EXHIBIT 10.1 - INVESTMENT MANAGEMENT AGMT.

                                                                   Exhibit 10.1


                        INVESTMENT MANAGEMENT AGREEMENT

         AGREEMENT, dated July 25, 2005, between BlackRock Kelso Capital
Corporation, a Delaware corporation, (the "BDC") and BlackRock Kelso Capital
Advisors LLC (the "Advisor"), a Delaware limited liability company.

         WHEREAS, Advisor has agreed to furnish investment advisory services to
the BDC, a business development company registered under the Investment Company
Act of 1940, as amended (the "1940 Act");

         WHEREAS, this Agreement has been approved in accordance with the
provisions of the 1940 Act, and the Advisor is willing to furnish such services
upon the terms and conditions herein set forth;

         NOW, THEREFORE, in consideration of the mutual premises and covenants
herein contained and other good and valuable consideration, the receipt of
which is hereby acknowledged, it is agreed by and between the parties hereto as
follows:

         1. In General. The Advisor agrees, all as more fully set forth herein,
to act as investment advisor to the BDC with respect to the investment of the
BDC's assets and to supervise and arrange for the day-to-day operations of the
BDC and the purchase of securities for and the sale of securities held in the
investment portfolio of the BDC.

         2. Duties and Obligations of the Advisor with Respect to Investment of
Assets of the BDC.

                  (a) Subject to the succeeding provisions of this paragraph
and subject to the direction and control of the BDC's Board of Directors, the
Advisor shall (i) act as investment advisor for and supervise and manage the
investment and reinvestment of the BDC's assets and in connection therewith
have complete discretion in purchasing and selling securities and other assets
for the BDC and in voting, exercising consents and exercising all other rights
appertaining to such securities and other assets on behalf of the BDC; (ii)
supervise continuously the investment program of the BDC and the composition of
its investment portfolio; (iii) arrange, subject to the provisions of Section
3(b) hereof, for the purchase and sale of securities and other assets held in
the investment portfolio of the BDC; and (iv) oversee the administration of all
aspects of the BDC's business and affairs and provide, or arrange for others
whom it believes to be competent to provide, certain services as specified in
paragraph (b) below. Nothing contained herein shall be construed to restrict
the BDC's right to hire its own employees or to contract for administrative
services to be performed by third parties, including but not limited to, the
calculation of the net asset value of the BDC's shares.

                  (b) Except to the extent provided for directly by the BDC,
the specific services to be provided or arranged for by the Advisor for the BDC
pursuant to paragraph (a)(iv) above are (i) maintaining the BDC's books and
records, to the extent not maintained by the BDC's custodian, transfer agent
and dividend disbursing agent in accordance with applicable laws and
regulations; (ii) initiating all money transfers to the BDC's custodian and
from the BDC's custodian for the payment of the BDC's expenses, investments and
dividends; (iii) reconciling account information and balances among the BDC's
custodian, transfer agent and dividend disbursing agent; (iv) preparing all
governmental filings by the BDC and all reports by the BDC to its shareholders;
(v) supervising the calculation of the net asset value of the BDC's shares; and
(vi) preparing notices and agendas for meetings of the BDC's shareholders and
the BDC's Board of Directors as well as minutes of such meetings in all matters
required by applicable law to be acted upon by the Board of Directors.

                  (c) In the performance of its duties under this Agreement,
the Advisor shall at all times use all reasonable efforts to conform to, and
act in accordance with, any requirements imposed by (i) the provisions of the
Investment Company Act of 1940 (the "Act"), and of any rules or regulations in
force thereunder; (ii) any other applicable provision of law; (iii) the
provisions of the Certificate of Incorporation and the By-Laws of the BDC, as
such documents are amended from time to time; (iv) the investment objectives,
policies and restrictions applicable to the BDC as set forth in the BDC's
Private Placement Memorandum; and (v) any policies and determinations of the
Board of Directors of the BDC.

                  (d) The Advisor will seek to provide qualified personnel to
fulfill its duties hereunder and, except as set forth in the following
sentence, will bear all costs and expenses incurred in connection with its
investment advisory duties thereunder. The BDC shall reimburse the Advisor for
all direct and indirect cost and expenses incurred by the Advisor (i) for
office space rental, office equipment and utilities allocable to performance of
investment advisory and non investment advisory administrative or operating
services hereunder by the Advisor and (ii) allocable to any non-investment
advisory administrative or operating services provided by the Advisor
hereunder, including salaries, bonuses, health insurance, retirement benefits
and all similar employment costs, such as office equipment and other overhead
items. All allocations made pursuant to this paragraph (d) shall be made
pursuant to allocation guidelines approved from time to time by the Board of
Directors. The BDC shall also be responsible for the payment of all the BDC's
other expenses, including (i) payment of the fees payable to the Advisor under
Section 8 hereof; (ii) organizational expenses; (iii) brokerage fees and
commissions; (iv) taxes; (v) interest charges on borrowings; (vi) the cost of
liability insurance or fidelity bond coverage for the BDC's officers and
employees, and directors' and officers' errors and omissions insurance
coverage; (vii) legal, auditing and accounting fees and expenses; (viii)
charges of the BDC's administrator (if any), custodian, transfer agent and
dividend disbursing agent and any other service providers; (ix) the BDC's dues,
fees and charges of any trade association of which the BDC is a member; (x) the
expenses of printing, preparing and mailing proxies, stock certificates,
reports, prospectuses, registration statements and other documents used by the
BDC; (xi) expenses of registering and offering securities of the BDC under
applicable law; (xii) the expenses of holding shareholder meetings; (xiii) the
compensation, including fees, of any of the BDC's directors, officers or
employees who are not affiliated persons of the Advisor; (xiv) all expenses of
computing the BDC's net asset value per share; (xv) litigation and
indemnification and other extraordinary or non recurring expenses; and (xvi)
all other non investment advisory expenses of the BDC.

                  (e) The Advisor shall give the BDC the benefit of its
professional judgment and effort in rendering services hereunder, but neither
the Advisor nor any of its officers, directors, employees, agents or
controlling persons shall be liable for any act or omission or for any loss
sustained by the BDC in connection with the matters to which this Agreement
relates, except a loss resulting from willful misfeasance, bad faith or gross
negligence in the performance of its duties, or by reason of its reckless
disregard of its obligations and duties under this Agreement; provided,
however, that the foregoing shall not constitute a waiver of any rights which
the BDC may have which may not be waived under applicable law.

         3. Covenants. (a) In the performance of its duties under this
Agreement, the Advisor shall at all times conform to, and act in accordance
with, any requirements imposed by: (i) the provisions of the 1940 Act and the
Investment Advisers Act of 1940, as amended, and all applicable Rules and
Regulations of the Securities and Exchange Commission; (ii) any other
applicable provision of law; (iii) the provisions of the Certificate of
Incorporation and By-Laws of the BDC, as such documents are amended from time
to time; (iv) the investment objectives and policies of the BDC as set forth in
its Private Placement Memorandum; and (v) any policies and determinations of
the Board of Directors of the BDC.

                  (b) In addition, the Advisor will:

                           (i) place orders either directly with the issuer or
         with any broker or dealer. Subject to the other provisions of this
         paragraph, in placing orders with brokers and dealers, the Advisor
         will attempt to obtain the best price and the most favorable execution
         of its orders. In placing orders, the Advisor will consider the
         experience and skill of the firm's securities traders as well as the
         firm's financial responsibility and administrative efficiency.
         Consistent with this obligation, the Advisor may select brokers on the
         basis of the research, statistical and pricing services they provide
         to the BDC and other clients of the Advisor. Information and research
         received from such brokers will be in addition to, and not in lieu of,
         the services required to be performed by the Advisor hereunder. A
         commission paid to such brokers may be higher than that which another
         qualified broker would have charged for effecting the same
         transaction, provided that the Advisor determines in good faith that
         such commission is reasonable in terms either of the transaction or
         the overall responsibility of the Advisor to the BDC and its other
         clients and that the total commissions paid by the BDC will be
         reasonable in relation to the benefits to the BDC over the long term.
         In addition, the Advisor is authorized to take into account the sale
         of shares of the BDC in allocating purchase and sale orders for
         portfolio securities to brokers or dealers (including brokers and
         dealers that are affiliated with the Advisor), provided that the
         Advisor believes that the quality of the transaction and the
         commission are comparable to what they would be with other qualified
         firms. In no instance, however, will the BDC's securities be purchased
         from or sold to the Advisor, or any affiliated person thereof, except
         to the extent permitted by the SEC or by applicable law;

                           (ii) maintain a policy and practice of conducting
         its investment advisory services hereunder independently of the
         commercial banking operations of its affiliates. When the Advisor
         makes investment recommendations for the BDC, its investment advisory
         personnel will not inquire or take into consideration whether the
         issuer of securities proposed for purchase or sale for the BDC's
         account are customers of the commercial department of its affiliates;
         and

                           (iii) treat confidentially and as proprietary
         information of the BDC all records and other information relative to
         the BDC, and the BDC's prior, current or potential shareholders, and
         will not use such records and information for any purpose other than
         performance of its responsibilities and duties hereunder, except after
         prior notification to and approval in writing by the BDC, which
         approval shall not be unreasonably with