**Exhibit 10.3**

**CUSTODY AGREEMENT**

AGREEMENT, dated as of May 5, 2006 between GladstoneCapital Corporation, a corporation existing under the laws of the State ofMaryland having its principal office and place of business at 1521 WestbranchDrive, Suite 200, McLean, Virginia  22102(the “Corporation”) and The Bank of New York, a New York corporation authorizedto do a banking business having its principal office and place of business atOne Wall Street, New York, New York 10286 (“Custodian”).

**W I T N ES S E T H:**

that for and inconsideration of the mutual promises hereinafter set forth the Corporation andCustodian agree as follows:

# **ARTICLE IDEFINITIONS**

Whenever used in this Agreement, the following wordsshall have the meanings set forth below:

## 1.     **“Authorized Person”** shall be any person,whether or not an officer or employee of the Corporation, duly authorized bythe Corporation’s board to execute any Certificate or to give any OralInstruction with respect to one or more Accounts, such persons to be designatedin a Certificate annexed hereto as Schedule I hereto or such other Certificateas may be received by Custodian from time to time.

## 2.     **“Custodian Affiliate”** shall mean anyoffice, branch or subsidiary of The Bank of New York Company, Inc.

## 3.     **“Book-Entry System”** shall mean theFederal Reserve/Treasury book-entry system for receiving and deliveringsecurities, its successors and nominees.

## 4.     **“Business Day”** shall mean any day on whichCustodian and relevant Depositories are open for business.

## 5.     **“Certificate”** shall mean any notice,instruction, or other instrument in writing, authorized or required by thisAgreement to be given to Custodian, which is actually received by Custodian byletter or facsimile transmission and signed on behalf of the Corporation by anAuthorized Person or a person reasonably believed by Custodian to be anAuthorized Person.

## 6.     **“Composite Currency Unit”** shall mean theEuro or any other composite currency unit consisting of the aggregate ofspecified amounts of specified currencies, as such unit may be constituted fromtime to time.

## 7.     **“Depository”** shall include (a) theBook-Entry System, (b) the Depository Trust Company, (c) any other clearingagency or securities depository registered with the Securities and 

1

----

## Exchange Commission identified to the Corporation from time to time,and (d) the respective successors and nominees of the foregoing.

## 8.     **“Foreign Depository”** shall mean (a)Euroclear, (b) Clearstream Banking, societe anonyme, (c) each EligibleSecurities Depository as defined in Rule 17f-7 under the InvestmentCompany Act of 1940, as amended, identified to the Corporation from time totime,****and (d) the respectivesuccessors and nominees of the foregoing.

## 9.     **“Instructions”** shall mean communicationsactually received by Custodian by S.W.I.F.T., tested telex, letter, facsimiletransmission, or other method or system specified by Custodian as available foruse in connection with the services hereunder.

## 10.   **“Oral Instructions”** shall mean verbalinstructions received by Custodian from an Authorized Person or from a personreasonably believed by Custodian to be an Authorized Person.

## 11.   **“Series”** shall mean the various portfolios,if any, of the Corporation listed on Schedule II hereto, and if none are listedreferences to Series shall be references to the Corporation.

## 12.   **“Securities”** shall include, withoutlimitation, any common stock and other equity securities, bonds, debentures andother debt securities, notes, mortgages or other obligations, and anyinstruments representing rights to receive, purchase, or subscribe for thesame, or representing any other rights or interests therein (whetherrepresented by a certificate or held in a Depository or by a Subcustodian).

## 13.   **“Subcustodian”** shall mean a bank (includingany branch thereof) or other financial institution (other than a ForeignDepository) located outside the U.S. which is utilized by Custodian inconnection with the purchase, sale or custody of Securities hereunder andidentified to the Corporation from time to time, and their respectivesuccessors and nominees.

**ARTICLE IIAPPOINTMENT OF CUSTODIAN; ACCOUNTS;REPRESENTATIONS, WARRANTIES, AND COVENANTS**

## 1.     (a)   The Corporation hereby appoints Custodian ascustodian of all Securities and cash at any time delivered to Custodian duringthe term of this Agreement, and authorizes Custodian to hold Securities inregistered form in its name or the name of its nominees.  Custodian hereby accepts such appointment andagrees to establish and maintain one or more securities accounts and cashaccounts for each Series in which Custodian will hold Securities and cash asprovided herein.  Custodian shallmaintain books and records segregating the assets of each Series from theassets of any other Series.  Suchaccounts (each, an “Account”; collectively, the “Accounts”) shall be in thename of the Corporation.

### (b)   Custodianmay from time to time establish on its books and records such sub-accountswithin each Account as the Corporation and Custodian may agree upon (each a “Special

2

----

### Account”), and Custodian shall reflect therein such assets as theCorporation may specify in a Certificate or Instructions.

### (c)   Custodianmay from time to time establish pursuant to a written agreement with and forthe benefit of a broker, dealer, future commission merchant or other thirdparty identified in a Certificate or Instructions such accounts on such termsand conditions as the Corporation and Custodian shall agree, and Custodianshall transfer to such account such Securities and money as the Corporation mayspecify in a Certificate or Instructions.

## 2.     TheCorporation hereby represents and warrants, which representations andwarranties shall be continuing and shall be deemed to be reaffirmed upon eachdelivery of a Certificate or each giving of Oral Instructions or Instructionsby the Corporation, that:

#### (a)   Itis duly organized and existing under the laws of the jurisdiction of itsorganization, with full power to carry on its business as now conducted, toenter into this Agreement, and to perform its obligations hereunder;

#### (b)   ThisAgreement has been duly authorized, executed and delivered by the Corporation,approved by a resolution of its board, constitutes a valid and legally bindingobligation of the Corporation, enforceable in accordance with its terms, andthere is no statute, regulation, rule, order or judgment binding on it, and noprovision of its charter or by-laws, nor of any mortgage, indenture, creditagreement or other contract binding on it or affecting its property, whichwould prohibit its execution or performance of this Agreement;

### (c)   Itis conducting its business in substantial compliance with all applicable lawsand requirements, both state and federal, and has obtained all regulatorylicenses, approvals and consents necessary to carry on its business as nowconducted;

### (d)   Itwill not use the services provided by Custodian hereunder in any manner thatis, or will result in, a violation of any law, rule or regulation applicable tothe Corporation;

### (e)   Itsboard or its foreign custody manager, as defined in Rule 17f-5 under theInvestment Company Act of 1940, as amended (the “‘40 Act”), has determined thatuse of each Subcustodian (including any Replacement Custodian) which Custodianis authorized to utilize in accordance with Section 1(a) of Article III hereofsatisfies the applicable requirements of the ‘40 Act and Rule 17f-5thereunder;

### (f)    TheCorporation or its investment adviser has determined that the custodyarrangements of each Foreign Depository provide reasonable safeguards againstthe custody risks associated with maintaining assets with such ForeignDepository within the meaning of Rule 17f-7 under the ‘40 Act;

### (g)   Itis fully informed of the protections and risks associated with various methodsof transmitting Instructions and Oral Instructions and delivering Certificatesto Custodian, shall, and shall cause each Authorized Person, to safeguard andtreat with extreme care any user and authorization codes, passwords and/orauthentication keys, understands that there may be more secure methods of transmittingor delivering the same than the methods 

3

----

### selected by it, agrees that the security procedures (if any) to befollowed in connection therewith provide a commercially reasonable degree ofprotection in light of its particular needs and circumstances, and acknowledgesand agrees that Instructions need not be reviewed by Custodian, mayconclusively be presumed by Custodian to have been given by person(s) dulyauthorized,  and may be acted upon asgiven;

### (h)   Itshall manage its borrowings, including, without limitation, any advance oroverdraft (including any day-light overdraft) in the Accounts, so that theaggregate of its total borrowings for each Series does not exceed the amountsuch Series is permitted to borrow under the ‘40 Act;

### (i)    Itstransmission or giving of, and Custodian acting upon and in reliance on,Certificates, Instructions, or Oral Instructions pursuant to this Agreementshall at all times comply with the ‘40 Act;

### (j)    Itshall impose and maintain restrictions on the destinations to which cash may bedisbursed by Instructions to ensure that each disbursement is for a properpurpose; and

### (k)   Ithas the right to make the pledge and grant the security interest and securityentitlement to Custodian contained in Section 1 of Article V hereof, free ofany right of redemption or prior claim of any other person or entity, suchpledge and such grants shall have a first priority subject to no setoffs,counterclaims, or other liens or grants prior to or on a parity therewith, andit shall take such additional steps as Custodian may require to assure suchpriority.

## 3.     TheCorporation hereby covenants that it shall from time to time complete andexecute and deliver to Custodian upon Custodian’s request a Form FR U-1 (orsuccessor form) whenever the Corporation borrows from Custodian any money to beused for the purchase or carrying of margin stock as defined in Federal ReserveRegulation U.

**ARTICLE IIICUSTODY AND RELATED SERVICES**

## 1.     (a)   Subject to the terms hereof, the Corporationhereby authorizes Custodian to hold any Securities received by it from time totime for the Corporation’s account. Custodian shall be entitled to utilize, subject to subsection (c) ofthis Section 1, Depositories, Subcustodians, and, subject to subsection (d) ofthis Section 1, Foreign Depositories, to the extent possible in connection withits performance hereunder.  Securitiesand cash held in a Depository or Foreign Depository will be held subject to therules, terms and conditions of such entity. Securities and cash held through Subcustodians shall be held subject tothe terms and conditions of Custodian’s agreements with suchSubcustodians.  Subcustodians may beauthorized to hold Securities in Foreign Depositories in which suchSubcustodians participate.  Unless otherwiserequired by local law or practice or a particular subcustodian agreement,Securities deposited with a Subcustodian, a Depositary or a Foreign Depositorywill be held in a commingled account, in the name of Custodian, holding onlySecurities held by Custodian as custodian for its customers.  Custodian shall identify on its books andrecords the Securities and cash belonging to the Corporation, whether helddirectly or indirectly through Depositories, Foreign Depositories, or 

4

----

## Subcustodians.  Custodian shall,directly or indirectly through Subcustodians, Depositories, or ForeignDepositories, endeavor, to the extent feasible, to hold Securities in thecountry or other jurisdiction in which the principal trading market for suchSecurities is located, where such Securities are to be presented forcancellation and/or payment and/or registration, or where such Securities areacquired.  Custodian at any time maycease utilizing any Subcustodian and/or may replace a Subcustodian with adifferent Subcustodian (the “Replacement Subcustodian”).  In the event Custodian selects a ReplacementSubcustodian, Custodian shall not utilize such Replacement Subcustodian untilafter the Corporation’s board or foreign custody manager has determined thatutilization of such Replacement Subcustodian satisfies the requirements of the ‘40Act and Rule 17f-5 thereunder.

### (b)   UnlessCustodian has received a Certificate or Instructions to the contrary, Custodianshall hold Securities indirectly through a Subcustodian only if (i) the Securitiesare not subject to any right, charge, security interest, lien or claim of anykind in favor of such Subcustodian or its creditors or operators, including areceiver or trustee in bankruptcy or similar authority, except for a claim ofpayment for the safe custody or administration of Securities on behalf of theCorporation by such Subcustodian, and (ii) beneficial ownership of theSecurities is freely transferable without the payment of money or value otherthan for safe custody or administration.

### (c)   Withrespect to each Depository, Custodian (i) shall exercise due care in accordancewith reasonable commercial standards in discharging its duties as a securitiesintermediary to obtain and thereafter maintain Securities or financial assetsdeposited or held in such Depository, and (ii) will provide, promptly uponrequest by the Corporation, such reports as are available concerning theinternal accounting controls and financial strength of Custodian.

### (d)   Withrespect to each Foreign Depository, Custodian shall exercise reasonable care,prudence, and diligence (i) to provide the Corporation with an analysis of thecustody risks associated with maintaining assets with the Foreign Depository,and (ii) to monitor such custody risks on a continuing basis and promptlynotify the Corporation of any material change in such risks.  The Corporation acknowledges and agrees thatsuch analysis and monitoring shall be made on the basis of, and limited by,information gathered from Subcustodians or through publicly availableinformation otherwise obtained by Custodian, and shall not include anyevaluation of Country Risks.  As usedherein the term “Country Risks” shall mean with respect to any ForeignDepository:  (a) the financialinfrastructure of the country in which it is organized, (b) such country’sprevailing custody and settlement practices, (c) nationalization, expropriationor other governmental actions, (d) such country’s regulation of the banking orsecurities industry, (e) currency controls, restrictions, devaluations orfluctuations, and (f) market conditions which affect the order execution ofsecurities transactions or affect the value of securities.

## 2.     Custodianshall furnish the Corporation with an advice of daily transactions (including aconfirmation of each transfer of Securities) and a monthly summary of alltransfers to or from the Accounts.

## 3.     Withrespect to all Securities held hereunder, Custodian shall, unless otherwiseinstructed to the contrary:

5

----

#### (a)   Receiveall income and other payments and advise the Corporation as promptly aspracticable of any such amounts due but not paid;

#### (b)   Presentfor payment and receive the amount paid upon all Securities which may matureand advise the Corporation as promptly as practicable of any such amounts duebut not paid;

#### (c)   Forwardto the Corporation copies of all information or documents that it may actuallyreceive from an issuer of Securities which, in the opinion of Custodian, areintended for the beneficial owner of Securities;

#### (d)   Execute,as custodian, any certificates of ownership, affidavits, declarations or othercertificates under any tax laws now or hereafter in effect in connection withthe collection of bond and note coupons;

#### (e)   Holddirectly or through a Depository, a Foreign Depository, or a Subcustodian allrights and similar Securities issued with respect to any Securities credited toan Account hereunder; and

#### (f)    Endorsefor collection checks, drafts or other negotiable instruments.

## 4.     (a)   Custodian shall notify the Corporation ofrights or discretionary actions with respect to Securities held hereunder, andof the date or dates by when such rights must be exercised or such action mustbe taken, provided that Custodian has actually received, from the issuer or therelevant Depository (with respect to Securities issued in the United States) orfrom the relevant Subcustodian, Foreign Depository, or a nationally orinternationally recognized bond or corporate action service to which Custodiansubscribes, timely notice of such rights or discretionary corporate action orof the date or dates such rights must be exercised or such action must betaken.  Absent actual receipt of suchnotice, Custodian shall have no liability for failing to so notify theCorporation.

### (b)   WheneverSecurities (including, but not limited to, warrants, options, tenders, optionsto tender or non-mandatory puts or calls) confer discretionary rights onthe Corporation or provide for discretionary action or alternative courses ofaction by the Corporation, the Corporation shall be responsible for making anydecisions relating thereto and for directing Custodian to act.  In order for Custodian to act, it mustreceive the Corporation’s Certificate or Instructions at Custodian’s offices,addressed as Custodian may from time to time request, not later than noon (NewYork time) at least two (2) Business Days prior to the last scheduled date toact with respect to such Securities (or such earlier date or time as Custodianmay specify to the Corporation).  AbsentCustodian’s timely receipt of such Certificate or Instructions, Custodian shallnot be liable for failure to take any action relating to or to exercise anyrights conferred by such Securities.

## 5.     Allvoting rights with respect to Securities, however registered, shall beexercised by the Corporation or its designee. Custodian will make available to the Corporation proxy voting 

6

----

## services upon the request of, and for the jurisdictions selected by,the Corporation in accordance with terms and conditions to be mutually agreedupon by Custodian and the Corporation.

## 6.     Custodianshall promptly advise the Corporation upon Custodian’s actual receipt ofnotification of the partial redemption, partial payment or other actionaffecting less than all Securities of the relevant class.  If Custodian, any Subcustodian, anyDepository, or any Foreign Depository holds any Securities in which theCorporation has an interest as part of a fungible mass, Custodian, suchSubcustodian, Depository, or Foreign Depository may select the Securities toparticipate in such partial redemption, partial payment or other action in anynon-discriminatory manner that it customarily uses to make such selection.

## 7.     Custodianshall not under any circumstances accept bearer interest coupons which havebeen stripped from United States federal, state or local government or agencysecurities unless explicitly agreed to by Custodian in writing.

## 8.     TheCorporation shall be liable for all taxes, assessments, duties and othergovernmental charges, including any interest or penalty with respect thereto (“Taxes”),with respect to any cash or Securities held on behalf of the Corporation or anytransaction related thereto.  TheCorporation shall indemnify Custodian and each Subcustodian for the amount ofany Tax that Custodian, any such Subcustodian or any other withholding agent isrequired under applicable laws (whether by assessment or otherwise) to pay onbehalf of, or in respect of income earned by or payments or distributions madeto or for the account of the Corporation (including any payment of Tax requiredby reason of an earlier failure to withhold). Custodian shall, or shall instruct the applicable Subcustodian or otherwithholding agent to, withhold the amount of any Tax which is required to bewithheld under applicable law upon collection of any dividend, interest orother distribution made with respect to any Security and any proceeds or incomefrom the sale, loan or other transfer of any Security.  In the event that Custodian or any Subcustodianis required under applicable law to pay any Tax on behalf of the Corporation,Custodian is hereby authorized to withdraw cash from any cash account in theamount required to pay such Tax and to use such cash, or to remit such cash tothe appropriate Subcustodian or other withholding agent, for the timely paymentof such Tax in the manner required by applicable law.  If the aggregate amount of cash in all cashaccounts is not sufficient to pay such Tax, Custodian shall promptly notify theCorporation of the additional amount of cash (in the appropriate currency)required, and the Corporation shall directly deposit such additional amount inthe appropriate cash account promptly after receipt of such notice, for use byCustodian as specified herein.  In theevent that Custodian reasonably believes that Corporation is eligible, pursuantto applicable law or to the provisions of any tax treaty, for a reduced rateof, or exemption from, any Tax which is otherwise required to be withheld orpaid on behalf of the Corporation under any applicable law, Custodian shall, orshall instruct the applicable Subcustodian or withholding agent to, eitherwithhold or pay such Tax at such reduced rate or refrain from withholding orpaying such Tax, as appropriate; provided that Custodian shall havereceived from the Corporation all documentary evidence of residence or otherqualification for such reduced rate or exemption required to be received undersuch applicable law or treaty.  In theevent that Custodian reasonably believes that a reduced rate of, or exemptionfrom, any Tax is obtainable only by means of an application for reCorporation,Custodian and the applicable Subcustodian shall have no responsibility for theaccuracy or validity of any forms or documentation provided 

7

----

## by the Corporation to Custodian hereunder.  The Corporation hereby agrees to indemnifyand hold harmless Custodian and each Subcustodian in respect of any liabilityarising from any underwithholding or underpayment of any Tax which results fromthe inaccuracy or invalidity of any such forms or other documentation, and suchobligation to indemnify shall be a continuing obligation of the Corporation,its successors and assigns notwithstanding the termination of this Agreement.

## 9.     (a)   For the purpose of settling Securities andforeign exchange transactions, the Corporation shall provide Custodian withsufficient immediately available Corporations for all transactions by such timeand date as conditions in the relevant market dictate. As used herein, “sufficientimmediately available Corporations” shall mean either (i) sufficient cashdenominated in U.S. dollars to purchase the necessary foreign currency, or (ii)sufficient applicable foreign currency, to settle the transaction.  Custodian shall provide the Corporation withimmediately available Corporations each day which result from the actualsettlement of all sale transactions, based upon advices received by Custodianfrom Subcustodians, Depositories, and Foreign Depositories.  Such Corporations shall be in U.S. dollars orsuch other currency as the Corporation may specify to Custodian.

### (b)   Anyforeign exchange transaction effected by Custodian in connection with thisAgreement may be entered with Custodian or a Custodian Affiliate acting asprincipal or otherwise through customary banking channels.  The Corporation may issue a standingCertificate or Instructions with respect to foreign exchange transactions, butCustodian may establish rules or limitations concerning any foreign exchangefacility made available to the Corporation. The Corporation shall bear all risks of investing in Securities orholding cash denominated in a foreign currency.

### (c)   Tothe extent that Custodian has agreed to provide pricing or other informationservices in connection with this Agreement, Custodian is authorized to utilizeany vendor (including brokers and dealers of Securities) reasonably believed byCustodian to be reliable to provide such information.  The Corporation understands that certainpricing information with respect to complex financial instruments (e.g.,derivatives) may be based on calculated amounts rather than actual markettransactions and may not reflect actual market values, and that the variancebetween such calculated amounts and actual market values may or may not bematerial. Where vendors do not provide information for particular Securities orother property, an Authorized Person may advise Custodian in a Certificateregarding the fair market value of, or provide other information with respectto, such Securities or property as determined by it in good faith.  Custodian shall not be liable for any loss,damage or expense incurred as a result of errors or omissions with respect toany pricing or other information utilized by Custodian hereunder.

## 10.           Until such time asCustodian receives a certificate to the contrary with respect to a particularSecurity, Custodian may release the identity of the Corporation to an issuerwhich requests such information pursuant to the Shareholder Communications Actof 1985 for the specific purpose of direct communications between such issuerand shareholder.

8

----

**ARTICLE IVPURCHASE AND SALE OF SECURITIES;CREDITS TO ACCOUNT**

## 1.     Promptly after each purchase or sale of Securities by theCorporation, the Corporation shall deliver to Custodian a Certificate or Instructions,or with respect to a purchase or sale of a Security generally required to besettled on the same day the purchase or sale is made, Oral Instructionsspecifying all information Custodian may reasonably request to settle suchpurchase or sale.  Custodian shallaccount for all purchases and sales of Securities on the actual settlement dateunless otherwise agreed by Custodian.

## 2.     TheCorporation understands that when Custodian is instructed to deliver Securitiesagainst payment, delivery of such Securities and receipt of payment thereformay not be completed simultaneously. Notwithstanding any provision in this Agreement to the contrary,settlements, payments and deliveries of Securities may be effected by Custodianor any Subcustodian in accordance with the customary or established securitiestrading or securities processing practices and procedures in the jurisdictionin which the transaction occurs, including, without limitation, delivery to apurchaser or dealer therefor (or agent) against receipt with the expectation ofreceiving later payment for such Securities. The Corporation assumes full responsibility for all risks, including,without limitation, credit risks, involved in connection with such deliveriesof Securities.

## 3.     Custodianmay, as a matter of bookkeeping convenience or by separate agreement with theCorporation, credit the Account with the proceeds from the sale, redemption orother disposition of Securities or interest, dividends or other distributionspayable on Securities prior to its actual receipt of final paymenttherefor.  All such credits shall beconditional until Custodian’s actual receipt of final payment and may bereversed by Custodian to the extent that final payment is not received.  Payment with respect to a transaction willnot be “final” until Custodian shall have received immediately availableCorporations which under applicable local law, rule and/or practice areirreversible and not subject to any security interest, levy or otherencumbrance, and which are specifically applicable to such transaction.

**ARTICLE VOVERDRAFTS OR INDEBTEDNESS**

## 1.     IfCustodian should in its sole discretion advance Corporations on behalf of anySeries which results in an overdraft (including, without limitation, anyday-light overdraft) because the money held by Custodian in an Account for suchSeries shall be insufficient to pay the total amount payable upon a purchase ofSecurities specifically allocated to such Series, as set forth in aCertificate, Instructions or Oral Instructions, or if an overdraft arises inthe separate account of a Series for some other reason, including, withoutlimitation, because of a reversal of a conditional credit or the purchase ofany currency, or if the Corporation is for any other reason indebted toCustodian with respect to a Series, including any indebtedness to The Bank ofNew York under the Corporation’s Cash Management and Related Services Agreement(except a borrowing for investment or for temporary or emergency purposes usingSecurities as collateral pursuant to a separate agreement and subject to theprovisions of Section 2 of this Article), such

9

----

## overdraft or indebtedness shall be deemed to be a loan made byCustodian to the Corporation for such Series payable on demand and shall bearinterest from the date incurred at a rate per annum ordinarily charged byCustodian to its institutional customers, as such rate may be adjusted fromtime to time.  In addition, the Corporation hereby agrees that Custodianshall to the maximum extent permitted by law have a continuing lien, securityinterest, and security entitlement in and to any property, including, withoutlimitation, any investment property or any financial asset, of such Series atany time held by Custodian for the benefit of such Series or in which suchSeries may have an interest which is then in Custodian’s possession or controlor in possession or control of any third party acting in Custodian’sbehalf.  The Corporation authorizes Custodian, in its sole discretion, atany time to charge any such overdraft or indebtedness together with interestdue thereon against any balance of account standing to such Series’ credit onCustodian’s books.

## 2.     Ifthe Corporation borrows money from any bank (including Custodian if theborrowing is pursuant to a separate agreement) for investment or for temporaryor emergency purposes using Securities held by Custodian hereunder ascollateral for such borrowings, the Corporation shall deliver to Custodian aCertificate specifying with respect to each such borrowing:  (a) the Series to which such borrowingrelates; (b) the name of the bank, (c) the amount of the borrowing, (d) thetime and date, if known, on which the loan is to be entered into, (e) the totalamount payable to the Corporation on the borrowing date, (f) the Securities tobe delivered as collateral for such loan, including the name of the issuer, thetitle and the number of shares or the principal amount of any particularSecurities, and (g) a statement specifying whether such loan is for investmentpurposes or for temporary or emergency purposes and that such loan is inconformance with the ‘40 Act and the Corporation’s prospectus.  Custodian shall deliver on the borrowing datespecified in a Certificate the specified collateral against payment by thelending bank of the total amount of the loan payable, provided that the sameconforms to the total amount payable as set forth in theCertificate.   Custodian may, at theoption of the lending bank, keep such collateral in its possession, but suchcollateral shall be subject to all rights therein given the lending bank byvirtue of any promissory note or loan agreement.  Custodian shall deliver such Securities asadditional collateral as may be specified in a Certificate to collateralizefurther any transaction described in this Section.  The Corporation shall cause all Securitiesreleased from collateral status to be returned directly to Custodian, andCustodian shall receive from time to time such return of collateral as may betendered to it.   In the event thatthe Corporation fails to specify in a Certificate the Series, the name of theissuer, the title and number of shares or the principal amount of anyparticular Securities to be delivered as collateral by Custodian, Custodianshall not be under any obligation to deliver any Securities.

**ARTICLE VISALE AND REDEMPTION OF SHARES**

## 1.     Wheneverthe Corporation shall sell any shares issued by the Corporation (“Shares”) itshall deliver to Custodian a Certificate or Instructions specifying the amountof money and/or Securities to be received by Custodian for the sale of suchShares and specifically allocated to an Account for such Series.

## 2.     Uponreceipt of such money, Custodian shall credit such money to an Account in thename of the Series for which such money was received.

10

----

## 3.     Exceptas provided hereinafter, whenever the Corporation desires Custodian to makepayment out of the money held by Custodian hereunder in connection with aredemption of any Shares, it shall furnish to Custodian a Certificate orInstructions specifying the total amount to be paid for such Shares.  Custodian shall make payment of such totalamount to the transfer agent specified in such Certificate or Instructions outof the money held in an Account of the appropriate Series.

## 4.     Notwithstandingthe above provisions regarding the redemption of any Shares, whenever anyShares are redeemed pursuant to any check redemption privilege which may fromtime to time be offered by the Corporation, Custodian, unless otherwiseinstructed by a Certificate or Instructions, shall, upon presentment of suchcheck, charge the amount thereof against the money held in the Account of theSeries of the Shares being redeemed, provided, that if the Corporation or itsagent timely advises Custodian that such check is not to be honored, Custodianshall return such check unpaid.

**ARTICLE VIIPAYMENT OF DIVIDENDS OR DISTRIBUTIONS**

## 1.     Wheneverthe Corporation shall determine to pay a dividend or distribution on Shares itshall furnish to Custodian Instructions or a Certificate setting forth withrespect to the Series specified therein the date of the declaration of suchdividend or distribution, the total amount payable, and the payment date.

## 2.     Uponthe payment date specified in such Instructions or Certificate, Custodian shallpay out of the money held for the account of such Series the total amountpayable to the dividend agent of the Corporation specified therein.

**ARTICLE VIIICONCERNING CUSTODIAN**

## 1.     (a)   Except as otherwise expressly providedherein, Custodian shall not be liable for any costs, expenses, damages,liabilities or claims, including attorneys’ and accountants’ fees(collectively, “Losses”), incurred by or asserted against the Corporation,except those Losses arising out of Custodian’s own negligence or willful misconduct.  Custodian shall have no liability whatsoeverfor the action or inaction of any Depositories or of any Foreign Depositories,except in each case to the extent such action or inaction is a direct result ofthe Custodian’s failure to fulfill its duties hereunder.  With respect to any Losses incurred by theCorporation as a result of the acts or any failures to act by any Subcustodian(other than a Custodian Affiliate), Custodian shall take appropriate action torecover such Losses from such Subcustodian; and Custodian’s sole responsibilityand liability to the Corporation shall be limited to amounts so received fromsuch Subcustodian (exclusive of costs and expenses incurred by Custodian).  In no event shall Custodian be liable to theCorporation or any third party for special, indirect or consequential damages,or lost profits or loss of business, arising in connection with this Agreement,nor shall Custodian or any Subcustodian be liable:  (i) for acting in accordance with anyCertificate or Oral Instructions actually received by Custodian and reasonablybelieved by Custodian to be given by an Authorized Person; (ii) foracting in accordance with Instructions 

11

----

## without reviewing the same; (iii) for conclusively presumingthat all Instructions are given only by person(s) duly authorized; (iv)for conclusively presuming that all disbursements of cash directed by theCorporation, whether by a Certificate, an Oral Instruction, or an Instruction,are in accordance with Section 2(i) of Article II hereof; (v) forholding property in any particular country, including, but not limited to,Losses resulting from nationalization, expropriation or other governmentalactions; regulation of the banking or securities industry; exchange or currencycontrols or restrictions, devaluations or fluctuations; availability of cash orSecurities or market conditions which prevent the transfer of property orexecution of Securities transactions or affect the value of property; (vi)for any Losses due to forces beyond the control of Custodian, including withoutlimitation strikes, work stoppages, acts of war or terrorism, insurrection,revolution, nuclear or natural catastrophes or acts of God, or interruptions,loss or malfunctions of utilities, communications or computer (software andhardware) services; (vii) for the insolvency of any Subcustodian (other than aCustodian Affiliate), any Depository, or, except to the extent such action orinaction is a direct result of the Custodian’s failure to fulfill its dutieshereunder, any Foreign Depository; or (viii) for any Losses arising fromthe applicability of any law or regulation now or hereafter in effect, or fromthe occurrence of any event, including, without limitation, implementation oradoption of any rules or procedures of a Foreign Depository, which may affect,limit, prevent or impose costs or burdens on, the transferability,convertibility, or availability of any currency or Composite Currency Unit inany country or on the transfer of any Securities, and in no event shall Custodianbe obligated to substitute another currency for a currency (including acurrency that is a component of a Composite Currency Unit) whosetransferability, convertibility or availability has been affected, limited, orprevented by such law, regulation or event, and to the extent that any suchlaw, regulation or event imposes a cost or charge upon Custodian in relation tothe transferability, convertibility, or availability of any cash currency orComposite Currency Unit, such cost or charge shall be for the account of theCorporation, and Custodian may treat any account denominated in an affectedcurrency as a group of separate accounts denominated in the relevant componentcurrencies.

### (b)   Custodianmay enter into subcontracts, agreements and understandings with any CustodianAffiliate, whenever and on such terms and conditions as it deems necessary orappropriate to perform its services hereunder. No such subcontract, agreement or understanding shall discharge Custodianfrom its obligations hereunder.

### (c)   TheCorporation agrees to indemnify Custodian and hold Custodian harmless from andagainst any and all Losses sustained or incurred by or asserted againstCustodian by reason of or as a result of any action or inaction, or arising outof Custodian’s performance hereunder, including reasonable fees and expenses ofcounsel incurred by Custodian in a successful defense of claims by theCorporation; provided however, that the Corporation shall not indemnifyCustodian for those Losses arising out of Custodian’s own negligence or willfulmisconduct.  This indemnity shall be acontinuing obligation of the Corporation, its successors and assigns,notwithstanding the termination of this Agreement.

## 2.     Withoutlimiting the generality of the foregoing, Custodian shall be under noobligation to inquire into, and shall not be liable for:

12

----

#### (a)   AnyLosses incurred by the Corporation or any other person as a result of thereceipt or acceptance of fraudulent, forged or invalid Securities, orSecurities which are otherwise not freely transferable or deliverable withoutencumbrance in any relevant market;

#### (b)   Thevalidity of the issue of any Securities purchased, sold, or written by or forthe Corporation, the legality of the purchase, sale or writing thereof, or thepropriety of the amount paid or received therefor;

#### (c)   Thelegality of the sale or redemption of any Shares, or the propriety of theamount to be received or paid therefor;

#### (d)   Thelegality of the declaration or payment of any dividend or distribution by theCorporation;

#### (e)   Thelegality of any borrowing by the Corporation;

#### (f)    Thelegality of any loan of portfolio Securities, nor shall Custodian be under anyduty or obligation to see to it that any cash or collateral delivered to it bya broker, dealer or financial institution or held by it at any time as a resultof such loan of portfolio Securities is adequate security for the Corporationagainst any loss it might sustain as a result of such loan, which duty orobligation shall be the sole responsibility of the Corporation.  In addition, Custodian shall be under no dutyor obligation to see that any broker, dealer or financial institution to whichportfolio Securities of the Corporation are lent makes payment to it of anydividends or interest which are payable to or for the account of theCorporation during the period of such loan or at the termination of such loan,provided, however that Custodian shall promptly notify the Corporation in theevent that such dividends or interest are not paid and received when due;

#### (g)   Thesufficiency or value of any amounts of money and/or Securities held in anySpecial Account in connection with transactions by the Corporation; whether anybroker, dealer, futures commission merchant or clearing member makes payment tothe Corporation of any variation margin payment or similar payment which theCorporation may be entitled to receive from such broker, dealer, futurescommission merchant or clearing member, or whether any payment received byCustodian from any broker, dealer, futures commission merchant or clearingmember is the amount the Corporation is entitled to receive, or to notify theCorporation of Custodian’s receipt or non-receipt of any such payment; or

#### (h)   Whetherany Securities at any time delivered to, or held by it or by any Subcustodian,for the account of the Corporation and specifically allocated to a Series aresuch as properly may be held by the Corporation or such Series under theprovisions of its then current prospectus and statement of additionalinformation, or to ascertain whether any transactions by the Corporation,whether or not involving Custodian, are such transactions as may properly beengaged in by the Corporation.

13

----

## 3.     Custodianmay, with respect to questions of law specifically regarding an Account, obtainthe advice of counsel and shall be fully protected with respect to anythingdone or omitted by it in good faith in conformity with such advice.

## 4.     Custodianshall be under no obligation to take action to collect any amount payable onSecurities in default, or if payment is refused after due demand andpresentment.

## 5.     Custodianshall have no duty or responsibility to inquire into, make recommendations,supervise, or determine the suitability of any transactions affecting anyAccount.

## 6.     TheCorporation shall pay to Custodian the fees and charges as may be specificallyagreed upon from time to time and such other fees and charges at Custodian’sstandard rates for such services as may be applicable.  The Corporation shall reimburse Custodian forall costs associated with the conversion of the Corporation’s Securitieshereunder and the transfer of Securities and records kept in connection withthis Agreement.  The Corporation shallalso reimburse Custodian for out-of-pocket expenses which are anormal incident of the services provided hereunder.

## 7.     Custodianhas the right to debit any cash account for any amount payable by theCorporation in connection with any and all obligations of the Corporation toCustodian.  In addition to the rights ofCustodian under applicable law and other agreements, at any time when theCorporation shall not have honored any of its obligations to Custodian,Custodian shall have the right without notice to the Corporation to retain orset-off, against such obligations of the Corporation, any Securities or cashCustodian or a Custodian Affiliate may directly or indirectly hold for theaccount of the Corporation, and any obligations (whether matured or unmatured)that Custodian or a Custodian Affiliate may have to the Corporation in any currencyor Composite Currency Unit.  Any suchasset of, or obligation to, the Corporation may be transferred to Custodian andany Custodian Affiliate in order to effect the above rights.

## 8.     TheCorporation agrees to forward to Custodian a Certificate or Instructionsconfirming Oral Instructions by the close of business of the same day that suchOral Instructions are given to Custodian. The Corporation agrees that the fact that such confirming Certificate orInstructions are not received or that a contrary Certificate or contraryInstructions are received by Custodian shall in no way affect the validity orenforceability of transactions authorized by such Oral Instructions andeffected by Custodian.  If the Corporationelects to transmit Instructions through an on-line communications systemoffered by Custodian, the Corporation’s use thereof shall be subject to theTerms and Conditions attached as Appendix I hereto.  If Custodian receives Instructions whichappear on their face to have been transmitted by an Authorized Person via (i)computer facsimile, email, the Internet or other insecure electronic method, or(ii) secure electronic transmission containing applicable authorization codes,passwords and/or authentication keys, the Corporation understands and agreesthat Custodian cannot determine the identity of the actual sender of suchInstructions and that Custodian shall conclusively presume that such WrittenInstructions have been sent by an Authorized Person, and the Corporation shallbe responsible for ensuring that only Authorized Persons transmit suchInstructions to Custodian.  If theCorporation elects (with Custodian’s prior consent) to transmit Instructionsthrough an on-

14

----

## line communications service owned or operated by a third party, theCorporation agrees that Custodian shall not be responsible or liable for thereliability or availability of any such service.

## 9.     Thebooks and records pertaining to the Corporation which are in possession ofCustodian shall be the property of the Corporation.  Such books and records shall be prepared andmaintained as required by the ‘40 Act and the rules thereunder. TheCorporation, or its authorized representatives, shall have access to such booksand records during Custodian’s normal business hours.  Upon the reasonable request of theCorporation, copies of any such books and records shall be provided byCustodian to the Corporation or its authorized representative.  Upon the reasonable request of theCorporation, Custodian shall provide in hard copy or on computer disc anyrecords included in any such delivery which are maintained by Custodian on acomputer disc, or are similarly maintained.

## 10.   Itis understood that Custodian is authorized to supply any information regardingthe Accounts which is required by any law, regulation or rule now or hereafterin effect.  The Custodian shall providethe Corporation with any report obtained by the Custodian on the system ofinternal accounting control of a Depository, and with such reports on its ownsystem of internal accounting control as the Corporation may reasonably requestfrom time to time.

## 11.   Custodianshall have no duties or responsibilities whatsoever except such duties andresponsibilities as are specifically set forth in this Agreement, and nocovenant or obligation shall be implied against Custodian in connection withthis Agreement.

**ARTICLE IXTERMINATION**

## 1.     Eitherof the parties hereto may terminate this Agreement by giving to the other partya notice in writing specifying the date of such termination, which shall be notless than ninety (90) days after the date of giving of such notice.  Inthe event such notice is given by the Corporation, it shall be accompanied by acopy of a resolution of the board of the Corporation, certified by theSecretary or any Assistant Secretary, electing to terminate this Agreement anddesignating a successor custodian or custodians, each of which shall be a bankor trust company having not less than $2,000,000 aggregate capital, surplus andundivided profits.  In the event such notice is given by Custodian, theCorporation shall, on or before the termination date, deliver to Custodian acopy of a resolution of the board of the Corporation, certified by theSecretary or any Assistant Secretary, designating a successor custodian orcustodians.  In the absence of such designation by the Corporation,Custodian may designate a successor custodian which shall be a bank or trustcompany having not less than $2,000,000 aggregate capital, surplus andundivided profits.  Upon the date set forth in such notice this Agreementshall terminate, and Custodian shall upon receipt of a notice of acceptance bythe successor custodian on that date deliver directly to the successorcustodian all Securities and money then owned by the Corporation and held by itas Custodian, after deducting all fees, expenses and other amounts for thepayment or reimbursement of which it shall then be entitled.

## 2.     Ifa successor custodian is not designated by the Corporation or Custodian inaccordance with the preceding Section, the Corporation shall upon the datespecified in the notice 

15

----

## of termination of this Agreement and upon the delivery by Custodian ofall Securities (other than Securities which cannot be delivered to theCorporation) and money then owned by the Corporation be deemed to be its owncustodian and Custodian shall thereby be relieved of all duties andresponsibilities pursuant to this Agreement, other than the duty with respectto Securities which cannot be delivered to the Corporation to hold such Securitieshereunder in accordance with this Agreement.

**ARTICLE XMISCELLANEOUS**

## 1.     TheCorporation agrees to furnish to Custodian a new Certificate of AuthorizedPersons in the event of any change in the then present Authorized Persons.  Until such new Certificate is received,Custodian shall be fully protected in acting upon Certificates or OralInstructions of such present Authorized Persons.

## 2.     Anynotice or other instrument in writing, authorized or required by this Agreementto be given to Custodian, shall be sufficiently given if addressed to Custodianand received by it at its offices at One Wall Street, New York, New York 10286,or at such other place as Custodian may from time to time designate in writing.

Any notice or other instrument in writing, authorizedor required by this Agreement to be given to the Corporation shall besufficiently given if addressed to the Corporation and received by it at itsoffices at 1521 Westbranch Drive, Suite 200, McLean, Virginia  22102, or at such other place as the Corporationmay from time to time designate in writing.

## 3.     Eachand every right granted to either party hereunder or under any other documentdelivered hereunder or in connection herewith, or allowed it by law or equity,shall be cumulative and may be exercised from time to time.  No failure on the part of either party toexercise, and no delay in exercising, any right will operate as a waiverthereof, nor will any single or partial exercise by either party of any rightpreclude any other or future exercise thereof or the exercise of any otherright.

## 4.     Incase any provision in or obligation under this Agreement shall be invalid,illegal or unenforceable in any exclusive jurisdiction, the validity, legalityand enforceability of the remaining provisions shall not in any way be affectedthereby.  This Agreement may not beamended or modified in any manner except by a written agreement executed byboth parties, except that any amendment to the Schedule I hereto need be signedonly by the Corporation and any amendment to Appendix I hereto need be signedonly by Custodian.  This Agreement shallextend to and shall be binding upon the parties hereto, and their respectivesuccessors and assigns; provided, however, that this Agreement shall not beassignable by either party without the written consent of the other.

## 5.     ThisAgreement shall be construed in accordance with the substantive laws of theState of New York, without regard to conflicts of laws principles thereof.  The Corporation and Custodian hereby consentto the jurisdiction of a state or federal court situated in New York City, 

16

----

## New York in connection with any dispute arising hereunder.  The Corporation hereby irrevocably waives, tothe fullest extent permitted by applicable law, any objection which it may nowor hereafter have to the laying of venue of any such proceeding brought in sucha court and any claim that such proceeding brought in such a court has beenbrought in an inconvenient forum.  TheCorporation and Custodian each hereby irrevocably waives any and all rights totrial by jury in any legal proceeding arising out of or relating to thisAgreement.

## 6.     TheCorporation herebyacknowledges that Custodian is subject to federal laws, including the CustomerIdentification Program (CIP) requirements under the USA PATRIOT Act and itsimplementing regulations, pursuant to which Custodian must obtain, verify andrecord information that allows Custodian to identify the Corporation.  Accordingly, prior to opening an Accounthereunder Custodian will ask the Corporation to provide certain informationincluding, but not limited to, the Corporation’s name, physical address, taxidentification number and other information that will help Custodian toidentify and verify the Corporation’s identity such as organizationaldocuments, certificate of good standing, license to do business, or otherpertinent identifying information.  TheCorporation agrees that Custodian cannot open an Account hereunder unless anduntil Custodian verifies the Corporation’s identity in accordance with its CIP.

## 7.     ThisAgreement may be executed in any number of counterparts, each of which shall bedeemed to be an original, but such counterparts shall, together, constituteonly one instrument.

17

----

**IN WITNESS WHEREOF**, theCorporation and Custodian have caused this Agreement to be executed by theirrespective officers, thereunto duly authorized, as of the day and year firstabove written.
|        | GLADSTONE CAPITAL CORPORATION |
|--------|-------------------------------|
|   |                          |   |
|   |                          |   |
|   | By:                           | /s/ Harry Brill |
|   | Name:                         | Harry Brill |
|   | Title:                        | Chief Financial Officer |
|   |                          | Tax Identification No: 54-2040781 |
|   |                          |   |
|   |                          |   |
|   | THE BANK OF NEW YORK          |
|   |                          |   |
|   |                          |   |
|   | By:                           |   |
|   | Name:                         | Edward G. McGann |
|   | Title:                        | Managing Director |

** **

18

----

**SCHEDULE ICERTIFICATE OF AUTHORIZED PERSONS(The Corporation - Oral and Written Instructions)**

The undersigned hereby certifies that he/she is theduly elected and acting ________________________ of Gladstone CapitalCorporation (the “Corporation”), and further certifies that the followingofficers or employees of the Corporation have been duly authorized inconformity with the Corporation’s Declaration of Trust and By-Laws to deliverCertificates and Oral Instructions to The Bank of New York (“Custodian”)pursuant to the Custody Agreement between the Corporation and Custodian datedMay  5, 2006 and that the signaturesappearing opposite their names are true and correct:
| David Gladstone      |   | Chief Executive Officer  |   | /s/ David Gladstone     |
|----------------------|--------|--------------------------|--------|-------------------------|
| Name                 |   | Title                    |   | Signature               |
|                 |   |                     |   |                    |
| George Stelljes  III |   | Chief Investment Officer |   | /s/ George Stelljes III |
| Name                 |   | Title                    |   | Signature               |
|                 |   |                     |   |                    |
| Harry Brill          |   | Chief Financial Officer  |   | /s/ Harry Brill         |
| Name                 |   | Title                    |   | Signature               |
|                 |   |                     |   |                    |
|  Name           |   | Title                    |   | Signature               |
|                 |   |                     |   |                    |
|                 |   |                     |   |                    |
|  Name           |   | Title                    |   | Signature               |
|                 |   |                     |   |                    |
|                 |   |                     |   |                    |
|  Name           |   | Title                    |   | Signature               |
|                 |   |                     |   |                    |
|                 |   |                     |   |                    |
|  Name           |   | Title                    |   | Signature               |

 

This certificate supersedes any certificate ofAuthorized Persons you may currently have on file.
| [seal] |   | By:    |
|--------|--------|--------|
|   |   | Title: |
| Date:  |   |   |

** **

19

----

**SCHEDULEII**

Gladstone CapitalCorporation

20

----

**APPENDIXI**

**ELECTRONICSERVICES TERMS AND CONDITIONS**

1.    License; Use. (a) This Appendix Ishall govern the Corporation’s use of electronic communications, informationdelivery, portfolio management and banking services, that The Bank of New Yorkand its affiliates (“Custodian”) may provide to the Corporation, such as TheBank of New York Inform TM and The Bank of New York CA$H-Register Plus®, and any computer software,proprietary data and documentation provided by Custodian to the Corporation inconnection therewith (collectively, the **“Electronic Services”**).In the event of any conflict between the terms of this Appendix I and the mainbody of this Agreement with respect to the Corporation’s use of the ElectronicServices, the terms of this Appendix I shall control.

(b) Custodiangrants to the Corporation a personal, nontransferable and nonexclusive licenseto use the Electronic Services to which the Corporation subscribes solely forthe purpose of transmitting instructions and information (“Written Instructions”),obtaining reports, analyses and statements and other information and data,making inquiries and otherwise communicating with Custodian in connection withthe Corporation’s relationship with Custodian. The Corporation shall use the Electronic Services solely for its owninternal and proper business purposes and not in the operation of a servicebureau.  Except as set forth herein, nolicense or right of any kind is granted to with respect to the ElectronicServices.  The Corporation acknowledgesthat Custodian and its suppliers retain and have title and exclusiveproprietary rights to the Electronic Services, including any trade secrets orother ideas, concepts, know-how, methodologies, and information incorporatedtherein and the exclusive rights to any copyrights, trade dress, look and feel,trademarks and patents (including registrations and applications forregistration of either), and other legal protections available in respectthereof.  The Corporation furtheracknowledges that all or a part of the Electronic Services may be copyrightedor trademarked (or a registration or claim made therefor) by Custodian or itssuppliers.  The Corporation shall nottake any action with respect to the Electronic Services inconsistent with theforegoing acknowledgments, nor shall the Corporation attempt to decompile,reverse engineer or modify the Electronic Services.  The Corporation may not copy, distribute,sell, lease or provide, directly or indirectly, the Electronic Services or anyportion thereof to any other person or entity without Custodian’s prior writtenconsent.  The Corporation may not removeany statutory copyright notice or other notice included in the ElectronicServices.  The Corporation shallreproduce any such notice on any reproduction of any portion of the ElectronicServices and shall add any statutory copyright notice or other notice uponCustodian’s request.

(c) Portions ofthe Electronic Services may contain, deliver or rely on data supplied by thirdparties (“Third Party Data”), such as pricing data and indicative data, 

21

----

and services supplied bythird parties (“Third Party Services”) such as analytic and accountingservices.  Third Party Data and ThirdParty Services supplied hereunder are obtained from sources that Custodianbelieves to be reliable but are provided without any independent investigationby Custodian.  Custodian and itssuppliers do not represent or warrant that the Third Party Data or Third PartyServices are correct, complete or current. Third Party Data and Third Party Services are proprietary to theirsuppliers, are provided solely for the Corporation’s internal use, and may notbe reused, disseminated or redistributed in any form.  The Corporation shall not use any Third PartyData in any manner that would act as a substitute for obtaining a license forthe data directly from the supplier. Third Party Data and Third Party Services should not be used in makingany investment decision.  CUSTODIAN ANDITS SUPPLIERS ARE NOT RESPONSIBLE FOR ANY RESULTS OBTAINED FROM THE USE OF ORRELIANCE UPON THIRD PARTY DATA OR THIRD PARTY SERVICES.  Custodian’s suppliers of Third Party Data andServices are intended third party beneficiaries of this Section 1(c) andSection 5 below.

(d) TheCorporation understands and agrees that any links in the Electronic Services toInternet sites may be to sites sponsored and maintained by third parties.  Custodian make no guarantees, representationsor warranties concerning the information contained in any third party site(including without limitation that such information is correct, current,complete or free of viruses or other contamination), or any products orservices sold through third party sites. All such links to third party Internet sites are provided solely as aconvenience to the Corporation and the Corporation accesses and uses such sitesat its own risk.  A link in theElectronic Services to a third party site does not constitute Custodian’sendorsement, authorisation or sponsorship of such site or any products andservices available from such site.

2.    Equipment.  The Corporation shall obtain and maintain atits own cost and expense all equipment and services, including but not limitedto communications services, necessary for it to utilize and obtain access tothe Electronic Services, and Custodian shall not be responsible for thereliability or availability of any such equipment or services.

3.    Proprietary Information.  The Electronic Services, and any proprietarydata (including Third Party Data), processes, software, information anddocumentation made available to the Corporation (other than which are or becomepart of the public domain or are legally required to be made available to thepublic) (collectively, the “Information”), are the exclusive and confidentialproperty of Custodian or its suppliers. However, for the avoidance of doubt, reports generated by theCorporation containing information relating to its account(s) (except for ThirdParty Data contained therein) are not deemed to be within the meaning of theterm “Information.”  the Corporationshall keep the Information confidential by using the same care and discretionthat the Corporation uses with respect to its own confidential property andtrade secrets, but not less than 

22

----

reasonable care.  Upon termination of the Agreement or thelicenses granted herein for any reason, the Corporation shall return toCustodian any and all copies of the Information which are in its possession orunder its control (except that the Corporation may retain reports containingThird Party Data, provided that such Third Party Data remains subject to theprovisions of this Appendix).  Theprovisions of this Section 3 shall not affect the copyright status of any ofthe Information which may be copyrighted and shall apply to all informationwhether or not copyrighted.

4.    Modifications.  Custodian reserves the right to modify theElectronic Services from time to time. The Corporation agrees not to modify or attempt to modify the ElectronicServices without Custodian’s prior written consent.  The Corporation acknowledges that anymodifications to the Electronic Services, whether by the Corporation orCustodian and whether with or without Custodian’s consent, shall become theproperty of Custodian.

5.    NO REPRESENTATIONS OR WARRANTIES;LIMITATION OF LIABILITY.  CUSTODIANAND ITS MANUFACTURERS AND SUPPLIERS MAKE NO WARRANTIES OR REPRESENTATIONS WITHRESPECT TO THE ELECTRONIC SERVICES OR ANY THIRD PARTY DATA OR THIRD PARTYSERVICES, EXPRESS OR IMPLIED, IN FACT OR IN LAW, INCLUDING BUT NOT LIMITED TOWARRANTIES OF MERCHANTABILITY, NON-INFRINGEMENT AND FITNESS FOR A PARTICULARPURPOSE.  THE CORPORATION ACKNOWLEDGESTHAT THE ELECTRONIC SERVICES, THIRD PARTY DATA AND THIRD PARTY SERVICES AREPROVIDED “AS IS.”  TO THE FULLEST EXTENTPERMITTED BY APPLICABLE LAW, IN NO EVENT SHALL CUSTODIAN OR ANY SUPPLIER BELIABLE FOR ANY DAMAGES, WHETHER DIRECT, INDIRECT SPECIAL, OR CONSEQUENTIAL,WHICH CUSTOMER MAY INCUR IN CONNECTION WITH THE ELECTRONIC SERVICES, THIRDPARTY DATA OR THIRD PARTY SERVICES, EVEN IF CUSTODIAN OR SUCH SUPPLIER KNEW OFTHE POSSIBILITY OF SUCH DAMAGES.  IN NOEVENT SHALL CUSTODIAN OR ANY SUPPLIER BE LIABLE FOR ACTS OF GOD, MACHINE ORCOMPUTER BREAKDOWN OR MALFUNCTION, INTERRUPTION OR MALFUNCTION OF COMMUNICATIONFACILITIES, LABOR DIFFICULTIES OR ANY OTHER SIMILAR OR DISSIMILAR CAUSE BEYONDTHEIR REASONABLE CONTROL.

6.    Security; Reliance; Unauthorized Use;Corporations Transfers.  Custodianwill establish security procedures to be followed in connection with the use ofthe Electronic Services, and the Corporation agrees to comply with the securityprocedures.  The Corporation understandsand agrees that the security procedures are intended to determine whetherinstructions received by Custodian through the Electronic Services areauthorized but are not (unless otherwise specified in writing) intended todetect any errors contained in such instructions.  The Corporation will cause all personsutilizing the 

23

----

Electronic Services totreat any user and authorization codes, passwords, authentication keys andother security devices with the highest degree of care andconfidentiality.  Upon termination of theCorporation’s use of the Electronic Services, the Corporation shall return toCustodian any security devices (e.g., token cards) provided by Custodian.  Custodian is hereby irrevocably authorized tocomply with and rely upon on Written Instructions and other communications,whether or not authorized, received by it through the Electronic Services.  The Corporation acknowledges that it has soleresponsibility for ensuring that only Authorized Persons use the ElectronicServices and that to the fullest extent permitted by applicable law Custodianshall not be responsible nor liable for any unauthorized use thereof or for anylosses sustained by the Corporation arising from or in connection with the use ofthe Electronic Services or Custodian’s reliance upon and compliance withWritten Instructions and other communications received through the ElectronicServices.  With respect to instructionsfor a transfer of Corporations issued through the Electronic Services, wheninstructed to credit or pay a party by both name and a unique numeric oralpha-numeric identifier (e.g. ABA number or account number), the Custodian,its affiliates, and any other bank participating in the Corporations transfer,may rely solely on the unique identifier, even if it identifies a partydifferent than the party named.  Suchreliance on a unique identifier shall apply to beneficiaries named in suchinstructions as well as any financial institution which is designated in suchinstructions to act as an intermediary in a Corporations transfer.  It is understood and agreed that unlessotherwise specifically provided herein, and to the extent permitted byapplicable law, the parties hereto shall be bound by the rules of anyCorporations transfer system utilized to effect a Corporations transferhereunder.

7.             Acknowledgments.  Custodian shall acknowledge through theElectronic Services its receipt of each Written Instruction communicatedthrough the Electronic Services, and in the absence of such acknowledgmentCustodian shall not be liable for any failure to act in accordance with suchWritten Instruction and the Corporation may not claim that such WrittenInstruction was received by Custodian. Custodian may in its discretion decline to act upon any instructions orcommunications that are insufficient or incomplete or are not received byCustodian in sufficient time for Custodian to act upon, or in accordance withsuch instructions or communications.

8.             Viruses.  The Corporation agrees to use reasonableefforts to prevent the transmission through the Electronic Services of anysoftware or file which contains any viruses, worms, harmful component orcorrupted data and agrees not to use any device, software, or routine tointerfere or attempt to interfere with the proper working of the ElectronicServices.

9.             Encryption.  The Corporation acknowledges and agrees thatencryption may not be available for every communication through the ElectronicServices, or for all data.  TheCorporation agrees that Custodian may deactivate any encryption features at 

24

----

any time, without noticeor liability to the Corporation, for the purpose of maintaining, repairing ortroubleshooting its systems.

10.           On-Line Inquiry and Modificationof Records. In connection with the Corporation’s use of the ElectronicServices, Custodian may, at the Corporation’s request, permit the Corporationto enter data directly into a Custodian database for the purpose of modifyingcertain information maintained by Custodian’s systems, including, but notlimited to, change of address information. To the extent that the Corporation is granted such access, theCorporation agrees to indemnify and hold Custodian harmless from all loss,liability, cost, damage and expense (including attorney’s fees and expenses) towhich Custodian may be subjected or which may be incurred in connection withany claim which may arise out of or as a result of changes to Custodiandatabase records initiated by the Corporation.

11.           Agents.   the Corporation may, on advance writtennotice to the Custodian, permit its agents and contractors (“Agents”) to accessand use the Electronic Services on the Corporation’s behalf, except that theCustodian reserves the right to prohibit the Corporation’s use of anyparticular Agent for any reason.  TheCorporation shall require its Agent(s) to agree in writing to be bound by theterms of the Agreement, and the Corporation shall be liable and responsible forany act or omission of such Agent in the same manner, and to the same extent,as though such act or omission were that of the Corporation.  Each submission of a Written Instruction orother communication by the Agent through the Electronic Services shallconstitute a representation and warranty by the Corporation that the Agentcontinues to be duly authorized by the Corporation to so act on its behalf andthe Custodian may rely on the representations and warranties made herein incomplying with such Written Instruction or communication.  Any Written Instruction or other communicationthrough the Electronic Services by an Agent shall be deemed that of theCorporation, and the Corporation shall be bound thereby whether or notauthorized. The Corporation may, subject to the terms of this Agreement andupon advance written notice to the Bank, provide a copy of the ElectronicService user manuals to its Agent if the Agent requires such copies to use theElectronic Services on the Corporation’s behalf.  Upon cessation of any such Agent’s services,the Corporation shall promptly terminate such Agent’s access to the ElectronicServices, retrieve from the Agent any copies of the manuals and destroy them,and retrieve from the Agent any token cards or other security devices providedby Custodian and return them to Custodian.

 

25

----