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EXHIBIT 10.3
UNSECURED LINE OF CREDIT AGREEMENT
THIS UNSECURED LINE OF CREDIT AGREEMENT, dated as of the 20th day of
December, 1996, is made by and between ALLIED CAPITAL CORPORATION, a Maryland
corporation ("Allied"), ALLIED INVESTMENT CORPORATION, a Maryland corporation
("AIC"), and ALLIED CAPITAL FINANCIAL CORPORATION, a Maryland corporation
("ACFC") (individually, a "Borrower" and collectively, the "Borrowers"), and
XXXXX BANK N.A., a national banking association (the "Bank"). The Bank has
agreed to extend credit to the Borrowers and the Borrowers have agreed to
obtain credit from the Bank on the terms and conditions set forth in this
Agreement. Accordingly, for good and valuable consideration, the receipt and
sufficiency of which are acknowledged, the Bank and the Borrowers agree as
follows:
ARTICLE 1
DEFINITIONS AND ACCOUNTING TERMS
SECTION 1.01. DEFINED TERMS. As used in this Agreement, the following
terms shall have the meanings assigned to them below, which meanings shall be
equally applicable to the singular and plural forms of the terms defined.
"ACFC NOTE" means a promissory note in the original principal amount
of Ten Million Dollars and no/100 ($10,000,000.00) evidencing the obligation of
ACFC to pay the principal amount of its borrowings hereunder, together with
interest thereon, as the same may be amended, modified or supplemented from
time to time. The term "ACFC Note" also shall include any promissory note
executed and delivered by ACFC in connection with an extension of the
Termination Date, an increase in the Maximum Amount or any other amendment to
this Agreement.
"ADC" means Allied Development Corporation, a District of Columbia
corporation.
"ADJUSTED SHAREHOLDERS' EQUITY" means, with respect to Allied,
Consolidated Shareholders' Equity less investments in AIC, ACFC and ADC as
shown on the equity method of accounting for unconsolidated subsidiaries in
accordance with GAAP.
"ADJUSTED TOTAL LIABILITIES" means, with respect to Allied, direct
liabilities of Allied only as shown on the equity method of accounting for
unconsolidated subsidiaries in accordance with GAAP.
"AFFILIATE" means with respect to any specified Person, any other
Person which, directly or indirectly, through one or more intermediaries,
controls or is controlled by, or is under common control with, such specified
Person. The term "control" means the possession, directly or indirectly, of the
power to direct or cause the direction of management and policies of a Person,
whether through ownership of common stock, by contract or otherwise.
"AGREEMENT" means this Unsecured Line of Credit Agreement, as the same
may be amended, modified or supplemented from time to time.
"AIC NOTE" means a promissory note in the original principal amount of
Ten Million Dollars and no/100 ($10,000,000.00) evidencing the obligation of
AIC to pay the principal amount of its
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borrowings hereunder, together with interest thereon, as the same may be
amended, modified or supplemented from time to time. The term "AIC Note" also
shall include any promissory note executed and delivered by AIC in connection
with an extension of the Termination Date, an increase in the Maximum Amount or
any other amendment to this Agreement.
"ALLIED NOTE" means a promissory note in the original principal amount
of Ten Million Dollars and no/100 ($10,000,000.00) evidencing the obligation of
Allied to pay the principal amount of its borrowings hereunder, together with
interest thereon, as the same may be amended, modified or supplemented from
time to time. The term "Allied Note" also shall include any promissory note
executed and delivered by Allied in connection with an extension of the
Termination Date, an increase in the Maximum Amount or any other amendment to
this Agreement.
"BUSINESS DAY" means any day other than a Saturday, Sunday or other
day on which commercial banks are authorized or required to close under the
laws of the District of Columbia.
"CAPITAL LEASE" means all leases which have been or should be
capitalized on the books of the lessee in accordance with GAAP.
"CONSOLIDATED" means, with reference to any term defined herein, that
term as applied to Allied and its Subsidiaries, consolidated in accordance with
GAAP.
"DEFAULT" means any event which with the giving of notice, the lapse
of time, or both, would constitute an Event of Default.
"EVENT OF DEFAULT" means any of the events specified as an "Event of
Default" under this Agreement, provided that any requirement for the giving of
notice, the lapse of time, or both, or any other condition, has been satisfied.
"GAAP" means generally accepted accounting principles consistently
applied.
"GUARANTY" means the guaranty agreement from Allied unconditionally
guaranteeing to the Bank the full repayment of the AIC Note and the ACFC Note
and all other obligations of AIC and ACFC hereunder, as the same may be
amended, modified or supplemented from time to time.
"INDEBTEDNESS" means (1) indebtedness or liability for borrowed money;
(2) obligations evidenced by bonds, debentures, notes, or other similar
instruments; (3) obligations for the deferred purchase price of property or
services (including trade obligations); (4) obligations as lessee under Capital
Leases; (5) current liabilities in respect of unfunded vested benefits under
Plans covered by ERISA; (6) obligations under letters of credit; (7)
obligations under acceptance facilities; (8) all guaranties, endorsements
(other than for collection or deposit in the ordinary course of business), and
other contingent obligations to purchase, to provide funds for payment, to
supply funds to invest in any Person, or otherwise to assure a creditor against
loss; and (9) obligations secured by any Liens, whether or not the obligations
have been assumed.
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"INVESTMENTS" means all debt or equity securities or share,
participation, or other interest in any Person, which is, or is of a type,
dealt in or traded on financial markets, or which is recognized in any area in
which it is issued or dealt in as a medium for investment.
"LETTER OF CREDIT" means a letter of credit issued by the Bank on
behalf of a Borrower as described below in Section 2.05.
"LIEN" means any mortgage, deed of trust, pledge, security interest,
hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or
other), or preference, priority, or other security agreement or preferential
arrangement, charge, or encumbrance of any kind or nature whatsoever
(including, without limitation, any conditional sale or other title retention
agreement, any financing lease having substantially the same economic effect as
any of the foregoing, and the filing of any financing statement under the
Uniform Commercial Code or comparable law of any jurisdiction to evidence any
of the foregoing).
"LOAN DOCUMENTS" means this Agreement, the Notes, the Guaranty, and
any other document now or hereafter executed or delivered in connection with
the Obligations in evidence thereof or as security therefor, including, without
limitation, any life insurance assignment, pledge agreement, security
agreement, deed of trust, mortgage, promissory note or subordination agreement.
"LOANS" means the loans to be made to the Borrowers by the Bank
pursuant to this Agreement and the Letters of Credit.
"MAXIMUM AMOUNT" means (i) with respect to all Loans at any time
outstanding, Ten Million Dollars and no/100 ($10,000,000.00), and (ii) with
respect to all Letters of Credit at any time outstanding, One Million, Five
Hundred Thousand Dollars and no/100 ($1,500,000.00), each as may be reduced
from time to time pursuant to Section 2.01(d) of this Agreement.
"NET INCOME" means income after deduction of all expenses, taxes and
other proper charges, determined in accordance with GAAP and shall exclude all
realized and unrealized gains or losses on Investments.
"NOTES" means the Allied Note, the AIC Note and the ACFC Note.
"OBLIGATIONS" means the Loans, the Notes, all Indebtedness and
obligations of any Borrower under this Agreement and the other Loan Documents,
as well as all other Indebtedness of such Borrower to the Bank, now existing or
hereafter arising, of every kind and description, whether or not evidenced by
notes or other instruments, and whether such Indebtedness is direct or
indirect, fixed or contingent, liquidated or unliquidated, due or to become
due, secured or unsecured, joint, several or joint and several, related or
unrelated to the Loans, similar or dissimilar to the Indebtedness arising out
of this Agreement, of the same or a different class of Indebtedness as the
Indebtedness arising out of this Agreement, including, without limitation, any
overdrafts in any deposit account maintained by such Borrower with the Bank,
all obligations of such Borrower with respect to Letters of Credit, any
Indebtedness of such Borrower that is assigned to the Bank and any Indebtedness
of such Borrower to any assignee of this Agreement.
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"PERSON" means an individual, partnership, corporation, business
trust, joint stock company, trust, unincorporated association, joint venture,
governmental authority or other entity of whatever nature.
"SHAREHOLDERS' EQUITY" means, at any date with respect to any Person,
shareholders' equity as computed in accordance with GAAP and reported in the
financial statements of such Person delivered to the Bank.
"SUBSIDIARY" means a corporation of which shares of stock having
ordinary voting power to elect a majority of the board of directors or other
managers of such corporation are at the time owned, or the management of which
is otherwise controlled, directly or indirectly, through one or more
intermediaries, or both, by any Person.
"TERMINATION DATE" means September 30, 1998, and any extension or
extensions thereof granted by the Bank in its sole discretion.
"TOTAL INTEREST EXPENSE" means, for any period with respect to any
Person, the aggregate amount of interest incurred during such period on all
Indebtedness of such Person outstanding during all or any part of such period,
including any fees incurred in connection with such Indebtedness.
"TOTAL LIABILITIES" means, with respect to any Person, the aggregate
amount of all liabilities of such Person (including tax and other proper
accruals), computed in accordance with GAAP.
SECTION 1.02. ACCOUNTING TERMS. All accounting terms used herein which
are not otherwise expressly defined in this Agreement shall have the meanings
respectively given to them in accordance with GAAP in effect on the date of
this Agreement. Except as otherwise provided herein, all financial computations
made pursuant to this Agreement shall be made in accordance with GAAP and all
balance sheets and other financial statements shall be prepared in accordance
with GAAP. Except as otherwise provided herein, whenever reference is made in
any provision of this Agreement to a balance sheet or other financial statement
or financial computation with respect to Allied, such terms shall mean a
consolidated balance sheet or other financial statement or financial
computation, as the case may be.
ARTICLE 2
TERMS OF THE LOANS
SECTION 2.01. AMOUNT AND BORROWING PROCEDURE.
(a) Subject to the terms and conditions of this Agreement, Allied,
AIC, and ACFC may, from time to time, until the Termination Date request Loans
from the Bank as provided herein in an aggregate principal amount under all
three of the Notes not to exceed at any one time outstanding the Maximum Amount
and the Bank will make such Loans on the terms provided herein and in the
Notes. Up to the aggregate Maximum Amount, Allied, AIC, and ACFC may borrow,
repay without penalty and re-borrow hereunder from the date of this Agreement
until the Termination Date.
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(b) The unpaid principal balance of the Loans shall bear interest as
provided in the Notes.
(c) The respective obligations of the Borrowers to repay the Loans,
together with interest thereon, shall be evidenced by the Notes. The unpaid
principal balance of the Notes shall be payable on the Termination Date
together with all interest accrued and unpaid.
(d) The Borrowers may terminate or reduce the credit facility provided
for in Section 2.01(a) of this Agreement in whole or in part by giving at least
fifteen (15) Business Days' prior written notice of such termination or
reduction to the Bank. The termination or reduction of the credit facility
provided for in Section 2.01(a) of this Agreement shall not affect the rights
of the Bank with respect to any Obligations arising prior or subsequent to such
termination or reduction and the provisions of this Agreement shall remain in
full force and effect until the Obligations have been fully and completely paid
and discharged.
(e) The Borrowers and the Bank from time to time may agree to extend
the Termination Date or increase the amount of credit to be provided under this
Agreement, or both. During any such periods of extension, the remaining terms
and conditions of this Agreement shall remain in full force and effect, and the
Borrowers shall execute and deliver any amendments or modifications to the Loan
Documents as the Bank may require in connection with any such extension or
increase. Nothing in this Section 2.01(e) shall obligate the Bank to grant such
extensions or to increase the amount of credit provided under this Agreement.
(f) Notwithstanding any other provision herein or in any of the Loan
Documents, the Borrowers agree that during each calendar year, there shall be a
period of no less than sixty (60) consecutive days when no Loans are
outstanding.
SECTION 2.02. FEES. Allied agrees to pay to the Bank, in consideration
of its commitment to make the Loans, an annual fee of one eighth of one percent
(0.125%) per annum of the Maximum Amount, payable on each anniversary of the
date of this Agreement until the Termination Date. In addition, the Borrowers
agree to pay to the Bank, in consideration of its agreement to make the Loans,
an unused commitment fee of one eighth of one percent (0.125%) per annum of the
average daily amount of the difference between the Maximum Amount and the
aggregate unpaid principal amount of the Loans outstanding on each day during
the preceding quarter. The fee shall commence to accrue as of the date of this
Agreement and shall cease to accrue on the Termination Date and shall be paid
quarterly in arrears on last Business Day of March, June, September or December
and on the Termination Date, commencing with the first such date after the date
of this Agreement. If on the Termination Date the Bank has received an amount
as a facility fee greater than that accrued under this Section 2.02, then such
amount shall be applied to the amount due under the Notes or if no amount is
then due the Bank shall pay such amount to the Borrowers.
SECTION 2.03. PAYMENTS AND COMPUTATIONS. All payments due under this
Agreement (including any payment or prepayment of principal, interest, fees and
other charges) or with respect to the Notes or the Loans shall be made in
lawful money of the United States of America, in immediately available funds,
to the Bank at its office at 000 00xx Xxxxxx, X.X., Xxxxxxxxxx, X.X. 00000, or
at such other place as the Bank may designate, and shall be applied first to
accrued fees, next to accrued late charges, next to accrued interest and then
to principal. If any payment of principal, interest or fees is due on a day
which is not a Business Day, then the due date will
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be extended to the next succeeding full Business Day and interest and fees will
be payable with respect to the extension. Upon the occurrence of an Event of
Default and during the continuation of such Event of Default, interest shall
accrue on the Loans at a per annum rate as provided in the Notes for such
event.
SECTION 2.04. LOAN ADVANCE PROCEDURES. Allied, AIC, and ACFC may at
any time or from time to time request a Loan provided that after such amount is
loaned the aggregate amount of all Loans shall not exceed the Maximum Amount.
Such request shall state the date on which the Loan is to be made which shall
be not less than one (1) Business Day after the receipt of such request by
Bank.
SECTION 2.05. LETTER OF CREDIT FACILITY. Subject to the terms of this
Agreement, Bank will issue standby letters of credit (each a "Letter of
Credit") on behalf of Allied, AIC, or ACFC. At no time, however, shall the
total face amount of all Letters of Credit outstanding, less any partial draws
paid under the Letters of Credit, exceed the Maximum Amount. Upon Bank's
request, Allied, AIC, or ACFC promptly shall pay to Bank issuance fees and such
other fees, commissions, costs, and any out-of-pocket expenses charged or
incurred by Bank with respect to any Letter of Credit. The commitment by Bank
to issue Letters of Credit shall, unless earlier terminated in accordance with
the terms of this Agreement, automatically terminate on the Termination Date
and no Letter of Credit shall expire on a date which is after the Termination
Date. Each Letter of Credit shall be in form and substance satisfactory to Bank
and in favor of beneficiaries satisfactory to Bank, provided that Bank may
refuse to issue a Letter of Credit due to the nature of the transaction or its
terms or in connection with any transaction where Bank, due to the beneficiary
or the nationality or residence of the beneficiary, would be prohibited by any
applicable law, regulation, or order from issuing such Letter of Credit. Prior
to the issuance of each Letter of Credit, and in all events prior to any daily
cutoff time Bank may have established for purposes thereof, Allied, AIC, or
ACFC shall deliver to Bank a duly executed form of Bank's standard form of
letter of credit reimbursement agreement and application for issuance of letter
of credit with proper insertions.
SECTION 2.06. USE OF PROCEEDS. The proceeds of the Loans hereunder
shall be used by the Borrowers for general corporate purposes and the obtaining
of Letters of Credit. The Borrowers will not, directly or indirectly, use any
part of such proceeds for the purpose of purchasing or carrying any margin
stock within the meaning of Regulation U of the Board of Governors of the
Federal Reserve System or to extend credit to any Person for the purpose of
purchasing or carrying any such margin stock, or for any purpose which
violates, or is inconsistent with, Regulation X of such Board of Governors.
ARTICLE 3
CONDITIONS PRECEDENT
SECTION 3.01. CONDITION PRECEDENT TO INITIAL LOAN. The obligation of
the Bank to make the initial Loan to any Borrower is subject to the condition
precedent that the Bank shall have received on or before the day of such Loan
each of the following, in form and substance satisfactory to the Bank and its
counsel:
(1) NOTES. The Notes duly executed by the Borrowers;
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(2) GUARANTY. The Guaranty duly executed by Allied;
(3) EVIDENCE OF ALL CORPORATE ACTION BY THE BORROWERS. Certified (as
of the date of this Agreement) copies of all corporate action taken by the
Borrowers, including resolutions of its Board of Directors, authorizing the
execution, delivery, and performance of the Loan Documents to which it is a
party and each other document to be delivered pursuant to this Agreement;
(4) INCUMBENCY AND SIGNATURE CERTIFICATE OF THE BORROWERS. A
certificate (dated as of the date of this Agreement) of the Secretary of each
Borrower certifying the names and true signatures of the officers of the
Borrower authorized to sign the Loan Documents to which it is a party and the
other documents to be delivered by the Borrower under this Agreement;
(5) OPINION OF COUNSEL FOR THE BORROWERS. A favorable opinion of
counsel for the Borrowers as to such matters as the Bank may reasonably
request;
SECTION 3.02. CONDITIONS PRECEDENT TO ALL LOANS. The obligation of the
Bank to make each Loan (including the initial Loan) shall be subject to the
further conditions precedent that on the date of such Loan:
(1) The following statements shall be true and the Borrower's
request for a Loan shall be deemed a statement by such
Borrower dated the date of such Loan, that:
(a) The representations and warranties contained in
Article IV of this Agreement are correct on and as
of the date of such Loan as though made on and as of
such date; and
(b) No Default or Event of Default has occurred and is
continuing, or would result from such Loan; and
(2) The Bank shall have received such other approvals, opinions,
or documents as the Bank may reasonably request.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
Each Borrower represents and warrants that:
SECTION 4.01. INCORPORATION, GOOD STANDING AND DUE QUALIFICATION. Each
of AIC and ACFC are wholly-owned Subsidiaries of Allied. Allied has no other
Subsidiaries other than ADC; AIC, ACFC and ADC have no Subsidiaries. Borrower
(a) is a corporation duly organized, validly existing, and in good standing
under the laws of the jurisdiction of its incorporation; (b) has the corporate
power and authority to own its assets and to transact the business in which it
is now engaged or in which it is proposed to be engaged; and (c) is duly
qualified as a foreign corporation and in good standing under the laws of each
other jurisdiction in which such qualification is required except in such
instances which would not, in any one case or in the
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aggregate, materially and adversely affect the financial condition, operations,
properties or business of the Borrower.
SECTION 4.02. CORPORATE POWER AND AUTHORITY. The execution, delivery
and performance by the Borrower of the Loan Documents to which it is a party
have been duly authorized by all necessary corporate action and do not and will
not (a) require any consent or approval of, or filing or registration with, any
governmental agency or authority or the stockholders of such corporation; (b)
contravene such corporation's charter or bylaws; (c) result in a breach of or
constitute a default under any agreement or instrument to which such
corporation is a party or by which it or its properties may be bound or
affected; (d) result in, or require, the creation or imposition of any lien
upon or with respect to any of the properties now owned or hereafter acquired
by such corporation; or (e) cause such corporation to be in default under any
law, rule, regulation, order, writ, judgment, injunction, decree, determination
or award applicable to such corporation.
SECTION 4.03. LEGALLY ENFORCEABLE AGREEMENT. This Agreement is, and
each of the other Loan Documents when delivered under this Agreement will be,
legal, valid and binding obligations of the Borrower enforceable against the
Borrower in accordance with their respective terms.
SECTION 4.04. FINANCIAL STATEMENTS. The most recent consolidated
financial statements of the Borrower which have been furnished to the Bank in
connection with this Agreement are complete and correct and fairly present the
financial condition of the Borrower as at the dates of such statements. Since
the dates of such statements, there has been no material adverse change in the
condition (financial or otherwise), business or operations of the Borrower.
SECTION 4.05. LITIGATION. Except as set forth in the Borrower's most
recent 10-Q and 10-K filed with the Securities and Exchange Commission, there
is no pending or threatened action or proceeding against or affecting the
Borrower, before any court, governmental agency or arbitrator, which may, in
any one case or in the aggregate, materially adversely affect the financial
condition, operations, properties or business of the Borrower.
SECTION 4.06. OTHER AGREEMENTS. The Borrower is not a party to any
indenture, loan, or credit agreement, or to any lease or other agreement or
instrument, or subject to any charter or corporate restriction, which has a
material adverse effect on the business, properties, assets, operations, or
conditions, financial or otherwise, of the Borrower, or the ability of the
Borrower to carry out its obligations under the Loan Documents to which it is a
party. The Borrower is not in default in any respect in the performance,
observance, or fulfillment of any of the obligations, covenants, or conditions
contained in any agreement or instrument material to its business to which it
is a party, except in such instances which would not, in any one case or in the
aggregate, materially and adversely affect the financial condition, operations,
properties or business of the Borrower.
SECTION 4.07. NO DEFAULTS ON OUTSTANDING JUDGMENTS OR ORDERS. The
Borrower has satisfied all judgments and is not in default with respect to any
judgment, writ, injunction, decree, rule, or regulation of any court,
arbitrator, or federal, state, municipal, or other governmental authority,
commission, board, bureau, agency or instrumentality, domestic or foreign.
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SECTION 4.08. OWNERSHIP AND LIENS. The Borrower has title to, or valid
leasehold interests in, all of its properties and assets, real and personal,
including the properties and assets and leasehold interests reflected in the
financial statements referred to in Section 4.04 (other than any properties or
assets disposed of in the ordinary course of business), and none of the
properties and assets owned by the Borrower and none of its leasehold interests
is subject to any Lien, except such as may be permitted pursuant to Section
6.01 of this Agreement.
SECTION 4.09. OPERATION OF BUSINESS. The Borrower possesses all
licenses, permits, franchises, patents, copyrights, trademarks, and trade
names, or rights thereto, to conduct its respective businesses substantially as
now conducted and as presently proposed to be conducted, and is not in
violation of any valid rights of others with respect to any of the foregoing,
except in such instances which would not, in any one case or in the aggregate,
materially and adversely affect the financial condition, operations, properties
or business of the Borrower.
SECTION 4.10. TAXES. The Borrower has filed all tax returns (federal,
state, and local) required to be filed and has paid all taxes, assessments, and
governmental charges and levies thereon to be due, including interest and
penalties.
SECTION 4.11. ENVIRONMENT. The Borrower has not received notice of,
nor knows of, or suspects facts which might constitute, any violations of any
federal, state, or local environmental, health, or safety laws, codes or
ordinances, and any rules or regulations promulgated thereunder with respect to
its businesses, operations, assets, equipment, property, leaseholds, or other
facilities.
ARTICLE 5
AFFIRMATIVE COVENANTS
Each Borrower covenants and agrees that:
SECTION 5.01. MAINTENANCE OF EXISTENCE. The Borrower will preserve and
maintain its corporate existence and good standing in the jurisdiction of its
incorporation, and qualify and remain qualified as a foreign corporation in
each jurisdiction in which such qualification is required, except if the
failure to so qualify would have, in any one case or in the aggregate, a
material and adverse effect on the financial condition, operations, properties
or business of the Borrower.
SECTION 5.02. MAINTENANCE OF RECORDS. The Borrower will keep adequate
records and books of account, in which complete entries will be made in
accordance with GAAP, reflecting all financial transactions of the Borrower.
The principal records and books of account, shall be kept at the chief
executive office of the Borrower's investment adviser at 0000 X Xxxxxx, X.X.,
0xx Xxxxx, Xxxxxxxxxx, X.X. 00000. The Borrower will not move such records and
books of account or change such chief executive office or the name under which
it does business without giving the Bank at least thirty (30) days' prior
written notice.
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SECTION 5.03. MAINTENANCE OF PROPERTIES. The Borrower will maintain,
keep, and preserve all of its properties (tangible and intangible) necessary or
useful in the proper conduct of its business in good working order and
condition, ordinary wear and tear excepted.
SECTION 5.04. CONDUCT OF BUSINESS. The Borrower will continue to
engage in an efficient and economical manner in a business of the same general
type as conducted by it on the date of this Agreement.
SECTION 5.05. COMPLIANCE WITH LAWS. The Borrower will comply in all
respects with all applicable laws, rules, regulations and orders (including,
without limitation, the Employee Retirement Income Security Act, as amended
from time to time), such compliance to include, without limitation, paying,
before the same become delinquent, all duly imposed taxes, assessments and
governmental charges imposed upon it or upon its property.
SECTION 5.06. MAINTENANCE OF INSURANCE. The Borrower will maintain
insurance with financially sound and reputable insurance companies or
associations in such amounts and covering such risks as are usually carried by
companies engaged in the same or a similar business and similarly situated.
SECTION 5.07. REPORTING REQUIREMENTS. The Borrower will furnish to the
Bank:
(a) Quarterly Financial Statements. As soon as available and, in any
event, within forty-five (45) days after the end of each of the quarters of
each fiscal year of the Borrower (i) unaudited financial statements consisting
of a consolidated balance sheet of the Borrower, as of the end of such quarter,
and consolidated statements of operations, changes in net assets and cash flows
of the Borrower for the period commencing at the end of the previous fiscal
year and ending with the end of such quarter, all in reasonable detail and
stating in comparative form the respective consolidated figures for the
corresponding date and period in the previous fiscal year and all prepared in
accordance with GAAP, and (ii) a certificate detailing a calculation of each of
the ratios and amounts referred to in the financial covenants of the Borrower
set forth in Sections 7.01 through 7.03 hereof, as may be applicable to such
Borrower. Such financial statements and certificate shall be certified to be
accurate by the chief financial officer of the Borrower (subject to year-end
adjustments);
(b) Annual Financial Statements. As soon as available and, in any
event, within one hundred twenty (120) days after the end of each fiscal year
of the Borrower audited financial statements consisting of a consolidated
balance sheet of the Borrower as of the end of such fiscal year, consolidated
statements of operations, changes in net assets, and cash flows of the Borrower
for such fiscal year, all in reasonable detail and stating in comparative form
the respective consolidated figures for the corresponding date and period in
the prior fiscal year and all prepared in accordance with GAAP. The
consolidated financial statements shall be accompanied by an opinion thereon
acceptable to the Bank of an independent certified public accounting firm
selected by the Borrower and acceptable to the Bank;
(c) Management Letters. Promptly upon receipt thereof, copies of any
reports submitted to the Borrower by independent certified public accountants
in connection with audit of the financial statements of the Borrower made by
such accountants;
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(d) Notice of Litigation. Promptly after the commencement thereof,
notice of all actions, suits and proceedings before any court or governmental
department, commission, board, bureau, agency or instrumentality, domestic or
foreign, affecting the Borrower, which, if determined adversely to the Borrower
could have a material adverse effect on the financial condition, properties or
operations of the Borrower;
(e) Notice of Defaults and Events of Default. As soon as possible and,
in any event, within 15 days after the occurrence of each Default and Event of
Default, a written notice setting forth the details of such Default or Event of
Default and the action which is proposed to be taken by the Borrower with
respect thereto;
(f) Proxy Statements, etc. Promptly after the sending or filing
thereof, copies of all proxy statements, financial statements and reports which
the Borrower sends to its stockholders, and copies of all regular, periodic and
special reports, and all material registration statements which the Borrower
files with the Securities and Exchange Commission or any governmental authority
which may be substituted therefor, or with any national securities exchange;
(g) General Information. Such other information respecting the
condition or operations, financial or otherwise, of the Borrower or any
Subsidiary as the Bank may from time to time reasonably request.
SECTION 5.08. ENVIRONMENT. The Borrower will be and remain in
compliance with the provisions of all federal, state, and local environmental,
health, and safety laws, codes and ordinances, and all rules and regulations
issued thereunder.
SECTION 5.09. INVESTMENT ADVISER. Allied Capital Advisers, Inc. will
remain the investment adviser for the Borrower.
SECTION 5.10. CORPORATE RELATIONSHIP. Each of AIC and ACFC will remain
wholly-owned subsidiaries of Allied.
SECTION 5.11. REFINANCING OF INDEBTEDNESS. With respect to any
Indebtedness (other than the Obligations) which matures prior to the
Termination Date, Borrower will refinance with a new maturity no earlier than
the Termination Date no less than seventy-five percent (75%) of such
Indebtedness; provided, however, that the amount of such required refinancing
shall be reduced by the amount, if any, of new equity raised by Borrower after
September 30, 1995.
ARTICLE 6
NEGATIVE COVENANTS
Each Borrower agrees that, without first obtaining the prior written
consent of the Bank:
SECTION 6.01. LIENS. The Borrower will not create, incur, assume or
permit to exist any Lien upon or with respect to any of its properties or
assets, now owned or hereafter acquired, except: (a) Liens in favor of the
Bank; (b) Liens which are incidental to the conduct of the business of the
Borrower, are not incurred in connection with the obtaining of credit and do
not
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materially impair the value or use of assets of the Borrower; and (c) Liens in
existence on the date of this Agreement and disclosed in writing to the Bank.
SECTION 6.02. INDEBTEDNESS. The Borrower will not create, incur,
assume or permit to exist Indebtedness, except (a) the Obligations; (b)
Indebtedness in existence on the date of this Agreement; (c) Indebtedness of
the Borrower subordinated to the Obligations on terms satisfactory to the Bank;
(d) Indebtedness of any Subsidiary to the Borrower or another Subsidiary; (e)
ordinary trade accounts payable; and (f) up to $50,000,000 of unsecured
debentures, the proceeds of which will be used by AIC or ACFC for investments
and loans to Community Reinvestment Act-qualified activities.
SECTION 6.03. MERGERS, ETC. The Borrower will not merge or consolidate
with any Person and will not permit any subsidiary to merge with any person
except that Borrower may merge with a Subsidiary and any Subsidiary may merge
with another Subsidiary.
SECTION 6.04. SALE AND LEASEBACK. The Borrower will not sell, transfer
or otherwise dispose of any real or personal property to any Person and
thereafter, in connection therewith, directly or indirectly, lease back the
same or similar property.
SECTION 6.05. SALE OF ASSETS. The Borrower will not sell, lease,
assign, transfer or otherwise dispose of any of its now owned or hereafter
acquired assets except: (a) for assets disposed of in the ordinary course of
business and (b) the sale or other disposition of assets no longer used or
useful in the conduct of its business.
SECTION 6.06. GUARANTIES, ETC. The Borrower will not assume,
guarantee, endorse or otherwise be or become directly or contingently
responsible or liable (including, but not limited to, any liability arising out
of any agreement to purchase any obligation, stock, assets, goods or services,
or to supply or advance any funds, assets, goods or services, or to maintain or
cause such Person to maintain a minimum working capital or net worth or
otherwise to assure the creditors of any Person against loss) for obligations
of any Person, or permit any such guaranties or liabilities to exist, except
(i) in favor of the Bank, (ii) with respect to Indebtedness in existence on the
date hereof and previously disclosed to the Bank in writing, (iii) guaranties
by endorsement of negotiable instruments for deposit or collection or similar
transactions in the ordinary course of business, and (iv) as may be implemented
in the ordinary course of Borrower's portfolio activities, provided, however,
that any such matter described in this clause (iv): (a) shall be treated as a
non-contingent liability for purposes of calculating the financial covenants
described below, and (b) if the aggregate amount thereof exceeds $100,000,
shall be itemized in a writing provided to the Bank along with the financial
statements described above.
SECTION 6.07. TRANSACTIONS WITH AFFILIATE. The Borrower will not enter
into any transaction, including, without limitation, the purchase, sale or
exchange of property or the rendering of any service, with any Affiliate,
except in the ordinary course of and pursuant to the reasonable requirements of
the Borrower's business and upon fair and reasonable terms no less favorable to
the Borrower than would be applicable in a comparable arm's-length transaction
with a Person not an Affiliate (provided that the investment advisory agreement
between Borrower and Allied Capital Advisers, Inc. shall not be deemed to
violate this provision).
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ARTICLE 7
FINANCIAL COVENANTS
So long as the Notes shall remain unpaid or the Bank shall have any
Commitment or outstanding Letter of Credit under this Agreement, the Borrowers
agree that:
SECTION 7.01. MAXIMUM LEVERAGE RATIO. Each of AIC and ACFC will
maintain at all times a ratio of Total Liabilities to Shareholders' Equity of
not greater than 5.0 to 1. Allied will maintain at all times (i) a ratio of
Consolidated Total Liabilities to Consolidated Shareholders' Equity of not
greater than 3.0 to 1, and (ii) a ratio of Adjusted Total Liabilities to
Adjusted Shareholders' Equity of not greater than 1.0 to 1.
SECTION 7.02. MINIMUM CONSOLIDATED SHAREHOLDERS' EQUITY. Allied will
maintain at all times Consolidated Shareholders' Equity of not less than Forty
Million Dollars ($40,000,000).
SECTION 7.03. CONSOLIDATED MINIMUM INTEREST COVERAGE. Allied will
maintain a ratio of (a) Consolidated Net Income plus Consolidated Total
Interest Expense to (b) Consolidated Total Interest Expense of not less than
1.5 to 1 as of the end of each calendar quarter for the previous four quarters.
With respect to the above covenants, no effect shall be given to the
contemplated credit facility from the Bank to Borrower consisting of a
cash-secured line of credit available only during the last ten (10) days of
each calendar quarter and to be repaid promptly thereafter.
ARTICLE 8
EVENTS OF DEFAULT
SECTION 8.01. EVENTS OF DEFAULT. Each of the following shall
constitute an Event of Default under this Agreement:
(a) Failure of a Borrower to pay any Obligation to the Bank,
including, without limitation, the principal of or interest on the Notes or any
of the Loans, when the same shall become due and payable, and such failure
shall continue for a period of five (5) days; or
(b) Failure of a Borrower to perform or observe any covenant set forth
in this Agreement (except any such failure resulting in the occurrence of
another Event of Default described in this section), or to perform or observe
any other term, condition, covenant, warranty, agreement or other provision
contained in this Agreement within thirty (30) days after receipt of notice
from the Bank specifying such failure; or
(c) Discovery that any representation or warranty by a Borrower in
this Agreement or any statement or representation made in any certificate,
report or opinion delivered pursuant to this Agreement or in connection with
any Loan under this Agreement was materially untrue in any material respect
provided, however, the Bank shall take no action based on a default under this
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paragraph unless such Borrower shall have been provided a reasonable
opportunity to render such misrepresentation or untruth immaterial; or
(d) If, as a result of default, any other obligation of a Borrower for
the payment of any debt in excess of $500,000.00 becomes or is declared to be
due and payable prior to the expressed maturity thereof, unless and to the
extent that the declaration is being contested in good faith in a court of
appropriate jurisdiction; or
(e) A Borrower makes an assignment for the benefit of creditors, files
a petition in bankruptcy, petitions or applies to any tribunal for any receiver
or any trustee of such Borrower or any substantial part of its property, or
commences any proceeding relating to such Borrower under any reorganization,
arrangement, readjustments of debt, dissolution or liquidation law or statute
of any jurisdiction, whether now or hereafter in effect; or
(f) If, within thirty (30) days after the filing of a bankruptcy
petition or the commencement of any proceeding against a Borrower seeking any
reorganization, arrangement, composition, readjustment, liquidation,
dissolution or similar relief under any present or future statute, law or
regulation, the proceeding shall not have been dismissed, or, if, within 30
days after the appointment, without the consent or acquiescence of such
Borrower, of any trustee, receiver or liquidator of such Borrower or of all or
any substantial part of the properties of such Borrower, the appointment shall
not have been vacated; or
(g) Any judgment against a Borrower in excess of $500,000.00 or any
attachment in excess of $500,000.00 against any property of a Borrower that
remains unpaid, undischarged, unbonded or undismissed for a period of thirty
(30) days, unless and to the extent that the judgment or attachment is appealed
in good faith in a court of higher jurisdiction and the appeal remains pending;
or
(h) The occurrence of an event of default (and the expiration of any
applicable cure period) under any other Loan Document.
SECTION 8.02. REMEDIES UPON DEFAULT. Upon the occurrence of an Event
of Default, the following provisions shall be applicable:
(a) The Bank may, at its option, terminate its obligation to make
Loans under this Agreement and declare all Obligations, whether incurred prior
to, contemporaneous with or subsequent to the date of this Agreement, and
whether represented in writing or otherwise, immediately due and payable and
may exercise all of it rights and remedies against the Borrowers.
(b) The Bank shall have such set-off rights as are provided by
applicable common law or statute.
(c) EACH BORROWER EXPRESSLY WAIVES ITS RIGHT TO A TRIAL BY JURY WITH
RESPECT TO ANY LITIGATION RELATING TO THIS AGREEMENT OR ANY OTHER LOAN
DOCUMENT.
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(d) The Bank may itself perform or comply, or otherwise cause
performance or compliance, with the obligations of the Borrowers contained in
this Agreement. The reasonable expenses of the Bank incurred in connection with
such performance or compliance shall be payable by the Borrowers to the Bank on
demand and shall constitute Obligations.
(e) The Bank may, at its sole and absolute discretion and in addition
to any other remedies available to it under this Agreement or otherwise,
require a Borrower to pay immediately to Bank, for application against drawings
under any outstanding Letters of Credit issued for the account of such
Borrower, the outstanding principal amount of any such Letters of Credit which
have not expired. Such amount shall be held in an interest-bearing account
pledged to secure the Obligations. Any portion of the amount remaining in such
account which is not applied to satisfy draws under any such Letters of Credit
or any other Obligations of such Borrower to the Bank shall be repaid to such
Borrower.
ARTICLE 9
MISCELLANEOUS
SECTION 9.01. COLLECTION COSTS. The Borrowers shall pay all of the
reasonable costs and expenses incurred by the Bank in connection with the
enforcement of this Agreement and the other Loan Documents, including, without
limitation, reasonable attorneys' fees and expenses.
SECTION 9.02. MODIFICATION AND WAIVER. Except for the other documents
expressly referred to in this Agreement, this Agreement contains the entire
agreement between the parties and supersedes all prior agreements between the
Bank and the Borrowers concerning the unsecured line of credit and the Loans
hereunder. No modification or waiver of any provision of the Notes or this
Agreement and no consent by the Bank to any departure therefrom by the
Borrowers shall be effective unless such modification or waiver shall be in
writing and signed by an officer of the Bank with a title of vice president or
any higher office, and the same shall then be effective only for the period and
on the conditions and for the specific instances and purposes specified in such
writing. No notice to or demand on the Borrowers in any case shall entitle the
Borrowers to any other or further notice or demand in similar or other
circumstances. No failure or delay by the Bank in exercising any right, power
or privilege hereunder shall operate as a waiver thereof; nor shall any single
or partial exercise thereof preclude any other or further exercise thereof or
the exercise of any other right, power or privilege. The rights and remedies of
the Bank contained in this Agreement are cumulative and not exclusive of any
rights or remedies otherwise provided by law.
SECTION 9.03. NOTICES. All notices, requests, demands or other
communications provided for in this Agreement shall be in writing and shall be
delivered by hand, sent prepaid by Federal Express (or a comparable overnight
delivery service) or sent by the United States mail, certified, postage
prepaid, return receipt requested, to the Bank, at 000 00xx Xxxxxx, X.X.,
Xxxxxxxxxx, X.X. 00000 Attention: Executive Vice President, Commercial Lending,
or to the Borrowers at c/o Allied Capital Advisers, Inc., 0000 X Xxxxxx, X.X.,
0xx Xxxxx, Xxxxxxxxxx, X.X. 00000, Attention: Chief Financial Officer. Any
notice, request, demand or other communication delivered or sent in the
foregoing manner shall be deemed given or made (as the case may be) upon the
earliest of (a) the date it is actually received, (b) on the business day after
the day on which it is properly delivered to Federal Express (or a comparable
overnight delivery service), or (c) on the third
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business day after the day on which it is deposited in the United States mail.
Any of the Borrowers or the Bank may change its address by notifying the other
party of the new address in any manner permitted by this Section 9.03.
SECTION 9.04. CAPTIONS. The captions of the various sections and
paragraphs of this Agreement have been inserted only for the purposes of
convenience; such captions are not a part of this Agreement and shall not be
deemed in any manner to modify, explain, enlarge or restrict any of the
provisions of this Agreement.
SECTION 9.05. SURVIVAL OF AGREEMENTS. All agreements, representations
and warranties made herein shall survive the delivery of this Agreement and the
making and renewal of the Loans hereunder.
SECTION 9.06. FEES AND EXPENSES. Whether or not any Loans are made
hereunder, the Borrowers shall pay on demand all reasonable out-of-pocket costs
and expenses incurred by the Bank in connection with the preparation,
negotiation, execution, delivery, filing, recording and administration of any
of the documents and instruments executed or delivered in connection herewith,
including, without limitation, the reasonable fees and expenses of counsel to
the Bank (including, the reasonable fees of salaried counsel employed by the
Bank or its affiliates), and local counsel who may be retained by the Bank,
with respect to such documents and any amendments thereof or of this Agreement
and any amendment hereof and with respect to advising the Bank as to its rights
and responsibilities hereunder or thereunder, provided, however, that the Bank
shall use reasonable efforts to notify the Borrowers prior to incurring any
costs or expenses chargeable to Borrowers under this section, unless the Bank
shall have determined in good faith, but at its sole and unfettered discretion,
that a delay or such notice may impair or adversely impact the rights,
remedies, claims or other interest of the Bank or the collectibility of the
Loans.
SECTION 9.07. USE OF DEFINED TERMS. All terms defined in this
Agreement shall have the defined meanings when used in certificates, reports or
other documents made or delivered pursuant to this Agreement, unless the
context shall otherwise require.
SECTION 9.08. SUCCESSORS AND ASSIGNS. This Agreement shall inure to
the benefit of and bind the respective parties hereto and their successors and
assigns; provided, however, that no Borrower may assign its rights hereunder
without the prior written consent of the Bank.
SECTION 9.09. INTERPRETATION. This Agreement and the rights and
obligations of the parties hereunder shall be construed and interpreted in
accordance with the laws of the District of Columbia, without reference to
conflicts of law principles.
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IN WITNESS WHEREOF, the Borrowers and the Bank have caused this
Agreement to be signed by their duly authorized representatives all as of the
day and year first above written.
ALLIED CAPITAL CORPORATION
a Maryland corporation.
By:/s/ G. Xxxxxx Xxxxxxxx, III
--------------------------------------------
Name: G. Xxxxxx Xxxxxxxx, III
Title: President
ALLIED INVESTMENT CORPORATION
a Maryland corporation.
By:/s/ G. Xxxxxx Xxxxxxxx, III
--------------------------------------------
Name: G. Xxxxxx Xxxxxxxx, III
Title: President
ALLIED CAPITAL FINANCIAL CORPORATION
a Maryland corporation.
By:/s/ G. Xxxxxx Xxxxxxxx, III
--------------------------------------------
Name: G. Xxxxxx Xxxxxxxx, III
Title: President
XXXXX BANK N.A.,
a national banking association.
By:/s/ Xxxxx X. Xxxxx
--------------------------------------------
Name: Xxxxx X. Xxxxx
Title: Vice President
