**EXHIBIT 10.9**

INVESTMENT ADVISORY ANDADMINISTRATIVE AGREEMENT

THIS INVESTMENT ADVISORY AND ADMINISTRATIVE AGREEMENT(this “Agreement”) is entered into as of the 2nd day of July 2004 by andbetween Gladstone Capital Corporation, a Maryland corporation and itswholly-owned subsidiary (the “Company”) and Gladstone Management Corporation, aDelaware corporation (“Adviser”).

W I T N E S S E T H:

WHEREAS, the Company is a non-diversified closed-endmanagement investment company that has elected to be regulated as a businessdevelopment company pursuant to the provisions of the Investment Company Act of1940, as amended, and the rules and regulations promulgated thereunder (the “InvestmentCompany Act”); and

WHEREAS, Adviser is a registered investment adviserpursuant to the Investment Advisers Act of 1940, as amended, and the rules andregulations promulgated there under (the “Advisers Act”); and

WHEREAS, the Company desires to retain Adviser toserve as its investment adviser and, in connection therewith, to performcertain administrative and investment advisory services on the terms andconditions set forth herein;

NOW, THEREFORE, in consideration of the mutualcovenants and agreements herein set forth, the parties agree as follows:

### 1.             APPOINTMENTOF ADVISER 

#### (a)           TheCompany hereby appoints Adviser to serve as its investment adviser andadministrator for the period and on the terms and subject to the conditions asset forth in this Agreement.

#### (b)           Adviserhereby accepts appointment as investment adviser and administrator to theCompany and agrees to render the services and discharge the duties set forth inthis Agreement in compliance with (i) the terms and conditions of thisAgreement, (ii) the Articles of Incorporation and Bylaws of the Company, eachas amended from time to time, (iii) the Company’s stated investment objectives,policies and limitations, (iv) applicable laws and regulations, and subject tothe supervision of the Company’s Board of Directors (the “Board”).

### 2.          SERVICES AND DUTIES OF ADVISER

#### (a)           Advisershall:

##### (i)            (A)manage the investment and reinvestment of the Company’s assets, includingidentifying, evaluating, and structuring such investments;

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##### (B)continuously review, supervise and administer the Company’s investment programto determine in its discretion the securities to be purchased or sold and theportion of the Company’s assets to be held un-invested; (C) offer to providesignificant managerial assistance to the issuers of securities in which theCompany is invested as required by the Investment Company Act; (D) arrange debtfinancing for the Company; (E) provide the Company with all required recordsconcerning Adviser’s efforts on behalf of the Company; and (F) provide regularreports to the Company’s Board concerning Adviser’s activities on behalf of theCompany; and

##### (ii)           managethe Company’s day-to-day operations and administration, record keeping andregulatory compliance functions.  Withoutlimiting the generality of the foregoing, Adviser specifically shall beresponsible for (A) preparing periodic financial statements; (B) preparingfinancial and accounting reports for presentation to the Company’s Board andfor stockholders and governmental agencies; (C) calculating and publishing theCompany’s net asset value per share; (D) overseeing the preparation and filingof the Company’s tax returns; (E) preparing and providing such reports to theCompany’s Board and stockholders as may from time to time be considerednecessary or appropriate by the Company’s Board or Adviser; (F) overseeing paymentof the Company’s expenses and performance of administrative and professionalservices rendered to the Company by others; (G) overseeing preparation of anannual proxy statement and conducting the annual meeting of stockholders of theCompany; and (H) managing such other operational, administrative and regulatorycompliance duties as shall from time to time arise as a result of the Company’soperations and investing activities.

#### (b)           Advisershall for all purposes herein provided be deemed to be an independentcontractor and, except as expressly provided or authorized herein, shall haveno authority to act for or represent the Company in any way or otherwise bedeemed an agent of the Company.

#### (c)           Advisermay, subject to the approvals required under the Investment Company Act, employone or more sub-investment advisers to assist Adviser in the performance of itsduties under this Agreement.  Such usedoes not relieve Adviser of any duty or liability it would otherwise have underthis Agreement.  Compensation of any suchsub-investment adviser for services provided and expenses assumed under anyagreement between Adviser and such sub-investment adviser permitted under thisparagraph is the sole responsibility of Adviser.

### 3.          COMPENSATION

#### (a)           TheCompany shall pay to Adviser as compensation for Adviser’s services rendered aquarterly investment advisory fee equal to five sixteenths of one percent(0.3125%) of the Company’s total assets (the “Advisory Fee”), and for thefacilities furnished and for the expenses borne by Adviser pursuant to Section4 the Company shall pay to Adviser a quarterly administrative fee equal tothree sixteenths of one percent (0.1875%) of the Company’s total assets (the “AdministrativeFee”). The Advisory Fee and Administrative Fee are hereinafter referred tocollectively as the

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#### “ManagementFee.”  The Management Fee shall becomputed on the basis of the Company’s quarter ending total assets and shall bepaid to Adviser as soon as practical after the quarter-ending total assetamount has been determined but in no case in less than 30 days after the end ofthe quarter.  For purposes of thisSection 3, “total assets” means the total assets of the Company as reduced bycash and cash equivalents pledged to creditors and without reduction for anyliabilities of the Company whether accrued or incurred.

#### (b)           Inthe event that Adviser has agreed to a fee waiver or an expense limitation orreimbursement arrangement with the Company, subject to such terms andconditions as Adviser and the Company may set forth in such agreement, theManagement Fee due Adviser hereunder shall be reduced, and, if necessary,Adviser shall bear expenses with respect to the Company to the extent requiredby such fee waiver or expense limitation or reimbursement agreement.

#### (c)           Inthe event this Agreement is terminated, any compensation to which Adviser maybe entitled to receive pursuant to this Section 3 shall be computed as of theperiod 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 thecurrent month as a percentage of the total number of days in such month.

### 4.          EXPENSES

#### (a)           Adviserwill pay for its own account all costs and expenses incurred by Adviser inrendering its services pursuant to this Agreement.  Without limiting the generality of theforegoing, Adviser will pay (i) the salaries and other employee benefits of thepersons in its organization whom Adviser may engage to render such services,including without limitation persons who may from time to time act as theCompany’s officers or directors, provided, however, that the Company’s Boardmay, in its sole discretion, award to the Company’s officers, employees ordirectors (as described in the Company’s equity incentive plan adopted by theCompany’s Board and stockholders in accordance with the Investment Company Act)options to acquire shares of the Company’s common stock, which shall not bedeemed part of such persons’ salaries or other employee benefits in respect oftheir employment by Adviser, and (ii) the cost of office space, equipment andservices, including telephone service, heat, utilities, and similar itemsrequired for the Company’s day-to-day operations.

#### (b)           TheCompany will be responsible to pay all of its operating expenses, except thosespecifically required to be borne by Adviser under this Agreement, and theCompany will reimburse Adviser promptly, against Adviser’s voucher, for anyexpenses incurred by Adviser for the Company’s account.  Without limitation, such operating expensesto be paid by the Company will include all the fees and disbursements of or tothe Company’s counsel, accountants, custodian, transfer agent and registrar;interest and taxes; fees and expenses incurred in producing and effectingfilings with federal and state securities administrators; costs of the Company’speriodic reports to and other communications with the Company’s stockholders;all other expenses incidental to holding meetings of the Company’sstockholders, including proxy

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#### solicitationstherefore; all expenses of any offering and sale by the Company of its capitalstock; fees and expenses of members of the Company’s Board who are notdirectors, managers, officers or employees of the Adviser or of any entityaffiliated with Adviser; premiums for the fidelity bond, directors and officersand errors and ommissions insurance policies maintained by the Company; alltransaction costs incident to the acquisition and disposition of securities bythe Company, including, without limitation, legal and accounting fees and otherprofessional or technical fees and expenses (*e.g*.,credit report, title search and delivery charges, costs of specializedconsultants such as accountants or industry-specific technical experts, anddeal-specific travel expenses) incurred in monitoring, negotiating andworking-out such investments, as well as responding to any litigation arisingtherefrom.  In addition, the Company willreimburse Adviser promptly, against Adviser’s voucher, for (a) any originationfee with respect to any loan or investment made by the Company that wasidentified or referred to the Company by any third party with which the Companyor Adviser then has a written agreement or arrangement that specifies theamount or rate of such fee or (b) any origination fee with respect to any loanor investment made by the Company that was identified or referred to theCompany by any third party with which the Company or Adviser then does not havea written agreement or arrangement.  Allsuch origination fees reimbursed to Adviser will be reviewed as of the end ofeach calendar quarter by the Company’s Board.

#### (c)           TheCompany’s Board retains, and has the exclusive right, to:

##### (i)            Grantstock compensation to the officers and directors of the Company and anyemployee of the Adviser who is also an employee of the Company (“dual employees”);

##### (ii)           Hire,fire and  control the activities of dualemployees in connection with and to the extent of such dual employees’ servicesprovided to the Company;

##### (iii)          Determinethe economic value of the services performed by dual employees for the Company(including wages and the number of units and value of any stock compensationgranted to such dual employees); and

##### (iv)          Remitfunds sufficient to cover the complete compensation, including all payrolltaxes, of dual employees providing services to the Company.

### 5.          LIMITATION OF LIABILITY

In the absence of: (i) willful misfeasance, bad faithor gross negligence on the part of Adviser in the performance of itsobligations and duties hereunder; (ii) reckless disregard by Adviser of itsobligations and duties hereunder; or (iii) a loss resulting from a breach offiduciary duty with respect to the receipt of compensation for services (inwhich case any award of damages shall be limited to the period and the amountset forth in Section 36(b)(3) of the Investment Company Act), Adviser shall notbe subject to liability to the Company or any of its stockholders for any errorof

 

 

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judgment, mistake of lawor any other act or omission in the course of, or connected with, its renderingof services hereunder including, without limitation, for any losses that may besustained in connection with the purchase, holding, redemption or sale of anysecurity by Adviser on behalf of the Company.

### 6.          EXCLUSIVITY

The services provided by Adviser hereunder are notexclusive and Adviser shall therefore remain free to render such services toothers.

### 7.          DURATION

This Agreement shall be effective beginning on thedate set forth in the preamble hereof, and shall remain in force for an initialperiod of two (2) years. Upon expiration of the initial term, the term of thisAgreement shall be automatically extended for successive one (1) year periods,provided that each such one (1) year extension is approved by the Company’sBoard or by the holders of at least a majority of the Company’s outstandingvoting securities, and the vote of a majority of the Company’s directors whoare not parties to this Agreement or interested persons of any such party, inaccordance with the requirements of the Investment Company Act.

### 8.          TERMINATION

#### (a)           ThisAgreement may be terminated by (i) the Company’s Board or (ii) the holders of amajority of the Company’s outstanding voting securities at any time and withoutpenalty, upon delivery of written notice of such termination at least sixty(60) days prior to the termination date.

#### (b)           ThisAgreement may be terminated by Adviser at any time and without penalty, upondelivery of written notice of such termination at least sixty (60) days priorto the termination date.

#### (c)           ThisAgreement shall immediately and automatically terminate in the event of itsassignment without the written consent of the Company.

### 9.          AMENDMENTS

This Agreement may be amended with the mutual consentof the parties; provided, however, that the Company shall not consent to anysuch amendment unless such amendment shall be approved by (i) a majority of theCompany’s directors, (ii) a majority the Company’s directors who are notinterested persons of the Company or of Adviser and (iii) the holders of amajority of the Company’s outstanding voting securities.

### 10.        SEVERABILITY

If any term or condition of this Agreement shall befound to be invalid or unenforceable to any extent or in any application, theremainder of this Agreement,

 

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including such term orcondition, except to the extent or in such application such term or conditionis held invalid or unenforceable, shall not be affected thereby, and each andevery term and condition of this Agreement shall be valid and enforceable tothe fullest extent and in the broadest application permitted by law.

### 11.        CAPTIONS

The captions of this Agreement are included forconvenience only and in no way define or limit any of the provisions hereof orotherwise affect their construction or effect.

### 12.        DEFINITIONS

For purposes of this Agreement, “majority of theoutstanding voting securities,” “assignment” and “interested person” shall havethe respective meanings assigned to them in the Investment Company Act,subject, however, to such exemptions as may be granted by the Securities andExchange Commission pursuant to its rule-making authority as set forth in theInvestment Company Act or the Advisers Act, as the case may be.

### 13.        NOTICES

All notices required or permitted to be deliveredunder or pursuant to this Agreement shall be so delivered by certified mail,postage prepaid, as follows:

If to Adviser:

 

GladstoneManagement Corporation

1750 Tyson’sBlvd., 4th Floor

McLean, VA 22102

Attn:  DavidGladstone

If to the Company:

 

Gladstone CapitalCorporation

1616 AndersonRoad, 2nd Floor

McLean, VA 22102

Attn:  TerryBrubaker and Harry Brill

Any notice delivered pursuant to this Section 13 shallbe deemed delivered on the third day following its deposit in the United Statesmail or the date such notice is actually received by the addressee, whichevershall occur first.

### 14.        ENTIRE AGREEMENT

This Agreement contains the entire agreement of theparties with respect to the matters referred to herein and supersedes all prioragreements, negotiations, commitments or understandings.

 

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### 15.        COUNTERPARTS

This Agreement may be executed in any number ofcounterparts, each of which when so executed and delivered shall be taken to bean original and together shall constitute one and the same document.

### 16.        GOVERNING LAW

This Agreement shall be construed in accordance withthe laws of the State of Delaware and the applicable provisions of theInvestment 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, theundersigned have executed and delivered this Agreement as of the date firstabove written.
|   | Gladstone  Capital Corporation |
|--------|--------------------------------|
|   |                           |   |
|   | By                             | /s/  TERRY BRUBAKER |
|   |                           | Terry  Brubaker  President and COO  Gladstone Management Corporation |
|   |                           |
|   | By                             | /s/  DAVID GLADSTONE |
|   |                           | David  Gladstone  Chairman of the Board and CEO |
|   |                           |
|        |                                |  |  |

 

 

 

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