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                                                                   EXHIBIT 10.4

                             UNCONDITIONAL GUARANTY


         This Unconditional Guaranty (this "Guaranty"), made as of December 20,
1996, by ALLIED CAPITAL CORPORATION (the "Guarantor") to and for the benefit of
RIGGS BANK N.A. ("Riggs"), a national banking association.

         In order to induce Riggs to extend and continue to extend credit, to
make and continue to make loans and advances and/or to forbear from exercising
any rights Riggs may have to require repayment of or security for any such
loans and advances heretofore made by Riggs, to ALLIED INVESTMENT CORPORATION
and ALLIED CAPITAL FINANCIAL CORPORATION (the "Borrower(s)"), the Guarantor:

         (1) Guaranty of Payment. Unconditionally and absolutely guarantees the
punctual payment when due (whether at stated maturity, by acceleration of
maturity or otherwise) of all obligations of the Borrower(s) arising under the
Unsecured Line of Credit Agreement executed by and among the Borrower(s),
Guarantor and Riggs dated the date hereof, providing for loans in the principal
amount of up to $10,000,000.00 (the "Agreement"), and any promissory notes or
other documents and instruments executed by the Borrower(s) pursuant thereto,
and all renewals, extensions and modifications thereof, such obligations and
the interest thereon and all other sums payable with respect thereto being
referred to herein as the "Indebtedness" and all documents and instruments
executed by the Borrower(s) or any of them in connection therewith being
referred to as the "Loan Documents." This is a guaranty of payment and not of
collection and shall be binding upon the Guarantor irrespective of the
genuineness, validity or enforceability of any underlying obligations of the
Borrower(s) or any of them or the existence, validity, enforceability or
perfection of any security therefor, it being the intention of the Guarantor
that this Guaranty be absolute and unconditional in all events and not
dischargeable or affected by any circumstances which may constitute a legal or
equitable discharge. This Guaranty shall continue to be effective or be
reinstated, as the case may be, if at any time any payment of the Indebtedness
or any part thereof is rescinded or must otherwise be returned by Riggs upon
the insolvency, bankruptcy or reorganization of any Borrower or Guarantor, or
otherwise, all as though such payment had not been made.

         (2) Waivers by Guarantor. Waives diligence, presentment, protest,
notice of dishonor, demand for payment under the Loan Documents, extension of
time of payment, notice of acceptance of this Guaranty, non-payment at maturity
and indulgences of every kind, and consent to any and all forbearances and
extensions of the time of payment of the Indebtedness, and to any and all
changes in the terms, agreements and conditions of the Indebtedness or any part
thereof hereafter made or granted, and to any and all substitutions and
exchanges or releases of all or any part of any collateral security given
therefor and any and all releases of any other party who is or may be liable
upon any of the Indebtedness.

         (3) No Subrogation. Agrees that no payment by any Guarantor pursuant
to any provision of this Guaranty or other satisfaction of Guarantor's
obligations under this Guaranty shall entitle Guarantor, by subrogation to the
rights of Riggs, by right of contribution or indemnity or under any agreement
or otherwise, to any payment by the Borrower(s) or by any other party obligated
to Riggs for payment of the Indebtedness or



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out of the assets of the Borrower(s) or any such other party, except after
payment in full of the Indebtedness.

         (4) No Waiver By Riggs; Remedies Cumulative. Agrees that no delay on
the part of Riggs in the exercise of any rights hereunder or failure to
exercise the same shall operate as a waiver of such rights, and that no notice
to or demand on the maker of any promissory note shall be deemed to be a waiver
of the obligation of the Guarantor or of the right of Riggs to take further
action without notice or demand as provided herein. Each right, power, and
remedy of Riggs against Borrower(s) or Guarantor arising hereunder or pursuant
to any of the Loan Documents or by law shall be cumulative and concurrent. The
exercise of any right, power or remedy or the failure or forbearance in the
exercise thereof against Borrower(s) or Guarantor shall not preclude or require
the exercise of any other right, power or remedy.

         (5) No Suit or Claim Required. Agrees that it shall not be necessary
for Riggs, to enforce this contract of Guaranty, to first institute suit
against the Borrower(s) or any of them to recover the amount of the
Indebtedness or any part thereof. Riggs shall not be obligated to file any
claim relating to the Indebtedness in the event that the Borrower(s) or any of
them become subject to a bankruptcy, reorganization or similar proceeding, and
the failure of Riggs so to file shall not affect the Guarantor's obligations
hereunder.

         (6) Expenses and Attorneys' Fees. Agrees that the Guarantor will
reimburse Riggs for all costs and expenses incurred by Riggs (including
reasonable attorneys' fees) in enforcing any rights under this Guaranty,
collecting any of the Indebtedness or protecting or realizing on any collateral
therefor. Attorneys' fees shall include, in the case of a staff attorney
employed by Riggs, the cost to Riggs of the services of such attorney, on an
hourly basis, as determined by Riggs.

         (7) Representations of Guarantor. Represents and warrants and shall be
deemed to represent and warrant on each day that any of the Indebtedness is
outstanding that (a) all statements and information heretofore or hereafter
provided by the Guarantor in connection with this Guaranty or the Indebtedness
are and will be true and correct in all material respects and do not and will
not omit to state any material fact, (b) Guarantor is duly organized and
validly existing as such under the laws of its jurisdiction of incorporation or
organization, (c) Guarantor has full power and authority to execute, deliver
and perform this Guaranty and this Guaranty constitutes the legal, valid and
binding obligation of Guarantor enforceable against Guarantor in accordance
with its terms, (d) except as otherwise disclosed to Riggs in writing, there is
no suit, action, proceeding or investigation pending in which an adverse
decision could materially adversely affect the financial condition of
Guarantor, and (e) Guarantor has made its own credit analysis with respect to
the Borrower(s) and the Indebtedness and has not relied on Riggs for any
information with respect thereto.

         (8) Acceleration of Maturity. Agrees that upon (a) a material breach
by Guarantor of any of its agreements, representations and warranties
hereunder, (b) an authorized and written denial by Guarantor of its liability
hereunder, (c) a failure by Guarantor to pay or


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perform when due any other material obligations of Guarantor to Riggs, or (d)
the dissolution, termination of existence, change of control, insolvency,
appointment of a receiver of any material part of the property of, commencement
of any bankruptcy or insolvency proceeding by or against (if not dismissed
within sixty (60) days of filing against), assignment of a material asset for
the benefit of creditors by, or issuance of an attachment, levy or execution
against a material part of the property of, Guarantor, all of the Indebtedness,
regardless of its terms, shall be deemed for purposes of this Guaranty to have
become matured and the Guarantor, at the election of Riggs, shall promptly pay
to Riggs all of the Indebtedness.

         (9) Subordination. Agrees that all of the present and future
indebtedness of the Borrower(s) or any of them to the Guarantor shall be and
hereby is subordinated to the Indebtedness.

         (10) Set Off. Agrees that, without limiting any other right of Riggs,
whenever Riggs has the right to declare any of the Indebtedness to be
immediately due and payable (whether or not it has so declared), Riggs and any
branch or affiliate acting on its behalf is hereby authorized at any time and
from time to time, to exercise all setoff rights to the fullest extent
permitted by law.

         (11) Books and Records, etc. Agrees that the books and records of
Riggs or any schedule, certificate or statement provided for in any agreement
between Riggs and the Borrower(s) or any of them showing the amount owed by the
Borrower(s) or any of them to Riggs from time to time or the rate of interest
on such amount shall be admissible in any action or proceeding against
Guarantor hereunder and shall be binding upon the Guarantor to the same extent
as upon the Borrower(s) or any of them pursuant to any of the Loan Documents.

         (12) Successors and Assigns. Agrees that this Guaranty shall inure to
the benefit of and may be enforced by Riggs, its successors and assigns and any
assignee from Riggs of the Indebtedness or any part thereof, and shall be
binding upon and enforceable upon the Guarantor and the successors, personal
representatives and assigns of the Guarantor including (a) any successor
person, association, partnership or corporation acquiring all or a substantial
part of the assets of Guarantor, (b) any successor partnership created by
reason of the admission of a new partner or the dissolution of an existing
partnership by reason of the death, resignation or other withdrawal of a
partner, and (c) any corporation into which Guarantor shall have been merged,
consolidated, reorganized or otherwise absorbed.

         (13) Governing Law; Jurisdiction. Agrees that this Guaranty shall be
deemed to be a contract under the laws of the District of Columbia (except for
the conflict of law provisions thereof) and shall be governed by, and construed
in accordance with, the laws of such jurisdiction, except to the extent that
the rights and remedies of Riggs with respect to collateral located in any
other jurisdiction are governed by the laws of such jurisdiction and except
that in any legal proceeding in any other jurisdiction, Riggs shall be entitled
to the benefit of all legal remedies available under the laws of such
jurisdiction. 


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Wherever possible each provision of this Guaranty shall be interpreted in such
manner as to be effective and valid under applicable law, but if any provision
of this Guaranty shall be prohibited by or invalid under such law, such
provision shall be ineffective to the extent of such prohibition or invalidity,
without invalidating the remainder of such provision or the remaining
provisions of this Guaranty. If any action arising out of this Guaranty is
commenced by Riggs in any District of Columbia court, or Federal court located
in the District of Columbia, Guarantor hereby consents to the jurisdiction of
any such court in any such action and to the laying of venue in the District of
Columbia. Any process in any such action shall be duly served upon Guarantor if
mailed by registered mail, postage prepaid, to Guarantor at its last known
residence or business address as shown by the records of Riggs or otherwise
served in accordance with law. The pleading of any statute of limitations and
any right of Guarantor to TRIAL BY JURY in any suit, action or proceeding in
connection herewith are hereby expressly WAIVED.

         IN WITNESS WHEREOF, the Guarantor has executed this instrument the day
and year first above written.



(SEAL)                          ALLIED CAPITAL CORPORATION
ATTEST:

By:/s/Suzanne V. Sparrow              By:/s/G. Cabell Williams, III
   --------------------------            ---------------------------------
Name:  Suzanne V. Sparrow             Name: G. Cabell Williams, III
Title:    Assistant Secretary         Title:   President

                                      Address: 1666 K Street, N.W., 9th Floor

                                               Washington, DC 20006


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