EXHIBIT 10.1

SECOND AMENDMENT TO CREDIT AGREEMENT AND WAIVER

THIS SECOND AMENDMENT TO CREDIT AGREEMENT AND WAIVER (the “Amendment”) is
entered into as of May 11, 2006, by and among ALLIED CAPITAL CORPORATION, a
corporation organized under the laws of the State of Maryland (“Borrower”) and
BANK OF AMERICA, N.A., as Administrative Agent (in such capacity, the
“Administrative Agent”) for the Lenders under the Credit Agreement (hereinafter
defined), and the lenders party hereto (“Lenders”).

R E C I T A L S

A. Borrower, Administrative Agent, certain other Agents and Lenders are parties
to that certain Credit Agreement dated as of September 30, 2005, as amended by
that certain First Amendment to Credit Agreement dated as of November 4, 2005
(the “Credit Agreement”). Unless otherwise indicated herein, all terms used with
their initial letter capitalized are used herein with their meaning as defined
in the Credit Agreement; all Section references are to Sections in the Credit
Agreement; and all Paragraph references are to Paragraphs in this Amendment.

B. Borrower has requested that (i) Section 2.5 of the Credit Agreement be
amended to decrease the applicable interest rate for Eurodollar Loans under the
Credit Agreement, (ii) Section 1.1 of the Credit Agreement be amended to
decrease the Money Market Rate, as applicable to Swing Line Loans, and (iii)
Section 3.8 of the Credit Agreement be amended to decrease the LC Fees (each a
“Rate Change,” and collectively the “Rate Changes”).

C. Borrower has also requested that Section 8.2 of the Credit Agreement be
amended to modify the financial reporting requirements as it relates to the
delivery of consolidating financial statements.

D. Pursuant to Section 2.13 of the Credit Agreement, Borrower has requested an
increase in Commitments under the Credit Agreement (the “Proposed Commitment
Increase”), which Commitment increase, if agreed upon by new or existing
Lenders, will become effective within 30 days after the Second Amendment
Effective Date (as hereinafter defined). In connection with such Proposed
Commitment Increase, Borrower is also requesting that (i) Lenders waive any
amounts which may be owed pursuant to Section 4.5 of the Credit Agreement as a
result of prepayments made to accommodate redistribution of the Commitments in
order to consummate the Proposed Commitment Increase, and (ii) the Credit
Agreement be further amended to permit Interest Periods of 7 and 14 days during
the 30-day period immediately following the effective date of any Commitment
increase effected pursuant to Section 2.13 of the Credit Agreement.

E. Subject to and upon the following terms and conditions, Administrative Agent
and Lenders are willing to amend and waive certain provisions of the Credit
Agreement to reflect the transactions referred to in the preceding recitals B
through D.

NOW, THEREFORE, in consideration of the premises and other good and valuable
consideration, the receipt and adequacy of which are hereby acknowledged,
Borrower, Administrative Agent, and Lenders agree, as follows:

PARAGRAPH 1 . AMENDMENTS AND WAIVERS TO CREDIT AGREEMENT.

1.1 Amendment Provisions.

(a) Section 1.1 of the Credit Agreement is amended as follows:

  (i)   The following definition of “Commitment Increase Effective Date” is
inserted alphabetically to read as follows:

“‘Commitment Increase Effective Date’ means, with respect to any increase in the
Commitments effected pursuant to Section 2.13, the date upon which such increase
in Commitments is effective.”

  (ii)   The definition of “Interest Period” is amended to permit 7 and 14 days
Interest Periods for Eurodollar Loans made during the 30-day period immediately
following the effective date of any Commitment increase by deleting the first
parenthetical in such Definition and substituting therefor the following:

“(solely with respect to Eurodollar Loans made during the thirty (30) calendar
day period immediately following the Effective Date or any Commitment Increase
Effective Date)”

  (iii)   The definition of “Money Market Rate” is amended by deleting the
reference to “1.30%” in clause (i) therein and substituting therefor “1.05%”.

  (b)   Section 2.5(a)(ii) of the Credit Agreement is amended to decrease the
interest rate for Eurodollar Loans by deleting the reference to “1.30%” in
clause (A) therein and substituting therefor “1.05%”.

  (c)   Section 3.8(d) of the Credit Agreement is amended to decrease the rate
applicable to LC Fees by deleting the reference to “1.30%” in clause (i) therein
and substituting therefor “1.05%”.

  (d)   Section 8.2 of the Credit Agreement is amended to modify the existing
reporting requirement with respect to annual delivery of consolidating financial
statements by adding the following proviso at the end of Section 8.2:

“provided that, at such time as no agreement evidencing Debt of Borrower and its
Consolidated Subsidiaries (other than this Agreement) requires the delivery of
consolidating financial statements, then, notwithstanding the foregoing,
Borrower will not be required to deliver the consolidating balance sheets of
Borrower and its Consolidated Subsidiaries and the related consolidating
statements of operations and cash flows of Borrower and its Consolidated
Subsidiaries.”

1.2 Waiver. By execution of this Amendment, the Lenders agree to waive any
amounts which may be owed pursuant to Section 4.5 of the Credit Agreement, if
any, as a result of any prepayments made to accommodate redistribution of the
Commitments on the Commitment Increase Effective Date for the Proposed
Commitment Increase, so long as the Commitment Increase Effective Date for the
Proposed Commitment Increase occurs no later than 30 days after the Second
Amendment Effective Date.

PARAGRAPH 2. SECOND AMENDMENT EFFECTIVE DATE. This Amendment shall be binding
upon the Administrative Agent, Borrower, and Lenders on the last day (the
“Second Amendment Effective Date”) upon which (a) counterparts of this Amendment
shall have been executed and delivered to Administrative Agent by Borrower,
Administrative Agent, and Lenders, or when Administrative Agent shall have
received, telecopied, telexed, or other evidence satisfactory to it that all
such parties have executed and are delivering to Administrative Agent
counterparts thereof; (b) Borrower shall have delivered to Administrative Agent
copies (certified by the Secretary or Assistant Secretary of Borrower) of all
corporate action taken by Borrower to authorize the execution, delivery, and
performance of this Amendment, and any related Debt incurrence; and (c) Borrower
shall have paid to each Lender (by payment to Administrative Agent for the
account of each Lender) an Amendment Fee equal to $ 10,000 for each Lender.

PARAGRAPH 3. REPRESENTATIONS AND WARRANTIES. As a material inducement to Lenders
and Administrative Agent to execute and deliver this Amendment, Borrower hereby
represents and warrants to Lenders and Administrative Agent (with the knowledge
and intent that such parties are relying upon the same in entering into this
Amendment) the following: (a) the representations and warranties in the Credit
Agreement and in all other Loan Documents are true and correct on the date
hereof in all material respects, as though made on the date hereof, except to
the extent that such representations and warranties expressly relate solely to
an earlier date (in which case such representations and warranties shall have
been true and accurate as of such earlier date); (b) no Default or Event of
Default exists under the Loan Documents or will exist after giving effect to the
transactions contemplated by this Amendment; (c) Borrower has the right and
power, and has taken all necessary action to authorize it to execute, deliver,
and perform this Amendment in accordance with its terms and to consummate the
transaction contemplated hereby; (d) this Amendment has been duly executed and
delivered by the duly authorized officers of Borrower, and is a legal, valid,
and binding obligation of Borrower, enforceable against it in accordance with
its terms; and (e) the execution, delivery and performance of this Amendment in
accordance with its terms, do not and will not, by the passage of time, the
giving of notice, or otherwise: (i) require any Governmental Approval, other
than such as have been obtained and are in full force and effect, or violate any
Applicable Law (including all Environmental Laws) relating to Borrower or any
Subsidiary; (ii) conflict with, result in a breach of, or constitute a default
under the articles of incorporation or the bylaws of Borrower or the
organizational documents of any Subsidiary, or any indenture, agreement, or
other instrument to which Borrower or any Subsidiary is a party or by which it
or any of its respective properties may be bound; or (iii) result in or require
the creation or imposition of any Lien upon or with respect to any property now
owned or hereafter acquired by Borrower or any Subsidiary.

PARAGRAPH 4. MISCELLANEOUS.

4.1 Effect on Loan Documents. The Credit Agreement and all related Loan
Documents shall remain unchanged and in full force and effect, except as
provided in this Amendment, and are hereby ratified and confirmed. On and after
the Second Amendment Effective Date, all references to the “Credit Agreement” or
the “Agreement” shall be to the Credit Agreement as herein amended. The
execution, delivery, and effectiveness of this Amendment shall not, except as
expressly provided herein, operate as a waiver of any rights of the Lenders
under the Credit Agreement or any Loan Documents, nor constitute a waiver under
the Credit Agreement or any other provision of the Loan Documents.

4.2 Reference to Miscellaneous Provisions. This Amendment and the other
documents delivered pursuant to this Amendment are part of the Loan Documents
referred to in the Credit Agreement, and the provisions relating to Loan
Documents set forth in Section 12 of the Credit Agreement are incorporated
herein by reference the same as if set forth herein verbatim.

4.3 Costs and Expenses. Borrower agrees to pay promptly the reasonable fees and
expenses of counsel to Administrative Agent for services rendered in connection
with the preparation, negotiation, reproduction, execution, and delivery of this
Amendment.

4.4 Counterparts. This Amendment may be executed in a number of identical
counterparts, each of which shall be deemed an original for all purposes, and
all of which constitute, collectively, one agreement; but, in making proof of
this Amendment, it shall not be necessary to produce or account for more than
one such counterpart. It is not necessary that all parties execute the same
counterpart so long as identical counterparts are executed by Borrower,
Administrative Agent, and Lenders.

4.5 Entirety. this written agreement represents the final agreement among the
parties and may not be contradicted by evidence of prior, contemporaneous, or
subsequent oral agreement of the parties. There are no unwritten oral agreements
among the parties.

4.6 Parties. This Amendment binds and inures to Borrower, Administrative Agent,
Lenders, and their respective successors and assigns.

IN WITNESS WHEREOF, the parties hereto have executed this Amendment in multiple
counterparts as of the respective dates indicated on each signature page hereof,
but effective as of the Second Amendment Effective Date.

Remainder of this page intentionally blank.

Signature page to follow

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Signature Page to that certain Second Amendment to Credit Agreement and Waiver
dated as of the date first stated above, amending that certain Credit Agreement
dated as of September 30, 2005, as amended and modified to date.

 
 
ALLIED CAPITAL CORPORATION, as Borrower
By: /s/ Kelly A. Anderson
 
Kelly A. Anderson, Executive Vice President and Treasurer
BANK OF AMERICA, N.A., as Administrative Agent and as a Lender
By: /s/ Elizabeth Kurilecz
 
Elizabeth Kurilecz, Senior Vice President
 
BRANCH BANKING AND TRUST COMPANY, as a Lender
By: /s/ James E. Davis
 
James E. Davis, Senior Vice President
CALYON NEW YORK BRANCH, as a Lender
By: /s/ Sebastian Rocco
 
Sebastian Rocco, Managing Director
By: /s/ William Denton
 
William Denton, Managing Director
 
CHEVY CHASE BANK, F.S.B., as a Lender
By: /s/ Richard L. Amador
 
Richard L. Amador, Group Vice President
CITIBANK, N.A., as a Lender
By: /s/ Peter McGovern
 
Peter McGovern, Senior Vice President
 
COMMERZBANK AKTIENGESELLSCHAFT NEW YORK AND GRAND CAYMAN BRANCHES, as a Lender
By: /s/ Michael P. McCarthy
 
Michael P. McCarthy, Vice President
By: /s/ Maureen A. Carson
 
Maureen A. Carson, Assistant Vice
President
DEUTSCHE BANK AG NEW YORK BRANCH, as a Lender
By: /s/ Ruth Leung
 
Ruth Leung, Director
By: /s/ Richard Herder
 
Richard Herder, Managing Director
 
FIRSTRUST BANK, as a Lender
By: /s/ John Hollingsworth
 
John Hollingsworth, Vice President
HSBC BANK USA, NA, as a Lender
By: /s/ Vince Clark
 
Vince Clark, Senior Vice President
 
JPMORGAN CHASE BANK, N.A., as a Lender
By: /s/ Christine Herrick
 
Christine Herrick, Vice President
LASALLE BANK N.A., as a Lender
By: /s/ Thomas Mills
 
Thomas Mills, Acting Vice President
 
M&T BANK, as a Lender
By: /s/ Ann Silverman
 
Ann Silverman, Acting Vice President
MERCANTILE-SAFE DEPOSIT & TRUST COMPANY, as a Lender
By: /s/ Guy E. Johnson
 
Guy E. Johnson, Executive Vice President
 
MERRILL LYNCH BANK USA, as a Lender
By: /s/ Louis Alder
 
Louis Alder, Director
PNC BANK, NATIONAL ASSOCIATION, as a Lender
By: /s/ Douglas T. Brown
 
Douglas T. Brown, Senior Vice President
 
UNION BANK OF CALIFORNIA, N.A., as a Lender
By: /s/ Robert Leeper
 
Robert Leeper, Senior Vice President
WACHOVIA BANK, NATIONAL ASSOCIATION, as a Lender
By: /s/ Grainne M. Pergolini
 
Grainne M. Pergolini, Vice President
 
WESTLB AG, NEW YORK BRANCH, as a Lender
By: /s/ John Moorhead
 
John Moorhead, Director
By: /s/ Sal Battinelli
 
Sal Battinelli, Executive Director
SUNTRUST BANK, as a Lender
By: /s/ David V. Pewter
 
David V. Pewter, Managing Director
 

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