-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, CM8jKZwcj1x2uVHRWEhCYQvjCx2dykCQCY7552wowqKKlweJRmQ9cNAED4GqFw2H yXNcxlfzsQbP37kBW3DYdg== 0000950133-96-001126.txt : 19960820 0000950133-96-001126.hdr.sgml : 19960820 ACCESSION NUMBER: 0000950133-96-001126 CONFORMED SUBMISSION TYPE: N-2/A PUBLIC DOCUMENT COUNT: 5 FILED AS OF DATE: 19960710 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: ALLIED CAPITAL LENDING CORP CENTRAL INDEX KEY: 0000003906 STANDARD INDUSTRIAL CLASSIFICATION: STATE OF INCORPORATION: MD FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: N-2/A SEC ACT: 1940 Act SEC FILE NUMBER: 811-02708 FILM NUMBER: 96593143 BUSINESS ADDRESS: STREET 1: 1666 K ST NW STE 901 CITY: WASHINGTON STATE: DC ZIP: 20006 BUSINESS PHONE: 2023311112 MAIL ADDRESS: STREET 2: 1666 K STREET NW CITY: WASHINGTON STATE: DC ZIP: 20006 FORMER COMPANY: FORMER CONFORMED NAME: ALLIED LENDING CORP DATE OF NAME CHANGE: 19920703 POS AMI 1 ALLIED CAPITAL LENDING N-2 (POST-EFFECTIVE NO. 1). 1 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 10, 1996 FILE NO. 333-02185 - - - -------------------------------------------------------------------------------- - - - -------------------------------------------------------------------------------- U.S. SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM N-2 (Check appropriate box or boxes) / / REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 / / PRE-EFFECTIVE AMENDMENT NO. /X/ POST-EFFECTIVE AMENDMENT NO. 1 ALLIED CAPITAL LENDING CORPORATION Exact Name of Registrant as Specified in Charter C/O ALLIED CAPITAL ADVISERS, INC. 1666 K STREET, N.W., 9TH FLOOR WASHINGTON, D.C. 20006-2803 Address of Principal Executive Offices (Number, Street, City, State, Zip Code) (202) 331-1112 Registrant's Telephone Number, Including Area Code DAVID GLADSTONE, CHAIRMAN AND CHIEF EXECUTIVE OFFICER ALLIED CAPITAL ADVISERS, INC. 1666 K STREET, N.W., 9TH FLOOR WASHINGTON, D.C. 20006-2803 Name and Address of Agent For Service (Number, Street, City, State, Zip Code) Copy to: STEVEN B. BOEHM, ESQUIRE SUTHERLAND, ASBILL & BRENNAN 1275 PENNSYLVANIA AVENUE, N.W. WASHINGTON, D.C. 20004-2404 Approximate Date of Proposed Public Offering: As soon as practicable after the effective date of the registration statement. If any securities being registered on this form will be offered on a delayed or continuous basis in reliance on Rule 415 under the Securities Act of 1933, other than securities offered in connection with a dividend reinvestment plan, check the following box: /X/ It is proposed that this filing will become effective (check appropriate box) / / when declared effective pursuant to section 8(c) / / This form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, and the Securities Act registration statement number of the earlier effective registration statement for the same offering is - . CALCULATION OF REGISTRATION FEE UNDER THE SECURITIES ACT OF 1933
- - - ---------------------------------------------------------------------------------------------------------------- PROPOSED MAXIMUM PROPOSED MAXIMUM OFFERING PRICE AGGREGATE TITLE OF SECURITIES AMOUNT BEING PER OFFERING AMOUNT OF BEING REGISTERED REGISTERED SHARE PRICE REGISTRATION FEE - - - ---------------------------------------------------------------------------------------------------------------- Common Stock, $0.0001 par value... 722,410 shares $14.625 (1) $10,565,246.25(1) $ 3,643.19(2) Common Stock, $0.0001 par value... 835 shares $14.5625(3) $ 12,159.69(3) $ 100.00(2) - - - ----------------------------------------------------------------------------------------------------------------
(1) Estimated for purposes of calculating the registration fee pursuant to Rule 457(c) under the Securities Act of 1933, as amended (the "1933 Act"), based on the average of the high and low prices per share on March 28, 1996 on the Nasdaq National Market. (2) Previously paid. (3) Estimated for purposes of calculating the registration fee pursuant to Rule 457(c) and the 1933 Act based on the average of the high and low prices per share on April 23, 1996 on the Nasdaq National Market. The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the registration statement shall become effective on such date as the Commission, acting pursuant to Section 8(a), may determine. - - - -------------------------------------------------------------------------------- - - - -------------------------------------------------------------------------------- 2 CROSS REFERENCE SHEET Pursuant to Rule 495(a) under the Securities Act of 1933 Showing the Location of Information Required by Form N-2 in Part A (Prospectus), Part B (Statement of Additional Information), and Part C (Other Information) of the Registration Statement
ITEM OF FORM N-2 CAPTION OR LOCATION IN PROSPECTUS - - - ------------------------------------------------- ------------------------------------------ PART A: INFORMATION REQUIRED IN A PROSPECTUS 1. Outside Front Cover Outside Front Cover Page; [Supplement] 2. Inside Front and Outside Back Cover Page Outside Front Cover Page 3. Fee Table and Synopsis Summary; Fees and Expenses; Available Information 4. Financial Highlights Financial Highlights; Management's Discussion and Analysis of Financial Condition and Results of Operations 5. Plan of Distribution The Offer; [Supplement] 6. Selling Shareholders (Not Applicable) 7. Use of Proceeds Use of Proceeds 8. General Description of the Registrant The Company; Public Trading and Net Asset Value Information; Financial Statements; [Supplement] 9. Management Management; Custodian, Transfer and Dividend Paying Agent and Registrar 10. Capital Stock, Long-Term Debt, and Other Authorized Classes of Securities; Securities Description of Common Stock; The Company; [Supplement] 11. Defaults and Arrears on Senior Securities (Not Applicable) 12. Legal Proceedings (Not Applicable) 13. Table of Contents of the Statement of Table of Contents of the Statement of Additional Information Additional Information PART B: INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION 14. Cover Page Outside Front Cover Page 15. Table of Contents Table of Contents 16. General Information and History Not Applicable 17. Investment Objective and Policies [Prospectus:] The Company 18. Management Management 19. Control Persons and Principal Holders of Control Persons and Principal Holders of Securities Securities 20. Investment Advisory and Other Services Investment Advisory and Other Services 21. Brokerage Allocation and Other Practices [Prospectus:] The Company 22. Tax Status Tax Status 23. Financial Statements [Prospectus:] Financial Statements PART C: OTHER INFORMATION 24. Financial Statements and Exhibits Financial Statements and Exhibits 25. Marketing Arrangements (Not Applicable) 26. Other Expenses of Issuance and Other Expenses of Issuance and Distribution Distribution 27. Persons Controlled by or Under Common Persons Controlled by or Under Common Control Control 28. Number of Holders of Securities Number of Holders of Securities 29. Indemnification Indemnification 30. Business and Other Connections of Business and Other Connections of Investment Adviser Investment Adviser 31. Location of Accounts and Records Locations of Accounts and Records 32. Management Services Management Services 33. Undertakings Undertakings
3 INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO THE REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE. SUBJECT TO COMPLETION: THE DATE OF ISSUANCE OF THIS PRELIMINARY PROSPECTUS, AS SUPPLEMENTED HEREBY, IS JULY 10, 1996. SUPPLEMENT DATED JULY , 1996, TO PROSPECTUS DATED APRIL 29, 1996 ALLIED CAPITAL LENDING CORPORATION The Company has received from existing stockholders, during the Subscription Period (from May 6, 1996 through June 4, 1996) for the rights offering of the Company's common stock just completed (the "Offer" or "Rights Offering"), subscriptions for 548,887 Shares at a Subscription Price of $13.04 per Share, which was 95% of the average of the last reported sales price of a share of the Company's common stock on the Nasdaq National Market on each of the last five trading days of the Subscription Period. The gross proceeds from the Rights Offering were approximately $7,157,500 before deducting the solicitation fees of approximately $132,000 (equal to 2.50% of the Subscription Price for each Share issued as a result of the soliciting efforts of broker-dealers that have executed and delivered a Soliciting Dealer Agreement to the Company) and before deducting the offering costs payable by the Company. The net proceeds to the Company from the Rights Offering (after deducting the solicitation fees but before deducting the offering costs) were approximately $7,025,500. As disclosed in the prospectus dated April 29, 1996 (the "Prospectus"), the Company reserved the right to offer and sell to Additional Offerees any Shares not subscribed for in the Rights Offering ("unsubscribed-for Shares") (see Prospectus page 16--"Sales of Shares Subsequent to the Offer"). Having exercised its discretion to increase the number of shares offered (see Prospectus page 2) by 15% (i.e., 94,336 Shares in addition to the original 628,909 Shares for an aggregate total of 723,245 Shares), the Company intends now to proceed with a public offering of the total 174,358 unsubscribed-for Shares (the "Public Offering"). Following the completion of the Rights Offering and the subsequent issuance of additional shares of the Company's common stock in connection with the payment of its quarterly dividend (see Prospectus page 26-- "Dividend Reinvestment Plan"), 4,943,163 shares of the Company's common stock were outstanding, 25.2% of which continued to be owned by Allied I. Following the completion of the Public Offering, Allied I's ownership of the Company's common stock is anticipated to represent 24.3% of the Company's shares then outstanding. (See Prospectus page 17--"Organization".) In the Public Offering, the Shares of the Company's common stock are offered by Lehman Brothers Inc. (the "Underwriter"), subject to prior sale, when, as and if delivered to and accepted by the Underwriter, and subject to its right to reject orders in whole or in part. The principal business address of Lehman Brothers Inc. is Three World Financial Center, New York, New York 10285-1900. Lehman Brothers Inc. is a broker-dealer registered under the Securities Exchange Act of 1934 and is a member of the National Association of Securities Dealers, Inc. ("NASD"). The Underwriter has advised the Company that it proposes to offer the Shares to the public at $12.74 per Share. The price to be paid by the public of $12.74 per Share in the Public Offering is $0.30 per Share less than the Subscription Price paid by existing stockholders in the Rights Offering and thereby reflects the cash dividend of that amount paid on June 28, 1996, to stockholders of record as of June 14, 1996. The last sale price for a share of the Company's common stock on Nasdaq on July 9, 1996 was $13.625. There can be no assurance that the Shares will trade subsequent to the Public Offering at or above this price. After the Public Offering of the Shares, the Underwriter may change the price at which the Shares are offered to the public. The Company will allow underwriting discounts of $0.326 per Share, or 2.56% of the offering price, to the Underwriter for sales of Shares in the Public Offering. Accordingly, the "Sales Load (as a percentage of offering price)" set forth under "Fees and Expenses" on Prospectus page 4 is 2.56% in the Public Offering as opposed to 2.50% in the Rights Offering. In the Public Offering, the aggregate Subscription Price, Sales Load, and Proceeds (before deduction of offering costs) to the Company will be $2,221,321, $56,841, and $2,164,480, respectively. Offering costs incurred in connection with both the Rights Offering and the Public Offering are currently estimated to be $272,000. The Underwriter has agreed, subject to the terms and conditions set forth in the underwriting agreement by and among the Company, Advisers, and the Underwriter (the "Underwriting Agreement"), to purchase from the Company, and the Company has agreed to sell to the Underwriter, the 174,358 unsubscribed-for Shares. S-1 4 The Underwriting Agreement provides that the obligations of the Underwriter to purchase the Shares listed above are subject to certain conditions. The Underwriting Agreement also provides that the Underwriter is committed to purchase, and the Company is obligated to sell, all of the unsubscribed-for Shares offered by the Prospectus, as supplemented hereby, if any of the Shares being sold pursuant to the Underwriting Agreement are purchased. The Underwriter has informed the Company that it does not intend to confirm sales to any account over which it exercises discretionary authority. During the Subscription Period, the Underwriter purchased 33,303 shares and sold 40,744 shares in its capacity as a market maker in the Company's common stock. The Company and Advisers, as its investment adviser, have agreed to indemnify the Underwriter against certain liabilities, including liabilities under the Securities Act of 1933, or to contribute to payments that the Underwriter may be required to make in respect thereof. Lehman Brothers Inc., which is acting as Underwriter in the Public Offering, from time to time offers investment banking services to the Company, for which it receives customary compensation. Lehman Brothers Inc. is the lender on the Company's $20 million line of credit expiring September 27, 1996 (see Prospectus page 23). Anthony T. Garcia, a Director of the Company, is Senior Vice President of Lehman Brothers Inc. By letter dated June 7, 1996, the Company has received notification from the SBA that it could proceed with the reorganization described on Prospectus page 17. Exemptive relief being sought from the Commission for the reorganization is still pending. IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER MAY OVER-ALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NASDAQ NATIONAL MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. S-2 5 The Prospectus dated April 29, 1996, which the preceding pages supplement, is incorporated herein by reference from the Prospectus included in Pre-Effective Amendment No. 2 to the Company's registration statement on Form N-2, as filed with the Commission on April 29, 1996 (Accession No. 0000950133-96-000425). 6 PART B INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION 7 INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY ANY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS STATEMENT OF ADDITIONAL INFORMATION DOES NOT CONSTITUTE A PROSPECTUS. SUBJECT TO COMPLETION: THE DATE OF ISSUANCE OF THIS PRELIMINARY STATEMENT OF ADDITIONAL INFORMATION IS JULY 10, 1996. 723,245 SHARES ALLIED CAPITAL LENDING CORPORATION COMMON STOCK ------------------------ STATEMENT OF ADDITIONAL INFORMATION JULY , 1996 This Statement of Additional Information is not a prospectus. It should be read with the prospectus dated April 29, 1996 relating to this offering (the "Prospectus") and the supplement thereto dated July , 1996, which may be obtained by calling the Company at (202) 973-6326 and asking for Investor Relations. Terms not defined herein have the same meaning as given to them in the Prospectus. TABLE OF CONTENTS
PAGE IN THE LOCATION STATEMENT OF RELATED OF ADDITIONAL DISCLOSURE IN INFORMATION THE PROSPECTUS ------------- -------------- CHANGE OF NAME...................................................... B-2 17 MANAGEMENT.......................................................... B-2 24 Directors and Certain Officers.................................... B-2 -- Compensation...................................................... B-5 -- Stock Options..................................................... B-7 -- CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES................. B-7 -- INVESTMENT ADVISORY AND OTHER SERVICES.............................. B-8 -- Investment Advisory Agreement..................................... B-8 24-25 Custodian Services................................................ B-9 27 Accounting Services............................................... B-9 27 TAX STATUS.......................................................... B-10 26
B-1 8 CHANGE OF NAME The Company changed its name from "Allied Lending Corporation" to "Allied Capital Lending Corporation" in September 1993 in anticipation of its initial public offering in November 1993. MANAGEMENT DIRECTORS AND CERTAIN OFFICERS The directors and certain officers of the Company as of July 8, 1996 are listed below together with their respective positions with the Company and a brief statement of their principal occupations during the past five years and any positions held with affiliates of the Company:
POSITION(S) HELD PRINCIPAL OCCUPATION(S) DURING PAST FIVE NAME, ADDRESS(1) AND AGE WITH THE COMPANY (5) YEARS - - - -------------------------- ------------------------- ----------------------------------------- David Gladstone* Chairman of the Board and Employed by Allied Capital Corporation (Age 54) Chief Executive ("Allied I") or Allied Capital Advisers, Officer(2) Inc. ("Advisers") since 1974; Chairman and Chief Executive Officer of Allied I, Allied Capital Corporation II ("Allied II"), Allied Capital Commercial Corporation ("Allied Commercial"), and Advisers; Director, President, and Chief Executive Officer of Business Mortgage Investors, Inc. ("BMI") and Allied Capital Mortgage Corporation ("Allied Mortgage"); Director of The Riggs National Corporation (bank holding company); Trustee of The George Washington University. He has served as a director of the Company since 1976. George C. Williams*(3) Director Employed by Allied I or Advisers from (Age 70) 1959 to July 5, 1996; Director of Allied I, Allied II, Allied Commercial, BMI, Allied Mortgage and Advisers; Vice Chairman of Allied I, Allied II, Allied Commercial, and Advisers until May 1996. Chairman of Allied Mortgage and BMI until May 1996. He has served as a director of the Company since 1976. Katherine C. Marien* Director, President and Employed by Advisers since 1992; (Age 47) Chief Operating Executive Vice President of Allied I, Officer(2) Allied II, Allied Commercial, BMI, Allied Mortgage and Advisers; Executive Vice President of the Company from 1992 to 1994; Financial Consultant with Wilks & Schwartz Broadcasting from 1990 to 1992; Financial Consultant to USA Mobile Communications, Inc. from 1991 to 1992; Senior Vice President of Communications Equity Associates from 1989 to 1991. She has served as a director of the Company since 1995.
B-2 9
POSITION(S) HELD PRINCIPAL OCCUPATION(S) DURING PAST FIVE NAME, ADDRESS(1) AND AGE WITH THE COMPANY (5) YEARS - - - -------------------------- ------------------------- ----------------------------------------- Jon W. Barker Director Associate with Grubb & Ellis (commercial (Age 52) real estate firm) since 1993; Vice President of Shannon & Luchs Company (commercial real estate firm) from 1979 to 1993. He has served as a director of the Company since 1993. Eleanor Deane Bierbower Director(2) Financial consultant since 1992; Managing (Age 39) Partner of Deane Investment Company L.P. since 1992; Chief Credit Officer of Palmer National Bank from 1988 to 1992. She has served as a director of the Company since 1993. Robert V. Fleming II Director(2) Principal of Hoskinson Davis & Fleming (Age 43) (real estate firm) since 1984; Member of the Board of Consultants of Riggs Bank N.A.; Trustee of the National Child Research Center; Member of the Associates Board of National Rehabilitation Hospital. He has served as a director of the Company since 1993. Anthony T. Garcia* Director Senior Vice President of Lehman Brothers (Age 39) Inc.; Director of Allied Commercial. He has served as a director of the Company since 1993. Arthur H. Keeney III Director President, Chief Executive Officer, (Age 52) Chairman of the Executive Committee and Director of The East Carolina Bank since 1995; Vice President and General Manager of The OMG Company (manufacturer of electronic training devices) from 1994 to 1995; Recruiting Consultant with Don Richards and Associates, Inc. (personnel services provider) from 1993 to 1994; Executive Director of the American Foundation for Urologic Disease from 1991 to 1993; Executive Vice President at Signet Bank from 1983 to 1991. He has served as a director of the Company since 1995. Robin B. Martin Director(2) President and Chief Executive Officer of (Age 47) The Deer River Group (broadcasting consulting firm) since 1978. Trustee, Rensselaer Polytechnic Institute since 1986; Chairman Emeritus, The Corcoran Gallery of Art. He has served as a director of the Company since May 1996. G. Cabell Williams III(3) Executive Vice President Employed by Advisers since 1981; (Age 42) Director, Chief Operating Officer and President of Allied I; Executive Vice President of Allied II, Allied Commercial, Advisers, Allied Mortgage and BMI.
B-3 10
POSITION(S) HELD PRINCIPAL OCCUPATION(S) DURING PAST FIVE NAME, ADDRESS(1) AND AGE WITH THE COMPANY (5) YEARS - - - -------------------------- ------------------------- ----------------------------------------- Jon A. DeLuca Executive Vice President, Employed by Advisers since 1994; (Age 33) Treasurer, and Chief Executive Vice President, Treasurer, and Financial Officer Chief Financial Officer of Allied I, Allied II, Allied Commercial, BMI, Allied Mortgage and Advisers. Manager of Entrepreneurial Services at Coopers & Lybrand from 1986 to 1994. Thomas R. Salley Secretary Partner, Andrews & Kurth, L.L.P. since (Age 38) April 1996; Secretary of Allied I, Allied II, Allied Commercial, BMI, Allied Mortgage and Advisers; General Counsel of Allied I, Allied II, Allied Commercial, BMI, Allied Mortgage and Advisers, and employed by Advisers since 1988 or inception to April 1996. Joan M. Sweeney Executive Vice President Employed by Advisers since 1993; (Age 36) President and Chief Operating Officer of Advisers; Executive Vice President of Allied I, Allied II, Allied Commercial, Allied Mortgage and BMI; Senior Manager at Ernst & Young from 1990 to 1993.
- - - --------------- * These directors are "interested persons" as defined in the 1940 Act. (1) Unless otherwise indicated, the address of directors and officers of the Company is 1666 K Street, N.W., 9th Floor, Washington, DC 20006-2803. (2) Member of the Executive Committee, which is intended, during intervals between meetings of the Board of Directors, to exercise all powers of the Board in the management and direction of the business and affairs of the Company, except where action by the Board is required by applicable law. (3) George C. Williams is the father of G. Cabell Williams III. B-4 11 COMPENSATION The Company has no employees and does not pay any cash compensation to any of its officers, other than directors' fees to those of its officers who are also directors. All of the Company's officers are employed by Advisers, the Company's investment adviser, which pays their cash compensation. The Company, from time to time, grants stock options to its officers under the Company's Stock Option Plan. During 1995, each director received a fee of $1,000 for each meeting of the Board of Directors of the Company or each separate committee meeting attended and $500 for each committee meeting held on the same day as a Board meeting. The same fees will be paid in 1996. In addition, on December 26, 1995 each non-officer director (Ms. Bierbower and Messrs. Barker, Fleming, Garcia, Frank L. Langhammer and Keeney) received a one-time grant of options to purchase 10,000 shares of the Company's common stock at $15.00 per share pursuant to the Company's Stock Option Plan. On May 13, 1996 Mr. Martin, a non-officer director first elected to the Board in May 1996, similarly received a one-time grant of options to purchase 10,000 shares of the Company's common stock at $15.00 per share. The exercise price of those grants was the minimum provided under the Company's Stock Option Plan. Mr. Langhammer's unvested options to purchase 6,667 shares were cancelled by their terms when he stepped down as a director in May 1996; his vested options to purchase 3,333 shares will expire unless exercised by July 12, 1996. The following table sets forth certain details of compensation paid to directors during 1995, as well as compensation paid for serving as a director of the two other investment companies to which the Company may be deemed related. COMPENSATION TABLE
PENSION OR ESTIMATED TOTAL COMPENSATION AGGREGATE RETIREMENT BENEFITS ANNUAL FROM COMPANY AND COMPENSATION FROM ACCRUED AS PART OF BENEFITS UPON RELATED COMPANIES NAME AND POSITION THE COMPANY(1) COMPANY EXPENSES RETIREMENT PAID TO DIRECTORS(2) - - - -------------------------------- ----------------- ------------------- ------------- -------------------- David Gladstone................. $ 9,000 $ 0 $ 0 $ 25,000 Chairman of the Board and Chief Executive Officer George C. Williams.............. 9,000 0 0 24,000 Vice Chairman of the Board(3) Katherine C. Marien............. 4,000 0 0 4,000 Director, President and Chief Operating Officer Jon W. Barker................... 10,000 0 0 10,000 Director Eleanor Deane Bierbower......... 8,000 0 0 8,000 Director Robert V. Fleming II............ 10,000 0 0 10,000 Director Anthony T. Garcia............... 7,000 0 0 7,000 Director Frank L. Langhammer............. 9,000 0 0 9,000 Director(4) Arthur H. Keeney III............ 7,000 0 0 7,000 Director
- - - --------------- (1) Consists only of directors' fees. (2) Comprised solely of amounts paid as compensation to directors by the Company, Allied I and Allied II. (3) George C. Williams resigned as Vice Chairman, effective May 1996, but remains a director of the Company. (4) Frank L. Langhammer, a former director of the Company, did not stand for re-election to the Board in May 1996. B-5 12 SUMMARY COMPENSATION TABLE Under Commission rules applicable to BDCs, the Company is required to set forth certain information regarding compensation paid from the Company during the last three fiscal years to its Chief Executive Officer and its President and the four other most highly compensated officers of Advisers, who are also officers of the Company. However, the Company has no employees and does not pay any cash compensation to any of its officers (other than directors' fees to those of its officers who are also directors). All of the Company's officers are employed by Advisers, which pays all of their cash compensation. The following chart summarizes the grants of options by the Company to the named executive officers during the past three fiscal years including the securities underlying those options, and any long term incentive plan ("LTIP") payouts.
LONG-TERM COMPENSATION -------------------------------------------- AWARDS ---------------------------- SECURITIES PAYOUTS RESTRICTED UNDERLYING ------------ NAMES AND PRINCIPAL POSITION YEAR STOCK AWARD(S) OPTIONS LTIP PAYOUTS - - - -------------------------------------------------- ---- -------------- ---------- ------------ David Gladstone................................... 1993 $0 66,660 $0 Chairman and Chief Executive 1994 0 0 0 Officer 1995 0 19,998 0 George C. Williams................................ 1993 $0 13,332 $0 Vice Chairman(1) 1994 0 0 0 1995 0 0 0 Katherine C. Marien............................... 1993 $0 66,660 $0 President and Chief 1994 0 0 0 Operating Officer 1995 0 33,330 0 John M. Scheurer.................................. 1993 $0 6,666 $0 Executive Vice President 1994 0 0 0 1995 0 6,666 0 G. Cabell Williams III............................ 1993 $0 13,332 $0 Executive Vice President 1994 0 0 0 1995 0 6,666 0 Joan M. Sweeney................................... 1993 $0 13,332 $0 Executive Vice President 1994 0 0 0 1995 0 6,666 0
- - - --------------- (1) George C. Williams resigned as an officer of Advisers and the Company, effective May 1996. B-6 13 STOCK OPTIONS The following table sets forth, for the Company's Chief Executive Officer and its President and the four other most highly compensated officers of Advisers, who are also officers of the Company, the details relating to option grants in 1995 and the potential realizable value of each grant, as prescribed to be calculated by the Commission.
OPTION GRANTS IN LAST FISCAL YEAR ---------------------------------------------------------------------------------- POTENTIAL REALIZABLE VALUE AT ASSUMED ANNUAL RATES OF STOCK PERCENT OF PRICE APPRECIATION NUMBER OF TOTAL OPTIONS OVER 10-YEAR SECURITIES GRANTED TO EXERCISE TERM(1) UNDERLYING EMPLOYEES PRICE PER EXPIRATION ------------------- NAME OPTIONS GRANTED IN 1995 SHARE DATE 5% 10% - - - ------------------------------- --------------- ------------- --------- ---------- ------- -------- David Gladstone................ 19,998 9.7% $ 15.00 02/15/05 $58,351 $270,596 George C. Williams............. 0 N/A N/A N/A N/A N/A Katherine C. Marien............ 33,330 16.1% $ 15.00 02/15/05 $97,252 $450,994 John M. Scheurer............... 6,666 3.2% $ 15.00 02/15/05 $19,450 $ 90,199 G. Cabell Williams III......... 6,666 3.2% $ 15.00 02/15/05 $19,450 $ 90,199 Joan M. Sweeney................ 6,666 3.2% $ 15.00 02/15/05 $19,450 $ 90,199
- - - --------------- (1) Potential realizable value is net of the option exercise price but before any tax liabilities that may be incurred. These amounts represent certain assumed rates of appreciation, as mandated by the Commission. Actual gains, if any, on stock option exercises are dependent on the future performance of the shares, overall market conditions, and the continued employment of the option holder. The potential realizable value may not necessarily be realized. CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES As of July 8, 1996, there were 4,943,163 shares of the Company's common stock outstanding. The following table sets forth certain information as of July 8, 1996 regarding the shares of the Company's common stock beneficially owned by the two persons known by the Company to own beneficially more than 5% of the Company's common stock, as well as all directors and executive officers as a group:
NAME AND ADDRESS NUMBER OF PERCENTAGE OF BENEFICIAL OWNER SHARES OWNED OF CLASS - - - --------------------------------------------------------------------- ------------ ---------- Allied Capital Corporation (Maryland)(1)............................. 1,244,914(2) 25.2% 1666 K Street, NW, Ninth Floor Washington, DC 20006 Liberty Investment Management........................................ 363,751(3) 7.4% 2502 Rocky Point Drive, Suite 500 Tampa, FL 33607 All directors and executive officers as a group (12 in number)(4).... 193,659 3.9%
- - - --------------- (1) Allied Capital Corporation has agreed to vote its shares on all matters only in the same proportion as the shares voted by the Company's public stockholders. (2) Shares owned of record. (3) Shares owned beneficially. (4) Included in the total number of shares beneficially owned are 153,318 shares underlying unexercised stock options that are exercisable within 60 days of July 8, 1996, and 6,000 shares owned by the Allied Employee Stock Ownership Plan, for which David Gladstone and G. Cabell Williams III are co-trustees and share voting power. B-7 14 INVESTMENT ADVISORY AND OTHER SERVICES Subject to the supervision and control of its Board of Directors, the investments of the Company are managed by Allied Capital Advisers, Inc., a publicly owned investment adviser located at 1666 K Street, N.W., 9th Floor, Washington, D.C. 20006-2803, telephone (202) 331-1112. Advisers is registered with the Commission under the Investment Advisers Act of 1940. The shares of Advisers are traded on the Nasdaq National Market (symbol: ALLA). As of July 8, 1996, Advisers employed thirty-three (33) investment and other professionals, as well as thirty-six (36) other employees. David Gladstone and George C. Williams (no longer an employee of Advisers, as discussed below) have 60 years of combined experience in making the types of investments proposed to be made by the Company. Mr. Gladstone holds an MBA degree from the Harvard Business School and worked for Price Waterhouse and ITT Corporation before joining the Allied Capital organization in 1974. He is the author of Venture Capital Handbook and Venture Capital Investing, both published by Simon & Schuster/Prentice Hall. Mr. Williams is a past President of the National Association of Small Business Investment Companies and has lectured as a resident executive at the McIntyre School of Commerce at the University of Virginia. Effective July 5, 1996, Mr. Williams retired as an employee of Advisers, but has entered into a consulting agreement with Advisers. He remains a director of Advisers and the Company. All investments of the Company must be approved by a credit committee composed of the senior investment officers of Advisers, including David Gladstone and Katherine C. Marien. Additionally, the Board of Directors of the Company reviews and approves all loans made by the Company. David Gladstone, George C. Williams, and Katherine C. Marien are interested persons and affiliated persons, as those terms are defined in the 1940 Act, of the Company and its investment adviser. Advisers is at this time a party to investment advisory agreements with the Company and with Allied I and Allied II, both business development companies which, directly or through one or more small business investment company subsidiaries, specialize in making loans with equity features to and equity investments in small business concerns. Advisers is the general partner of a private limited partnership which itself is the general partner of two privately funded venture capital limited partnerships, Allied Venture and Allied Technology, engaging in the same business as the Allied I and Allied II but no longer making new investments. Advisers serves as the investment adviser to those two limited partnerships. All of these entities co-invest with one another. In addition, Advisers is the investment manager of Allied Commercial, a publicly held real estate investment trust (a "REIT"), and the co-manager of BMI, a privately held REIT. Allied Commercial and BMI participate with one another in buying interest-paying business loans secured by real estate. At March 31, 1996, total assets under Advisers' management were over $721 million. INVESTMENT ADVISORY AGREEMENT In May 1995, the Company's stockholders approved a new investment advisory agreement with Advisers (the "current agreement"). The current agreement will remain in effect from year to year as long as its continuance is approved at least annually by the Board of Directors, including a majority of the disinterested directors, or by the vote of the holders of a majority, as defined in the 1940 Act, of the outstanding voting securities of the Company. The current agreement may, however, be terminated at any time on sixty (60) days' notice, without the payment of any penalty, by the Board of Directors or by vote of a majority of the Company's outstanding voting securities, as defined, and will terminate automatically in the event of its assignment. Advisers is the investment adviser of the Company pursuant to an investment advisory agreement. Under that agreement, Advisers manages the loans made by the Company, subject to the supervision and control of the Board of Directors of the Company, and evaluates, structures, closes and monitors those loans made by the Company. The Company will not make any loan or other investment that has not been recommended by Advisers. Except as to those investment decisions that require specific approval by the Company's Board, Advisers has the authority to effect loans and sales of portions of loans for the Company's account. Some of the directors and officers of Advisers are also directors and officers of the Company. B-8 15 The current agreement provides that the Company will pay all of its own operating expenses, except those specifically required to be borne by Advisers. The expenses paid by Advisers include the compensation of its officers and the cost of office space, equipment, and other personnel necessary for day-to-day operations. The expenses that are paid by the Company include the Company's share of transaction costs (including legal and accounting fees) incident to the acquisition and disposition of investments, regular legal and auditing fees and expenses, the fees and expenses of the Company's directors, the costs of printing and distributing proxy statements and other communications to stockholders, the costs of promoting the Company's stock, and the fees and expenses of the Company's custodian and transfer agent. The Company, rather than Advisers, is also required to pay expenses associated with litigation and other extraordinary or non-recurring expenses with respect to its operations and investments, as well as expenses of required and optional insurance and bonding. Advisers is, however, entitled to retain for its own account any fees paid by or for the account of any company, including a portfolio company, for special investment banking or consulting work performed for that company which is not related to the Company's such investment transaction or follow-on managerial assistance. Advisers will report to the Board of Directors not less often than quarterly all fees received by Advisers from any source whatever and whether, in its opinion, any such fee is one that Advisers is entitled to retain under the provisions of the current agreement. In the event that any member of the Board of Directors should disagree, the matter will be conclusively resolved by a majority of the Board of Directors, including a majority of the independent Directors. If the Company uses the services of attorneys or paraprofessionals on the staff of Advisers for the Company's corporate purposes in lieu of outside counsel, the Company will reimburse Advisers for such services at hourly rates calculated to cover the cost of such services, as well as for incidental disbursements by Advisers in connection with such services. As compensation for its services to and the expenses paid for the account of the Company, Advisers is entitled to be paid quarterly, in arrears, a fee equal to 0.625% per quarter of the quarter-end value of the Company's total assets (other than Interim Investments and cash) and 0.125% per quarter of the quarter-end value of the Company's Interim Investments and cash. Such fees on an annual basis equal approximately 2.5% of the Company's total assets (other than Interim Investments and cash) and 0.5% of the Company's Interim Investments and cash. For the purposes of calculating the fee, the values of the Company's assets are determined as of the end of each calendar quarter. The quarterly fee is paid as soon as practicable after the values have been determined. CUSTODIAN SERVICES Under a Custodian Agreement, Riggs Bank N.A., whose principal business address is 808 17th Street, N.W., Washington, D.C. 20006, holds all securities of the Company, provides record keeping services, and serves as the Company's custodian. ACCOUNTING SERVICES The firm of Matthews, Carter and Boyce was the independent accountant for the Company for the year ended December 31, 1995 and has been selected to serve as such for the year ending December 31, 1996 by the Board of Directors and such selection was ratified by the shareholders of the Company. Its business address is: 8200 Greensboro Drive, Suite 1000, McLean, Virginia 22102-3864. Its phone number is (703)761-4600. Matthews, Carter and Boyce is also the independent accountant for the Company's subsidiary. Matthews, Carter and Boyce, or its predecessor, has served as the Company's independent accountant since its inception and has no financial interest in the Company. The expense recorded during the fiscal year ended December 31, 1995, for the professional services provided to the Company by Matthews, Carter and Boyce consisted of fees for audit services (which included the audit of the consolidated financial statements of the Company and review of the filings by the Company of reports and registration statements with the Commission, the SBA or other regulatory authorities) and for non-audit services, the fees for which the latter aggregated approximately 17% of the total fees. The non-audit services, which were arranged for by management without prior consideration by the Board of Directors, consisted of non-audit related consultation and the preparation of tax returns for the Company. B-9 16 TAX STATUS The Company, which has elected to be treated as a "business development company" under the 1940 Act, has qualified and expects to continue to qualify as a regulated investment company ("RIC") under the Internal Revenue Code of 1986, as amended ("Code"). As such, the Company is not subject to Federal income tax on that part of its investment company taxable income (consisting generally of net investment income and net short-term capital gains, if any) and any net capital gain (the excess of net long-term capital gain over net short-term capital loss) that it distributes to its shareholders. It is the Company's intention to distribute substantially all such income and gains. The "Distribution Requirement," in order to qualify for that treatment, is that the Company must distribute to its shareholders for each taxable year at least 90% of its investment company taxable income. The Company must also meet the following additional requirements: (1) The Company must derive at least 90% of its gross income each taxable year from dividends, interest, payments with respect to securities loans, and gains from the sale or other disposition of securities or foreign currencies, or other income (including gains from options, futures, or forward contracts) derived with respect to its business of investing in securities or those currencies ("Income Requirement"); (2) The Company must derive less than 30% of its gross income each taxable year from gains (without including losses) on the sale or other disposition of securities, or any of the following, that were held for less than three months--options, futures, or forward contracts (other than those on foreign currencies), or foreign currencies (or options, futures, or forwards thereon) that are not directly related to the Company's principal business of investing in securities (or options and futures with respect thereto) ("Short-Short Limitation"); (3) At the close of each quarter of the Company's taxable year, at least 50% of the value of its total assets must be represented by cash and cash items, U.S. Government securities, securities of other RIC's, and other securities that, with respect to any one issuer, do not exceed 5% of the value of the Company's total assets and that do not represent more than 10% of the outstanding voting securities of the issuer; and (4) At the close of each quarter of the Company's taxable year, not more than 25% of the value of its total assets may be invested in securities (other than U.S. Government securities or the securities of other RIC's) of any one issuer. The Company will be subject to a nondeductible 4% excise tax on amounts not distributed to shareholders on a timely basis or if the Company does not distribute at least 98% of its net investment income and net capital gains. The Company intends to make sufficient distributions to avoid this 4% excise tax. The Company, formerly a wholly owned subsidiary of Allied I, originates loans which are partially guaranteed by the SBA. The Company then sells the guaranteed portion of these loans in the secondary market. In connection with the sale of the guaranteed portion of loans in 1992, the Internal Revenue Service may assert that these transactions subject the Company to a liability for income taxes of up to $845,000 for that year. If the Internal Revenue Service in the future asserts such a claim, management and tax counsel believe that the Company has valid defenses for the position that such transactions do not subject the Company to a liability for additional income taxes; however, the Company has an agreement with the former Parent pursuant to which the Company is indemnified against such liability if asserted. Although the Company presently does not expect to do so, it is authorized to borrow funds and to sell assets in order to satisfy its distribution requirements. However, under the 1940 Act, the Company will not be permitted to make distributions to stockholders while the Company's debt obligations and other senior securities are outstanding unless certain "asset coverage" tests are met. Moreover, the Company's ability to dispose of assets to meet its distribution requirements may be limited by other requirements relating to its tax status as a RIC, including the Short-Short Limitation and the diversification requirements. If the Company disposes of assets in order to meet its distribution requirements, it may make such dispositions at times which, from an investment standpoint, are not advantageous. If the Company fails to satisfy the Distribution Requirement or otherwise fails to qualify as a RIC in any taxable year, it will be subject to tax in such year on all of its taxable income, regardless of whether the Company makes any distributions to its stockholders. In addition, in that case, all of the Company's distributions to its stockholders will be characterized as ordinary income (to the extent of the Company's B-10 17 current and accumulated earnings and profits). In contrast, as explained below, if the Company qualifies as a RIC, a portion of its distributions may be characterized as long-term capital gain in the hands of stockholders. Dividends paid by the Company from net investment income, the excess of net short-term capital gain over net long-term capital loss, and original issue discount or certain market discount income will be taxable to stockholders as ordinary income to the extent of the Company's current or accumulated earnings and profits. Distributions paid by the Company from the excess of net long-term capital gain over net short-term capital loss will be taxable as long-term capital gains regardless of the stockholder's holding period for his or her shares. To the extent that the Company retains any net capital gain, it may designate such retained gain as "deemed distributions" and pay a tax thereon for the benefit of its stockholders. In that event, the stockholders will be required to report their share of retained net capital gain on their tax returns as if it had been distributed to them and report a credit for the tax paid thereon by the Company. The amount of the deemed distribution net of such tax would be added to the stockholder's cost basis for his shares. Since the Company expects to pay tax on net capital gain at the regular corporate tax rate of 35% and the maximum rate payable by individuals on net capital gain is 28%, the amount of credit that individual stockholders may report would exceed the amount of tax that they would be required to pay on net capital gain. Stockholders who are not subject to federal income tax or tax on capital gains should be able to file a Form 990T or other appropriate form that allows them to recover the excess taxes paid on their behalf. Any dividend declared by the Company in October, November, or December of any calendar year, payable to stockholders of record on a specified date in such a month and actually paid during January of the following year, will be treated as if it had been received by the stockholders on December 31 of the year in which the dividend was declared. Investors should be careful to consider the tax implications of buying shares just prior to a distribution. Even if the price of the shares includes the amount of the forthcoming distribution, the stockholder generally will be taxed upon receipt of the distribution and will not be entitled to offset the distribution against the tax basis in his shares. A stockholder may recognize taxable gain or loss if he sells or exchanges his shares. Any gain arising from (or, in the case of distributions in excess of earnings and profits, treated as arising from) the sale or exchange of shares generally will be a capital gain or loss except in the case of dealers or certain financial institutions. This capital gain or loss normally will be treated as a long-term capital gain or loss if the stockholder has held his shares for more than one year; otherwise, it will be classified as short-term capital gain or loss. However, any capital loss arising from the sale or exchange of shares held for six months or less will be treated as a long-term capital loss to the extent of the amount of capital gain dividends received with respect to such shares and, for this purpose, the special rules of Section 246(c)(3) and (4) of the Code generally apply in determining the holding period of shares. Net capital gain of noncorporate taxpayers is currently subject to a maximum federal income tax rate of 28% while other income may be taxed at rates as high as 39.6%. Corporate taxpayers are currently subject to federal income tax on net capital gain at the maximum 35% rate also applied to ordinary income. Tax rates imposed by states and local jurisdictions on capital gain and ordinary income may differ. The Company may be required to withhold U.S. federal income tax at the rate of 31% of all taxable dividends and distributions payable to stockholders who fail to provide the Company with their correct taxpayer identification number. Withholding from dividends and distributions also is required for shareholders who otherwise are subject to backup withholding. Backup withholding is not an additional tax, and any amounts withheld may be credited against a stockholder's U.S. federal income tax liability. Federal withholding taxes at a 30% rate (or a lesser treaty rate) may apply to distributions to stockholders that are nonresident aliens or foreign partnerships, trusts, or corporations. Foreign investors should consult their tax advisors with respect to the possible U.S. federal, state, and local tax consequences and foreign tax consequences of an investment in the Company. B-11 18 The Company will send to each of the stockholders, as promptly as possible after the end of each fiscal year, a notice detailing, on a per share and per distribution basis, the amounts includible in such stockholder's taxable income for such year as ordinary income and as long-term capital gain. In addition, the federal tax status of each year's distributions generally will be reported to the Internal Revenue Service. The foregoing is only a general summary of some of the important federal income tax considerations generally affecting the Company and its shareholders. No attempt is made to present a complete explanation of the federal tax treatment of the Company's activities. Potential investors are urged to consult their own tax advisers for more detailed information and for information regarding any applicable state, local, or foreign taxes. B-12 19 PART C OTHER INFORMATION 20 PART C OTHER INFORMATION ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS 1. FINANCIAL STATEMENTS The following financial statements of Allied Capital Lending Corporation (the "Registrant" or "Company") are incorporated into Part A of this Post-Effective Amendment No. 1 to the Company's registration statement on Form N-2 (the "Registration Statement") by reference from pages F-1 through F-14 of the Prospectus included in Pre-Effective Amendment No. 2 to the Registration Statement, as filed with the Commission on April 29, 1996 (Accession No. 0000950133-96-000425): Consolidated Balance Sheet -- March 31, 1996 (unaudited) and December 31, 1995 and 1994 Consolidated Statement of Operations -- For the Three Months Ended March 31, 1996 and 1995 (unaudited) and the Years Ended December 31, 1995, 1994 and 1993 Consolidated Statement of Changes in Net Assets -- For the Three Months Ended March 31, 1996 and 1995 (unaudited) and the Years Ended December 31, 1995, 1994 and 1993 Consolidated Statement of Cash Flows -- For the Three Months Ended March 31, 1996 and 1995 (unaudited) and the Years Ended December 31, 1995, 1994 and 1993 Consolidated Statement of Investments in Small Business Concerns -- March 31, 1996 (unaudited) and December 31, 1995 and 1994 Notes to Consolidated Financial Statements Report of Independent Accountants 2. EXHIBITS a. Amended and Restated Articles of Incorporation of the Registrant(1) b. By-Laws of the Registrant, as amended(6) c. None d.1. Specimen certificate of Registrant's Common Stock, par value $0.0001, the rights of holders of which are defined in Exhibits a and b(9) e. Registrant's Dividend Reinvestment Plan(1) f. None g. Investment Advisory Agreement between Registrant and Allied Capital Advisers, Inc. ("Advisers")(2) h.2. Form of Underwriting Agreement among Lehman Brothers Inc.; the Registrant; and Advisers* i. Registrant's Incentive Stock Option Plan, as amended(5) j. Custodian Agreement between Riggs Bank N.A. (formerly known as The Riggs National Bank of Washington, D.C.) and the Registrant, dated February 27, 1989(4) k.1. Tax Indemnification Agreement dated November 12, 1993 between the Registrant and Allied Capital Corporation(3) k.2. Amended and Restated Line of Credit, Security and Pledge Agreement, dated February 26, 1996 and as amended April 18, 1996, and Promissory Note dated February 26, 1996, between the Company and Riggs Bank N.A. (formerly known as The Riggs National Bank of Washington, D.C.)(9) k.3.A. Promissory Note, dated September 27, 1995, between ACLC Limited Partnership and Lehman Commercial Paper, Inc.(7) k.3.B. Loan and Security Agreement, dated September 25, 1995, between ACLC Limited Partnership and Lehman Commercial Paper Inc.(9) k.4. Form of agreement between the Company and its regional associates(4) k.7. Line of Credit, Security and Pledge Agreement and Promissory Note, dated April 18, 1996, between ACLC Limited Partnership and Riggs Bank N.A.(9) l. Opinion of Sutherland, Asbill & Brennan as to the legality of the common stock being registered, and Consent to the use of such Opinion**
C-1 21 m. None n. Consent of Matthews, Carter and Boyce, independent accountants* o. None p. None q. None r. Financial Data Schedule* s.1 Powers of Attorney of certain signatories of this registration statement(8) s.2 Power of Attorney of a signatory of this registration statement*
- - - --------------- * Filed herewith. ** To be filed by subsequent post-effective amendment. (1) Incorporated by reference to an exhibit of the same number to the Company's registration statement on Form N-2 (File No. 33-68836). (2) Incorporated by reference to Exhibit A to the Company's definitive proxy statement relating to its annual meeting of stockholders held on May 9, 1995 (File No. 0-22832). (3) Incorporated by reference to Exhibit 10(c) to the Form 10-K filed by Allied Capital Corporation for the year ended December 31, 1993 (File No. 814-97). (4) Incorporated by reference to an exhibit to Amendment No. 1 to the Company's registration statement on Form N-2 (File No. 33-68836). (5) Incorporated by reference to Exhibit B to the Company's definitive proxy statement relating to its annual meeting of stockholders held on May 20, 1994 (File No. 0-22832). (6) Incorporated by reference to Exhibit 3(ii) filed with the Company's Annual Report on Form 10-K for the year ended December 31, 1995 (File No. 0-22832). (7) Incorporated by reference to Exhibit 10(e) filed with the Company's Annual Report on Form 10-K for the year ended December 31, 1995 (File No. 0-22832). (8) Incorporated by reference to an exhibit of same number to the Company's initial registration statement on Form N-2 (File No. 333-02185), as filed with the Commission on April 2, 1996. (9) Incorporated by reference to an exhibit of the same number to Pre-Effective Amendment No. 1 to the Company's registration statement on Form N-2 (File No. 333-02185), as filed with the Commission on April 26, 1996. ITEM 25. MARKETING ARRANGEMENTS The Company has no marketing arrangements to be disclosed pursuant to this Item. ITEM 26. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION The expenses in connection with the distribution of the securities being offered hereby (including the rights offering and subsequent sales), other than underwriting discounts and commissions, are estimated as follows: Securities and Exchange Commission Registration Fee............... $ 3,743 NASD Filing Fee................................................... 1,556 Blue Sky Fees and Expenses........................................ 2,840 Information Agent's Fees and Expenses............................. 56,346 Transfer Agent's and Registrar's Fees and Expenses................ 38,500 Expenses of Nominees.............................................. 22,000 Printing and Conversion Expenses.................................. 66,586 Legal Fees and Expenses........................................... 75,000 Accountant's Fees and Expenses.................................... 5,100 -------- Total................................................... $271,671 ========
C-2 22 ITEM 27. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL Allied Capital Lending Corporation (the Registrant)* -- Maryland Subsidiary: ACLC Limited Partnership -- Maryland............................................ 99% Allied Capital Corporation(1)* -- Maryland Subsidiaries: Allied Investment Corporation -- Maryland....................................... 100% Allied Capital Financial Corporation -- Maryland................................ 100% Allied Development Corporation -- District of Columbia.......................... 100% Allied Capital Corporation II* -- Maryland Subsidiaries: Allied Investment Corporation II -- Maryland.................................... 100% Allied Financial Corporation II -- Maryland..................................... 100% Allied Capital Commercial Corporation* -- Maryland Subsidiaries: ALCC Holdings, Inc. -- Maryland................................................. 100% ALCC Acceptance Corporation -- Maryland......................................... 100% Business Mortgage Investors, Inc.* -- Maryland Subsidiaries: BMI Holdings, Inc. -- Maryland.................................................. 100% BMI Acceptance Corporation -- Maryland.......................................... 100% Allied Capital Funding, L.L.C.** -- Delaware Allied Capital Mortgage Corporation* -- Maryland Allied Capital Advisers, Inc. -- Maryland Subsidiary: Allied Capital Property Corporation -- Maryland................................. 100%
- - - --------------- * Each of these entities is, like the Registrant, advised by Advisers. By so including these entities herein, the Registrant does not concede that it and such other entities are controlled by Advisers. ** The members of Allied Capital Funding, L.L.C. are ALCC Acceptance Corporation and BMI Acceptance Corporation. (1) Allied Capital Corporation owned 1,244,914 shares, or approximately 25.2% of the Company's outstanding common stock, at July 8, 1996. The Registrant does not concede that it is controlled by Allied I. On matters requiring a vote of the Company's stockholders, Allied I has agreed to vote its shares only in the same proportion as the shares voted by the Company's public stockholders. ITEM 28. NUMBER OF HOLDERS OF SECURITIES The following table presents the number of record holders of each class of securities of the Company and its Subsidiary outstanding as of June 30, 1996:
NUMBER OF TITLE OF CLASS RECORD HOLDERS --------------------------------------------------------------- -------------- Common Stock................................................... 1,637* LIBOR + 2.2% Secured Revolving Line of Credit (The Company).... 1 LIBOR + 2.0% Secured Revolving Line of Credit (ACLC Limited Partnership)................................... 1 LIBOR + 2.7% Secured Revolving Line of Credit (ACLC Limited Partnership)................................... 1
* Estimate. The Company estimates that there are a total of 7,800 beneficial owners of its common stock. C-3 23 ITEM 29. INDEMNIFICATION The Annotated Code of Maryland, Corporations and Associations, Section 2-418 provides that a Maryland corporation may indemnify any director of the corporation and any person who, while a director of the corporation, is or was serving at the request of the corporation as a director, officer, partner, trustee, employee, or agent of another foreign or domestic corporation, partnership, joint venture, trust, or other enterprise or employee benefit plan, made a party to any proceeding by reason of service in that capacity unless it is established that the act or omission of the director was material to the matter giving rise to the proceeding and was committed in bad faith or was the result of active and deliberate dishonesty; or the director actually received an improper personal benefit in money, property or services; or, in the case of any criminal proceeding, the director had reasonable cause to believe that the act or omission was unlawful. Indemnification may be made against judgments, penalties, fines, settlements, and reasonable expenses actually incurred by the director in connection with the proceeding, but if the proceeding was one by or in the right of the corporation, indemnification may not be made in respect of any proceeding in which the director shall have been adjudged to be liable to the corporation. Such indemnification may not be made unless authorized for a specific proceeding after a determination has been made, in the manner prescribed by the law, that indemnification is permissible in the circumstances because the director has met the applicable standard of conduct. On the other hand, the director must be indemnified for expenses if he has been successful in the defense of the proceeding or as otherwise ordered by a court. The law also prescribes the circumstances under which the corporation may advance expenses to, or obtain insurance or similar cover for, directors. The law also provides for comparable indemnification for corporate officers and agents. The Articles of Incorporation of the Company provide that its directors and officers shall, and its agents in the discretion of the Board of Directors may, be indemnified to the fullest extent permitted from time to time by the laws of Maryland. The Company's By-Laws also, however, provide that the Company may not indemnify any director or officer against liability to the Registrant or its security holders to which he might otherwise be subject by reason of such person's willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of his office unless a determination is made by final decision of a court, by vote of a majority of a quorum of directors who are disinterested, non-party directors or by independent legal counsel that the liability for which indemnification is sought did not arise out of such disabling conduct. Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the Company pursuant to the provisions described above, or otherwise, the Company has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Company of expenses incurred or paid by a director, officer or controlling person in the successful defense of an action, suit or proceeding) is asserted by a director, officer or controlling person in connection with the securities being registered, the Company will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of the court of the issue. The Registrant, in conjunction with its investment adviser and other entities managed thereby, carries liability insurance for the benefit of its directors and officers on a claims-made basis of up to $2,500,000, subject to a $200,000 retention and the other terms thereof. ITEM 30. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER Advisers, the investment adviser of the Registrant, is engaged in the business of identifying, evaluating, structuring, closing, and monitoring the investments made by the Registrant as well as other public and private entities engaged in small business finance. Certain information about the activities of each current director or C-4 24 executive officer of Allied Capital Advisers, Inc., in which he or she is engaged, or has been engaged at any time during the past two fiscal years ended December 31, 1995, is set forth below:
NAME AND PRINCIPAL ADDRESS* OF EACH COMPANY WITH WHICH THE NAMED PERSON HAS HAD ANY CONNECTION NAME AND THE NATURE OF SUCH CONNECTION - - - ------------------------- ------------------------------------------------------------------ David Gladstone.......... Chairman of the Board and Chief Executive Officer, Allied Capital Advisers, Inc., Allied Capital Corporation, Allied Capital Corporation II, Allied Capital Lending Corporation, and Allied Capital Commercial Corporation; Director, President and Chief Executive Officer, Business Mortgage Investors, Inc. and Allied Capital Mortgage Corporation; Director, The Riggs National Corporation, 808 17th Street, N.W., Washington, DC 20006; Trustee of The George Washington University, 2121 I Street, N.W., Washington, DC 20052. George C. Williams....... Director and formerly Vice Chairman of the Board, Allied Capital Advisers, Inc., Allied Capital Corporation, Allied Capital Corporation II, Allied Capital Lending Corporation, and Allied Capital Commercial Corporation; Chairman, Business Mortgage Investors, Inc. and Allied Capital Mortgage Corporation. Brooks H. Browne......... Director, Allied Capital Advisers, Inc.; President, Environmental Enterprises Assistance Fund, 1901 N. Moore Street, Suite 1004, Arlington, VA 22209. Robert E. Long........... Director, Allied Capital Advisers, Inc.; Chairman and Chief Executive Officer, Business Network News, Inc., 99 Canal Center Plaza, Suite 220, Alexandria, VA 22314; Director, American Heavy Lift Shipping Company, 365 Canal Street, New Orleans, LA 70130; Global Travel, Inc., 1911 N. Fort Meyer Drive, Arlington, VA 22209, CSC Scientific, Inc., 8315 Lee Highway, Fairfax, VA 22031; Outer Seal Building Products, Inc., 5114 College Avenue, College Park, MD 20740; Business News Network, Inc., 99 Canal Center Plaza, Suite 220, Alexandria, VA 22314; and Ambase Corporation, 51 Weavers Street, Greenwich, CT 06831. William L. Walton........ Director, Allied Capital Advisers, Inc.; Director and President, Education Partners, Inc.; Director, Odyssey Publishing Co.; Chairman, Success Lab, Inc.; and President, Language Odyssey (all located at 401 N. Michigan Avenue, Suite 3370, Chicago, IL 60611). Joan M. Sweeney.......... Director, President, and Chief Operating Officer, Allied Capital Advisers, Inc.; Executive Vice President, Allied Capital Corporation, Allied Capital Corporation II, Allied Capital Lending Corporation, Allied Capital Commercial Corporation, Business Mortgage Investors, Inc. and Allied Capital Mortgage Corporation. William F. Dunbar........ Executive Vice President, Allied Capital Advisers, Inc.; President and Chief Operating Officer, Allied Capital Corporation II; Executive Vice President, Allied Capital Corporation, Allied Capital Commercial Corporation, Allied Capital Lending Corporation, and Business Mortgage Investors, Inc. Katherine C. Marien...... Executive Vice President, Allied Capital Advisers, Inc.; President and Chief Operating Officer, Allied Capital Lending Corporation; Executive Vice President, Allied Capital Corporation, Allied Capital Corporation II, Allied Capital Commercial Corporation, and Business Mortgage Investors, Inc.
C-5 25
NAME AND PRINCIPAL ADDRESS* OF EACH COMPANY WITH WHICH THE NAMED PERSON HAS HAD ANY CONNECTION NAME AND THE NATURE OF SUCH CONNECTION - - - ------------------------- ------------------------------------------------------------------ John M. Scheurer......... Executive Vice President, Allied Capital Advisers, Inc.; President and Chief Operating Officer, Allied Capital Commercial Corporation; Executive Vice President, Allied Capital Corporation, Allied Capital Corporation II, Allied Capital Lending Corporation and Allied Capital Mortgage Corporation; Executive Vice President and Chief Operating Officer, Business Mortgage Investors, Inc. George Stelljes III...... Executive Vice President, Allied Capital Advisers, Inc.; Senior Vice President, Allied Capital Corporation, Allied Capital Corporation II, Allied Capital Commercial Corporation, Allied Capital Lending Corporation, and Business Mortgage Investors, Inc.; Director, Total Foam, Inc., 80 Rowe Avenue, Unit B, Milford, CT 06460; and Colorado Directory, Inc., 6061 S. Willow Drive, Suite 232, Englewood, CO 80111. G. Cabell Williams III... Executive Vice President, Allied Capital Advisers, Inc.; President and Chief Operating Officer, Allied Capital Corporation; Executive Vice President, Allied Capital Corporation II, Allied Capital Commercial Corporation, Allied Capital Lending Corporation and Business Mortgage Investors, Inc. Director, President, and Treasurer, Broadcast Holdings, Inc., 1025 Vermont Avenue, N.W., Suite 1030, Washington, DC 20005 and Georgetown Broadcasting Company, Inc., 1416 Highmarket Street, Georgetown, SC 29442; Director, Environmental Enterprises Assistance Fund, 1901 N. Moore Street, Suite 1004, Arlington, VA 22209. Jon A. DeLuca............ Executive Vice President, Treasurer and Chief Financial Officer, Allied Capital Advisers, Inc., Allied Capital Corporation, Allied Capital Corporation II, Allied Capital Lending Corporation, Allied Capital Commercial Corporation, Business Mortgage Investors, Inc. and Allied Capital Mortgage Corporation. Manager, Entrepreneurial Services, Coopers & Lybrand (1986-1994).
- - - --------------- * The business address of Allied Capital Advisers, Inc., Allied Capital Corporation, Allied Capital Corporation II, Allied Capital Lending Corporation, Allied Capital Commercial Corporation, Business Mortgage Investors, Inc., and Allied Capital Mortgage Corporation is c/o Allied Capital Advisers, Inc., 1666 K Street, N.W., Ninth Floor, Washington, D.C. 20006-2803. ITEM 31. LOCATIONS OF ACCOUNTS AND RECORDS All of the accounts and records of the Registrant, including all the accounts, books and documents required to be maintained by Section 31(a) of the 1940 Act and the rules thereunder, are maintained by Allied Capital Advisers, Inc., 1666 K Street, N.W., Ninth Floor, Washington, D.C. 20006-2803. ITEM 32. MANAGEMENT SERVICES Other than with its investment adviser, the Registrant is not a party to any contract pursuant to which any person performs management-related services to the Registrant. C-6 26 ITEM 33. UNDERTAKINGS 1. The Registrant undertakes to suspend the offering of shares until the Prospectus is amended if: (1) subsequent to the effective date of its Registration Statement, the net asset value declines more than ten percent from its net asset value as of the effective date of the Registration Statement; or (2) the net asset value increases to an amount greater than its net proceeds as stated in the Prospectus. 2. Not Applicable. 3. Not Applicable. 4. a. The Registrant undertakes to file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement: (1) To include any prospectus required by Section 10(a)(3) of the 1933 Act; (2) To reflect in the prospectus any fact or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement; and (3) To include any material information with respect to the plan of distribution not previously disclosed in the Registration Statement or any material change to such information in the Registration Statement; b. The Registration undertakes that, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof; and c. The Registrant undertakes to remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. 5. Not Applicable. 6. The Registrant undertakes to send by first class mail or other means designed to ensure equally prompt delivery, within two business days of receipt of a written or oral request, any Statement of Additional Information. C-7 27 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Washington, and District of Columbia, on the 10th day of July, 1996. ALLIED CAPITAL LENDING CORPORATION By: /s/ David Gladstone ------------------------------------ David Gladstone Chairman of the Board and Chief Executive Officer Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates indicated.
SIGNATURE TITLE DATE - - - ------------------------------------- ---------------------------------------- -------------- /s/ David Gladstone Chairman of the Board and Chief July 10, 1996 - - - ------------------------------------- Executive Officer (Principal Executive David Gladstone Officer) and Director * Director - - - ------------------------------------- George C. Williams * President and Chief Operating Officer - - - ------------------------------------- and Director Katherine C. Marien * Director - - - ------------------------------------- Jon W. Barker * Director - - - ------------------------------------- Eleanor Deane Bierbower * Director - - - ------------------------------------- Robert V. Fleming II * Director - - - ------------------------------------- Anthony T. Garcia * Director - - - ------------------------------------- Arthur H. Keeney III * Director - - - ------------------------------------- Robin B. Martin * Executive Vice President, Treasurer and - - - ------------------------------------- Chief Financial Officer (Principal Jon A. DeLuca Financial Officer and Principal Accounting Officer) * By: /s/ David Gladstone - - - -------------------------------------
David Gladstone, Attorney-in-Fact and Agent, on July 10, 1996, pursuant to the Powers of Attorney filed as Exhibit s.1 to the initial registration statement or pursuant to the Power of Attorney filed as Exhibit s.2 herewith. 28 EXHIBIT INDEX
EXHIBIT NUMBER DESCRIPTION - - - ------ ------------------------------------------------------------------------------------ h.2. Form of Underwriting Agreement among Lehman Brothers Inc.; the Registrant; and Advisers n. Consent of Matthews, Carter and Boyce, independent accountants r. Financial Data Schedule s.2 Power of Attorney of a signatory of this registration statement
EX-99.2H.2 2 FORM OF UNDERWRITING AGREEMENT. 1 EXHIBIT h.2 174,358 SHARES ALLIED CAPITAL LENDING CORPORATION COMMON STOCK UNDERWRITING AGREEMENT July __, 1996 LEHMAN BROTHERS INC. Three World Financial Center New York, New York 10285 Dear Sirs: Allied Capital Lending Corporation, a Maryland corporation (the "Company"), proposes to issue and sell to Lehman Brothers Inc. (the "Underwriter") 174,358 shares (the "Shares") of Common Stock, $0.0001 par value (the "Common Stock") of the Company. The Shares to be sold hereunder are shares not sold in the Company's rights offering which concluded on June 4, 1996 and in which the Underwriter participated as dealer-manager or underwriter. This is to confirm the agreement concerning the purchase of the Shares from the Company by the Underwriter. 1. Representations and Warranties. (a) The Company represents and warrants to, and agrees with, the Underwriter that: (i) A registration statement on Form N-2 (File No. 333-02185) with respect to the Shares (A) has been prepared by the Company in conformity with the requirements of the Securities Act of 1933, as amended (the "Securities Act"), and the Investment Company Act of 1940, as amended (the "1940 Act"), and the rules and regulations of the Securities and Exchange Commission (the "Commission") under the Securities Act and the 1940 Act, (B) has been filed with the Commission under the Securities Act and (C) has become effective under the Securities Act. If any post-effective amendment to such registration statement has been filed with the Commission prior to the execution and delivery of this Agreement, the most recent such amendment has been declared effective by the Commission. Copies of such registration statement as amended to date have been delivered by the Company to you. A Notification of Election to be Subject to Sections 55 through 65 of the 1940 Act on Form N-54A (the "Election") has been prepared in conformity with Section 54(a) of the 1940 Act and has been filed by the Company with the Commission under the 1940 Act, and the Election remains in effect. A registration statement on Form 8-A with respect to the Shares has been prepared by the Company in conformity with Section 12(g) of the Securities Exchange Act of 1934, as amended 2 (the "Exchange Act") and the rules and regulations under the Exchange Act and has been filed with the Commission under the Exchange Act. For purposes of this Agreement: "Rules and Regulations" means the rules and regulations of the Commission under the Securities Act, 1940 Act, Exchange Act and the Investment Advisers Act of 1940, as amended (the "Advisers Act"); "Effective Time" means the date and the time as of which such registration statement, or the most recent post-effective amendment thereto, if any, was declared effective by the Commission; "Effective Date" means the date of the Effective Time; "Preliminary Prospectus" means each prospectus and related statement of additional information included in such registration statement, or amendments thereto, before it became effective under the Securities Act and any prospectus filed with the Commission by the Company pursuant to Rule 497(a) of the Rules and Regulations; "Registration Statement" means such registration statement, as amended at the Effective Time, including all information deemed to be a part thereof as of the Effective Time pursuant to paragraph (b) of Rule 430A of the Rules and Regulations; and "Prospectus" means the form of prospectus and statement of additional information relating to the Shares, as first filed pursuant to Rule 497 of the Rules and Regulations ("Rule 497") and any amendment or supplement thereto. The Commission has not issued any order preventing or suspending the use of any Preliminary Prospectus or the Prospectus. (ii) The Registration Statement, the Election and the Form 8-A registration statement contains, and any post-effective amendment to the Registration Statement filed with the Commission after the Effective Time, the Prospectus will contain, all statements which are required by the Securities Act, the 1940 Act, and the Exchange Act and the Rules and Regulations; at the time of filing thereof, any Preliminary Prospectus did not, and on the Effective Date, the Registration Statement did not, and any post-effective amendment to the Registration Statement filed with the Commission after the Effective Time, the Prospectus will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading; provided that the Company makes no representation or warranty as to information contained in or omitted from the Registration Statement or the Prospectus in reliance upon, and in conformity with, written information furnished to the Company by you, specifically for inclusion therein, but, for this purpose, tax-related information in the Registration Statement and the Prospectus shall not be deemed to have been furnished by you. There is no contract or document required to be described in the Registration Statement or the Prospectus or to be filed as an exhibit to the Registration Statement which is not described or filed as required. - 2 - 3 (iii) Neither the Company nor any partnership that it controls, nor any of the Company's subsidiaries (hereinafter, the Company, such partnerships and subsidiaries are collectively referred to as the "Company" unless inappropriate in the context) is in violation of its articles of incorporation, bylaws or other governing documents or is in default under any agreement, indenture or instrument. (iv) This Agreement, the Investment Advisory Agreement (the "Advisory Agreement") between the Company and Allied Capital Advisers, Inc. ("Allied Advisers"), the Custody Agreement between the Company and Riggs Bank N.A. (the "Riggs Custody Agreement"), the Custody Agreement between the Company and the U.S. Small Business Administration (the "SBA Custody Agreement", the Riggs Custody Agreement and the SBA Custody Agreement being sometimes referred to herein together as the "Custody Agreements"), and the Tax Indemnification Agreement between the Company and Allied Capital Corporation (the "Indemnification Agreement") have each been duly authorized, executed and delivered by the Company; and this Agreement, the Advisory Agreement, the Riggs Custody Agreement, the SBA Custody Agreement, and the Indemnification Agreement each constitutes the valid and binding obligation of the Company and is enforceable against the Company in accordance with its terms (a) subject, as to enforcement, to bankruptcy, insolvency, reorganization and other laws of general applicability relating to or affecting creditors' rights and to general equity principles, and (b) except for rights to indemnity under this Agreement and the Advisory Agreement, to the extent that such rights may be limited by federal or state securities laws or the public policy underlying such laws. No consent, approval, authorization or order of any court or governmental agency or body or financial institution is required for the execution, delivery and performance of this Agreement, the Advisory Agreement, the Riggs Custody Agreement, the SBA Custody Agreement, or the Indemnification Agreement by the Company or the consummation by the Company of the transactions contemplated hereby or thereby, except such as have been obtained and such as may be required under the Securities Act, the 1940 Act, the Exchange Act, the rules of the National Association of Securities Dealers, Inc. (the "NASD") or applicable state securities laws in connection with the purchase and distribution of the Shares by the Underwriter. The execution, delivery and performance of this Agreement, the Advisory Agreement, the Riggs Custody Agreement, the SBA Custody Agreement, and the Indemnification Agreement by the Company and the consummation by the Company of the transactions contemplated hereby and thereby will not conflict with, result in the creation or imposition of any lien, charge, claim or encumbrance upon any property or asset of the Company pursuant to the terms of, result in a ghbreach or violation by the Company of any of the terms or provisions of, or constitute a default by the Company under, any indenture, mortgage, deed of trust, loan agreement, lease or other agreement or instrument to - 3 - 4 which the Company is a party or by which it is bound or by which it or its property is subject that is material to the Company, the articles of incorporation, bylaws or other governing documents of the Company, any statute, rule, administrative regulation, or any judgment, decree, order, rule or regulation of any court or governmental agency or body having jurisdiction over the Company or any of its property. (v) Except as described in or contemplated by the Registration Statement and the Prospectus, (A) there has not been any material adverse change in, or adverse development which materially affects, the condition (financial or other), results of operation, business or prospects of the Company from the date as of which information is given in the Prospectus, (B) there have been no transactions entered into by the Company that are material to the Company other than those in the ordinary course of business and (C) there has been no dividend or distribution of any kind declared, paid or made by the Company on any class of its capital stock, other than the dividend declared by the Company on May 13, 1996 and paid on June 28, 1996 to stockholders of record of the Company on June 14, 1996. (vi) Matthews, Carter and Boyce, whose report appears in the Prospectus, are independent certified public accountants as required by the Securities Act and the Rules and Regulations. The financial statements and schedules (including the related notes and supporting schedules) included in the Registration Statement, any Preliminary Prospectus or the Prospectus present fairly the financial condition, results of operations and changes in financial condition of the Company at the dates and for the periods indicated and have been prepared in accordance with generally accepted accounting principles applied on a consistent basis throughout the periods indicated. (vii) All of the outstanding shares of Common Stock have been, and the Shares, upon issuance and delivery and payment therefor in the manner herein described, will be, duly authorized, validly issued, fully paid and nonassessable, with no personal liability attaching to the ownership thereof. None of the Shares when delivered will be subject to any lien, claim, encumbrance, preemptive rights or any other claim of any third party and the Shares will conform to the description thereof contained in the Registration Statement and the Prospectus. Neither the filing of the Registration Statement nor the offering or sale of the Shares as contemplated by this Agreement gives rise to any rights, other than those which have been waived or satisfied, for or relating to the registration of any shares of Common Stock or other securities of the Company. (viii) The Company has been duly organized and is validly existing and in good standing under the laws of the State of Maryland, is duly qualified to do business and is in good - 4 - 5 standing as a foreign corporation (and, with respect to any partnership controlled by the Company, as a foreign partnership) in each jurisdiction in which the failure to be so qualified would have a material adverse effect on the Company and has all power and authority necessary to own or hold its properties and to conduct its business as described in the Prospectus and to issue and sell the Shares as contemplated by this Agreement. (ix) Except as described in the Registration Statement and the Prospectus, there is no litigation or governmental proceeding to which the Company is a party or to which any property of the Company is subject or which is pending or, to the knowledge of the Company, threatened against the Company which might result in any material adverse change in the condition (financial or other), results of operations, business or prospects of the Company or which is required to be disclosed in the Registration Statement and Prospectus. (x) The Company is not in violation of any law, ordinance, governmental rule or regulation or court decree to which it may be subject which violation could reasonably be expected to have a material adverse effect on the condition (financial or other), results of operation, business or prospects of the Company. (xi) The Company has not taken and shall not take, directly or indirectly, any action designed to cause or result in, or which has constituted or which might reasonably be expected to constitute, the stabilization or manipulation of the price of the shares of Common Stock to facilitate the sale or resale of the Shares. (xii) Any advertising and sales literature used by the Company in connection with the public offering and sale of the Shares complies with the Securities Act and the Rules and Regulations and does not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading. (xiii) There are no contracts or other documents that are required to be filed as exhibits to the Registration Statement by the Securities Act or by the Rules and Regulations that have not been so filed. (xiv) The Company has filed, or will by the Closing Date have filed, all tax returns and reports required to be filed by it by the Closing Date, or have requested extensions with respect thereto, and such returns are, or by the Closing Date will be, materially correct and complete. The Company, to the best of its knowledge, has paid all taxes (which term includes interest charges and penalties relating to taxes) which it is - 5 - 6 required to pay by the Closing Date and adequate provision has been made in the Company's financial statements for taxes that will be due from the Company but for which payment is not due from the Company by the Closing Date. (b) Allied Advisers represents, warrants to and agrees with the Underwriter that: (i) Allied Advisers has been duly organized and is validly existing and in good standing as a corporation under the laws of Maryland, with full power and authority to own or lease its properties and conduct its business as described in the Prospectus and is duly qualified to do business and is in good standing as a foreign corporation in each jurisdiction in which such qualification is required (except where the failure so to qualify would not have a material adverse effect on the ability of Allied Advisers to conduct its business with respect to the Company as described in the Prospectus), and has all power and authority necessary to perform its management services with respect to the Company as described in the Prospectus. (ii) Allied Advisers is duly registered and in good standing with the Commission under the Advisers Act as an investment adviser. Allied Advisers is not prohibited by the Advisers Act, or the rules and regulations under such Act, from acting for the Company under the Advisory Agreement as contemplated by the Prospectus. (iii) The description of Allied Advisers in the Prospectus does not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances under which they were made. (iv) This Agreement and the Advisory Agreement have each been duly authorized, executed and delivered by Allied Advisers and each constitutes the valid and binding obligation of Allied Advisers and is enforceable against Allied Advisers in accordance with its terms. No consent, approval, authorization or order of any court or governmental agency or body or financial institution is required for the execution, delivery and performance of this Agreement or the Advisory Agreement by Allied Advisers or the consummation by Allied Advisers of the transactions contemplated hereby or thereby, except such as have been obtained and such as may be required under the Exchange Act, the 1940 Act and the Advisers Act. The execution, delivery and performance of this Agreement and the Advisory Agreement by Allied Advisers and the consummation by Allied Advisers of the transactions contemplated hereby and thereby will not conflict with, result in the creation or imposition of any lien, charge, claim or encumbrance upon any property or asset of Allied - 6 - 7 Advisers pursuant to the terms of, result in a breach or violation by Allied Advisers of any of the terms or provisions of, or constitute a default by Allied Advisers under, any indenture, mortgage, deed of trust, loan agreement, lease or other agreement or instrument to which Allied Advisers is a party or to which it is bound or to which it or its property is subject that is material to Allied Advisers, the corporate charter, bylaws or other governing documents of Allied Advisers, any statute, rule, administrative regulation, or any judgment, decree, order, rule or regulation of any court or governmental agency or body having jurisdiction over Allied Advisers or any of its property. (v) Except as described in the Registration Statement and the Prospectus, there is no litigation or governmental proceeding to which Allied Advisers is a party or to which any property of Allied Advisers is subject or which is pending or, to the knowledge of Allied Advisers, threatened against Allied Advisers which might result in any material adverse change in the condition (financial or other), results of operations, business or prospects of Allied Advisers or which is required to be disclosed in the Registration Statement and the Prospectus. (vi) Except as described in or contemplated by the Registration Statement or the Prospectus, (A) there has not been any material adverse change in, or adverse development which materially affects, the condition (financial or other), results of operation, business or prospects, of Allied Advisers as of the date of the Prospectus from the information contained in Allied Advisers's Form 10-K filed with the Commission on March 29, 1996, and (B) there have been no transactions entered into by Allied Advisers that are material to Allied Advisers other than those in the ordinary course of business or that have not been described in such Form 10-K or a Form 8-K filed subsequent to March 29, 1996. (vii) Any advertising and sales literature prepared by Allied Advisers or submitted for review and approved by Allied Advisers and used by the Company in connection with the public offering and sale of the Shares complies with the Securities Act and the Rules and Regulations and does not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading. 2. Purchase of the Shares by the Underwriter. Subject to the terms and conditions and upon the basis of the representations and warranties herein set forth, the Company agrees to issue and sell to the Underwriter, and the Underwriter agrees to purchase at a price of $12.414 per Share the number of Shares set forth opposite the Underwriter's name in Schedule I - 7 - 8 hereto. The Underwriter agrees to offer the Shares to the public as set forth in the Prospectus. 3. Delivery of and Payment for Shares. Delivery of certificates for the Shares shall be made at the offices of Simpson Thacher & Bartlett, 425 Lexington Avenue, New York, New York (or such other places as may be mutually agreed upon), at 10:00 A.M., New York City time, on the third full Business Day following the date of this Agreement or on such later date as shall be determined by you and the Company (the "Closing Date"). Delivery of certificates for the Shares shall be made by or on behalf of the Company to you, for the account of the Underwriter, against payment of the purchase price therefor by certified or official bank checks payable in New York Clearing House funds to the order of and in the respective amounts owing to the Company or, if the day following the Closing Date is not a Business Day, by Federal Funds (immediately available funds). The certificates for the Shares shall be registered in such names and denominations as you shall have requested at least two full Business Days prior to the Closing Date, and shall be made available for checking and packaging in New York, New York or such other location as may be designated by you at least one full Business Day prior to the Closing Date. Time shall be of the essence, and delivery of certificates for the Shares at the time and place specified in this Agreement is a further condition to the obligations of the Underwriter. 4. Covenants. The Company covenants and agrees with the Underwriter that: (a) The Company shall comply with the provisions of and make all requisite filings with the Commission pursuant to Rules 497 and 430A of the Rules and Regulations and shall notify you promptly (in writing, if requested) of all such filings. The Company shall notify you promptly of any request by the Commission for any amendment of or supplement to the Registration Statement or the Prospectus or for additional information; the Company shall prepare and file with the Commission, promptly upon your request, any amendments or supplements to the Registration Statement or the Prospectus which, in your opinion, may be necessary or advisable in connection with the distribution of the Shares; and the Company shall not file any amendment or supplement to the Registration Statement or the Prospectus, which filing is not consented to by you after reasonable notice thereof, such consent not to be unreasonably withheld or delayed. The Company shall advise you promptly of the issuance by the Commission or any State or other regulatory body of any stop order or other order suspending the effectiveness of the Registration Statement, suspending or preventing the use of any Preliminary Prospectus or the Prospectus or suspending the qualification of the Shares for offering or sale in any - 8 - 9 jurisdiction, or of the institution of any proceedings for any such purpose; and the Company shall use its best efforts to prevent the issuance of any stop order or other such order and, should a stop order or other such order be issued, to obtain as soon as possible the lifting thereof. (b) The Company shall furnish to the Underwriter and counsel for the Underwriter a signed copy of the Registration Statement as originally filed and each amendment thereto filed with the Commission, including all consents and exhibits filed therewith, and shall furnish to the Underwriter such number of conformed copies of the Registration Statement, as originally filed and each amendment thereto (excluding exhibits other than this Agreement), the Prospectus and all amendments and supplements to any of such documents, in each case as soon as available and in such quantities as the Underwriter may from time to time reasonably request. (c) Within the time during which the Prospectus relating to the Shares is required to be delivered under the Securities Act, the Company shall comply with all requirements imposed upon it by the Securities Act, as now and hereafter amended, and by the Rules and Regulations, as from time to time in force, so far as is necessary to permit the continuance of sales of or dealings in the Shares as contemplated by the provisions hereof and by the Prospectus. If during such period any event occurs as a result of which the Prospectus as then amended or supplemented would include an untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in the light of the circumstances then existing, not misleading, or if during such period it is necessary to amend the Registration Statement or supplement the Prospectus to comply with the Securities Act, the Company shall promptly notify you and shall amend the Registration Statement or supplement the Prospectus (at the expense of the Company) so as to correct such statement or omission or to effect such compliance. (d) The Company shall take or cause to be taken all necessary action and furnish to whomever you may direct such information as may be required in qualifying the Shares for sale under the laws of such jurisdictions as you shall designate, and to continue such qualifications in effect for as long as may be necessary for the distribution of the Shares; except that in no event shall the Company be obligated in connection therewith to qualify as a foreign corporation or to execute a general consent to service of process. (e) The Company shall make generally available to its security holders (and shall deliver to the Underwriter), pursuant to Rule 158(a) or (b) under the Securities Act, as soon as practicable but in any event not later than 45 days after the end - 9 - 10 of its fiscal quarter in which the first anniversary date of the Effective Date occurs, an earnings statement satisfying the requirements of Section 11(a) of the Securities Act and covering a period of at least 12 consecutive months beginning after the Effective Date. (f) The Company shall not take, directly or indirectly, any action designed to cause or result in, or which might reasonably be expected to constitute, the stabilization or manipulation of the price of the shares of Common Stock to facilitate the sale or resale of the Shares. (g) The Company shall apply the net proceeds of the sale of the Shares as set forth in the Prospectus, and shall take such steps as shall be necessary to ensure that the Company shall continue to qualify as a "business development company" within the meaning of such term under the 1940 Act, and the rules and regulations thereunder. (h) Whether or not this Agreement becomes effective or is terminated or the sale of the Shares to the Underwriter is consummated, the Company shall pay or cause to be paid (A) all expenses (including stock transfer taxes) incurred in connection with the delivery to the Underwriter of the Shares, (B) all fees and expenses (including, without limitation, fees and expenses of the Company's accountants and counsel, but excluding fees and expenses of counsel for the Underwriter) in connection with the preparation, printing, filing, delivery and shipping of the Registration Statement (including the financial statements therein and all amendments and exhibits thereto), each Preliminary Prospectus, the Prospectus and any amendments or supplements to the foregoing, and any advertising or sales literature (other than the sales materials prepared by the Underwriter for internal use only), and the printing, delivery and shipping of this Agreement and Blue Sky Memoranda, (C) all filing fees and fees and disbursements of counsel to the Underwriter incurred in connection with the qualification of the Shares under state securities laws as provided in section 4(d) hereof, (D) the filing fee of the NASD, (E) the costs of quotation of the Shares in the Nasdaq National Market, (F) the cost of printing certificates representing the Shares, (G) the cost and charges of any transfer agent or registrar, and (H) all other costs and expenses incident to the performance of its obligations hereunder for which provision is not otherwise made in this Section. It is understood, however, that, except as provided in this Section and Sections 6 and 8 hereof, the Underwriter shall pay all of its own costs and expenses, including the fees of its counsel, stock transfer taxes due upon resale of any of the Shares by it and any advertising expenses incurred in connection with any offers it may make. If the sale of the Shares provided for herein is not consummated pursuant to Section 8 hereof by reason of acts of the Company which prevent - 10 - 11 this Agreement from becoming effective, or by reason of any failure, refusal or inability on the part of the Company to perform any agreement on its part to be performed or because any other condition of the Underwriter's obligations hereunder is not fulfilled or if the Underwriter shall decline to purchase the Shares for any reason permitted under this Agreement, the Company shall reimburse the Underwriter for all reasonable out-of-pocket disbursements (including fees and disbursements of counsel) incurred by the Underwriter in connection with any investigation or preparation made by it in respect of the marketing of the Shares or in contemplation of the performance by it of its obligations hereunder. (i) The Company shall continue to take such action as shall be necessary to cause the Shares to be approved for quotation in the Nasdaq National Market and to comply with the rules and regulations of the NASD with respect to such Shares. (j) During a period of five years from the Effective Date, the Company shall furnish to the Underwriter copies of all reports or other communications furnished to shareholders and copies of any reports or financial statements furnished to or filed with the Commission or any national securities exchange on which any class of securities of the Company is listed. 5. Conditions of Underwriter's Obligations. The obligations of the Underwriter hereunder are subject to the accuracy, as of the date hereof and the Closing Date (as if made on such Closing Date), of the representations and warranties of the Company and Allied Advisers contained herein, to the performance by the Company and Allied Advisers of their obligations hereunder and to the following additional conditions: (a) The Prospectus shall have been filed with the Commission in a timely fashion in accordance with Section 4(a) hereof, all post-effective amendments to the Registration Statement shall have become effective, all filings required by Rule 497 of the Rules and Regulations have been made and no such filings have been made without the consent of the Underwriter, such consent not to be reasonably withheld or delayed; no stop order suspending the effectiveness of the Registration Statement or any amendment or supplement thereto shall have been issued; no proceedings for the issuance of any such order shall have been initiated or threatened; and any request of the Commission for additional information (to be included in the Registration Statement or the Prospectus or otherwise) shall have been disclosed to you and complied with to your satisfaction. (b) The Underwriter shall not have been advised by the Company or shall have discovered and disclosed to the Company that the Registration Statement or the Prospectus, or any amendment or supplement thereto, contains an untrue statement of - 11 - 12 fact which, in your opinion or in the opinion of counsel for the Underwriter, is material, or omits to state a fact which, in your written opinion or in the opinion of counsel for the Underwriter, is material and is required to be stated therein or is necessary to make any statement therein not misleading. (c) On the Closing Date, there shall have been furnished to you the opinion (addressed to the Underwriter) of Sutherland, Asbill & Brennan, counsel for the Company, dated as of the Closing Date and in form and substance satisfactory to counsel for the Underwriter, to the effect that: (i) The Company has been duly organized and is validly existing as a corporation (or in the case of a partnership controlled by the Company, as a partnership) in good standing under the laws of the State of Maryland, with full power and authority to own or hold its properties and conduct its business as described in the Prospectus. (ii) To the best of such counsel's knowledge, the Company is not in violation of its articles of incorporation, bylaws or other governing documents, or in material default under any agreement, indenture or instrument known to such counsel. (iii) All of the outstanding shares of Common Stock have been, and the Shares upon issuance and delivery and payment therefor in the manner herein described, will be, duly authorized, validly issued, fully paid and nonassessable, with no personal liability attaching to the ownership thereof; there are no preemptive or other rights to subscribe for or to purchase, nor (except as disclosed in the Registration Statement and the Prospectus) any restriction upon the voting or transfer of, any shares of Common Stock pursuant to the Company's articles of incorporation, bylaws, other governing documents or any agreement or other instrument known to such counsel to which the company is a party or by which it may be bound; and, to the best of such counsel's knowledge, neither the filing of the Registration Statement nor the offering or sale of the Shares as contemplated by this Agreement gives rise to any rights, other than those which have been waived or satisfied, for or relating to the registration of any shares of Common Stock or - 12 - 13 other securities of the Company. The authorized, issued and outstanding capitalization of the Company as of March 31, 1996 is as set forth in the Prospectus, and the Common Stock conforms to the description thereof contained in the Prospectus. (iv) This Agreement, the Advisory Agreement, the Custody Agreements, and the Indemnification Agreement have each been duly authorized, executed and delivered by the Company; and this Agreement (assuming its due execution and delivery by you), the Advisory Agreement, the Custody Agreements, and the Indemnification Agreement each constitutes the valid and binding obligation of the Company and is enforceable against the Company in accordance with its terms (a) subject, as to enforcement, to bankruptcy, insolvency, reorganization and other laws of general applicability relating to or affecting creditors' rights and to general equity principles, and (b) except for rights to indemnity under this Agreement and the Advisory Agreement, to the extent that such rights may be limited by federal or state securities laws or the public policy underlying such laws. No consent, approval, authorization or order of any court, governmental agency or body or financial institution is required for the execution, delivery and performance of this Agreement, the Advisory Agreement, the Custody Agreements, or the Indemnification Agreement by the Company or the consummation by the Company of the transactions contemplated hereby or thereby, except such as have been obtained and such as may be required under applicable state securities laws in connection with the purchase and distribution of the Shares by the Underwriter. The execution, delivery and performance of this Agreement, the Advisory Agreement, the Custody Agreements, and the Indemnification Agreement by the Company and the consummation by the Company of the transactions contemplated hereby and thereby will not conflict with, result in the creation or imposition of any lien, charge, claim or encumbrance upon any property or asset of the Company pursuant to the terms of, result in a breach or violation by the Company of any of - 13 - 14 the terms or provisions of, or constitute a default by the Company under, any indenture, mortgage, deed of trust, loan agreement, lease or other agreement or instrument filed by the Company with the Commission or known to such counsel to which the Company is a party or to which it is bound or to which it or its property is subject, the articles of incorporation, bylaws or other governing documents of the Company, any statute, rule, administrative regulation, or, insofar as such counsel knows, any judgment, decree, order, rule or regulation of any court or governmental agency or body having jurisdiction over the Company or any of its property. (v) The Registration Statement and the Prospectus (except that no opinion need be expressed as to the financial statements or other financial or performance data contained therein, including, without limitation, the form or content of the "Fees and Expenses" table in the Prospectus) comply as to form in all material respects with the requirements of the Securities Act and the Rules and Regulations. The Registration Statement and all post-effective amendments thereto have become effective under the Securities Act and, to the best of such counsel's knowledge, no stop order suspending the effectiveness of the Registration Statement has been issued and no proceedings for that purpose have been instituted or are pending before or contemplated by the Commission and all filings required by Rule 497 of the Rules and Regulations have been made. (vi) All summaries in the Prospectus of statutes, regulations, legal or governmental proceedings, contracts and other documents accurately present the information required to be shown in order to make the statements made therein not misleading; and such counsel does not know of any contracts or documents required to be summarized or described therein or to be filed as exhibits thereto which are not so summarized, described or filed, nor does such counsel know of any pending or threatened litigation or any governmental proceeding, statute or regulation which would affect the subject - 14 - 15 matter of this Agreement or is required to be described in the Prospectus which is not so described. (vii) The information in the Prospectus under the caption "Tax Status," has been reviewed by such counsel, is correct in all respects and does not omit to state any material matter of law relating to the taxation of the Company and its shareholders, and that if the Company is operated in accordance with the statements made in the Prospectus, the Company will qualify as a regulated investment company, under Subchapter M of the Internal Revenue Code of 1986, as amended. (viii) The Company is a small business lending company approved by the Small Business Administration. (ix) The Company meets all requirements to qualify as a "business development company" as that term is defined in the 1940 Act. (x) The Shares are duly authorized for quotation in the Nasdaq National Market and a registration statement has been filed pursuant to Section 12 of the Exchange Act for such Shares and has been declared effective. Such opinion shall also contain a statement that such counsel has no reason to believe that (i) the Registration Statement, as of its Effective Date, or any amendment thereto, at the time it became effective, contained any untrue statement of a material fact or omitted to state any material fact required to be stated therein or necessary in order to make the statements therein not misleading, or (ii) the Prospectus or any supplement or amendment thereto on such Closing Date or at the time such Prospectus or supplement or amendment thereto was issued contains or contained any untrue statement of a material fact or omits or omitted to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. (d) On the Closing Date, there shall have been furnished to you the opinion (addressed to the Underwriter) of Sutherland, Asbill & Brennan, counsel for Allied Advisers, dated as of the Closing Date and in form and substance satisfactory to counsel for the Underwriter, to the effect that: - 15 - 16 (i) Allied Advisers has been duly incorporated and is validly existing as a corporation in good standing under the laws of the State of Maryland, with full power and authority to own, lease and operate its properties and conduct its business, and is duly qualified to do business and is in good standing in the District of Columbia. (ii) This Agreement and the Advisory Agreement have been duly authorized, executed and delivered by Allied Advisers and each complies with all applicable provisions of the Advisers Act; this Agreement (assuming its due execution and delivery by you), and the Advisory Agreement each constitutes the valid and binding obligation of Allied Advisers and is enforceable against Allied Advisers in accordance with its terms (a) subject, as to enforcement, to bankruptcy, insolvency, reorganization and other laws of general applicability relating to or affecting creditors' rights and to general equity principles, and (b) except for rights to indemnity under this Agreement and the Advisory Agreement, to the extent that such rights may be limited by federal or state securities laws or the public policy underlying such laws; the execution, delivery and performance of this Agreement and the Advisory Agreement by Allied Advisers will not conflict with, or result in the creation or imposition of any lien, charge or encumbrance upon any property or asset of Allied Advisers pursuant to the terms of, result in a breach or violation by Allied Advisers of any of the terms or provisions of, or constitute a default by Allied Advisers under, any agreement, indenture or instrument filed by the Company or Allied Advisers with the Commission or known to such counsel, to which Allied Advisers is a party or to which it is bound or to which it or its property is subject, or result in a violation of the corporate charter, bylaws or other governing documents of Allied Advisers or any statute, rule, administrative regulation, or, insofar as such counsel knows, any judgment, decree, order, rule or regulation of any court or governmental agency or body having jurisdiction over Allied Advisers or any of its property; and no consent, approval, - 16 - 17 authorization or order of, or filing or registration with, any court, governmental agency or body or financial institution is required for the execution, delivery and performance of this Agreement or the Advisory Agreement by Allied Advisers, except such as has been obtained and such as may be required under applicable state securities laws. (iii) Allied Advisers is duly registered with the Commission under the Advisers Act as an investment adviser and is not prohibited by the Advisers Act, or the rules and regulations under such act, from acting for the Company under the Advisory Agreement as contemplated by the Prospectus. (iv) Such counsel does not know of any litigation or any proceeding pending or threatened against Allied Advisers that could affect the subject matter of this Agreement or the Advisory Agreement or the registration or good standing of Allied Advisers with the Commission, which is required to be disclosed in the Prospectus which is not disclosed and correctly summarized therein. (v) To the best of such counsel's knowledge, Allied Advisers is not in violation of its corporate charter or bylaws, or in material default under any agreement, indenture or instrument. (vi) The description of Allied Advisers in the Registration Statement and the Prospectus does not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading. (e) There shall have been furnished to you a certificate, dated the Closing Date and addressed to you, signed by the Chairman of the Board or the President and by the Chief Financial Officer of the Company to the effect that: (i) the representations and warranties of the Company contained in this Agreement are true and correct, as if made at and as of the Closing Date, and the Company has complied with all the agreements and satisfied all the conditions on its part to be complied with or satisfied at or prior to the Closing Date; (ii) to the knowledge of such officers based upon due inquiry of appropriate personnel of the Commission, no stop order suspending - 17 - 18 the effectiveness of the Registration Statement has been issued, and no proceeding for that purpose has been initiated or threatened; (iii) the signers of said certificate have carefully examined the Registration Statement and the Prospectus, and any amendments or supplements thereto, and such documents (a) contain all statements and information required to be included therein, and (b) do not include any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading; and (iv) since the Effective Date there has occurred no event required to be set forth in an amendment or supplement to the Registration Statement or the Prospectus which has not been so set forth. (f) There shall have been furnished to you a certificate, dated the Closing Date and addressed to you, signed by the Chairman of the Board or the President of Allied Advisers to the effect that: (i) the representations and warranties of Allied Advisers contained in this Agreement are true and correct, as if made at and as of the Closing Date, and Allied Advisers has complied with all the agreements and satisfied all the conditions on its part to be complied with or satisfied at or prior to the Closing Date; (ii) the signer of said certificate has carefully examined the Registration Statement and the Prospectus, and any amendments or supplements thereto, and such documents (a) contain all statements and information required to be included therein concerning Allied Advisers, and (b) do not include any untrue statement of a material fact or omit to state any material fact required to be stated therein concerning Allied Advisers or necessary to make such statements not misleading; and (iii) since the Effective Date there has occurred no event concerning Allied Advisers required to be set forth in an amendment or supplement to the Registration Statement or the Prospectus which has not been so set forth. (g) Since the Effective Date, the Company shall not have become a party to or the subject of any litigation which is materially adverse to the Company, nor shall there have been a material adverse change in the general affairs, operations, business, prospects, key personnel, capitalization, financial condition or net worth of the Company, whether or not arising in the ordinary course of business, which loss, litigation or change, in your judgment, shall render it impractical or inadvisable to proceed with the payment for and delivery of the Shares. (h) On the Closing Date, you shall have received a letter of Matthews, Carter and Boyce, dated the Closing Date and addressed to you, confirming that they are independent certified public accountants within the meaning of the Securities Act and the Rules and Regulations and stating, as of the date of such letter (or, with respect to matters involving changes or developments since the respective dates as of which specified - 18 - 19 financial information is given in the Prospectus, as of a date not more than five days prior to the date of such letter), the conclusions and findings of such firm with respect to the financial information and other matters covered by its letter delivered to you concurrently with the execution of this Agreement and confirming the conclusions and findings set forth in such prior letter. (i) You shall have been furnished such additional documents and certificates as you or counsel for the Underwriter may reasonably request. (j) The Shares to be purchased on the Closing Date by the Underwriter shall have been approved for quotation in the Nasdaq National Market, and Shares of the same class of the Company's common stock are so quoted. All such opinions, certificates, letters and documents shall be in compliance with the provisions hereof only if they are satisfactory in form and substance to you and to counsel for the Underwriter. The Company shall furnish to you conformed copies of such opinions, certificates, letters and other documents in such number as you shall reasonably request. If any of the conditions specified in this Section 5 shall not have been fulfilled when and as required by this Agreement, the Agreement and all obligations of the Underwriter hereunder may be cancelled by you at, or at any time prior to, the Closing Date. Any such cancellation shall be without liability of the Underwriter to the Company. Notice of such cancellation shall be given to the Company in writing, or by telegraph or telephone and confirmed in writing. 6. Indemnification and Contribution. (a) The Company shall indemnify and hold harmless the Underwriter against any loss, claim, damage or liability (or any action in respect thereof), joint or several, to which the Underwriter may become subject, under the Securities Act or otherwise, insofar as such loss, claim, damage or liability (or action in respect thereof) arises out of or is based upon (i) any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement, any Preliminary Prospectus, the Prospectus or the Registration Statement as amended or supplemented or in any Blue Sky application or other document executed by the Company specifically for that purpose or based upon written information furnished by the Company filed in any state or other jurisdiction in order to qualify any or all of the Shares under the securities laws thereof (any such application, document or information being hereinafter referred to as a "Blue Sky Application"), (ii) the omission or alleged omission to state in the Registration Statement, any Preliminary Prospectus, the Prospectus or the Registration Statement as amended or supplemented or in any Blue Sky Application a material fact required to be stated therein or - 19 - 20 necessary to make the statements therein not misleading; or (iii) a breach of a representation warranty, or covenant made by the Company herein; and shall reimburse the Underwriter promptly after receipt of invoices from the Underwriter for any legal or other expenses as may reasonably be incurred by the Underwriter in connection with investigating, preparing to defend or defending against or appearing as a third-party witness in connection with any such loss, claim, damage, liability or action, notwithstanding the possibility that payments for such expenses might later be held to be improper, in which case such payments shall be promptly refunded; provided, however, that the Company shall not be liable under this paragraph 6(a) in any such case to the extent, but only to the extent, that any such loss, claim, damage, liability or action arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission made in reliance upon and in conformity with written information, other than tax-related information, furnished to the Company by or on behalf of the Underwriter specifically for use in the preparation of the Registration Statement, any Preliminary Prospectus, the Prospectus or the Registration Statement as amended or supplemented, or any Blue Sky Application. (b) Allied Advisers shall indemnify and hold harmless the Underwriter against any loss, claim, damage or liability (or any action in respect thereof), joint or several, to which the Underwriter may become subject, under the Securities Act or otherwise, insofar as such loss, claim, damage or liability (or action in respect thereof) arises out of or is based upon (i) any untrue statement or alleged untrue statement of a material fact with respect to itself contained in the Registration Statement, any Preliminary Prospectus, the Prospectus or the Registration Statement as amended or supplemented or in any document executed by Allied Advisers specifically for that purpose or based upon written information furnished by Allied Advisers, (ii) the omission or alleged omission to state in the Registration Statement, any Preliminary Prospectus, the Prospectus or the Registration Statement as amended or supplemented a material fact with respect to itself required to be stated therein or necessary to make the statements therein not misleading, or (iii) any breach by Allied Advisers of any representation, warranty or covenant made herein by it; and shall reimburse the Underwriter promptly after receipt of invoices from the Underwriter for any legal or other expenses as may reasonably be incurred by the Underwriter in connection with investigating, preparing to defend or defending against or appearing as a third-party witness in connection with any such loss, claim, damage, liability or action, notwithstanding the possibility that payments for such expenses might later be held to be improper, in which case such payments shall be promptly refunded; provided, however, that Allied Advisers shall not be liable under this paragraph 6(b) in any such case to the extent, but only to the extent, that any - 20 - 21 such loss, claim, damage, liability or action arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission made in reliance upon and in conformity with written information furnished to Allied Advisers by or on behalf of the Underwriter specifically for use in the preparation of the Registration Statement, any Preliminary Prospectus, the Prospectus or the Registration Statement as amended or supplemented, and provided further that Allied Advisers shall be liable to such indemnified party in any such case only to the extent that the Company fails to indemnify and hold harmless such indemnified party pursuant to paragraph 6(a). (c) The Underwriter shall indemnify and hold harmless the Company and Allied Advisers against any loss, claim, damage or liability (or any action in respect thereof) to which the Company may become subject, under the Securities Act or otherwise, insofar as such loss, claim, damage or liability (or action in respect thereof) arises out of or is based upon (i) any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement, any Preliminary Prospectus, the Prospectus or the Registration Statement as amended or supplemented, or in any Blue Sky Application, or (ii) the omission or alleged omission to state in the Registration Statement, any Preliminary Prospectus, the Prospectus or the Registration Statement as amended or supplemented, or in any Blue Sky Application a material fact required to be stated therein or necessary to make the statements therein not misleading and shall reimburse the Company or Allied Advisers promptly after receipt of invoices from the Company or Allied Advisers for any legal or other expenses reasonably incurred by the Company or Allied Advisers in connection with investigating, preparing to defend or defending against or appearing as a third-party witness in connection with any such loss, claim, damage, liability or action notwithstanding the possibility that payments for such expenses might later be held to be improper, in which case such payments shall be promptly refunded; provided, however, that such indemnification or reimbursement shall be available in each such case to the extent, but only to the extent, that such untrue statement or alleged untrue statement or omission or alleged omission was made in reliance upon and in conformity with written information furnished to the Company or Allied Advisers by or on behalf of the Underwriter specifically for use in the preparation thereof. (d) Promptly after receipt by any indemnified party under subsections (a), (b) or (c) above of notice of any claim or the commencement of any action, the indemnified party shall, if a claim in respect thereof is to be made against the indemnifying party under such subsection, notify the indemnifying party in writing of the claim or the commencement of that action; provided, however, that the failure so to notify the indemnifying party shall not relieve it from any liability which it may have - 21 - 22 under this Section 6 except to the extent that it has been prejudiced in any material respect by such failure or from any liability which it may have to an indemnified party otherwise than under this Section 6. If any such claim or action shall be brought against any indemnified party, and it shall notify the indemnifying party thereof, the indemnifying party shall be entitled to participate therein and, to the extent that it wishes, jointly with any other similarly notified indemnifying party, to assume the defense thereof with counsel reasonably satisfactory to the indemnified party. After notice from the indemnifying party to the indemnified party of its election to assume the defense of such claim or action, the indemnifying party shall not be liable to the indemnified party under such subsection for any legal or other expenses subsequently incurred by the indemnified party in connection with the defense thereof other than reasonable costs of investigation; except that the Underwriter shall have the right to employ counsel to represent it if it is subject to liability arising out of any claim in respect of which indemnity may be sought by the Underwriter against the Company or Allied Advisers under such subsection if, in your reasonable judgement, it is advisable for you to be represented by separate counsel, and in that event the fees and expenses of such separate counsel shall be paid by the Company or Allied Advisers. (e) If the indemnification provided for in this Section 6 is unavailable in whole or in part to hold harmless an indemnified party under subsections (a), (b) or (c) above, then each indemnifying party shall, in lieu of indemnifying such indemnified party, contribute to the amount paid or payable by such indemnified party as a result of the losses, claims, damages or liabilities referred to in subsections (a), (b) or (c) above (i) in such proportion as is appropriate to reflect the relative benefits received by the Company and Allied Advisers on the one hand and the Underwriter on the other from the offering of the Shares or (ii) if the allocation provided by clause (i) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the Company and Allied Advisers on the one hand and the Underwriter on the other in connection with the statements or omissions that resulted in such losses, claims, damages or liabilities, or actions in respect thereof, as well as any other relevant equitable considerations. The relative benefits received by the Company and Allied Advisers on the one hand and the Underwriter on the other shall be deemed to be in the same proportion as the total net proceeds from the offering of the Shares (before deducting expenses) received by the Company bear to the total underwriting discounts and commissions received by the Underwriter, in each case as set forth in the supplement dated July __, 1996 to the Prospectus. Relative fault shall be determined by reference to, among other things, whether the - 22 - 23 untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company or Allied Advisers or the Underwriter and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such untrue statement or omission. The Company and Allied Advisers and the Underwriter agree that it would not be just and equitable if contributions pursuant to this subsection (e) were to be determined by pro rata allocation or by any other method of allocation which does not take into account the equitable considerations referred to in the first sentence of this subsection (e). The amount paid by an indemnified party as a result of the losses or claims, damages or liabilities (or actions in respect thereof) referred to in the first sentence of this subsection (e) shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in connection with investigation, preparing to defend or defending against any action or claim which is the subject of this subsection (e). Notwithstanding the provisions of this subsection (e), the Underwriter shall not be required to contribute any amount in excess of the amount by which the total price at which the Shares underwritten by it and distributed to the public were offered to the public exceeds the amount of any damages which the Underwriter has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. Each party entitled to contribution agrees that, upon the service of a summons or other initial legal process upon it in any action instituted against it for which contribution may be sought, it shall promptly give written notice of such service to the party or parties from whom contribution may be sought. However, the omission so to notify such party or parties of any such service shall not relieve such party or parties from any obligation it or they may have hereunder or otherwise (except as specifically provided in this subsection (e)). (f) The obligations of the Company and Allied Advisers under this Section 6 shall be in addition to any liability which the Company and Allied Advisers may otherwise have, and shall extend, upon the same terms and conditions, to each person, if any, who controls the Underwriter within the meaning of the Securities Act; and the obligations of the Underwriter under this Section 6 shall be in addition to any liability that the Underwriter may otherwise have, and shall extend, upon the same terms and conditions, to each director of the Company and Allied Advisers (including any person who, with his or her consent, is named in the Registration Statement as about to become a director of the Company), to each Officer of the Company who has signed the Registration Statement, to each of the officers of Allied - 23 - 24 Advisers and to each person, if any, who controls the Company or Allied Advisers within the meaning of the Securities Act. 7. Effective Date and Termination. (a) This Agreement shall become effective at 11:00 A.M., New York City time, on the first full Business Day following the date hereof or at such earlier time after the Registration Statement becomes effective as you shall first release the Shares for sale to the public. You shall notify the Company immediately after you have taken any action which causes this Agreement to become effective. Until this Agreement is effective, it may be terminated by the Company by giving notice as hereinafter provided to you, or by you by giving notice as hereinafter provided to the Company, except that the provisions of Section 4(h) and Section 6 shall at all times be effective. For purposes of this Agreement, the release of the Shares for sale to the public shall be deemed to have been made when you release, by telegram or otherwise, firm offers of the Shares or release for publication a newspaper advertisement relating to the Shares, whichever occurs first. (b) Until the Closing Date, this Agreement may be terminated by you by giving notice as hereinafter provided to the Company if (i) the Company shall have failed, refused or been unable, at or prior to the Closing Date, to perform any agreement on its part to be performed hereunder, (ii) any other condition of the Underwriter's obligation hereunder is not fulfilled, (iii) trading in securities generally on the New York Stock Exchange, the American Stock Exchange or the Nasdaq National Market shall have been suspended or minimum prices shall have been established on either of such exchanges or such system by the Commission or such exchange or other regulatory body or governmental authority having jurisdiction, (iv) a banking moratorium is declared by either Federal or New York State authorities, (v) the United States becomes engaged in hostilities or there is an escalation of hostilities involving the United States or there is a declaration of a national emergency or war by the United States, or (vi) there shall have taken place such a material adverse change in general economic, political or financial conditions, or the effect of international conditions on the financial markets in the United States shall be such, as to make it inadvisable or impracticable, in the judgment of a majority in interest of the Underwriter, to proceed with the delivery of the Shares. Any termination of this Agreement pursuant to this Section 8 shall be without liability on the part of the Company or the Underwriter, except as otherwise provided in Sections 4(h) and 6 hereof. Any notice referred to above may be given at the address specified in Section 10 hereof in writing or by facsimile, telegraph or telephone, and if by facsimile, telegraph or telephone, shall be immediately confirmed in writing. - 24 - 25 8. Survival of Certain Provisions. The agreements contained in Section 6 hereof and the representations, warranties and agreements of the Company and Allied Advisers contained in Sections 1 and 4 hereof shall survive the delivery of the Shares to the Underwriter hereunder and shall remain in full force and effect, regardless of any termination or cancellation of this Agreement or any investigations made by or on behalf of any indemnified party. 9. Notices. Except as otherwise provided in the Agreement, (a) whenever notice is required by the provisions of this Agreement to be given to the Company or Allied Advisers, such notice shall be in writing or by facsimile addressed to the Company c/o Allied Advisers, or to Allied Advisers itself, at 1666 K Street, N.W., Suite 901, Washington, D.C. 20006 Attention: David Gladstone, facsimile: (202) 659-2053; and (b) whenever notice is required by the provisions of this Agreement to be given to the Underwriter, such notice shall be in writing or by facsimile addressed to Lehman Brothers Inc., Three World Financial Center, New York, New York 10285 Attention: Syndicate Department, facsimile: (212) 528-6588. 10. Information Furnished by Underwriter. The Underwriter confirms that the statements set forth in the fourth, fifth and tenth paragraphs of the supplement dated July __, 1996 to the Prospectus, insofar as it relates to the distribution of the Shares by the Underwriter, constitute the written information furnished by or on behalf of the Underwriter referred to in paragraph (a)(ii) of Section 1 hereof and in paragraphs (a), (b) and (c) of Section 6 hereof. 11. Parties. This Agreement shall inure to the benefit of and be binding upon the Underwriter, the Company and Allied Advisers, and their respective successors. This Agreement and the terms and provisions hereof are for the sole benefit of only those persons, except that (a) the representations, warranties, indemnities and agreements of the Company and Allied Advisers contained in this Agreement shall also be deemed to be for the benefit of the person or persons, if any, who controls the Underwriter within the meaning of Section 15 of the Securities Act and (b) the indemnity agreement of the Underwriter contained in Section 6 hereof shall be deemed to be for the benefit of directors of the Company (including any individuals identified in the Registration Statement as Directors of the Company but not yet elected as such on the date hereof), officers of the Company who signed the Registration Statement, any person controlling the Company or Allied Advisers and the Directors of Allied Advisers. Nothing in this Agreement shall be construed to give any person, other than the persons referred to in this paragraph, any legal or equitable right, remedy or claim under or in respect of this Agreement or any provision contained herein. - 25 - 26 12. Definition of "Business Day". For purposes of this Agreement, "Business Day" means any day on which both the New York Stock Exchange, Inc. and banks in New York are open for business. 13. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of New York. 14. Counterparts. This Agreement may be signed in one or more counterparts, each of which shall constitute an original and all of which together shall constitute one and the same agreement. - 26 - 27 Please confirm, by signing and returning to us two counterparts of this Agreement, that the foregoing correctly sets forth the Agreement among the Company, Allied Advisers and the Underwriter. Very truly yours, ALLIED CAPITAL LENDING CORPORATION By: --------------------------------------- Katherine C. Marien President ALLIED CAPITAL ADVISERS, INC. By: --------------------------------------- Joan Sweeney President Confirmed and accepted as of the date first above mentioned LEHMAN BROTHERS, INC. By: ------------------------------------- Name: Title: - 27 - 28 SCHEDULE I
Underwriter Number of Shares ----------- ---------------- Lehman Brothers Inc. 174,358
- 28 - EX-99.2N 3 CONSENT OF MATTHEWS, CARTER & BOYCE. 1 EXHIBIT n Matthews, Carter and Boyce A Professional Corporation Allied Capital Lending Corporation Washington, DC 20006 We hereby consent to the use in the Prospectus incorporated by reference into this Post-Effective Amendment No. 1 to the Registration Statement on Form N-2 (File No. 333-02185), in the form in which it becomes effective, of our report dated February 2, 1996 relating to the financial statements of Allied Capital Lending Corporation for the years ended December 31, 1995, 1994 and 1993, which appear in such Prospectus. We also consent to the reference to us under the headings "Financial Highlights" and "Reports and Independent Accountants" in such Prospectus. /s/ Matthews, Carter and Boyce McLean, Virginia July 9, 1996 Certified Public 8200 Greensboro Drive, Suite 1000 Tel: 703-761-4600 Accountants McLean, Virginia 22102-3864 Fax: 703-761-3139 EX-99.2S.2 4 POWER OF ATTORNEY. 1 EXHIBIT s.2 POWER OF ATTORNEY The undersigned Director of Allied Capital Lending Corporation, a Maryland corporation (the "Company"), hereby constitutes and appoints David Gladstone, Katherine C. Marien, and Jon A. DeLuca and each of them (with full power to each of them to act alone), his true and lawful attorney-in-fact and agent, with full power of substitution to each, for him and on his behalf and in his name, place, and stead, to execute and file any of the documents referred to below relating to registration under the Securities Act of 1933, as amended (the "1933 Act"), of the offer and sale of shares of common stock newly issued or reissued by the Company. Such documents shall include, but shall not be limited to, registration statements on any form or forms under the 1933 Act, and any and all amendments and supplements thereto, with all exhibits and all instruments necessary or appropriate in connection therewith, each of said attorneys-in-fact and agents and his or her substitutes being empowered to act with or without the others or other, and to have full power and authority to do or cause to be done in the name and on behalf of the undersigned each and every act and thing requisite and necessary or appropriate with respect thereto to be done in and about the premises in order to effectuate the same, as fully to all intents and purposes as the undersigned might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, may do or cause to be done by virtue thereof. IN WITNESS WHEREOF, the undersigned has hereunto set his hand, this 27th day of June, 1996. /s/ R B Martin --------------------------- Robin B. Martin EX-27 5 FINANCIAL DATA SCHEDULE.
6 THIS SCHEDULE CONTAINS SUMMARY UNAUDITED FINANCIAL INFORMATION EXTRACTED FROM ALLIED CAPITAL LENDING CORPORATION AND SUBSIDIARY'S CONSOLIDATED BALANCE SHEET AS OF MARCH 31, 1996 AND CONSOLIDATED STATEMENTS OF OPERATIONS, CHANGES IN NET ASSETS AND CASH FLOWS FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS INCORPORATED INTO PART A OF THIS POST-EFFECTIVE AMENDMENT NO. 1 TO THE COMPANY'S REGISTRATION STATEMENT ON FORM N-2 (THE "REGISTRATION STATEMENT") BY REFERENCE FROM PAGES F-1 THROUGH F-14 OF THE PROSPECTUS INCLUDED IN PRE-EFFECTIVE AMENDMENT NO. 2 TO THE REGISTRATION STATEMENT, AS FILED WITH THE COMMISSION ON APRIL 29, 1996 (ACCESSION NO. 0000950133-96-000425). 1,000 3-MOS DEC-31-1996 JAN-01-1996 MAR-31-1996 44,532 44,356 703 638 5,467 51,164 0 0 18,199 18,199 0 33,318 4,389 4,385 (177) 0 0 0 (176) 32,965 0 1,591 662 842 1,411 (60) (21) 1,330 0 1,315 0 0 0 0 4 81 (213) 0 0 0 314 396 842 32,925 7.50 0.32 (0.02) 0.30 0 0 7.51 0 17,461 3.98
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