EX-10.1






ALLIED CAPITAL CORPORATION

RETENTION AGREEMENT




This Retention Agreement (this “Agreement”) is entered into by and between Allied Capital
Corporation, a Maryland corporation (the “Company”) and        (“Employee”) and will be
effective as of March 3, 2009 (the “Effective Date”).



WHEREAS, the Employee is a valued employee of the Company; and



WHEREAS, the Company desires to provide Employee with additional incentive to remain with the
Company through 1) the issuance of a Stock Option Award; and 2) the issuance of a Retention Award
that would be paid in the event of a Separation from Service (as defined in Section 409A of the
Internal Revenue Code of 1986, as amended (“Code”) and the regulations promulgated thereunder
(“Section 409A”)) from the Company and all entities with whom the Company would be considered a
single employer under Section 414(b) and (c) of the Code, within a certain period prior to or after
a Change of Control.



NOW THEREFORE, the Company and the Employee agree to the following:




	1)	 	Term: The term of this Agreement shall commence on the Effective Date and shall
continue in effect until December 31, 2011. In addition, this Agreement shall terminate upon
the death of the Employee. However, if Employee dies after he has become entitled to a
Retention Award under this Agreement, but while any amount of such award would still be
payable to him had he continued to live, all such amounts, unless otherwise provided herein,
shall be paid in accordance with the terms of the Agreement to Employee’s estate.






	2)	 	Stock Option Award: Employee has been granted an award of        stock options on
March 3, 2009, in accordance with the terms and conditions of the Allied Capital Corporation
Amended Stock Option Plan and the Notice of Grant of Stock Options and Option Agreement
(attached).






	3)	 	Retention Award: If during the Term and within 90 days prior to a Change of Control
or within 18 months following a Change of Control, the Employee experiences a Separation from
Service due to (a) the termination of his employment by the Company or its successor or
assigns for any reason other than Cause or (b) Employee’s termination of employment for Good
Reason, Employee will be eligible for the award described in this paragraph 3, subject to
execution of the Separation Agreement described in paragraph 4 herein. For the purposes of
this Agreement:






	 	a)	 	Company shall pay Employee the sum of $      (less withholdings required by law), in a
lump sum payment on the first business day following the six month anniversary of the
Termination Date.






	 	b)	 	Provided that Employee makes a timely election to continue health and dental insurance
benefits under the Company’s group health plans under the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended, and the regulations issued thereunder (COBRA), the
Company will pay Employee’s COBRA premiums as they become due for a period of up to 12
months or, if earlier, until Employee begins employment with a new employer. These
payments will be made directly to the insurance carrier and shall begin no later than the
date that occurs 10 days after the Separation Agreement becomes effective. Employee shall
notify Employer upon acceptance of employment with a new employer.






	4)	 	Release: Notwithstanding any provision herein to the contrary, the Company shall not
have any obligation to pay (or cause to be paid) any Retention Award or portion of a Retention
Award under this Agreement unless and until the Executive executes a binding Separation
Agreement, in such a form as the Company may reasonably request. Such Separation Agreement
shall release all claims against the Company, its subsidiaries and other related parties
relating to the Employee’s employment and termination. In addition, it shall include, among
other things, certification that Employee has not disclosed and will not disclose any
confidential information, that Employee has returned all Company property, and that Employee
shall not disparage the Company, or its officers, directors or employees.






	5)	 	Definitions:






	 	a)	 	Cause: "Cause” shall mean that the Company has made a good faith determination
that Employee: (a) has continued to fail to substantially perform duties or comply with
Company policies after the Company has given Employee written notice of such failure; (b)
has engaged in gross misconduct, moral turpitude, embezzlement, misappropriation of
corporate assets, gross negligence or violation of any laws with which the Company is
required to comply; (c) has become ineligible to serve as employee, officer or director of
the Company pursuant to Section 9 of the Investment Company Act of 1940, as amended; (d)
has committed, or pled “guilty” or “no contest” to any felony, or any crime involving
breach of trust or dishonesty; or (e) has materially breached Employee’s fiduciary duty,
duty of loyalty to the Company or duty not to disclose confidential information.






	 	b)	 	Change of Control: “Change of Control” shall mean the occurrence of any of the
following events after the Effective Date of this Agreement: (a) the sale or other
disposition of all or substantially all of the Company’s assets; (b) the acquisition,
whether directly, indirectly, beneficially (within the meaning of rule 13d-3 of the
Securities Exchange Act of 1934, as amended (the 1934 Act)) or of record, as a result of a
merger, consolidation or otherwise, of securities of the Company representing 15% or more
of the aggregate voting power of the Company’s then-outstanding Common Stock by any
“person” (within the meaning of Sections 13(d) and 14(d) of the 1934 Act), including, but
not limited to, any corporation or group of persons acting in concert, other than (i) the
Company or its subsidiaries and/or (ii) any employee pension benefit plan (within the
meaning of Section 3(2) of the Employee Retirement Income Security Act of 1974) of the
Company or its subsidiaries, including a trust established pursuant to any such plan; or
(c)  the individuals who were members of the Board as of the Effective Date (the “Incumbent
Board”) cease to constitute at least two-thirds of the Board; provided, however, that any
director appointed by at least two-thirds of the then Incumbent Board or nominated by at
least two-thirds of the Nominating Committee of the Board (a majority of the members of the
Nominating Committee shall be members of the then Incumbent Board or appointees thereof),
other than any director appointed or nominated in connection with, or as a result of, a
threatened or actual proxy or control contest, shall be deemed to constitute a member of
the Incumbent Board.






	 	c)	 	Good Reason: “Good Reason” shall mean that without Employee’s consent: (a)
Employee’s office has been relocated by the Company to a location more than 40 miles from
Employee’s then current principal office or (b) Employee’s base compensation has been
materially reduced. Employee’s termination for Good Reason shall be deemed to be an
involuntary termination provided that Employee gives written notice to the Company of the
existence of one of the Good Reason conditions above within ninety days of the initial
existence of the condition and the Company is provided with a period of thirty days during
which it may remedy the condition and fails to do so.






	 	d)	 	Termination Date: “Termination Date” shall mean the date specified in a
written notice of termination to the other party. In the case of a termination without
Cause by the Company, such date shall be not less than thirty (30) days from the date such
notice is given. In the case of a termination by Employee for Good Reason, such date shall
be not less than seven (7) days or more than fifteen (15) days following the expiration of
the 30 day remedy period described in Section 5(c) of this Agreement.






	6)	 	In the event that payment of a Retention Award pursuant to this Agreement would result in the
imposition of a penalty tax pursuant to Section 280G(b)(3) of the Code, and the regulations
promulgated thereunder, such payments shall be reduced to the maximum amount which may be paid
under Section 280G without exceeding such limits. Any reduction in payments necessary to
comply with the requirements of this Agreement relating to the limitation of Section 280G or
applicable regulatory limits shall be made in accordance with Section 409A of the Code.






	7)	 	Mitigation: Employee shall not be required to mitigate the amount of any Retention
Award payment provided for in this Agreement by seeking other employment or otherwise, nor
shall any amounts received from other employment or otherwise by the Employee offset in any
manner the obligations of the Company hereunder except as provided otherwise herein.






	8)	 	Binding Agreement: This Agreement shall bind any successor (whether direct or
indirect, by purchase, merger, consolidation, or otherwise) to all or substantially all of the
business or assets of the Company, in the same manner and to the same extent that the Company
would be obligated under this Agreement if no succession had taken place. In the case of any
transaction in which a successor would not, by the foregoing provision or by operation of law,
be bound by the Agreement, the Company shall require such successor expressly and
unconditionally to assume and agree to perform the obligations of the Company under this
Agreement, in the same manner and to the same extent that the Company would be required to
perform if no such succession had taken place. This Agreement may not be assigned by Employee
but shall inure to the benefit of Employee, his heirs and personal representatives.






	9)	 	Amendment of Agreement: This Agreement may not be modified or amended, except by an
instrument in writing signed by the parties hereto. Any such modification or amendment shall
be subject to Section 409A of the Code and the regulations thereunder and any other applicable
law.






	10)	 	Knowing and Voluntary. Each party has read and fully understands this Agreement and
has consulted with counsel of its own choosing before entering into this Agreement. Each
party has had a reasonable time to consider this Agreement and is entering into it knowingly
and voluntarily, without any duress or coercion.






	11)	 	Construction. In the event an ambiguity or question of intent or interpretation
arises, this Agreement shall be construed as if drafted jointly by the parties and no
presumption or burden of proof shall arise favoring or disfavoring either party by virtue of
the authorship of any of the provisions of this Agreement.






	12)	 	Execution. This Agreement may be executed in two or more counterparts, each of which
shall be deemed an original but all of which together shall constitute one and the same
instrument. This Agreement may be executed by facsimile signatures.






	13)	 	Dispute Resolution: Any disputes between Employee and the Company or any of its
former, current or future parents, subsidiaries or affiliates (except claims for injunctive
relief necessary to prevent irreparable harm or under either workers or unemployment
compensation laws) shall be resolved in accordance with the Federal Arbitration Act.
Arbitration will be conducted consistent with the American Arbitration Association’s National
Rules for Resolution of Employment Disputes that are in effect at the time of the arbitration.






	14)	 	Waiver. No term or condition of this Agreement shall be deemed to have been waived,
nor shall there be estoppels against the enforcement of any provision of this Agreement,
except by written instrument of the party charged with such waiver or estoppel. No such
written waiver shall be deemed a continuing waiver, unless specifically stated therein, and
each waiver shall operate only as to the specific term or condition waived and shall not
constitute a waiver of such term or condition for the future or as to any act other than the
act specifically waived.






	15)	 	Severability. If, for any reason, any provision of this Agreement is held invalid,
such invalidity shall not affect the other provisions of this Agreement not held so invalid,
and each such other provision shall, to the full extent consistent with applicable law,
continue in full force and effect.






	16)	 	Headings. The headings of the paragraphs herein are included solely for convenience
of reference and shall not control the meaning or interpretation of any of the provisions of
this Agreement.






	17)	 	Governing Law; Regulatory Authority. This Agreement has been executed and delivered
in the State of Maryland and its validity, interpretation, performance and enforcement shall
be governed by the laws of the State of Maryland, except to the extent that federal law is
governing. If this Agreement conflicts with any applicable federal law as now or hereafter in
effect, then federal law shall govern.






	18)	 	Effect of Prior Agreements. This Agreement contains the entire understanding between
the parties hereto and supersedes any prior agreements, except the Notice of Grant of Stock
Options and Option Agreement and the Indemnification Agreement, promises or arrangements,
whether oral or written, between the Company or any predecessor of the Company and the
Employee with respect to the subject matter contained herein. Any of Employee’s rights
hereunder shall be in addition to any rights under benefit plans or agreement of the Company
to which Employee is a party or in which Employee is a participant, including, but not limited
to any Company sponsored employee benefit plans, indemnification agreements or stock option
plans.






	19)	 	Nothing in this Agreement changes the “at-will” nature of the Employee’s employment and
either the Employee or the Company may end the employment relationship at any time without
Cause or Good Reason.





IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the day and year first
above written.



	 	 	 
	EMPLOYEE

	 	ALLIED CAPITAL CORPORATION
	BY:

	 	BY:
	 

	 	 






John M. Scheurer Chief Executive Officer & President



Date: Date: