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Exhibit 4.1




Patriot Capital Funding, Inc.




EMPLOYEE RESTRICTED STOCK PLAN




1. PURPOSE OF THE PLAN




     The purpose of this Restricted Stock Plan (this “Plan”) is to advance the interests of Patriot
Capital Funding, Inc. (the “Company”) and its wholly-owned subsidiaries by providing to employees
of the Company and employees of its wholly-owned subsidiaries additional incentives, to the extent
permitted by law, to exert their best efforts on behalf of the Company, to increase their
proprietary interest in the success of the Company, to reward outstanding performance and to
provide a means to attract and retain persons of outstanding ability to the service of the Company.
It is recognized that the Company’s efforts to attract or retain these individuals will be
facilitated with this additional form of compensation.




2. ADMINISTRATION




     This Plan shall be administered by the Company’s Board of Directors (“Board”). In its
administration of the Plan, the Board shall receive recommendations from the Compensation Committee
(the “Committee”) of the Board, which is comprised solely of directors who are not interested
persons of the Company within the meaning of Section 2(a)(19) of the Investment Company Act of
1940, as amended (the “Act”). The Board shall interpret this Plan and, to the extent and in the
manner contemplated herein, shall exercise the discretion reserved to it hereunder. The Board may
prescribe, amend and rescind rules and regulations relating to this Plan and make all other
determinations necessary for its administration. The decision of the Board on any interpretation of
this Plan or administration hereof, if in compliance with the provisions of the Act and regulations
promulgated thereunder, shall be final and binding with respect to the Company. Each issuance of
restricted stock to employees of the Company and employees of its wholly-owned subsidiaries will be
approved by the required majority, as defined in Section 57(o) of the 1940 Act, of the Board on the
basis that such issuance is in the best interests of the Company and its shareholders.




3. SHARES SUBJECT TO THE PLAN




     The shares subject to this Plan shall be shares of the Company’s common stock, par value $0.01
per share (“Shares”). Subject to the provisions hereof concerning adjustment, the total number of
shares that may be awarded as restricted shares under this Plan shall not exceed 2,065,045 Shares.
Any Shares that were granted pursuant to an award of restricted stock under this Plan but that are
forfeited pursuant to the terms of the Plan or an award agreement shall again be available under
this Plan. Shares may be made available from authorized, un-issued or reacquired stock or partly
from each.




4. PARTICIPANTS




     (A) Employees. The Board shall determine and designate from time to time those employees of
the Company and those employees of its wholly-owned subsidiaries who shall be eligible to
participate in this Plan (the “Participants”). The Board, upon the recommendation of the Committee,
shall also determine the number of Shares to be offered from time to time to the Participants. The
Committee, in making these recommendations, and the Board, in making these determinations, may take into account, among
other things, the past service of such Participants on behalf of the Company and its wholly-owned
subsidiaries, the present and potential contributions of such Participants to the success of the
Company and its wholly-owned subsidiaries and such other factors as the Committee or the Board from
time to time shall deem relevant in connection with accomplishing the purposes of this Plan.



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     (B) Award Agreements. All Shares of restricted stock granted to Participants under the Plan
will be governed by an agreement. The agreement documenting the award of any restricted stock
granted pursuant to this Plan shall contain such terms and conditions as the Board from time to
time shall deem advisable, including but not limited to the lapsing of forfeiture restrictions,
only in such installments as the Board may determine or otherwise prescribe. Agreements governing
awards made to different Participants or at different times need not contain similar provisions. In
the case of any discrepancy between the terms of the Plan and the terms of any award agreement, the
Plan provisions shall control.



5. RESTRICTED STOCK




     Each agreement governing an award of restricted stock shall state the number of Shares subject
to the award, the terms and conditions pursuant to which such Participant shall acquire a
non-forfeitable right to the Shares awarded as restricted stock through the lapsing of forfeiture
provisions and the timing of the lapsing of forfeiture provisions, all as from time to time
determined or otherwise prescribed by the Board. Shares awarded as restricted stock to some or all
of the Participants, as determined from time to time by the Board, upon the recommendation of the
Committee, may be subject to forfeiture provisions relating to continued employment during stated
periods of time and/or may include for key employees and other Participants forfeiture provisions
relating to the achievement of one or more objective performance goals based upon attainment of
specified levels of any one or more of the following business criteria: dividend coverage,
operating income, growth in operating income, capital gains, asset quality, levels of non-accrual
or other challenged investments, and/or investment charge-offs, and/or may also include any one or
more of the following additional business criteria: asset growth, revenue, revenue growth,
operating efficiency, division, group or corporate financial goals, total shareholder return,
attainment of strategic and operational initiatives, appreciation in and/or maintenance of the
price of the Shares or any other publicly-traded securities of the Company, and/or comparisons with
various stock market indices. The Board shall have the power to impose such other conditions or
restrictions on awards subject to this Section as it may deem necessary or appropriate to ensure
that such awards satisfy all requirements for “performance-based compensation” within the meaning
of Section 162(m) of the Internal Revenue Code.




6. LIMITATIONS ON RESTRICTED STOCK AWARDS




     Grants of restricted stock awards shall be subject to the following limitations:




     (A) No one Participant shall be granted awards of restricted stock relating to more than 25%
of the Shares available for issuance under this Plan.




     (B) In any fiscal year, no Participant may be granted awards under this Plan related to more
than 300,000 Shares.




     (C) The total number of shares that may be outstanding as restricted shares under all of the
Company’s compensation plans shall not exceed ten (10) percent of the total number of Shares
authorized and outstanding at any time.



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     (D) The amount of voting securities that would result from the exercise of all of the
Company’s outstanding warrants, options, and rights, together with any restricted stock issued
pursuant to this Plan and any other compensation plan of the Company, at the time of issuance shall
not exceed 25% of the outstanding voting securities of the Company, provided, however, that if the
amount of voting securities that would result from the exercise of all of the Company’s outstanding
warrants, options, and rights issued to the Company’s directors, officers, and employees, together
with any restricted stock issued pursuant to this Plan and any other compensation plan of the
Company, would exceed 15% of the outstanding voting securities of the Company, then the total
amount of voting securities that would result from the exercise of all outstanding warrants,
options, and rights, together with any restricted stock issued pursuant to this Plan, at the time
of issuance shall not exceed 20% of the outstanding voting securities.




7. TRANSFERABILITY OF RESTRICTED STOCK




     While subject to forfeiture provisions, Shares of restricted stock granted under this Plan
shall not be transferable other than to the spouse or lineal descendants (including adopted
children) of the Participant, any trust for the benefit of the Participant or the benefit of the
spouse or lineal descendants (including adopted children) of the Participant, or the guardian or
conservator of the Participant (“Permitted Transferees”).




8. TERMINATION OF RESTRICTED STOCK AWARDS




     A Participant’s rights to Shares awarded as restricted stock under this Plan shall, under all
circumstances, be set forth in the agreement governing the award of such Shares of restricted
stock.



9. EFFECT OF CHANGE IN STOCK SUBJECT TO THE PLAN




     Subject to any required action by the shareholders of the Company and the provisions of
applicable corporate law, the number of Shares that has been authorized or reserved for issuance,
grant or award under this Plan and the number of Shares covered by any applicable vesting or
forfeiture schedule hereunder, shall be proportionately adjusted for (a) a division, combination or
reclassification of any of the Shares or (b) a dividend payable in Shares.



10. MISCELLANEOUS PROVISIONS




     (A) The Board will review periodically the potential impact that issuances of awards under
this Plan could have on the Company’s earnings and net asset value per Share, such review to take
place prior to any decisions to grant awards under this Plan, but in no event less frequently than
annually.




     (B) The Board is authorized to take appropriate steps to ensure that neither the grant of nor
the lapsing of the forfeiture restrictions on awards under this Plan would have an effect contrary
to the interests of the Company’s stockholders. This authority includes the authority to prevent or
limit the granting of additional awards under this Plan.




     (C) The granting of any award under the Plan shall not impose upon the Company any obligation
to employ or continue to employ any Participant, and the right of the Company and its subsidiaries
to terminate the employment of any Participant or other employee shall not be diminished or
affected by reason of the fact that an award has been made under the Plan to such Participant.



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     (D) All awards under this Plan shall be made within ten years from the earlier of the date of
adoption of this Plan (or any amendment thereto requiring shareholder approval pursuant to the
Code) or the date this Plan (or any amendment thereto requiring shareholder approval pursuant to
the Code) is approved by the stockholders of the Company.




     (E) A leave of absence granted to an employee does not constitute an interruption in
continuous employment for purposes of this Plan as long as the leave of absence does not extend
beyond 12 complete calendar months.




     (F) Any notices given in writing shall be deemed given if delivered in person or by certified
mail; if given to the Company addressed to its Corporate Secretary at Patriot Capital Funding,
Inc., 274 Riverside Avenue, Westport, CT 06880.




     (G) This Plan and all actions taken by those acting under this Plan shall be governed by the
substantive laws of Delaware without regard to any rules regarding conflict-of-law or
choice-of-law.




     (H) All costs and expenses incurred in the operation and administration of this Plan shall be
borne by the Company.



11. AMENDMENT AND TERMINATION




     The Board may modify, revise or terminate this Plan at any time and from time to time, subject
to applicable stockholder approval or other requirements as may be contained in (a) the Company’s
articles of incorporation or by-laws and (b) applicable law and orders. The Board shall seek
stockholder approval of any action modifying a provision of the Plan where it is determined that
such stockholder approval is appropriate under the provisions of (a) applicable law or orders, or
(b) the Company’s articles of incorporation or by-laws. This Plan shall terminate when all Shares
reserved for issuance hereunder have been issued and the forfeiture restrictions on all restricted
stock awards have lapsed, or by action of the Board pursuant to this paragraph, whichever shall
first occur.




12. EFFECTIVE DATE OF THE PLAN




     The Plan shall become effective upon the later to occur of (1) adoption by the Board, and
(2) approval of this Plan by the shareholders of the Company; provided, however, the Plan shall not
be effective with respect to an award of restricted stock unless the Company has received an order
of the Securities and Exchange Commission that permits such award.




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