EXHIBIT 10.9
INVESTMENT ADVISORY AND
ADMINISTRATIVE AGREEMENT
THIS INVESTMENT ADVISORY AND ADMINISTRATIVE AGREEMENT
(this “Agreement”) is entered into as of the 2nd day of July 2004 by and
between Gladstone Capital Corporation, a Maryland corporation and its
wholly-owned subsidiary (the “Company”) and Gladstone Management Corporation, a
Delaware corporation (“Adviser”).
W I T N E S S E T H:
WHEREAS, the Company is a non-diversified closed-end
management investment company that has elected to be regulated as a business
development company pursuant to the provisions of the Investment Company Act of
1940, as amended, and the rules and regulations promulgated thereunder (the “Investment
Company Act”); and
WHEREAS, Adviser is a registered investment adviser
pursuant to the Investment Advisers Act of 1940, as amended, and the rules and
regulations promulgated there under (the “Advisers Act”); and
WHEREAS, the Company desires to retain Adviser to
serve as its investment adviser and, in connection therewith, to perform
certain administrative and investment advisory services on the terms and
conditions set forth herein;
NOW, THEREFORE, in consideration of the mutual
covenants and agreements herein set forth, the parties agree as follows:
1. APPOINTMENT
OF ADVISER
(a) The
Company hereby appoints Adviser to serve as its investment adviser and
administrator for the period and on the terms and subject to the conditions as
set forth in this Agreement.
(b) Adviser
hereby accepts appointment as investment adviser and administrator to the
Company and agrees to render the services and discharge the duties set forth in
this Agreement in compliance with (i) the terms and conditions of this
Agreement, (ii) the Articles of Incorporation and Bylaws of the Company, each
as amended from time to time, (iii) the Company’s stated investment objectives,
policies and limitations, (iv) applicable laws and regulations, and subject to
the supervision of the Company’s Board of Directors (the “Board”).
2. SERVICES AND DUTIES OF ADVISER
(a) Adviser
shall:
(i) (A)
manage the investment and reinvestment of the Company’s assets, including
identifying, evaluating, and structuring such investments;
(B)
continuously review, supervise and administer the Company’s investment program
to determine in its discretion the securities to be purchased or sold and the
portion of the Company’s assets to be held un-invested; (C) offer to provide
significant managerial assistance to the issuers of securities in which the
Company is invested as required by the Investment Company Act; (D) arrange debt
financing for the Company; (E) provide the Company with all required records
concerning Adviser’s efforts on behalf of the Company; and (F) provide regular
reports to the Company’s Board concerning Adviser’s activities on behalf of the
Company; and
(ii) manage
the Company’s day-to-day operations and administration, record keeping and
regulatory compliance functions. Without
limiting the generality of the foregoing, Adviser specifically shall be
responsible for (A) preparing periodic financial statements; (B) preparing
financial and accounting reports for presentation to the Company’s Board and
for stockholders and governmental agencies; (C) calculating and publishing the
Company’s net asset value per share; (D) overseeing the preparation and filing
of the Company’s tax returns; (E) preparing and providing such reports to the
Company’s Board and stockholders as may from time to time be considered
necessary or appropriate by the Company’s Board or Adviser; (F) overseeing payment
of the Company’s expenses and performance of administrative and professional
services rendered to the Company by others; (G) overseeing preparation of an
annual proxy statement and conducting the annual meeting of stockholders of the
Company; and (H) managing such other operational, administrative and regulatory
compliance duties as shall from time to time arise as a result of the Company’s
operations and investing activities.
(b) Adviser
shall for all purposes herein provided be deemed to be an independent
contractor and, except as expressly provided or authorized herein, shall have
no authority to act for or represent the Company in any way or otherwise be
deemed an agent of the Company.
(c) Adviser
may, subject to the approvals required under the Investment Company Act, employ
one or more sub-investment advisers to assist Adviser in the performance of its
duties under this Agreement. Such use
does not relieve Adviser of any duty or liability it would otherwise have under
this Agreement. Compensation of any such
sub-investment adviser for services provided and expenses assumed under any
agreement between Adviser and such sub-investment adviser permitted under this
paragraph is the sole responsibility of Adviser.
3. COMPENSATION
(a) The
Company shall pay to Adviser as compensation for Adviser’s services rendered a
quarterly investment advisory fee equal to five sixteenths of one percent
(0.3125%) of the Company’s total assets (the “Advisory Fee”), and for the
facilities furnished and for the expenses borne by Adviser pursuant to Section
4 the Company shall pay to Adviser a quarterly administrative fee equal to
three sixteenths of one percent (0.1875%) of the Company’s total assets (the “Administrative
Fee”). The Advisory Fee and Administrative Fee are hereinafter referred to
collectively as the
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“Management
Fee.” The Management Fee shall be
computed on the basis of the Company’s quarter ending total assets and shall be
paid to Adviser as soon as practical after the quarter-ending total asset
amount has been determined but in no case in less than 30 days after the end of
the quarter. For purposes of this
Section 3, “total assets” means the total assets of the Company as reduced by
cash and cash equivalents pledged to creditors and without reduction for any
liabilities of the Company whether accrued or incurred.
(b) In
the event that Adviser has agreed to a fee waiver or an expense limitation or
reimbursement arrangement with the Company, subject to such terms and
conditions as Adviser and the Company may set forth in such agreement, the
Management Fee due Adviser hereunder shall be reduced, and, if necessary,
Adviser shall bear expenses with respect to the Company to the extent required
by such fee waiver or expense limitation or reimbursement agreement.
(c) In
the event this Agreement is terminated, any compensation to which Adviser may
be entitled to receive pursuant to this Section 3 shall be computed as of the
period ending on the last business day on which this Agreement is in effect,
subject to pro rata adjustment based on the number of days elapsed in the
current month as a percentage of the total number of days in such month.
4. EXPENSES
(a) Adviser
will pay for its own account all costs and expenses incurred by Adviser in
rendering its services pursuant to this Agreement. Without limiting the generality of the
foregoing, Adviser will pay (i) the salaries and other employee benefits of the
persons in its organization whom Adviser may engage to render such services,
including without limitation persons who may from time to time act as the
Company’s officers or directors, provided, however, that the Company’s Board
may, in its sole discretion, award to the Company’s officers, employees or
directors (as described in the Company’s equity incentive plan adopted by the
Company’s Board and stockholders in accordance with the Investment Company Act)
options to acquire shares of the Company’s common stock, which shall not be
deemed part of such persons’ salaries or other employee benefits in respect of
their employment by Adviser, and (ii) the cost of office space, equipment and
services, including telephone service, heat, utilities, and similar items
required for the Company’s day-to-day operations.
(b) The
Company will be responsible to pay all of its operating expenses, except those
specifically required to be borne by Adviser under this Agreement, and the
Company will reimburse Adviser promptly, against Adviser’s voucher, for any
expenses incurred by Adviser for the Company’s account. Without limitation, such operating expenses
to be paid by the Company will include all the fees and disbursements of or to
the Company’s counsel, accountants, custodian, transfer agent and registrar;
interest and taxes; fees and expenses incurred in producing and effecting
filings with federal and state securities administrators; costs of the Company’s
periodic reports to and other communications with the Company’s stockholders;
all other expenses incidental to holding meetings of the Company’s
stockholders, including proxy
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solicitations
therefore; all expenses of any offering and sale by the Company of its capital
stock; fees and expenses of members of the Company’s Board who are not
directors, managers, officers or employees of the Adviser or of any entity
affiliated with Adviser; premiums for the fidelity bond, directors and officers
and errors and ommissions insurance policies maintained by the Company; all
transaction costs incident to the acquisition and disposition of securities by
the Company, including, without limitation, legal and accounting fees and other
professional or technical fees and expenses (e.g.,
credit report, title search and delivery charges, costs of specialized
consultants such as accountants or industry-specific technical experts, and
deal-specific travel expenses) incurred in monitoring, negotiating and
working-out such investments, as well as responding to any litigation arising
therefrom. In addition, the Company will
reimburse Adviser promptly, against Adviser’s voucher, for (a) any origination
fee with respect to any loan or investment made by the Company that was
identified or referred to the Company by any third party with which the Company
or Adviser then has a written agreement or arrangement that specifies the
amount or rate of such fee or (b) any origination fee with respect to any loan
or investment made by the Company that was identified or referred to the
Company by any third party with which the Company or Adviser then does not have
a written agreement or arrangement. All
such origination fees reimbursed to Adviser will be reviewed as of the end of
each calendar quarter by the Company’s Board.
(c) The
Company’s Board retains, and has the exclusive right, to:
(i) Grant
stock compensation to the officers and directors of the Company and any
employee of the Adviser who is also an employee of the Company (“dual employees”);
(ii) Hire,
fire and control the activities of dual
employees in connection with and to the extent of such dual employees’ services
provided to the Company;
(iii) Determine
the economic value of the services performed by dual employees for the Company
(including wages and the number of units and value of any stock compensation
granted to such dual employees); and
(iv) Remit
funds sufficient to cover the complete compensation, including all payroll
taxes, of dual employees providing services to the Company.
5. LIMITATION OF LIABILITY
In the absence of: (i) willful misfeasance, bad faith
or gross negligence on the part of Adviser in the performance of its
obligations and duties hereunder; (ii) reckless disregard by Adviser of its
obligations and duties hereunder; or (iii) a loss resulting from a breach of
fiduciary duty with respect to the receipt of compensation for services (in
which case any award of damages shall be limited to the period and the amount
set forth in Section 36(b)(3) of the Investment Company Act), Adviser shall not
be subject to liability to the Company or any of its stockholders for any error
of
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judgment, mistake of law
or any other act or omission in the course of, or connected with, its rendering
of services hereunder including, without limitation, for any losses that may be
sustained in connection with the purchase, holding, redemption or sale of any
security by Adviser on behalf of the Company.
6. EXCLUSIVITY
The services provided by Adviser hereunder are not
exclusive and Adviser shall therefore remain free to render such services to
others.
7. DURATION
This Agreement shall be effective beginning on the
date set forth in the preamble hereof, and shall remain in force for an initial
period of two (2) years. Upon expiration of the initial term, the term of this
Agreement shall be automatically extended for successive one (1) year periods,
provided that each such one (1) year extension is approved by the Company’s
Board or by the holders of at least a majority of the Company’s outstanding
voting securities, and the vote of a majority of the Company’s directors who
are not parties to this Agreement or interested persons of any such party, in
accordance with the requirements of the Investment Company Act.
8. TERMINATION
(a) This
Agreement may be terminated by (i) the Company’s Board or (ii) the holders of a
majority of the Company’s outstanding voting securities at any time and without
penalty, upon delivery of written notice of such termination at least sixty
(60) days prior to the termination date.
(b) This
Agreement may be terminated by Adviser at any time and without penalty, upon
delivery of written notice of such termination at least sixty (60) days prior
to the termination date.
(c) This
Agreement shall immediately and automatically terminate in the event of its
assignment without the written consent of the Company.
9. AMENDMENTS
This Agreement may be amended with the mutual consent
of the parties; provided, however, that the Company shall not consent to any
such amendment unless such amendment shall be approved by (i) a majority of the
Company’s directors, (ii) a majority the Company’s directors who are not
interested persons of the Company or of Adviser and (iii) the holders of a
majority of the Company’s outstanding voting securities.
10. SEVERABILITY
If any term or condition of this Agreement shall be
found to be invalid or unenforceable to any extent or in any application, the
remainder of this Agreement,
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including such term or
condition, except to the extent or in such application such term or condition
is held invalid or unenforceable, shall not be affected thereby, and each and
every term and condition of this Agreement shall be valid and enforceable to
the fullest extent and in the broadest application permitted by law.
11. CAPTIONS
The captions of this Agreement are included for
convenience only and in no way define or limit any of the provisions hereof or
otherwise affect their construction or effect.
12. DEFINITIONS
For purposes of this Agreement, “majority of the
outstanding voting securities,” “assignment” and “interested person” shall have
the respective meanings assigned to them in the Investment Company Act,
subject, however, to such exemptions as may be granted by the Securities and
Exchange Commission pursuant to its rule-making authority as set forth in the
Investment Company Act or the Advisers Act, as the case may be.
13. NOTICES
All notices required or permitted to be delivered
under or pursuant to this Agreement shall be so delivered by certified mail,
postage prepaid, as follows:
If to Adviser:
Gladstone
Management Corporation
1750 Tyson’s
Blvd., 4th Floor
McLean, VA 22102
Attn: David
Gladstone
If to the Company:
Gladstone Capital
Corporation
1616 Anderson
Road, 2nd Floor
McLean, VA 22102
Attn: Terry
Brubaker and Harry Brill
Any notice delivered pursuant to this Section 13 shall
be deemed delivered on the third day following its deposit in the United States
mail or the date such notice is actually received by the addressee, whichever
shall occur first.
14. ENTIRE AGREEMENT
This Agreement contains the entire agreement of the
parties with respect to the matters referred to herein and supersedes all prior
agreements, negotiations, commitments or understandings.
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15. COUNTERPARTS
This Agreement may be executed in any number of
counterparts, each of which when so executed and delivered shall be taken to be
an original and together shall constitute one and the same document.
16. GOVERNING LAW
This Agreement shall be construed in accordance with
the laws of the State of Delaware and the applicable provisions of the
Investment Company Act and the Investment Advisers Act.
17. EFFECTIVE DATE
This Agreement shall become effective on October 1,
2004 or any date before that date if both parties agree.
IN WITNESS WHEREOF, the
undersigned have executed and delivered this Agreement as of the date first
above written.
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Gladstone
Capital Corporation
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By
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/s/
TERRY BRUBAKER
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Terry
Brubaker
President and COO
Gladstone Management Corporation
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By
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/s/
DAVID GLADSTONE
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David
Gladstone
Chairman of the Board and CEO
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