Allied Capital Invests $49.5 Million in Leading Provider of Interactive Classroom Solutions.

WASHINGTON -- Allied Capital Corporation (NYSE:ALD) announced today that it has invested $49.5 million to support the acquisition of Interwrite Learning by eInstruction Corporation, to form one of the largest providers in the U.S. of interactive classroom solutions serving the K-12 and higher education markets. eInstruction is a portfolio company of Leeds Equity Partners, a New York-based private equity firm. Allied Capital's investment took the form of a second lien loan, subordinated notes and an equity co-investment. The transaction closed in December 2007.

eInstruction's combined classroom solutions now include: (i) leading technology products such as student response systems ("SRSs"), interactive whiteboards, mobile teacher slates and teacher panels; (ii) award winning software including ExamView[R] Assessment Suite, CPS, Interwrite Workspace(TM), Interwrite Response and REAP; and (iii) expansive content with over 5 million publisher textbook questions available through ExamView, Learning Series proprietary questions aligned to state standards and Interwrite learning objects.

The company's products are designed to engage students in the classroom to improve academic progress, increase educator productivity and provide real-time information for use by teachers, schools, universities and parents. The company's products are used in over 325,000 classrooms and training rooms in more than 60 countries across K-12, higher education, corporate, military and government industry sectors.

"Allied Capital is pleased to support Leeds Equity in this transaction, whose deep knowledge of the educational markets makes them an ideal owner of these two companies," said Benton Cummings, Managing Director of Allied Capital. "The combination of these two companies has enormous strategic value and the combined product platforms will enable the company to take advantage of a fast growing industry."

"Allied Capital has been a uniquely valuable financing partner to us, providing flexible structuring and timely execution that enabled this transaction to be completed even in today's turbulent credit markets," said Carter Harned, Managing Director of Leeds Equity Partners. "We look forward to working closely with the Allied Capital team to continue to grow the company in a highly dynamic marketplace," he added.

About Allied Capital

Allied Capital is a leading business development company (BDC) in the U.S. that invests private debt and equity capital in middle market businesses nationwide. Founded in 1958 and operating as a public company since 1960, Allied Capital is celebrating 50 years of investing in and supporting the U.S. entrepreneurial economy.

Allied Capital provides long-term debt and equity capital for management and sponsor-led buyouts, and for recapitalizations, acquisitions and growth of middle market companies. Allied Capital's one-stop financing capabilities include first and second lien senior loans, unitranche debt, junior or subordinated debt and equity. Allied Capital seeks to invest in stable, less cyclical companies that produce significant free cash flow and high returns on invested capital. At September 30, 2007, the Company's private finance portfolio included investments in 110 companies that currently generate aggregate revenues of over $13 billion and employ more than 90,000 people.

Headquartered in Washington, DC, Allied Capital offers shareholders the opportunity to participate in the private equity industry through an investment in its New York Stock Exchange-listed stock. Allied Capital has paid consistent or increasing regular, quarterly cash dividends annually to shareholders since 1963. For more information, please visit www.alliedcapital.com, call Allied Capital investor relations toll-free at [phone], or e-mail us at [e-mail].

About eInstruction Corporation([R])

eInstruction pioneered the first student response system for the education market during the 1980's. Its Classroom Performance System (CPS) provides instructors and students with real-time feedback on comprehension during instruction. Today CPS remains the leading student response system in education, being used with over 1.5 million students in more than 60,000 K-12 classrooms and over 400,000 students in more than 400 colleges and universities.

In 2006, eInstruction acquired FSCreations and integrated its ExamView([R]) and Learning Series software and content platforms so instructors can seamlessly use publisher and proprietary question banks in lesson plans, quizzes and tests with eInstruction technology. The result is an integrated system for instruction and assessment with real-time feedback. For more information, please visit www.eInstruction.com.

About Interwrite Learning(TM)

Interwrite Learning traces its roots to the development of high performance digitizers for use in construction and estimating markets in the 1970's. Interwrite later applied the basic principles of that technology to its first electromagnetic interactive whiteboard to provide interactive solutions to the education market.

Interwrite developed and later patented the first mobile teacher slate for education and continues to be the leader in that product category. Interwrite's education portfolio also includes its PRS student response system, award-winning instructional software Interwrite Workspace(TM) and interactive learning objects. Today, Interwrite Learning offers its education solutions in 40 languages with 250,000 systems operating in classrooms worldwide. For more information, please visit www.interwritelearning.com.

About Leeds Equity Partners, LLC 

Leeds Equity Partners, LLC is a private equity firm focused on investments in the education, training and information and business services industries (the "Knowledge Industries"). The firm is currently investing its fourth private equity fund, Leeds Equity Partners IV, L.P., which is the largest fund focused exclusively on investing in companies within the Knowledge Industries, a $1.3 trillion domestic market. The firm was founded in 1993 and is based in New York. For more information, please visit www.leedsequity.com.

Forward-Looking Statements 

The information contained in this press release contains forward-looking statements. These forward-looking statements are subject to the inherent uncertainties in predicting future results and conditions. Certain factors could cause actual results and conditions to differ materially from those projected in these forward-looking statements, and some of these factors are enumerated in Allied Capital's filings with the Securities and Exchange Commission.