exv10w10






Exhibit 10.10




Redemption Agreement




     This Redemption Agreement (the “Agreement”) is made and entered into as of
September 7, 2010, by and between Gladstone Capital Corporation, a Maryland corporation
(“Pledgee”), and David Gladstone (“Pledgor”) (each of Pledgee and Pledgor a “Party” and
collectively, the “Parties”).



Recitals




     Whereas, in connection with Pledgor’s exercise of certain stock options (the
“Options”) to acquire shares of Pledgee’s common stock, par value $0.01 per share (the “Common
Stock”), Pledgor executed that certain Secured Promissory Note (the “Note”) in favor of Pledgee in
the principal amount of Five Million Nine Hundred Thousand Ten Dollars ($5,900,010.00) in payment
of the exercise price of the Options, thereby acquiring Three Hundred Ninety Three Thousand Three
Hundred Thirty Four (393,334) shares of Common Stock (the “Initially Pledged Shares”);



     Whereas, concurrently with the execution of the Note, Pledgee and Pledgor entered
into that certain Stock Pledge Agreement dated as of August 23, 2001 (the “Pledge Agreement”);



     Whereas, pursuant to Section 1 of the Pledge Agreement, Pledgor granted to
Pledgee a first priority security interest in the Pledged Collateral (as defined in the Pledge
Agreement), which includes the Initially Pledged Shares and all additional shares received,
receivable or otherwise distributed in respect of the Initially Pledged Shares (the “Additional
Pledged Shares” and, collectively with the Initially Pledged Shares, the “Pledged Shares”);



     Whereas, an Event of Default occurred under Section 6(a) of the Note by virtue of
the failure of Pledgor to repay the amounts outstanding under the Note within five (5) business
days of August 23,2010;



     Whereas, Pledgor and Pledgee have agreed that, pursuant to the terms and conditions
of this Agreement, Pledgee will accept and retire the Pledged Shares in partial or full
satisfaction, as applicable, of Pledgor’s obligations to Pledgee under the Note (collectively, the
“Obligations”); and



     Whereas, notwithstanding the foregoing recital, by entering into this Agreement,
Pledgor and Pledgee do not intend to alter any of Pledgee’s rights and remedies under the Pledge
Agreement and at law and equity, including but not limited to its rights under Section 9 of the
Pledge Agreement.



Agreement




     In consideration of the foregoing and of the mutual promises and covenants set forth below,
the parties agree as follows:



     1. Pursuant to Section 8.9A-620 of the Virginia Uniform Commercial Code, Pledgee proposes to
accept the Pledged Shares in partial or full satisfaction, as applicable, of the



 









 







Obligations in accordance with the terms, conditions and procedures set forth on Schedule
A hereto (in each instance, an “Automatic Redemption”). Pledgor hereby consents to that
acceptance. In connection with any such Automatic Redemption, effective immediately upon such
Automatic Redemption, the outstanding principal amount and any accrued and unpaid interest on the
Note shall be automatically reduced to the extent of the product of (A) the number of Pledged
Shares redeemed multiplied by (B) the Redemption Price, as defined in Schedule A hereto (such
product, a “Redemption Amount”). In no event shall a Redemption Amount exceed the amount of the
outstanding principal amount of, and accrued and unpaid interest on, the Note at the time of such
Automatic Redemption. Upon the full satisfaction of the Obligations, this Agreement shall
immediately terminate and be of no further effect.



     2. Pledgor hereby agrees to execute such documents and to take such further actions as
Pledgee deems appropriate to transfer the Pledged Shares into the name of Secured Party and/or
such other person or entity as Pledgee deems appropriate and as Pledgee deems appropriate to
otherwise achieve the purposes of this Agreement.



     3. Representation and Warranties of Pledgor. Effective as of the date hereof, Pledgor hereby
represents and warrants to Pledgee as follows:



          (a) As of the date hereof, Pledgor is not aware of any material nonpublic information
concerning Pledgee or its securities. Pledgor is not entering in this Agreement during a “black
out period” pursuant to Pledgee’s Code of Ethics and Business Conduct. Pledgor is entering into
this Agreement in good faith and not as part of a plan or scheme to evade the prohibitions of Rule
10b-5 or Section 10(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or
to evade the compliance with any other federal or state securities laws.




          (b) Pledgor has full power and authority to execute and deliver this Agreement, to perform
his obligations hereunder, and to consummate the transactions contemplated hereby. This Agreement
has been duly authorized, executed and delivered by Pledgor. This Agreement constitutes the legal,
valid and binding obligation of Pledgor, enforceable in accordance with its terms, subject to
applicable laws affecting creditors’ rights and to equitable principles.




          (c) The execution and delivery of this Agreement by Pledgor, the consummation of the
transactions herein contemplated, and the compliance with the terms of this Agreement will not
conflict with, result in the breach of, or constitute a material default under, or require any
consent or approval under, any agreement or instrument to which Pledgor is a party or by which he
may be bound.




          (d) Pledgor is, at the time of delivery of the Pledged Shares to Pledgee hereunder, and at
all times which this Agreement is in effect shall be, the sole holder of record and the sole
beneficial owner of the Pledged Shares, free and clear of any lien thereon or affecting title
thereto, except for the lien created by the Pledge Agreement.




          (e) None of the Pledged Shares have been transferred in violation of securities registration,
securities disclosure or similar laws of any jurisdiction to which such transfer may be subject
with respect to which such transfer could have a material adverse effect.







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          (f) While this Agreement is in effect, Pledgor agrees not to enter into or alter any
corresponding or hedging transaction or position with respect to the Pledged Shares and agrees not
to alter or deviate from the terms of this Agreement.




          (g) Pledgor represents and warrants that entering in this Agreement and the content hereof do
not violate and/or are not inconsistent with Pledgee’s trading policies and restrictions for
insiders, that the execution of this Agreement and the transactions completed under this Agreement
will not contravene any legal provision or any lock up agreement or other agreement or instrument
or any judgment, order or decree from any court, governmental body or agency.




          (h) Pledgor agrees that Pledgor shall at all times during the performance of this Agreement,
comply with all applicable laws, including, without limitation, Section 16 of the Exchange Act and
the rules and regulations promulgated thereunder. Pledgor agrees to make all filings, if any,
required under Sections 13(d), 13(g) and 16 of the Exchange Act in a timely manner, to the extent
any such filings are applicable to Pledgor.




          (i) Neither Pledgee, nor any of its officers, directors, stockholders, agents,
representatives or affiliates, has made warranties or representations to Pledgor with respect to
the income tax consequences of the transactions contemplated by this Agreement.




     4. Representations and Warranties of Pledgee. Pledgee hereby represents and warrants to
Pledgor as follows:



          (a) Pledgee has full power and authority to execute and deliver this Agreement, to perform
its obligations hereunder, and to consummate the transactions contemplated hereby. This Agreement
has been duly authorized, executed and delivered by Pledgee. Without limiting the generality of
the foregoing, this Agreement and any redemption of the Pledged Shares pursuant hereto have been
approved by Pledgee’s Board of Directors for purposes of exempting such redemptions from the
application of Section 16(b) of the Exchange Act. This Agreement constitutes the legal, valid and
binding obligation of Pledgee, enforceable in accordance with its terms, subject to applicable
laws affecting creditors’ rights and to equitable principles.




          (b) The execution and delivery of this Agreement by Pledgee, the consummation of the
transactions herein contemplated, and the compliance with the terms of this Agreement will not
conflict with, result in the breach of, or constitute a material default under, or require any
consent or approval under, any agreement or instrument to which Pledgee is a party or by which it
may be bound.




     5. No Inducements. Neither Pledgee nor any other party has made any oral or written
representation, inducement, promise or agreement to Pledgor in connection with the redemption of
the Pledged Shares, other than as expressly set forth in this Agreement.



     6. Severability. If any provision of this Pledge Agreement is held to be unenforceable for
any reason, it shall be adjusted, if possible, rather than voided in order to achieve the intent
of the parties to the extent possible. In any event, all other provisions of this Pledge Agreement
shall be deemed valid and enforceable to the full extent possible.



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     7. Assignment; Binding Effect. Subject to the limitations set forth in this Agreement, this
Agreement shall be binding upon and inure to the benefit of the executors, administrators, heirs,
legal representatives, and successors of the parties hereto.



     8. Governing Law. This Agreement shall be governed by and construed in accordance with the
laws of the Commonwealth of Virginia.



     9. Reservation of Rights. Pledgee hereby expressly reserves all of its rights and remedies
under the Pledge Agreement and at law and equity, including but not limited to its rights under
Section 9 of the Pledge Agreement. Without limiting the generality of the foregoing, pursuant to
and in accordance with the terms of Section 9 of the Pledge Agreement, Pledgee may at any time, at
its election, apply, set off, collect or sell in one or more sales, or take such steps as may be
necessary to liquidate and reduce to cash in the hands of Pledgee in whole or in part, with or
without any previous demands or demand of performance or notice or advertisement, the Pledged
Shares.



     10. No Modification of Note or Pledge Agreement. The Note and the Pledge Agreement shall
continue in full force and effect and be unaltered hereby.



     11. Counterparts. This Agreement may be executed in two or more counterparts, each of which
shall be deemed an original, but all of which together shall constitute one instrument.



     12. Independent Counsel. The parties acknowledge that this Agreement has been prepared on
behalf of Pledgee by Cooley LLP, counsel to Pledgee and that Cooley LLP does
not represent, and is not acting on behalf of, Pledgor. Pledgor has been afforded the opportunity
to consult with his own counsel with respect to this Agreement.



     13. Termination. Pledgor may terminate this Agreement at any time by providing written notice
of such termination to Pledgee’s board of directors.



     14. Amendment. This Agreement may be amended with the prior written approval of both Parties.
This Agreement may only be amended (i) during an open “trading window” under Pledgee’s Code of
Ethics and Business Conduct, and (ii) at a time that Pledgor is not aware of any material
nonpublic information concerning Pledgee or its securities. Notwithstanding anything herein to the
contrary, any amendment to the Planned Redemptions chart on Schedule A hereto shall be agreed upon
in writing by Pledgor and each member of Pledgee’s special committee of its independent directors,
created on July 7, 2010. For the avoidance of doubt, agreement in writing, as it pertains to the
amendment of the Planned Redemptions chart on Schedule A hereto, shall include agreement to such
amendment through or via electronic mail or fax. Any update to the Completed Redemptions chart on
Schedule A hereto completed by Pledgee’s chief compliance officer or internal counsel shall not
constitute an amendment of Schedule A or this Agreement.



[Signature Page Follows]






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     In Witness Whereof, the Parties have executed this Redemption Agreement as of the
date first above written.



	 	 	 	 	 
	 	PLEDGEE:



Gladstone Capital Corporation

 	 
	 	By  	/s/ George Stelljes, III
 	 
	 	 	Name  	George Stelljes, III 	 
	 	 	Title  	President 	 
	 
	 	PLEDGOR:
 	 
	 	/s/ David Gladstone 	 
	 	David Gladstone 	 
	 	 	 
	 



[Signature Page to Redemption Agreement]




 









 








Schedule A





     The Pledged Shares will be redeemed pursuant to Section 1 of this Agreement automatically at
the intraday high trading price of the Common Stock (the “Redemption Price”) after an intraday
trading price of the Common Stock reaches or exceeds the Trigger Price (as delineated in the
Planned Redemptions chart below) within the relevant Time Frame (as delineated in the Planned
Redemptions chart below); provided, however, that no more Pledged Shares shall be redeemed
pursuant to this Agreement than are necessary to fully satisfy the Obligations. Once the
Obligations are fully satisfied, any remaining Planned Redemptions, or portions thereof, as
delineated in the chart below, shall be cancelled automatically.



     This Schedule A shall be amended or updated, as applicable, from time to time by Pledgee’s
chief compliance officer to reflect any additions to the Completed Redemptions chart or
amendments to Planned Redemptions chart approved in accordance with Section 14 of this Agreement.
In the absence of Pledgee’s chief compliance officer, Pledgee’s internal counsel shall be
permitted to amend or update this Schedule A, as applicable.



 






Planned Redemptions



	 	 	 	 	 
	Number of Pledged Shares	 	 	 	 
	to be Redeemed	 	Trigger Price	 	Time Frame
	393,334
	 	$15.00
	 	Good Until Cancelled






Completed Redemptions




	 	 	 	 	 	 	 	 	 
	Number of	 	 	 	Aggregate	 	 	 	Obligation
	Shares	 	Redemption	 	Redemption	 	Redemption	 	Balance After
	Redeemed	 	Price	 	Amount	 	Date	 	Redemption