Document:

Exhibit 10.1

 

INVESTMENT
ADVISORY AND MANAGEMENT AGREEMENT

BETWEEN

GLADSTONE INVESTMENT CORPORATION

AND

GLADSTONE MANAGEMENT CORPORATION

 

AGREEMENT
made this 22 day of June, 2005, by and between GLADSTONE INVESTMENT CORPORATION, a Delaware corporation (the “Corporation”), and GLADSTONE MANAGEMENT CORPORATION, a
Delaware corporation (the “Adviser”).

 

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

 

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

 

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

 

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

 

1.     DUTIES OF THE ADVISER.

 

(a) The
Corporation hereby employs the Adviser to act as the investment adviser to the
Corporation and to manage the investment and reinvestment of the assets of the
Corporation, subject to the supervision of the Board of Directors of the
Corporation, for the period and upon the terms herein set forth, (i) in
accordance with the investment objective, policies and restrictions that are
set forth in the Corporation’s Registration Statement on Form N-2, filed
March 29, 2005, as the same shall be amended from time to time (as
amended, the “Registration
Statement”), (ii) in accordance with the Investment Company
Act and (iii) during the term of this Agreement in accordance with all other
applicable federal and state laws, rules and regulations, and the Corporation’s
charter and by-laws. Without limiting the generality of the foregoing, the
Adviser shall, during the term and subject to the provisions of this Agreement,
(i) determine the composition of the portfolio of the Corporation, the
nature and timing of the changes therein and the manner of implementing such
changes; (ii) identify, evaluate and negotiate the structure of the
investments made by the Corporation; (iii) close and monitor the
Corporation’s investments; (iv) determine the securities and other assets that
the Corporation will purchase, retain, or sell; (v) perform due diligence on
prospective portfolio companies; and (vi) provide the Corporation with
such other investment advisory, research and related services as the
Corporation may, from time to time, reasonably require for the investment of
its funds. The Adviser shall have the discretion, power and authority on behalf
of the Corporation to effectuate its investment decisions for the Corporation,
including the execution and delivery of all documents relating to the
Corporation’s

 

 

investments and the placing of orders for other purchase or sale
transactions on behalf of the Corporation. In the event that the Corporation
determines to acquire debt financing, the Adviser will arrange for such
financing on the Corporation’s behalf, subject to the oversight and approval of
the Corporation’s Board of Directors. If it is necessary for the Adviser to
make investments on behalf of the Corporation through a special purpose
vehicle, the Adviser shall have authority to create or arrange for the creation
of such special purpose vehicle and to make such investments through such
special purpose vehicle in accordance with the Investment Company Act.

 

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

 

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

 

(d) The
Adviser shall for all purposes herein provided be deemed to be an independent
contractor and, except as expressly provided or authorized herein, shall have
no authority to act for or represent the Corporation in any way or otherwise be
deemed an agent of the Corporation.

 

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

 

(f) The
Adviser has adopted and implemented written policies and procedures reasonably
designed to prevent violation of the Federal Securities laws by the Adviser.
The Adviser has provided the Corporation, and shall provide the Corporation at
such times in the future as the Corporation shall reasonably request, with a
copy of such

 

 

policies and procedures and a report of such policies and procedures.
Such report shall be of sufficient scope and in sufficient detail, as may
reasonably be required to comply with Rule 38a-1 under the Investment
Company Act and to provide reasonable assurance that any material inadequacies
would be disclosed by such examination, and, if there are no such inadequacies,
the report shall so state.

 

2.     CORPORATION’S
RESPONSIBILITIES AND EXPENSES PAYABLE BY THE CORPORATION.

 

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

 

3.     COMPENSATION
OF THE ADVISER.

 

The Corporation agrees to pay, and the
Adviser agrees to accept, as compensation for the services provided by the
Adviser hereunder, a base management fee (“Base

 

 

Management Fee”)
and an incentive fee (“Incentive
Fee”) as hereinafter set forth. The Corporation shall make any
payments due hereunder to the Adviser or to the Adviser’s designee as the
Adviser may otherwise direct.

 

(a)   Base Management Fee.

 

(i) For
services rendered during the period from the date of the closing of the
Corporation’s initial public offering of its common stock (the “IPO”) through
March 31, 2006, the Base Management Fee shall be payable monthly in
arrears, and shall be calculated at an annual rate of 2.00% of the value of the
Corporation’s total assets, less the cash proceeds and cash equivalent
investments from the IPO that are not invested in debt or equity securities of
portfolio companies in accordance with the Corporation’s investment objectives
described in the Registration Statement (the “Gross Invested Assets”), valued as of
the end of each month during the period.

 

(ii) For
services rendered during the period from the date that is six months after the
date of the closing of the IPO through March 31, 2006, the Base Management
Fee shall be payable quarterly in arrears, and shall be calculated at an annual
rate of 2.00% of the average value of the Corporation’s Gross Invested Assets,
valued as of the end of the two most recently completed calendar quarters.

 

(iii) For
services rendered after March 31, 2006, the Base Management Fee shall be
payable quarterly in arrears, and shall be calculated at an annual rate of
2.00% of the average value of the Corporation’s total assets, including
investments made with proceeds of borrowings, less any uninvested cash or cash
equivalents resulting from borrowings (the “Gross Assets”), valued as of the end of
the two most recently completed calendar quarters, and appropriately adjusted
for any share issuances or repurchases during the current calendar quarter.

 

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

 

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

 

(i) One part
will be calculated and payable quarterly in arrears based on the pre-Incentive
Fee net investment income for the immediately preceding calendar quarter. For
this purpose, pre-Incentive Fee net investment income means interest income,
dividend income and any other income (including any other fees, such as
commitment, origination, structuring, diligence, consulting fees that the
Corporation receives from portfolio companies, but excluding fees for providing
managerial assistance) accrued by the Corporation during the calendar quarter,
minus the Corporation’s operating expenses for the quarter (including the Base
Management Fee, expenses payable under the Administration Agreement, and any
interest expense and dividends paid on any issued and outstanding preferred
stock, but excluding the Incentive Fee). Pre-Incentive Fee net investment
income includes, in the case of investments with a deferred interest feature
(such as original issue discount, debt instruments with payment-in-kind
interest and zero

 

 

coupon
securities), accrued income that the Corporation has not yet received in cash.
Pre-Incentive Fee net investment income does not include any realized capital
gains, realized capital losses or unrealized capital appreciation or
depreciation. Pre-Incentive Fee net investment income, expressed as a rate of
return on the value of the Corporation’s net assets at the end of the
immediately preceding calendar quarter, will be compared to a “hurdle rate” of
1.75% per quarter (7% annualized). The Corporation will pay the Adviser an
Incentive Fee with respect to the Corporation’s pre-Incentive Fee net
investment income in each calendar quarter as follows: (1) no Incentive
Fee in any calendar quarter in which the Corporation’s pre-Incentive Fee net
investment income does not exceed the hurdle rate; (2) 100% of the
Corporation’s pre-Incentive Fee net investment income with respect to that
portion of such pre-Incentive Fee net investment income, if any, that exceeds
the hurdle rate but is less than 2.1875% in any calendar quarter (8.75%
annualized); and (3) 20% of the amount of the Corporation’s pre-Incentive
Fee net investment income, if any, that exceeds 2.1875% in any calendar quarter
(8.75% annualized). These calculations will be appropriately pro rated for any
period of less than three months and adjusted for any share issuances or
repurchases during the current quarter.

 

(ii) The second
part of the Incentive Fee (the “Capital Gains Fee”) will be determined and payable in
arrears as of the end of each fiscal year (or upon termination of this
Agreement as set forth below), commencing on March 31, 2006, and will
equal 20.0% of the Corporation’s realized capital gains for the calendar year,
if any, computed net of all realized capital losses and unrealized capital
depreciation at the end of such year; provided that the Capital Gains Fee
determined as of March 31, 2006 will be calculated for a period of shorter
than twelve calendar months to take into account any net realized capital
gains, if any, computed net of all realized capital losses and unrealized
capital depreciation for the period ending March 31, 2006. The amount of
capital gains used to determine the Capital Gains Fee shall be calculated at
the end of each applicable year by subtracting the sum of the Corporation’s
Cumulative Aggregate Realized Capital Losses and Aggregate Unrealized Capital
Depreciation from the Corporation’s Cumulative Aggregate Realized Capital Gains
(each as defined in Section below. If this number is positive at the end of
such year, then the Capital Gains Fee for such year will be equal to 20.0% of
such amount, less the aggregate amount of any Capital Gains Fees paid in all
prior years. In the event that this Agreement shall terminate as of a date that
is not a calendar year end, the termination date shall be treated as though it
were a calendar year end for purposes of calculating and paying a Capital Gains
Fee.

 

(iii) For
purposes of this Section 3:

 

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

 

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

 

 

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

 

4.     COVENANTS
OF THE ADVISER.

 

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

 

5.     EXCESS
BROKERAGE COMMISSIONS.

 

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

 

6.     LIMITATIONS
ON THE EMPLOYMENT OF THE ADVISER.

 

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

 

 

employees, partners, stockholders, members, managers or otherwise, and
that the Adviser and directors, officers, employees, partners, stockholders,
members and managers of the Adviser and its affiliates are or may become
similarly interested in the Corporation as stockholders or otherwise.

 

7.     RESPONSIBILITY OF DUAL DIRECTORS, OFFICERS AND/OR
EMPLOYEES.

 

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

 

8.     LIMITATION OF LIABILITY OF THE ADVISER:
INDEMNIFICATION.

 

The Adviser (and its officers, managers, partners, agents, employees,
controlling persons, members and any other person or entity affiliated with the
Adviser, including without limitation the Administrator) shall not be liable to
the Corporation for any action taken or omitted to be taken by the Adviser in
connection with the performance of any of its duties or obligations under this
Agreement or otherwise as an investment adviser of the Corporation, except to
the extent specified in Section 36(b) of the Investment Company Act concerning
loss resulting from a breach of fiduciary duty (as the same is finally
determined by judicial proceedings) with respect to the receipt of compensation
for services, and the Corporation shall indemnify, defend and protect the
Adviser (and its officers, managers, partners, agents, employees, controlling
persons, members and any other person or entity affiliated with the Adviser,
including without limitation its general partner and the Administrator, each of
whom shall be deemed a third party beneficiary hereof) (collectively, the “Indemnified Parties”)
and hold them harmless from and against all damages, liabilities, costs and
expenses (including reasonable attorneys’ fees and amounts reasonably paid in
settlement) incurred by the Indemnified Parties in or by reason of any pending,
threatened or completed action, suit, investigation or other proceeding
(including an action or suit by or in the right of the Corporation or its
security holders) arising out of or otherwise based upon the performance of any
of the Adviser’s duties or obligations under this Agreement or otherwise as an
investment adviser of the Corporation. Notwithstanding the preceding sentence
of this Paragraph 8 to the contrary, nothing contained herein shall
protect or be deemed to protect the Indemnified Parties against or entitle or
be deemed to entitle the Indemnified Parties to indemnification in respect of,
any liability to the Corporation or its security holders to which the
Indemnified Parties would otherwise be subject by reason of willful
misfeasance, bad faith or gross negligence in the performance of the Adviser’s
duties or by reason of the reckless disregard of the Adviser’s duties and
obligations under this Agreement (as the same shall be determined in accordance
with the Investment Company Act and any interpretations or guidance by the
Securities and Exchange Commission or its staff thereunder).

 

 

9.     EFFECTIVENESS,
DURATION AND TERMINATION OF AGREEMENT.

 

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

 

10.  NOTICES.

 

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

 

11.  AMENDMENTS.

 

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

 

12.  ENTIRE
AGREEMENT: GOVERNING LAW.

 

This Agreement contains the entire agreement
of the parties and supersedes all prior agreements, understandings and
arrangements with respect to the subject matter hereof. This Agreement shall be
construed in accordance with the laws of the State of Delaware and the
applicable provisions of the Investment Company Act. To the extent the
applicable laws of the State of Delaware, or any of the provisions herein,
conflict with the provisions of the Investment Company Act, the latter shall
control.

 

[The remainder of this page intentionally left blank]

 

 

IN WITNESS WHEREOF, the parties hereto have caused
this Agreement to be duly executed on the date above written. 

 

 

	
  GLADSTONE INVESTMENT CORPORATION

  
	
   

  
	
  By:

  	
  /s/ David Gladstone

  	
   

  
	
   

  	
  David Gladstone

  
	
   

  	
  Chief Executive Officer

  
	
   

  	
   

  
	
  GLADSTONE MANAGEMENT CORPORATION

  
	
   

  
	
  By:

  	
  /s/ David Gladstone

  	
   

  
	
   

  	
  David Gladstone

  
	
   

  	
  Chief Executive OfficerExhibit
10.2

 

ADMINISTRATION
AGREEMENT

 

THIS ADMINISTRATION AGREEMENT (this “Agreement”) is made as of June 22, 2005 by
and between Gladstone Investment Corporation, a Delaware corporation
(hereinafter referred to as the “Corporation”), and Gladstone Administration, LLC, a
Delaware limited liability company (hereinafter referred to as the “Administrator”).

 

PREAMBLE

 

The Corporation is a newly organized closed-end
management investment company that has elected to be treated as a business
development company under the Investment Company Act of 1940 (hereinafter
referred to as the “Investment
Company Act”). The Corporation desires to retain the
Administrator to provide administrative services to the Corporation in the
manner and on the terms hereinafter set forth. The Corporation’s investment
adviser is the Administrator’s sole member. The Administrator is willing to
provide administrative services to the Corporation on the terms and conditions
hereafter set forth.

 

AGREEMENT

 

NOW, THEREFORE, in consideration of the premises and the
covenants hereinafter contained and for other good and valuable consideration,
the receipt and adequacy of which is hereby acknowledged, the Corporation and
the Administrator hereby agree as set forth below:

 

1.              DUTIES OF THE ADMINISTRATOR.

 

(a) Employment of
Administrator. The
Corporation hereby employs the Administrator to act as administrator of the
Corporation, and to furnish, or arrange for others to furnish, the
administrative services, personnel and facilities described below, subject to
review by and the overall control of the Board of Directors of the Corporation,
for the period and on the terms and conditions set forth in this Agreement. The
Administrator hereby accepts such employment and agrees during such period to
render, or arrange for the rendering of, such services and to assume the
obligations herein set forth subject to the reimbursement of costs and expenses
provided for below. The Administrator and such others shall for all purposes
herein be deemed to be independent contractors and shall, unless otherwise
expressly provided or authorized herein, have no authority to act for or
represent the Corporation in any way or otherwise be deemed agents of the
Corporation.

 

(b) Services.
The Administrator shall perform (or oversee, or arrange for, the performance
of) the administrative services necessary for the operation of the Corporation.
Without limiting the generality of the foregoing, the Administrator shall
provide the Corporation with office facilities, equipment, clerical,
bookkeeping and record keeping services at such facilities and such other
services as the Administrator, subject to review by the Board of Directors of
the Corporation, shall from time to time determine to be necessary or useful to
perform its obligations under this Agreement. The Administrator shall also, on
behalf of the Corporation, conduct relations with custodians, depositories,
transfer agents, dividend disbursing agents, other stockholder servicing
agents, accountants, attorneys, underwriters, brokers and dealers, corporate
fiduciaries, insurers, banks and such other persons in any such other capacity deemed to be necessary or desirable. The
Administrator shall make reports to the Corporation’s Board of Directors of its
performance of obligations hereunder and furnish advice and recommendations
with respect to such other aspects of the business and affairs of the
Corporation as it shall determine to be desirable; provided that nothing herein
shall be construed to require the Administrator to, and the Administrator shall
not, provide any advice or recommendation relating to the securities and other
assets that the Corporation should purchase, retain or sell or any other
investment advisory services to the Corporation. The Administrator shall be responsible

 

 

for
the financial and other records that the Corporation is required to maintain
and shall prepare reports to stockholders, and reports and other materials
filed with the Securities and Exchange Commission (the “SEC”). The
Administrator will provide on the Corporation’s behalf significant managerial
assistance to those portfolio companies to which the Corporation is required to
provide such assistance under the Investment Company Act or other applicable
law. In addition, the Administrator will assist the Corporation in determining
and publishing the Corporation’s net asset value, overseeing the preparation
and filing of the Corporation’s tax returns, and the printing and dissemination
of reports to stockholders of the Corporation, and generally overseeing the
payment of the Corporation’s expenses and the performance of administrative and
professional services rendered to the Corporation by others.

 

(c) The Administrator is hereby authorized to
enter into one or more sub-administration agreements with other service
providers (each a “Sub-Administrator”)
pursuant to which the Administrator may obtain the services of the service
providers in fulfilling its responsibilities hereunder. Any such
sub-administration agreements shall be in accordance with the requirements of
the Investment Company Act and other applicable federal and state law and shall
contain a provision requiring the Sub-Administrator to comply with
Sections 2 and 3 below as if it were the Administrator.

 

2.              RECORDS.

 

The Administrator agrees to maintain and keep all
books, accounts and other records of the Corporation that relate to activities
performed by the administrator hereunder and, if required by the Investment
Company Act, will maintain and keep such books, accounts and records in
accordance with that Act. In compliance with the requirements of
Rule 31a-3 under the Investment Company Act, the Administrator agrees that
all records which it maintains for the Corporation shall at all times remain
the property of the Corporation, shall be readily accessible during normal
business hours, and shall be promptly surrendered upon the termination of the
Agreement or otherwise on written request. The Administrator further agrees
that all records which it maintains for the Corporation pursuant to
Rule 31a-1 under the Investment Company Act will be preserved for the
periods prescribed by Rule 31a-2 under the Investment Company Act unless
any such records are earlier surrendered as provided above. Records shall be
surrendered in usable machine-readable form. The Administrator shall have the
right to retain copies of such records subject to observance of its
confidentiality obligations under this Agreement.

 

3.              POLICIES AND PROCEDURES.

 

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

 

4.              CONFIDENTIALITY.

 

The parties hereto agree that each shall treat
confidentially the terms and conditions of this Agreement and all information
provided by each party to the other regarding its business and operations. All
confidential information provided by a party hereto, including nonpublic
personal information pursuant to Regulation S-P of the Securities &
Exchange Commission (“SEC”),
shall be used by any other party hereto solely for the purpose of rendering
services pursuant to this Agreement and, except as may be required in carrying
out this Agreement, shall not be disclosed to any third party, without the
prior consent of such providing party. The foregoing shall not be applicable to
any information that is publicly available when provided or thereafter becomes
publicly available other than through a breach of this Agreement, or that is

 

 

required
to be disclosed by any regulatory authority, any authority or legal counsel of
the parties hereto, by judicial or administrative process or otherwise by
applicable law or regulation.

 

5.              COMPENSATION: ALLOCATION OF COSTS AND EXPENSES.

 

In full consideration of the provision of the
services of the Administrator, the Corporation shall reimburse the
Administrator for the costs and expenses incurred by the Administrator in
performing its obligations and providing personnel and facilities hereunder.

 

The Corporation will bear all costs and
expenses that are incurred in its operation and transactions that are not
specifically assumed by the Corporation’s investment adviser (the “Adviser”), pursuant
to that certain Investment Advisory Agreement, dated as of June 22,  2005 by and between the Corporation and the
Adviser. Costs and expenses to be borne by the Corporation include, but are not
limited to, those relating to: organization and offering; calculating the
Corporation’s net asset value (including the cost and expenses of any independent
valuation firm); expenses incurred by the Adviser payable to third parties,
including agents, consultants or other advisors (such as independent valuation
firms, accountants and legal counsel), in monitoring financial and legal
affairs for the Corporation and in monitoring the Corporation’s investments and
performing due diligence on its prospective portfolio companies; interest
payable on debt, if any, incurred to finance the Corporation’s investments;
offerings of the Corporation’s common stock and other securities; investment
advisory and management fees; administration fees, if any, payable under this
Agreement; fees payable to third parties, including agents, consultants or
other advisors, relating to, or associated with, evaluating and making investments;
transfer agent and custodial fees; federal and state registration fees; all
costs of registration and listing the Corporation’s shares on any securities
exchange; federal, state and local taxes; independent directors’ fees and
expenses; costs of preparing and filing reports or other documents required by
the SEC; costs of any reports, proxy statements or other notices to stockholders,
including printing costs; the Corporation’s allocable portion of the fidelity
bond, directors and officers/errors and omissions liability insurance, and any
other insurance premiums; direct costs and expenses of administration,
including printing, mailing, long distance telephone, copying, secretarial and
other staff, independent auditors and outside legal costs; and all other
expenses incurred by the Corporation or the Administrator in connection with
administering the Corporation’s business, including payments under this
Agreement based upon the Corporation’s allocable portion of the Administrator’s
overhead in performing its obligations under this Agreement, including rent,
and the allocable portion of the salaries and benefits expenses of the
Corporation’s chief compliance officer, chief financial officer and controller
and their respective staffs.

 

6.              LIMITATION OF LIABILITY OF THE ADMINISTRATOR:
INDEMNIFICATION.

 

The Administrator (and its officers, managers,
partners, agents, employees, controlling persons, members, and any other person
or entity affiliated with the Administrator, including without limitation its
sole member, the Adviser) shall not be liable to the Corporation for any action
taken or omitted to be taken by the Administrator in connection with the
performance of any of its duties or obligations under this Agreement or
otherwise as administrator for the Corporation, and the Corporation shall
indemnify, defend and protect the Administrator (and its officers, managers,
partners, agents, employees, controlling persons, members, and any other person
or entity affiliated with the Administrator, including without limitation the
Adviser, each of whom shall be deemed a third party beneficiary hereof)
(collectively, the “Indemnified
Parties”) and hold them harmless from and against all damages,
liabilities, costs and expenses (including reasonable attorneys’ fees and
amounts reasonably paid in settlement) incurred by the Indemnified Parties in
or by reason of any pending, threatened or completed action, suit,
investigation or other proceeding

 

 

(including
an action or suit by or in the right of the Corporation or its security
holders) arising out of or otherwise based upon the performance of any of the
Administrator’s duties or obligations under this Agreement or otherwise as
administrator for the Corporation. Notwithstanding the preceding sentence of
this Paragraph 6 to the contrary, nothing contained herein shall protect
or be deemed to protect the Indemnified Parties against or entitle or be deemed
to entitle the Indemnified Parties to indemnification in respect of, any
liability to the Corporation or its security holders to which the Indemnified
Parties would otherwise be subject by reason of willful misfeasance, bad faith
or negligence in the performance of the Administrator’s duties or by reason of
the reckless disregard of the Administrator’s duties and obligations under this
Agreement (to the extent applicable, as the same shall be determined in
accordance with the Investment Company Act and any interpretations or guidance
by the SEC or its staff thereunder).

 

7.              ACTIVITIES OF THE ADMINISTRATOR.

 

The services of the Administrator to the
Corporation are not to be deemed to be exclusive, and the Administrator and
each affiliate is free to render services to others. It is understood that
directors, officers, employees and stockholders of the Corporation are or may
become interested in the Administrator and its affiliates, as directors,
officers, members, managers, employees, partners, stockholders or otherwise,
and that the Administrator and directors, officers, members, managers,
employees, partners and stockholders of the Administrator and its
affiliates are or may become similarly interested in the Corporation as
stockholders or otherwise.

 

8.              DURATION AND TERMINATION OF THIS AGREEMENT.

 

This Agreement shall become effective as of the date
hereof, and shall remain in force with respect to the Corporation for two years
thereafter, and thereafter continue from year to year, but only so long as such
continuance is specifically approved at least annually by (i) the Board of
Directors of the Corporation and (ii) a majority of those Directors who
are not parties to this Agreement or “interested persons” (as defined in the
Investment Company Act) of any such party. This Agreement may be terminated at
any time, without the payment of any penalty, by vote of the Directors of the
Corporation, or by the Administrator, upon 60 days’ written notice to the
other party. This Agreement may not be assigned by a party without the consent
of the other party.

 

9.              AMENDMENTS OF THIS AGREEMENT.

 

This Agreement may be amended pursuant to a written
instrument by mutual consent of the parties.

 

10.       GOVERNING LAW.

 

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

 

11.       ENTIRE AGREEMENT.

 

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

 

 

12.       NOTICES.

 

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

 

[REMAINDER OF PAGE
INTENTIONALLY LEFT BLANK]

 

IN WITNESS WHEREOF, the parties hereto have executed and
delivered this Agreement as of the date first above written. 

 

 

	
  GLADSTONE INVESTMENT CORPORATION

  
	
   

  
	
  By:

  	
  /s/
  David Gladstone

  	
   

  
	
   

  	
  David
  Gladstone

  
	
   

  	
  Chief
  Executive Officer

  
	
   

  	
   

  
	
  GLADSTONE ADMINISTRATION, LLC

  
	
   

  
	
  By:

  	
  /s/
  David Gladstone

  	
   

  
	
   

  	
  David
  Gladstone, Manager

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