their successors and
assigns; provided, however, that the Borrower may not assign its rights
hereunder without the prior written consent of the Bank.
SECTION 10.09. INTERPRETATION. This Agreement and the rights and
obligations of the parties hereunder shall be construed and interpreted in
accordance with the laws of the District of Columbia, without reference to
conflicts of law principles.
20
<PAGE> 21
IN WITNESS WHEREOF, the Borrower and the Bank have caused this
Agreement to be signed by their duly authorized representatives all as of the
day and year first above written.
ALLIED CAPITAL CREDIT CORPORATION RIGGS BANK N.A.
a Maryland corporation a national banking association
By: /s/ Katherine C. Marien BY: /s/ David H. Olson
----------------------------- ----------------------------------
Name: Katherine C. Marien Name: David H. Olson
Title: President ----------------------------------
Title: Vice President
----------------------------------
21
<PAGE> 22
EXHIBIT "A"
BORROWING BASE APPLICATION AND COMPLIANCE CERTIFICATE
TO Riggs Bank N.A.
FROM: Allied Capital Credit Corporation ("Borrower")
DATE: , 199
-------------------------- ---
RE: Line of Credit, Security and Pledge Agreement
This is a (check one)
( ) Borrowing application delivered to you pursuant to
----- the above Agreement as a condition precedent to an
advance to Borrower under the Agreement
( ) Borrowing compliance certificate delivered to you
----- pursuant to the Agreement as a certification as of
the quarter ending _______________________________.
All capitalized terms used herein shall have the meaning as defined in the
Agreement. All Third-Party Loans referred to below are Eligible Third-Party
Loans.
1. First Mortgage 504 Loans (non-construction)
A. Aggregate principal amount $
----------------------
B. Advance rate 80%
C. Available Loan(s) against above $
----------------------
II. Second Mortgage 504 Loans (non-construction)
A. Aggregate principal amount $
----------------------
B. Advance Rate 90%
C. Available Loan(s) against above $
----------------------
22
<PAGE> 23
III. Companion Loans (non-construction)
A. Aggregate principal amount $
------------
B. Advance Rate 80%
C. Available Loan(s) against above $
------------
III. Construction Loans
A. Aggregate principal amount $
------------
B. Advance Rate 50%
C. Available Loan(s) against above $
(not to exceed $7,500,000) ------------
IV. Total Availability (sum of above) $
------------
Total outstanding amount of Loans $
------------
Excess availability or (overdraw) $
------------
Loan advance request (use for
Loan application only) $
------------
The undersigned hereby certifies that as of the date hereof, the
representations and warranties contained in the Agreement or in any other Loan
Document or otherwise made in writing in connection therewith or herewith are
true and correct in all material respects, and no Default or Event of Default
has occurred and is continuing. If this instrument is a Loan application, the
undersigned, further certifies that all conditions precedent to the advance
being requested hereby have been satisfied.
Allied Capital Credit Corporation, a Maryland corporation
By:
--------------------------------------------
Name:
--------------------------------------------
Title:
--------------------------------------------
23
<PAGE> 1
FIRST AMENDMENT TO LINE OF CREDIT,
SECURITY AND PLEDGE AGREEMENT
This First Amendment to Line of Credit, Security and Pledge Agreement
("Amendment") dated as of March 19, 1997 is entered into by ALLIED CAPITAL
CREDIT CORPORATION ("Allied Credit"), ALLIED CAPITAL LENDING CORPORATION
("Allied") and RIGGS BANK N.A. (the "Lender").
WHEREAS, Allied Credit and the Lender entered into that certain Line
of Credit, Security and Pledge Agreement dated January 1, 1997 (the
"Agreement"); and
WHEREAS, Allied Credit and Allied have requested that Lender release
Allied as Guarantor in exchange for Allied becoming a co-borrower under the
Agreement, and modify certain financial covenants of Allied Credit and Allied
accordingly under the Agreement; and
WHEREAS, the parties wish to amend the Agreement as provided herein to
evidence the foregoing;
WHEREAS, capitalized terms not otherwise defined herein shall be used
herein as defined in the Agreement.
NOW THEREFORE, the Lender, Allied Credit and Allied agree as follows:
1. The Agreement is hereby amended by deleting the definition of
"Guarantor" and all references to Guarantor. Lender hereby releases Allied
from its Unconditional Guaranty dated January 1, 1997 relating to the Loan.
2. Allied hereby agrees to assume and become liable for all of the
obligations of Borrower under the Agreement, and the term "Borrower" under the
Agreement shall hereafter mean and refer to Allied Credit and Allied,
individually or collectively as the context may require, and where used
collectively, the obligations of Allied Credit and Allied shall be joint and
several.
3. The Agreement is hereby amended by deleting Section 8.01 in its
entirety and substituting the following in its place:
SECTION 8.01. MAXIMUM LEVERAGE RATIOS. Allied will maintain
at all times a ratio of its Consolidated Total Liabilities to its
Consolidated Shareholders' Equity of not greater than 1.75 to 1.
Allied Credit will maintain at all times a ratio of its Total
Liabilities to its Shareholders' Equity of not greater than 1 to 1.
4. The Agreement is hereby amended by deleting Section 8.02 in its
entirety and substituting the following in its place:
SECTION 8.02. CONSOLIDATED MINIMUM INTEREST COVERAGE RATIO.
Allied will maintain at all times a ratio of its Consolidated Adjusted
EBITDA to its Consolidated Total Interest Expense of not less than 1.5
to 1 for the previous four quarters as of the end of each calendar
quarter.
1
<PAGE> 2
5. The Agreement is hereby amended by deleting Section 8.03 in its
entirety and substituting the following in its place:
SECTION 8.03. CONSOLIDATED PRO FORMA DEBT SERVICE RATIO.
Allied will maintain at all times a ratio of its Consolidated Adjusted
EBITDA for the previous four quarters to its Consolidated Pro Forma
Debt Service of not less than 1.25 to 1 as of the end of each calendar
quarter.
6. Borrower hereby reaffirms the Agreement as amended hereby and
agrees that in all respects except as explicitly modified by the terms of this
Amendment that the Agreement shall remain in full force and effect.
7. In consideration of the Amendment contained herein, Borrower
represents, warrants and agrees that (i) there are no claims, defenses or
set-offs with respect to the Agreement, any Loan or any Note, or with respect
to the indebtedness evidenced or secured thereby or with respect to the
collection or enforcement of any of them or with respect to the collateral,
(and to the extent any claim, set-off or defense exists they are each hereby
waived and relinquished in their entirety), (ii) no Event of Default, as
defined in the Agreement, the Note or any other Loan Document, and no event
which with the lapse of time or the giving of notice or both would constitute
such an Event of Default, has occurred; (iii) Lender has made no
representations or commitments, oral or written, or undertaken any obligations
other than as expressly set forth in the Agreement, the Loan Documents and this
Amendment, (iv) except as otherwise previously disclosed in writing to the
Lender, each of the representations and warranties contained in the Agreement
are true and correct as of the date hereof and shall be deemed to be restated
and remade as of the date of this Amendment as if set out herein in their
entirety; and (v) the making, delivery and performance by the Borrower of this
Amendment and all instruments, documents and notes executed contemporaneously
herewith, have been duly authorized by all necessary corporate action, and
constitute the valid and binding obligations of the Borrower enforceable in
accordance with their terms.
8. All capitalized terms not otherwise defined in this Amendment
shall have the meanings ascribed thereto in the Agreement. Each and every of
the terms and provisions of this Amendment shall be binding upon and shall
inure to the benefit of the parties hereto and their respective heirs,
successors, personal representatives and assigns.
BORROWER EXPRESSLY REPRESENTS AND WARRANTS TO HOLDER THAT IT (A) HAS
READ EACH AND EVERY PROVISION OF THIS INSTRUMENT; (B) HAS BEEN GIVEN THE
OPPORTUNITY TO HAVE THIS INSTRUMENT REVIEWED BY COMPETENT LEGAL COUNSEL OF ITS
OWN CHOOSING; AND (C) UNDERSTANDS, AGREES TO AND ACCEPTS THE PROVISIONS HEREOF.
2
<PAGE> 3
IN WITNESS WHEREOF, the Borrower and the Lender have executed this
Amendment as of the date first above written.
ALLIED CAPITAL CREDIT CORPORATION
By: /s/ Katherine C. Marien
----------------------------------
Name: Katherine C. Marien
Title: President
ALLIED CAPITAL LENDING CORPORATION
By: /s/ Katherine C. Marien
----------------------------------
Name: Katherine C. Marien
Title: President
RIGGS BANK N.A.
By: /s/ David H. Olson
----------------------------------
Name: David H. Olson
Title: Vice President
3
<PAGE> 1
Allied Capital Lending Corporation and Subsidiaries
Exhibit 11 Statement of Computation of Earnings Per Share
Form 10-Q
June 30, 1997
<TABLE>
<CAPTION>
For the Three Months Ended For the Six Months Ended
June 30, June 30,
------------------------------- ---------------------------
1997 1996 1997 1996
------------------------------- ---------------------------
<S> <C> <C> <C> <C>
Primary Earnings Per Common Share:
Net Increase in Net Assets Resulting
from Operations $1,739,000 $1,146,000 $3,044,000 $2,476,000
=============================== ============================
Weighted average number of
shares outstanding 5,138,986 4,548,971 5,133,410 4,469,063
Weighted average number of
shares issuable on exercise
of outstanding stock options - - 9,821 -
------------------------------- ---------------------------
Weighted average number of shares and
share equivalents outstanding 5,138,986 4,548,971 5,143,231 4,469,063
=============================== ============================
Earnings per Share $0.34 $0.25 $0.59 $0.55
=============================== ============================
Fully Diluted Earnings Per Common Share:
Net Increase in Net Assets Resulting
from Operations $1,739,000 $1,146,000 $3,044,000 $2,476,000
=============================== ============================
Weighted average number of
shares and share equivalents
outstanding as computed for
primary earnings per share 5,138,986 4,548,971 5,143,231 4,469,063
Weighted average of additional
shares issuable on exercise
of outstanding stock options - - 142 -
------------------------------- ---------------------------
Weighted average of shares and
share equivalents outstanding, as adjusted 5,138,986 4,548,971 5,143,373 4,469,063
=============================== ============================
Earnings per Share $0.34 $0.25 $0.59 $0.55
=============================== ============================
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM ALLIED
CAPITAL LENDING CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET AND
CONSOLIDATED STATEMENTS OF OPERATIONS, CHANGES IN NET ASSETS, AND CASH FLOWS
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FORM 10Q FOR THE QUARTER
ENDED JUNE 30, 1997.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<INVESTMENTS-AT-COST> 56,222
<INVESTMENTS-AT-VALUE> 56,149
<RECEIVABLES> 857
<ASSETS-OTHER> 1,727
<OTHER-ITEMS-ASSETS> 8,251
<TOTAL-ASSETS> 66,984
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 25,008
<TOTAL-LIABILITIES> 25,008
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 42,660
<SHARES-COMMON-STOCK> 5,144
<SHARES-COMMON-PRIOR> 5,127
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (612)
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (73)
<NET-ASSETS> 41,976
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 4,066
<OTHER-INCOME> 1,481
<EXPENSES-NET> 2,289
<NET-INVESTMENT-INCOME> 3,258
<REALIZED-GAINS-CURRENT> (44)
<APPREC-INCREASE-CURRENT> (170)
<NET-CHANGE-FROM-OPS> 3,044
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 3,296
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 7
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 10
<NET-CHANGE-IN-ASSETS> 5
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> (530)
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 858
<INTEREST-EXPENSE> 1,125
<GROSS-EXPENSE> 2,289
<AVERAGE-NET-ASSETS> 41,974
<PER-SHARE-NAV-BEGIN> 8.19
<PER-SHARE-NII> 0.63
<PER-SHARE-GAIN-APPREC> (0.01)
<PER-SHARE-DIVIDEND> 0.64
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 8.16
<EXPENSE-RATIO> 0.06
<AVG-DEBT-OUTSTANDING> 22,923
<AVG-DEBT-PER-SHARE> 4.46
</TABLE>
