2. You and the Company hereby delete in its entirety Section 8 of the 2007 EmploymentAgreement and substitute the following language in its place:8. Tax Equalization Payment. In addition to the amounts payable under Section 7hereof, if it shall be determined that any event or any payment, vesting, distribution, ortransfer by the Company (or any successor, affiliate or by any other person) to you or foryour benefit under the terms of this Agreement or otherwise (including, without limitation,the Stock Option Agreement(s), the Split Dollar Life Insurance Agreement or any employeebenefit plan) (collectively, a “Payment”) would be subject to or result in the imposition ofthe excise tax under Section 4999 of the Internal Revenue Code of 1986, as amended (the“Code”) (and any regulations issued thereunder, any successor provision, and any similarprovision of state or local income tax law) (collectively, the “Excise Tax”), then theCompany shall pay to you a lump sum (“Tax Equalization Payment”) in an amount sufficientthat, after payment of the federal, state or local income, employment or other requiredtaxes (other than taxes that may be imposed by Section 409A of the Code) (“Regular Taxes”),you shall receive an amount equal to the Excise Tax. Such payment shall be made within 15days of the date which you remit such Excise Tax. In determining the amount of any RegularTaxes, the maximum applicable marginal rate of tax for the year in which the TaxEqualization Payment is payable shall be used. The amount of this Tax Equalization Paymentshall be determined by the Company’s independent accountants.3. **Knowing and Voluntary****.**Each party has read and fully understands this SecondAmendment and has consulted with counsel of its own choosing before entering into this SecondAmendment. Each party has had a reasonable time to consider this Second Amendment and is enteringinto it knowingly and voluntarily without any duress or coercion.4. **Complete Agreement****.**This Second Amendment constitutes the entire agreement between youand the Company regarding the amendment of Sections 7(c) and 8 of the 2007 Employment Agreementand supersedes all prior agreements and understandings between you and the Company regardingSections 7(c) and 8 of the 2007 Employment Agreement. In making this Second Amendment, the partieswarrant that they did not rely on any representations or statements other than those contained inthis Second Amendment. This Second Amendment may not be amended except by an instrument inwriting signed by you and by the Chair of Company’s Compensation Committee on behalf of theCompany.5. **Conflict of Terms**. In the event of a conflict or inconsistency between the 2007Employment Agreement and this Second Amendment, this Second Amendment shall control and govern therights and obligations of the parties.6. **Construction****.**In the event an ambiguity or question of intent or interpretation arises,this Second Amendment shall be construed as if drafted joined by the parties and no presumption orburden of proof shall arise favoring or disfavoring either party by virtue of the authorship of anyof the provisions of this Second Amendment.7. **Execution****.**This Second Amendment may be executed in two or more counterparts, eachof which shall be deemed an original but all of which together shall constitute one and the sameinstrument. This Second Amendment may be executed by facsimile signatures.
 

 
IN WITNESS WHEREOF, each of the parties has executed this Second Amendment, in the case of theCompany by its authorized officer, as of the day and year set forth under their signatures below.                 ALLIED CAPITAL CORPORATION                        /s/Penni F. Roll   BY: /s/Anthony T. Garcia  Penni F. Roll   Anthony T. Garcia        Compensation Committee Chair             Date: December 15, 2008   Date: December 15, 2008