Exhibit 10.1

SECOND AMENDED AND RESTATED

INVESTMENT ADVISORY AND MANAGEMENT AGREEMENT

BETWEEN

GLADSTONE CAPITAL CORPORATION

AND

GLADSTONE MANAGEMENT CORPORATION

Agreement made this 14th day of April 2020, by and between Gladstone Capital
Corporation, a Maryland corporation (the “Fund”), and Gladstone Management
Corporation, a Delaware corporation (the “Adviser”).

Whereas, the Fund is a closed-end management investment company that has elected
to be treated as a business development company under the Investment Company Act
of 1940 (the “Investment Company Act”);

Whereas, the Adviser is an investment adviser that has registered under the
Investment Advisers Act of 1940 (the “Advisers Act”);

Whereas, the Fund and the Adviser entered into that certain Amended and Restated
Investment Advisory and Management Agreement, as of October 1, 2006, as amended
on October 13, 2015 (collectively, the “Prior Agreement”);

Whereas, the Fund and the Adviser wish to amend and restate the Prior Agreement
hereby; and

Whereas, the Fund desires to retain the Adviser to furnish investment advisory
services to the Fund on the terms and conditions hereinafter set forth, and the
Adviser wishes to be retained to provide such services.

Now, Therefore, in consideration of the premises and for other good and valuable
consideration, the parties hereby agree as follows:

1. Duties of the Adviser.

(a) The Fund hereby employs the Adviser to act as the investment adviser to the
Fund and to manage the investment and reinvestment of the assets of the Fund,
subject to the supervision of the Board of Directors of the Fund, for the period
and upon the terms herein set forth, (i) in accordance with the investment
objective, policies and restrictions that are set forth in the Fund’s
Registration Statement on Form N-2, as the same shall be amended from time to
time (as amended, the “Registration Statement”), (ii) in accordance with the
Investment Company Act and (iii) during the term of this Agreement in accordance
with all other applicable federal and state laws, rules and regulations, and the
Fund’s charter and by-laws. Without limiting the generality of the foregoing,
the Adviser shall, during the term and subject to the provisions of this
Agreement, (i) determine the composition of the portfolio of the Fund, the
nature and timing of the changes therein and the manner of implementing such
changes; (ii) identify, evaluate and negotiate the structure of the investments
made by the Fund; (iii) close and monitor the Fund’s investments; (iv) determine
the securities and other assets that the Fund will purchase, retain, or sell;
(v) perform due diligence on prospective portfolio companies; and (vi) provide
the Fund with such other investment advisory, research and related services as
the Fund may, from time to time, reasonably

 

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require for the investment of its funds. The Adviser shall have the discretion,
power and authority on behalf of the Fund to effectuate its investment decisions
for the Fund, including the execution and delivery of all documents relating to
the Fund’s investments and the placing of orders for other purchase or sale
transactions on behalf of the Fund. In the event that the Fund determines to
acquire debt financing, the Adviser will arrange for such financing on the
Fund’s behalf, subject to the oversight and approval of the Fund’s Board of
Directors. If it is necessary for the Adviser to make investments on behalf of
the Fund through a special purpose vehicle, the Adviser shall have authority to
create or arrange for the creation of such special purpose vehicle and to make
such investments through such special purpose vehicle in accordance with the
Investment Company Act.

(b) The Adviser hereby accepts such employment and agrees during the term hereof
to render the services described herein for the compensation provided herein.

(c) Subject to the requirements of the Investment Company Act, the Adviser is
hereby authorized to enter into one or more sub-advisory agreements with other
investment advisers (each, a “Sub-Adviser”) pursuant to which the Adviser may
obtain the services of the Sub-Adviser(s) to assist the Adviser in fulfilling
its responsibilities hereunder. Specifically, the Adviser may retain a
Sub-Adviser to recommend specific securities or other investments based upon the
Fund’s investment objective and policies, and work, along with the Adviser, in
structuring, negotiating, arranging or effecting the acquisition or disposition
of such investments and monitoring investments on behalf of the Fund, subject to
the oversight of the Adviser and the Fund. The Adviser, and not the Fund, shall
be responsible for any compensation payable to any Sub-Adviser. Any sub-advisory
agreement entered into by the Adviser shall be in accordance with the
requirements of the Investment Company Act and other applicable federal and
state law and shall contain a provision requiring the Sub-Adviser to comply with
sections 1(e) and 1(f) below as if it were the Adviser.

(d) The 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 Fund in any way or otherwise
be deemed an agent of the Fund.

(e) The Adviser shall keep and preserve for the period required by the
Investment Company Act any books and records relevant to the provision of its
investment advisory services to the Fund and shall specifically maintain all
books and records with respect to the Fund’s portfolio transactions and shall
render to the Fund’s Board of Directors such periodic and special reports as the
Board may reasonably request. The Adviser agrees that all records that it
maintains for the Fund are the property of the Fund and will surrender promptly
to the Fund any such records upon the Fund’s request, provided that the Adviser
may retain a copy of such records.

(f) The Adviser has adopted and implemented written policies and procedures
reasonably designed to prevent violation of the Federal Securities laws by the
Adviser. The Adviser has provided the Fund, and shall provide the Fund at such
times in the future as the Fund shall reasonably request, with a copy of such
policies and procedures and a report of such policies and procedures. Such
report shall be of sufficient scope and in sufficient detail, as may reasonably
be required to comply with Rule 38a-1 under the Investment Company Act and to
provide reasonable assurance that any material inadequacies would be disclosed
by such examination, and, if there are no such inadequacies, the report shall so
state.

 

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2. Fund’s Responsibilities and Expenses Payable by the Fund.

All investment professionals of the Adviser and their respective staffs, when
and to the extent engaged in providing investment advisory and management
services hereunder, and the compensation and routine overhead expenses of such
personnel allocable to such services, will be provided and paid for by the
Adviser and not by the Fund. The Fund will bear all other costs and expenses of
its operations and transactions, including (without limitation) those relating
to: organization and offering; calculating the Fund’s net asset value (including
the cost and expenses of any independent valuation firm); expenses incurred by
the Adviser payable to third parties, including agents, consultants or other
advisors (such as independent valuation firms, accountants and legal counsel),
in monitoring financial and legal affairs for the Fund and in monitoring the
Fund’s investments and performing due diligence on its prospective portfolio
companies; interest payable on debt, if any, incurred to finance the Fund’s
investments; offerings of the Fund’s common stock and other securities;
investment advisory and management fees; administration fees, if any, payable
under the Administration Agreement between the Fund and Gladstone
Administration, LLC (the “Administrator”), the Fund’s administrator; fees
payable to third parties (including agents, consultants or other advisors)
relating to, or associated with, evaluating and making investments; transfer
agent and custodial fees; federal and state registration fees; all costs of
registration and listing the Fund’s shares on any securities exchange; federal,
state and local taxes; independent Directors’ fees and expenses; costs of
preparing and filing reports or other documents required by the Securities and
Exchange Commission; costs of any reports, proxy statements or other notices to
stockholders, including printing costs; the Fund’s allocable portion of the
fidelity bond, directors and officers/errors and omissions liability insurance,
and any other insurance premiums; direct costs and expenses of administration,
including printing, mailing, long distance telephone, copying, secretarial and
other staff, independent auditors and outside legal costs; and all other
expenses incurred by the Fund or the Administrator in connection with
administering the Fund’s business, including payments under the Administration
Agreement between the Fund and the Administrator based upon the Fund’s allocable
portion of the Administrator’s overhead in performing its obligations under the
Administration Agreement, including rent and the allocable portion of the cost
of the Fund’s chief compliance officer, chief financial officer, controller and
their respective staffs.

3. Compensation of the Adviser.

The Fund agrees to pay, and the Adviser agrees to accept, as compensation for
the services provided by the Adviser hereunder, a base management fee (“Base
Management Fee”) and an incentive fee (“Incentive Fee”) as hereinafter set
forth. The Fund shall make any payments due hereunder to the Adviser or to the
Adviser’s designee as the Adviser may otherwise direct.

(a) Base Management Fee.

(i) The Base Management Fee shall be payable quarterly in arrears, and shall be
calculated at an annual rate of 1.75% of the average value of the Fund’s total
assets, including investments made with proceeds of borrowings, less any
uninvested cash or cash equivalents resulting from

 

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borrowings (the “Gross Assets”), valued as of the end of the two most recently
completed calendar quarters, and appropriately adjusted for any share issuances
or repurchases during the current calendar quarter.

(ii) Base Management Fees payable for any partial month or quarter will be
appropriately prorated.

(b) The Incentive Fee shall consist of two parts, as follows:

(i) One part will be calculated and payable quarterly in arrears based on the
pre-Incentive Fee net investment income for the immediately preceding calendar
quarter. For this purpose, pre-Incentive Fee net investment income means
interest income, dividend income and any other income (including any other fees,
such as commitment, origination, structuring, diligence, consulting fees that
the Fund receives from portfolio companies, but excluding fees for providing
managerial assistance) accrued by the Fund during the calendar quarter, minus
the Fund’s operating expenses for the quarter (including the Base Management
Fee, less any rebate of other fees received by the Adviser), expenses payable
under the Administration Agreement and any interest expense and dividends paid
on any issued and outstanding preferred stock, but excluding the Incentive Fee).
Pre-Incentive Fee net investment income includes, in the case of investments
with a deferred interest feature (such as original issue discount, debt
instruments with payment-in-kind interest and zero coupon securities), accrued
income that the Fund has not yet received in cash. Pre-Incentive Fee net
investment income does not include any realized capital gains, realized capital
losses or unrealized capital appreciation or depreciation. Pre-Incentive Fee net
investment income, expressed as a rate of return on the value of the Fund’s net
assets at the end of the immediately preceding calendar quarter, will be
compared to a “hurdle rate” of 1.75% per quarter (7% annualized). The Fund will
pay the Adviser an Incentive Fee with respect to the Fund’s pre-Incentive Fee
net investment income in each calendar quarter as follows: (1) no Incentive Fee
in any calendar quarter in which the Fund’s pre-Incentive Fee net investment
income does not exceed the hurdle rate; (2) 100% of the Fund’s pre-Incentive Fee
net investment income with respect to that portion of such pre-Incentive Fee net
investment income, if any, that exceeds the hurdle rate but is less than 2.1875%
in any calendar quarter (8.75% annualized); and (3) 20% of the amount of the
Fund’s pre-Incentive Fee net investment income, if any, that exceeds 2.1875% in
any calendar quarter (8.75% annualized). For purposes of the period beginning
April 1, 2020 through March 31, 2021, Pre-Incentive Fee net investment income,
expressed as a rate of return on the value of the Fund’s net assets at the end
of the immediately preceding calendar quarter, will be compared to a “hurdle
rate” of 2.00% per quarter (8% annualized). The Fund will pay the Adviser an
Incentive Fee with respect to the Fund’s pre-Incentive Fee net investment income
in each calendar quarter as follows: (1) no Incentive Fee in any calendar
quarter in which the Fund’s pre-Incentive Fee net investment income does not
exceed the hurdle rate; (2) 100% of the Fund’s pre-Incentive Fee net investment
income with respect to that portion of such pre-Incentive Fee net investment
income, if any, that exceeds the hurdle rate but is less than 2.4375% in any
calendar quarter (9.75% annualized); and (3) 20% of the amount of the Fund’s
pre-Incentive Fee net investment income, if any, that exceeds 2.4375% in any
calendar quarter (9.75% annualized). These calculations will be appropriately
pro rated for any period of less than three months and adjusted for any share
issuances or repurchases during the current quarter.

 

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(ii) The second part of the Incentive Fee (the “Capital Gains Fee”) will be
determined and payable in arrears as of the end of each fiscal year (or upon
termination of this Agreement as set forth below), commencing on September 30,
2007, and will equal 20.0% of the Fund’s realized capital gains, if any,
computed net of all realized capital losses and unrealized capital depreciation
at the end of such year. The amount of capital gains used to determine the
Capital Gains Fee shall be calculated at the end of each applicable year by
subtracting the sum of the Fund’s Cumulative Aggregate Realized Capital Losses
and Aggregate Unrealized Capital Depreciation from the Fund’s Cumulative
Aggregate Realized Capital Gains (each as defined in Section 3(b)(iii) below).
If this number is positive at the end of such year, then the Capital Gains Fee
for such year will be equal to 20.0% of such amount, less the aggregate amount
of any Capital Gains Fees paid in all prior years. In the event that this
Agreement shall terminate as of a date that is not a fiscal year end, the
termination date shall be treated as though it were a fiscal year end for
purposes of calculating and paying a Capital Gains Fee.

(iii) For purposes of this Section 3:

(1) “Cumulative Aggregate Realized Capital Gains” shall mean the sum of the
differences between the net sales price of each investment in the Fund’s
portfolio when sold, and the original cost of such investment since inception of
the Fund.

(2) “Cumulative Aggregate Realized Capital Losses” shall mean the sum of the
amounts by which the net sales price of each investment in the Fund’s portfolio
when sold is less than the original cost of such investment since inception of
the Fund.

(3) “Aggregate Unrealized Capital Depreciation” shall mean the sum of the
difference, if negative, between the valuation of each investment in the Fund’s
portfolio as of the applicable Capital Gains Fee calculation date and the
original cost of such investment.

4. Covenants of the Adviser.

The Adviser covenants that it is registered as an investment adviser under the
Advisers Act. The Adviser agrees that its activities will at all times be in
compliance in all material respects with all applicable federal and state laws
governing its operations and investments.

5. Excess Brokerage Commissions.

The Adviser is hereby authorized, to the fullest extent now or hereafter
permitted by law, to cause the Fund to pay a member of a national securities
exchange, broker or dealer an amount of commission for effecting a securities
transaction in excess of the amount of commission another member of such
exchange, broker or dealer would have charged for effecting that transaction, if
the Adviser determines in good faith, taking into account such factors as price
(including the applicable brokerage commission or dealer spread), size of order,
difficulty of execution, and operational facilities of the firm and the firm’s
risk and skill in positioning blocks of securities, that such amount of
commission is reasonable in relation to the value of the brokerage and/or
research services provided by such member, broker or dealer, viewed in terms of
either that particular transaction or its overall responsibilities with respect
to the Fund’s portfolio, and constitutes the best net results for the Fund.

 

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6. Limitations on the Employment of the Adviser.

The services of the Adviser to the Fund are not exclusive, and the Adviser may
engage in any other business or render similar or different services to others
including, without limitation, the direct or indirect sponsorship or management
of other investment based accounts or commingled pools of capital, however
structured, having investment objectives similar to those of the Fund, so long
as its services to the Fund hereunder are not impaired thereby, and nothing in
this Agreement shall limit or restrict the right of any manager, partner,
officer or employee of the Adviser to engage in any other business or to devote
his or her time and attention in part to any other business, whether of a
similar or dissimilar nature, or to receive any fees or compensation in
connection therewith (including fees for serving as a director of, or providing
consulting services to, one or more of the Fund’s portfolio companies, subject
to applicable law). So long as this Agreement or any extension, renewal or
amendment remains in effect, the Adviser shall be the only investment adviser
for the Fund, subject to the Adviser’s right to enter into sub-advisory
agreements. The Adviser assumes no responsibility under this Agreement other
than to render the services called for hereunder. It is understood that
directors, officers, employees and stockholders of the Fund are or may become
interested in the Adviser and its affiliates, as directors, officers, employees,
partners, stockholders, members, managers or otherwise, and that the Adviser and
directors, officers, employees, partners, stockholders, members and managers of
the Adviser and its affiliates are or may become similarly interested in the
Fund as stockholders or otherwise.

7. Responsibility of Dual Directors, Officers or Employees.

If any person who is a manager, partner, officer or employee of the Adviser or
the Administrator is or becomes a director, officer or employee of the Fund and
acts as such in any business of the Fund, then such manager, partner, officer
and/or employee of the Adviser or the Administrator shall be deemed to be acting
in such capacity solely for the Fund, and not as a manager, partner, officer or
employee of the Adviser or the Administrator or under the control or direction
of the Adviser or the Administrator, even if paid by the Adviser or the
Administrator.

8. Limitation of Liability of the Adviser: Indemnification.

The Adviser (and its officers, managers, partners, agents, employees,
controlling persons, members and any other person or entity affiliated with the
Adviser, including without limitation the Administrator) shall not be liable to
the Fund for any action taken or omitted to be taken by the Adviser in
connection with the performance of any of its duties or obligations under this
Agreement or otherwise as an investment adviser of the Fund, except to the
extent specified in Section 36(b) of the Investment Company Act concerning loss
resulting from a breach of fiduciary duty (as the same is finally determined by
judicial proceedings) with respect to the receipt of compensation for services,
and the Fund shall indemnify, defend and protect the Adviser (and its officers,
managers, partners, agents, employees, controlling persons, members and any
other person or entity affiliated with the Adviser, including without limitation
its general partner and the Administrator, each of whom shall be deemed a third
party beneficiary hereof) (collectively, the “Indemnified Parties”) and hold
them harmless from and against all damages, liabilities, costs and expenses
(including reasonable attorneys’ fees and amounts reasonably paid in settlement)
incurred by the Indemnified Parties in or by reason of any pending, threatened
or completed action, suit, investigation or other proceeding (including an
action or suit by or in the right of the Fund or

 

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its security holders) arising out of or otherwise based upon the performance of
any of the Adviser’s duties or obligations under this Agreement or otherwise as
an investment adviser of the Fund. Notwithstanding the preceding sentence of
this Paragraph 8 to the contrary, nothing contained herein shall protect or be
deemed to protect the Indemnified Parties against or entitle or be deemed to
entitle the Indemnified Parties to indemnification in respect of, any liability
to the Fund or its security holders to which the Indemnified Parties would
otherwise be subject by reason of willful misfeasance, bad faith or gross
negligence in the performance of the Adviser’s duties or by reason of the
reckless disregard of the Adviser’s duties and obligations under this Agreement
(as the same shall be determined in accordance with the Investment Company Act
and any interpretations or guidance by the Securities and Exchange Commission or
its staff thereunder).

9. Effectiveness, Duration and Termination of Agreement.

This Agreement shall become effective as of the first date above written. This
Agreement shall remain in effect for one year, and thereafter shall continue
automatically for successive annual periods, provided that such continuance is
specifically approved at least annually by (a) the vote of the Fund’s Board of
Directors, or by the vote of a majority of the outstanding voting securities of
the Fund and (b) the vote of a majority of the Fund’s Directors who are not
parties to this Agreement or “interested persons” (as such term is defined in
Section 2(a)(19) of the Investment Company Act) of any such party, in accordance
with the requirements of the Investment Company Act. This Agreement may be
terminated at any time, without the payment of any penalty, upon 60 days’
written notice, by the vote of a majority of the outstanding voting securities
of the Fund, or by the vote of the Fund’s Directors or by the Adviser. This
Agreement will automatically terminate in the event of its “assignment” (as such
term is defined for purposes of Section 15(a)(4) of the Investment Company Act).
The provisions of Paragraph 8 of this Agreement shall remain in full force and
effect, and the Adviser and its representatives shall remain entitled to the
benefits thereof, notwithstanding any termination or expiration of this
Agreement. Further, notwithstanding the termination or expiration of this
Agreement as aforesaid, the Adviser shall be entitled to any amounts owed under
Section 3 through the date of termination or expiration.

All fees and calculations contemplated hereunder, including those for the
quarter ending June 30, 2020 and any period thereafter, shall be calculated as
if this Agreement was effective as of April 1, 2020.

10. Notices.

Any notice under this Agreement shall be given in writing, addressed and
delivered or mailed, postage prepaid, to the other party at its principal
office.

11. Amendments.

This Agreement may be amended by mutual consent, but the consent of the Fund
must be obtained in conformity with the requirements of the Investment Company
Act.

12. Entire Agreement; Governing Law.

This Agreement contains the entire agreement of the parties and supersedes all
prior agreements, understandings and arrangements with respect to the subject
matter hereof. This

 

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Agreement shall be construed in accordance with the laws of the State of
Delaware and the applicable provisions of the Investment Company Act. To the
extent the applicable laws of the State of Delaware or any of the provisions
herein, conflict with the provisions of the Investment Company Act, the latter
shall control.

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In Witness Whereof, the parties hereto have caused this Agreement to be duly
executed on the date above written.

 

Gladstone Capital Corporation

By:  

/s/ Bob Marcotte

  Bob Marcotte   President Gladstone Management Corporation By:  

/s/ David Gladstone

  David Gladstone   Chief Executive Officer