Exhibit 10.26**CUSTODIAN AGREEMENT**     This Agreement between Allied Capital Corporation, a corporation organized and existing underthe laws of the State of Maryland (the “Company”), and Chevy Chase Trust, a Maryland trust company(the “Custodian”), is entered into this 9th day of March, 2006.     WITNESSETH: that in consideration of the mutual covenants and agreements hereinaftercontained, the parties hereto agree as follows:Section 1: EMPLOYMENT OF CUSTODIAN AND PROPERTY TO BE HELD BY IT     The Company hereby employs the Custodian as the custodian of such of the Company’s securitiesand similar investments that the Company desires to be held by the Custodian (“Securities”). TheCustodian agrees to accept from the Company for custody pursuant to this Agreement such Securitiesthat the Company shall deliver to the Custodian for this purpose, and all payments of income orprincipal received by it with respect to such Securities that have not, pursuant to ProperInstructions (as defined in Section 3 of this Agreement), been removed from such custody. TheCustodian shall not be responsible for any property of the Company held or received by the Companyand not delivered to the Custodian.Section 2: DUTIES OF THE CUSTODIAN WITH RESPECT TO PROPERTY OF THECOMPANY HELD BY THE CUSTODIAN*Section 2.1. Holding Securities:*     The Custodian shall hold and physically segregate for the account of the Company all non-cashproperty to be held by it, including all documents, certificates and other such instrumentsincluding any schedule of payments (“Financing Documents”) as are received by the Custodian, andall securities owned by the Company other than securities which are maintained pursuant to Section2.7 in a clearing agency which acts as a securities depository or in a book-entry system authorizedby the U.S. Department of the Treasury (each, a “U.S. Securities System”).*Section 2.2 Delivery of Securities:*     The Custodian shall release and deliver securities owned by the Company held by the Custodianor in a U.S. Securities System account of the Custodian only upon receipt of Proper Instructions,which may be continuing instructions when deemed appropriate by the parties, and only in thefollowing cases: 1. Upon sale of such securities for the account of the Company andreceipt of payment therefor;  2. Upon the receipt of payment in connection with any repurchaseagreement related to such securities entered into by the Company;  3. In the case of a sale effected through a U.S. SecuritiesSystem, in accordance with the provisions of Section 2.7 hereof;
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 4. To the issuer thereof or its agent when such securities arecalled, redeemed, retired or otherwise become payable; provided that, in anysuch case, the cash or other consideration is to be delivered to the Custodian;  5. Upon the sale of such securities for the account of theCompany, to the broker or its clearing agent, against a receipt, forexamination in accordance with “street delivery” custom; provided that in anysuch case, the Custodian shall have no responsibility or liability for any lossarising from the delivery of such securities prior to receiving payment forsuch securities except as may arise from the Custodian’s own negligence orwillful misconduct;  6. For exchange or conversion pursuant to any plan of merger,consolidation, recapitalization, reorganization or readjustment of thesecurities of the issuer of such securities, or pursuant to provisions forconversion contained in such securities, or pursuant to any deposit agreement;provided that, in any such case, the new securities and cash, if any, are to bedelivered to the Custodian;  7. For delivery as security in connection with any borrowing bythe Company requiring a pledge of assets by the Company, but only againstreceipt of amounts borrowed; and  8. For any other purpose, but only upon receipt of ProperInstructions specifying the securities of the Company to be delivered andnaming the person or persons to whom delivery of such securities shall be made.*Section 2.3. Registration of Securities:*     Securities held by the Custodian (other than bearer securities) shall be registered in thename of the Company or in the name of any nominee of the Company or of any nominee of the Custodianwhich nominee shall be assigned exclusively to the Company. All securities accepted by theCustodian on behalf of the Company under the terms of this Agreement shall be in “street name” orother good delivery form.*Section 2.4. Bank Accounts:*     The Custodian shall open and maintain a separate bank account or accounts in the United Statesin the name of the Company, subject only to draft or order by the Custodian acting pursuant to theterms of this Agreement, and shall hold in such account or accounts, subject to the provisionshereof, all cash received by it from or for the account of the Company, other than cash maintainedby the Company in a bank account established and used in accordance with Rule 17f-3 under theInvestment Company Act of 1940, as amended (the “1940 Act”).*Section 2.5. Collection of Income:*     Subject to the provisions of Section 2.3 the Custodian shall collect on a timely basis allincome and other payments with respect to registered securities held hereunder and payments withrespect to Loans to which the Company shall be entitled either by law or pursuant to custom in thesecurities business, and shall collect on a timely basis all income and other payments with respectto bearer securities if, on the date of payment by the issuer, such securities are held by theCustodian or its agent thereof and shall credit such income, as collected, to the Company’s
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custodian account. Without limiting the generality of the foregoing, the Custodian shalldetach and present for payment all coupons and other income items requiring presentation as andwhen they become due and shall collect interest when due on securities held hereunder. TheCustodian will have no duty or responsibility in connection therewith, other than to provide theCompany with such information or data as may be necessary to assist the Company in arranging forthe timely delivery to the Custodian of the income to which the Company is properly entitled.*Section 2.6. Payment of Company Monies:*     Upon receipt of Proper Instructions, which may be continuing instructions when deemedappropriate by the parties, the Custodian shall pay out monies of the Company in the followingcases only: 1. Upon the purchase of securities for the account of the Companybut only (a) against the delivery of such securities to the Custodian (or anybank, banking firm or trust company doing business in the United States orabroad which is qualified under the 1940 Act to act as a custodian and has beendesignated by the Custodian as its agent for this purpose) registered in thename of the Company or in the name of a nominee of the Custodian referred to inSection 2.3 hereof or in proper form for transfer; (b) in the case of apurchase effected through a U.S. Securities System, in accordance with theconditions set forth in Section 2.8 hereof; (c) in the case of repurchaseagreements entered into between the Company and the Custodian, or another bank,or a broker-dealer which is a member of NASD, (i) against delivery of thesecurities either in certificate form or through an entry crediting theCustodian’s account at the Federal Reserve Bank with such securities or (ii)against delivery of the receipt evidencing purchase by the Company ofsecurities owned by the Custodian along with written evidence of the agreementby the Custodian to repurchase such securities from the Company; or (d) fortransfer to a time deposit account of the Company in any bank, whether domesticor foreign; such transfer may be effected prior to receipt of a confirmationfrom a broker and/or the applicable bank pursuant to Proper Instructions fromthe Company as defined herein;  2. In connection with conversion, exchange or surrender ofsecurities owned by the Company as set forth in Section 2.2 hereof;  3. For the payment of any expense or liability incurred by theCompany, as directed by Proper Instructions;  4. For any other purpose, but only upon receipt of ProperInstructions specifying the amount of such payment and naming the person orpersons to whom such payment is to be made.*Section 2.7. Deposit of Company Assets in U.S. Securities Systems:*     The Custodian may deposit and/or maintain securities owned by the Company in a U.S. SecuritiesSystem in compliance with the conditions of Rule 17f-4 of the 1940 Act, as amended from time totime.
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*Section 2.8. Segregated Account:*     The Custodian shall, upon receipt of Proper Instructions, establish and maintain a segregatedaccount or accounts for and on behalf of the Company, into which account or accounts may betransferred cash and/or securities, including securities maintained in an account by the Custodianpursuant to Section 2.7 hereof, (i) in accordance with the provisions of any agreement among theCompany, the Custodian and a broker-dealer registered under the Exchange Act and a member of theNASD, relating to compliance with the rules of any registered national securities exchange (or theCFTC or any registered contract market), or of any similar organization or organizations, regardingescrow or other arrangements in connection with transactions by the Company, , (ii) for thepurposes of compliance by the Company with the procedures required by Investment Company ActRelease No. 10666, or any subsequent release of the U.S. Securities and Exchange Commission (the“SEC”), or interpretative opinion of the staff of the SEC, relating to the maintenance ofsegregated accounts by registered investment companies, and (iii) for any other purpose uponreceipt of Proper Instructions.*Section 2.9. Ownership Certificates for Tax Purposes:*     Upon the reasonable request of the Company, the Custodian shall execute ownership and othercertificates and affidavits for all federal and state tax purposes in connection with receipt ofincome or other payments with respect to domestic securities of the Company held by it and inconnection with transfers of securities.*Section 2.10. Proxies:*     The Custodian shall, with respect to the securities held hereunder, cause to be promptlyexecuted by the registered holder of such securities, if the securities are registered otherwisethan in the name of the Company or a nominee of the Company, all proxies, without indication of themanner in which such proxies are to be voted, and shall promptly deliver to the Company suchproxies, all proxy soliciting materials and all notices relating to such securities.*Section 2.11. Communications Relating to Company Securities:*     Subject to the provisions of Section 2.3, the Custodian shall transmit promptly to the Companyall written information (including, without limitation, pendency of calls and maturities ofsecurities and expirations of rights in connection therewith ) received by the Custodian fromissuers (which term, for this purpose, includes sellers of Loans) of the securities being held forthe Company.Section 3: PROPER INSTRUCTIONS     Proper Instructions, which may also be standing instructions, as used throughout thisAgreement shall mean instructions received by the Custodian from an authorized person of theCompany. The Company shall provide, and the Custodian shall accept, a writing from the Company,signed by the Treasurer, identifying those persons authorized to give such instructions to theCustodian. Such instructions may be faxed, emailed or transmitted via hard copy in a certifiedletter or overnight delivery service, provided that the Company has followed any applicablesecurity procedures agreed to from time to time by the Company and the Custodian.
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     Oral instructions will be considered Proper Instructions if the Custodian reasonably believesthem to have been given by a person authorized to give such instructions with respect to thetransaction involved. The Company shall cause all oral instructions to be confirmed in writing.     The Company shall cause its duly authorized officer to certify to the Custodian in writing thenames and specimen signatures of persons authorized to give Proper Instructions. The Custodianshall be entitled to rely upon the identity and authority of such persons until it receives noticefrom the Company to the contrary.     The Custodian shall be held harmless in acting upon any instructions, notice, request,consent, certificate or other instrument or paper believed by it to be genuine and to have beenproperly executed by or on behalf of the Company.Section 4: ACTIONS PERMITTED WITHOUT EXPRESS AUTHORITY     The Custodian may in its discretion, without express authority from the Company: 1) Make payments to itself or others for minor expenses ofhandling securities or other similar items relating to its duties under thisAgreement, provided that all such payments shall be accounted for to theCompany;  2) Surrender securities in temporary form for securities indefinitive form;  3) Endorse for collection, in the name of the Company, checks,drafts and other negotiable instruments; and  4) In general, attend to all non-discretionary details inconnection with the sale, exchange, substitution, purchase, transfer and otherdealings with the securities and property of the Company except as otherwisedirected by the Board.Section 5: RECORDS     The Custodian shall create and maintain all records relating to its activities and obligationsunder this Agreement in such manner as will meet the obligations of the Company under the 1940 Act,with particular attention to Section 31 and the applicable rules thereunder. To the extent thatthe Custodian, in its sole opinion, is able to do so, the Custodian shall provide assistance to theCompany (at the Company’s reasonable request made from time to time) by providingsub-certifications regarding certain of its services performed hereunder to the Company inconnection with the Company’s Sarbanes-Oxley Act of 2002 certification requirements. All suchrecords shall be the property of the Company and shall at all times during the regular businesshours of the Custodian be open for inspection by duly authorized officers, employees or agents ofthe Company and employees and agents of the SEC. The Custodian shall, at the Company’s request,supply the Company with a tabulation of securities owned by the Company and held by the Custodianand shall, when requested to do so by the Company and
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for such compensation as shall be agreed upon between the Company and the Custodian, includecertificate numbers in such tabulations.Section 6: OPINION OF COMPANY’S INDEPENDENT ACCOUNTANT     The Custodian shall take all reasonable action, as the Company may from time to time request,to provide information to the Company’s independent accountants with respect to its activitieshereunder in connection with the preparation of the Company’s Form N-2, and Forms 10-Q and 10-K orother reports to the SEC and with respect to any other requirements thereof.Section 7: REPORTS TO COMPANY BY INDEPENDENT PUBLIC ACCOUNTANTS     The Custodian shall provide the Company, at such times as the Company may reasonably require,with reports by independent public accountants on the accounting system, internal accountingcontrol and procedures for safeguarding securities, including securities deposited and/ormaintained in a U.S. Securities System, relating to the services provided by the Custodian underthis Agreement; such reports, shall be of sufficient scope and in sufficient detail, as mayreasonably be required by the Company to provide reasonable assurance that any materialinadequacies would be disclosed by such examination, and, if there are no such inadequacies, thereports shall so state.Section 8: COMPENSATION OF CUSTODIAN     The Custodian shall be entitled to reasonable compensation for its services and expenses asCustodian, as agreed upon from time to time with the Company.Section 9: RESPONSIBILITY OF CUSTODIAN     So long as and to the extent that it is in the exercise of reasonable care, the Custodianshall not be responsible for the title, validity or genuineness of any property or evidence oftitle thereto received by it or delivered by it pursuant to this Agreement and shall be heldharmless in acting upon any notice, request, consent, certificate or other instrument reasonablybelieved by it to be genuine and to be signed by the proper party or parties. The Custodian shallbe held to the exercise of reasonable care in carrying out the provisions of this Agreement, butshall be kept indemnified by and shall be without liability to the Company for any action taken oromitted by it in good faith without negligence, including, without limitation, acting in accordancewith any Proper Instruction. The Custodian shall be without liability to the Company for any loss,liability, claim or expense resulting from or caused by any force majeure event or any foreigncountry risk, including without limitation nationalization, expropriation, currency restrictions,or acts of war, revolution, riots or terrorism.     Except as may arise from the Custodian’s own negligence, willful misconduct or fraud, or thenegligence, willful misconduct or fraud of an agent acting on the behalf of the Custodian, theCustodian shall be without liability to the Company for any loss, liability, claim or expenseresulting from or caused by: (i) events or circumstances beyond the reasonable control of theCustodian or Securities System or any agent or nominee of any of the foregoing, including, withoutlimitation, the interruption, suspension or restriction of trading on or the closure of anysecurities market, power or other mechanical or technological failures or interruptions, computer
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viruses or communications disruptions, work stoppages, natural disasters, or other similarevents or acts; (ii) errors by the Company in its instructions to the Custodian; provided suchinstructions have been in accordance with this Agreement; (iii) the insolvency of or acts oromissions by a Securities System; (iv) any delay or failure of any broker, agent or intermediary,central bank or other commercially prevalent payment or clearing system to deliver to theCustodian’s agent securities purchased or in the remittance or payment made in connection withsecurities sold; (v) any delay or failure of any company, corporation, or other body in charge ofregistering or transferring securities in the name of the Custodian, the Company, the Company’snominees or agents or any consequential losses arising out of such delay or failure to transfersuch securities including non-receipt of interests, rights and other accretions or benefits; (vi)delays or inability to perform its duties due to any disorder in market infrastructure with respectto any particular security or Securities System; and (vii) any provision of any present or futurelaw or regulation or order of the United States of America, or any state thereof, or any othercountry, or political subdivision thereof or of any court of competent jurisdiction.     If the Company requires the Custodian to take any action with respect to securities, whichaction involves the payment of money or which action may, in the opinion of the Custodian, resultin the Custodian being liable for the payment of money or incurring liability of some other form,the Company, as a prerequisite to requiring the Custodian to take such action, shall provideindemnity to the Custodian in an amount and form satisfactory to the Custodian. The Custodianshall take no action, nor act upon any instructions, that it reasonably believes would result inthe violation of any state or federal law.     If the Company requires the Custodian, its affiliates, subsidiaries or agents, to advance cashor securities for any purpose (including but not limited to securities settlements, foreignexchange contracts and assumed settlement) or in the event that the Custodian or its nominee shallincur or be assessed any taxes, charges, expenses, assessments, claims or liabilities in connectionwith the performance of this Agreement, except such as may arise from its or its nominee’s ownnegligent action, negligent failure to act or willful misconduct, any property at any time held forthe account of the Company shall be security therefor and should the Company fail to repay theCustodian promptly, the Custodian shall be entitled to utilize available cash and to dispose of theCompany’s assets to the extent necessary to obtain reimbursement.     In no event shall the Custodian be liable for indirect, special or consequential damages.Section 10: EFFECTIVE PERIOD, TERMINATION AND AMENDMENT     This Agreement shall become effective as of its execution, shall continue in full force andeffect for an indefinite term (subject to the termination provisions hereof), and may be amended atany time by mutual agreement of the parties hereto and may be terminated by either party by aninstrument in writing delivered or sent by certified mail or sent overnight delivery to the otherparty, such termination to take effect not sooner than sixty (60) days after the date of suchdelivery or mailing; provided, however, that the Company shall not amend or terminate thisAgreement in contravention of any applicable federal or state regulations, or any provision of theCompany’s Articles of Incorporation, and further provided, that the Company may at any time byaction of its Board (i) substitute another bank or trust company for the Custodian by giving noticeas described above to the Custodian, or (ii) immediately terminate this Agreement in the
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event of the appointment of a conservator or receiver for the Custodian by the principalregulator of the Custodian or upon the happening of a like event at the direction of an appropriateregulatory agency or court of competent jurisdiction.     Upon termination of the Agreement, the Company shall pay to the Custodian such compensation asmay be due as of the date of such termination and shall likewise reimburse the Custodian for itsreasonable costs, expenses and disbursements in accordance with the terms hereof.Section 11: SUCCESSOR CUSTODIAN     If a successor custodian for the Company shall be appointed by the Board, the Custodian shall,upon termination, deliver to such successor custodian at the office of the Custodian, duly endorsedand in the form for transfer, all securities of the Company then held by it hereunder and shalltransfer to an account of the successor custodian all of the securities of the Company held in aSecurities System.     If no such successor custodian shall be appointed, the Custodian shall, in like manner, uponreceipt of a Certified Resolution, deliver at the office of the Custodian and transfer suchsecurities, funds and other properties in accordance with such resolution.     In the event that no written order designating a successor custodian or Certified Resolutionshall have been delivered to the Custodian on or before the date when such termination shall becomeeffective, then the Custodian shall have the right to deliver to a bank or trust company, which isa “bank” as defined in the 1940 Act, having an aggregate capital, surplus, and undivided profits,as may be required under the 1940 Act, all securities, funds and other properties held by theCustodian hereunder and all instruments held by the Custodian relative thereto and all otherproperty held by it under this Agreement on behalf of the Company, and to transfer to an account ofsuch successor custodian all of the Company’s securities held in any Securities System.Thereafter, such bank or trust company shall be the successor of the Custodian under thisAgreement.     In the event that securities, funds and other properties remain in the possession of theCustodian after the date of termination hereof owing to failure of the Company to procure theCertified Resolution to appoint a successor custodian, the Custodian shall be entitled to faircompensation for its services during such period as the Custodian retains possession of suchsecurities, funds and other properties and the provisions of this Agreement relating to the dutiesand obligations of the Custodian shall remain in full force and effect.Section 12: INTERPRETIVE AND ADDITIONAL PROVISIONS     In connection with the operation of this Agreement, the Custodian and the Company may fromtime to time agree on such provisions interpretive of or in addition to the provisions of thisAgreement as may in their joint opinion be consistent with the general tenor of this Agreement.Any such interpretive or additional provisions shall be in a writing signed by both parties andshall be annexed hereto, provided that no such interpretive or additional provisions shallcontravene any applicable federal or state regulations or any provision of the Company’s Articles
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of Incorporation. No interpretive or additional provisions made as provided in the precedingsentence shall be deemed to be an amendment of this Agreement.Section 13: MARYLAND LAW TO APPLY     This Agreement shall be construed and the provisions thereof interpreted under and inaccordance with laws of the State of Maryland, excluding the conflicts of laws principles thereof.Section 14: PRIOR AGREEMENTS     This Agreement supersedes and terminates, as of the date hereof, all prior agreements betweenthe Company and the Custodian relating to the custody of the Company’s assets.Section 15: NOTICES.     Any notice, instruction or other instrument required to be given hereunder may be delivered inperson to the offices of the parties as set forth herein during normal business hours or deliveredprepaid registered mail or by telex, cable or telecopy to the parties at the following addresses orcontact information or such other addresses or contact information as may be notified by any partyfrom time to time.     To the Company: ALLIED CAPITAL CORPORATION  1919 Pennsylvania Avenue, NW  Washington, DC 20006       Attention: Kelly Anderson, Treasurer  Telephone: 202-973-6328  Telecopy: 202-659-2053     To the Custodian: CHEVY CHASE TRUST  7501 Wisconsin Avenue, 14th Floor  Bethesda MD 20814       Attention:         Telephone:         Telecopy:            Such notice, instruction or other instrument shall be deemed to have been served in the caseof a registered letter at the expiration of five business days after posting, and, in the case of,fax or email on the business day after the receipt thereof. Evidence that the notice was properlyaddressed, stamped and put into the post shall be conclusive evidence of posting.Section 16: REPRODUCTION OF DOCUMENTS     This Agreement and all schedules, addenda, exhibits, attachments and amendments hereto may bereproduced by any photographic, photostatic, microfilm, micro-card, miniature
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photographic or other similar process. The parties hereto all/each agree that any suchreproduction shall be admissible in evidence as the original itself in any judicial oradministrative proceeding, whether or not the original is in existence and whether or not suchreproduction was made by a party in the regular course of business, and that any enlargement,facsimile or further reproduction of such reproduction shall likewise be admissible in evidence.Section 17: COUNTERPARTS     This Agreement may be executed in one or more counterparts, and by the parties hereto onseparate counterparts, each of which shall be deemed to be an original but all of which togethershall constitute but one and the same instrument.[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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     IN WITNESS WHEREOF, each of the parties has caused this instrument to be executed in its nameand behalf by its duly authorized representative and its seal to be hereunder affixed as of March9, 2006.       ALLIED CAPITAL CORPORATION COMPANY SIGNATURE ATTESTED TO BY:       By: /s/ Kelly A. Anderson By: /s/ Suzanne V. Sparrow              Name: Kelly A. Anderson Name: Suzanne V. Sparrow              Title: Executive Vice President &Treasurer Title: Secretary              CHEVY CHASE TRUST SIGNATURE ATTESTED TO BY:       By: /s/ Lynn M. Panagos By: /s/ Chris Davis              Name: Lynn M. Panagos Name: Chris Davis              Title: Managing Director Title: Vice President       
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