SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted
by Rule 14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material under Rule 14a-12
GLADSTONE CAPITAL CORPORATION
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4)
and 0-11
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computed pursuant to Exchange Act Rule 0-11 (set forth the
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/ / Fee paid previously with preliminary materials.
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/ / Exchange Act Rule 0-11(a)(2) and identify the filing for which
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filing by registration statement number, or the Form or Schedule
and the date of its filing.
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GLADSTONE CAPITAL CORPORATION
1616 Anderson Road, Suite 208, McLean, Virginia 22102
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MARCH 26, 2002
TO THE STOCKHOLDERS OF GLADSTONE CAPITAL CORPORATION:
Notice Is Hereby Given that the Annual Meeting of Stockholders of Gladstone
Capital Corporation, a Maryland corporation (the "Company"), will be held on
Tuesday, March 26, 2002 at 10:00 a.m. local time in the third floor conference
room of the Company's principal executive office at 1616 Anderson Road, McLean,
VA 22101 for the following purposes:
(1) To elect one director to hold office until the 2005 Annual Meeting of
Stockholders.
(2) To ratify the selection of Ernst & Young LLP as independent auditors of
the Company for its fiscal year ending September 30, 2002.
(3) To transact such other business as may properly come before the meeting
or any adjournment or postponement thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
The Board of Directors has fixed the close of business on February 19, 2002
as the record date for the determination of stockholders entitled to notice of
and to vote at this Annual Meeting and at any adjournment or postponement
thereof.
By Order of the Board of Directors
/s/ Terry Brubaker
Terry Brubaker
Secretary
McLean, Virginia
February 26, 2002
ALL STOCKHOLDERS ARE CORDIALLY INVITED TO ATTEND THE MEETING IN PERSON.
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE, SIGN AND
RETURN THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE IN ORDER TO ENSURE YOUR
REPRESENTATION AT THE MEETING. A RETURN ENVELOPE (WHICH IS POSTAGE PREPAID IF
MAILED IN THE UNITED STATES) IS ENCLOSED FOR THAT PURPOSE. EVEN IF YOU HAVE
GIVEN YOUR PROXY, YOU MAY STILL VOTE IN PERSON IF YOU ATTEND THE MEETING. PLEASE
NOTE, HOWEVER, THAT IF YOUR SHARES ARE HELD OF RECORD BY A BROKER, BANK OR OTHER
NOMINEE AND YOU WISH TO VOTE AT THE MEETING, YOU MUST OBTAIN FROM THE RECORD
HOLDER A PROXY ISSUED IN YOUR NAME.
GLADSTONE CAPITAL CORPORATION
1616 Anderson Road, Suite 208, McLean, Virginia 22102
PROXY STATEMENT
FOR ANNUAL MEETING OF STOCKHOLDERS
MARCH 26, 2002
INFORMATION CONCERNING SOLICITATION AND VOTING
GENERAL
The enclosed proxy is solicited on behalf of the Board of Directors of
Gladstone Capital Corporation, a Maryland corporation ("Gladstone" or the
"Company"), for use at the Annual Meeting of Stockholders to be held on
March 26, 2002, at 10:00 a.m. local time (the "Annual Meeting"), or at any
adjournment or postponement thereof, for the purposes set forth herein and in
the accompanying Notice of Annual Meeting. The Annual Meeting will be held in
the third floor conference room of the Company's principal executive office at
1616 Anderson Road, McLean, VA 22101. The Company intends to mail this proxy
statement and accompanying proxy card on or about February 26, 2002 to all
stockholders entitled to vote at the Annual Meeting.
SOLICITATION
The Company will bear the entire cost of solicitation of proxies, including
preparation, assembly, printing and mailing of this proxy statement, the proxy
card and any additional information furnished to stockholders. Copies of
solicitation materials will be furnished to banks, brokerage houses, fiduciaries
and custodians holding in their names shares of Common Stock beneficially owned
by others to forward to such beneficial owners. The Company may reimburse
persons representing beneficial owners of Common Stock for their costs of
forwarding solicitation materials to such beneficial owners. Original
solicitation of proxies by mail may be supplemented by telephone, telegram or
personal solicitation by directors, officers or other regular employees of the
Company or, at the Company's request, Georgeson Shareholder Communications
Company ("Georgeson"). No additional compensation will be paid to directors,
officers or other regular employees for such services, but Georgeson will be
paid its customary fee, estimated to be about $5,000, if it renders solicitation
services.
VOTING RIGHTS AND OUTSTANDING SHARES
Only holders of record of Common Stock at the close of business on
February 19, 2002 will be entitled to notice of and to vote at the Annual
Meeting. At the close of business on January 23, 2002 the Company had
outstanding and entitled to vote 10,060,178 shares of Common Stock.
Each holder of record of Common Stock on such date will be entitled to one
vote for each share held on all matters to be voted upon at the Annual Meeting.
All votes will be tabulated by the inspector of election appointed for the
meeting, who will separately tabulate affirmative and negative votes,
abstentions and broker non-votes. Abstentions and broker non-votes are counted
towards a quorum but are not counted for any purpose in determining whether a
matter is approved.
REVOCABILITY OF PROXIES
Any person giving a proxy pursuant to this solicitation has the power to
revoke it at any time before it is voted, unless the proxy states that it is
irrevocable and is coupled with an interest. It may be revoked by filing with
the Secretary of the Company at the Company's principal executive office, 1616
Anderson Road, Suite 208, McLean, Virginia 22102, a written notice of revocation
or a duly executed proxy bearing a later date, or it may be revoked by attending
the meeting and voting in person.
Attendance at the meeting will not, by itself, revoke a proxy. However, no proxy
is valid after eleven months from its date, unless otherwise provided in the
proxy.
STOCKHOLDER PROPOSALS
The deadline for submitting a stockholder proposal for inclusion in the
Company's proxy statement and form of proxy for the Company's 2003 annual
meeting of stockholders pursuant to Rule 14a-8 of the Securities and Exchange
Commission is October 29, 2002. Stockholders wishing to submit proposals or
director nominations that are not to be included in such proxy statement and
proxy must deliver notice to the Secretary at the principal executive offices of
the Corporation not later than the close of business on the sixtieth day nor
earlier than the close of business on the ninetieth day prior to the first
anniversary of the preceding year's annual meeting. Stockholders are also
advised to review the Company's Bylaws, which contain additional requirements
with respect to advance notice of stockholder proposals and director
nominations.
PROPOSAL 1
ELECTION OF DIRECTORS
The Company's Amended and Restated Articles of Incorporation and Bylaws
provide that the Board of Directors shall be divided into three classes, each
class consisting, as nearly as possible, of one-third of the total number of
directors, with each class having a three-year term. In general, vacancies on
the Board may be filled only by persons elected by a majority of the remaining
directors. However, if the stockholders of any class or series are entitled
separately to elect one or more directors, a majority of the remaining directors
elected by that class or series or the sole remaining director elected by that
class or series may fill any vacancy in the directors elected by that class or
series. A director elected by the Board of Directors to fill a vacancy shall be
elected to hold office until the next annual meeting of stockholders or until
his successor is elected and qualified.
The Board of Directors is presently composed of five members. There is one
director in the class whose term of office expires in 2002. The nominee for
election to this class is currently a director of the Company who was previously
elected by the Company's sole stockholder prior to the Company's initial public
offering. If elected at the Annual Meeting, the nominee would serve until the
2005 annual meeting and until his or her successor is elected and has qualified,
or until his earlier death, resignation or removal. The nominee is not being
proposed for election pursuant to any agreement or understanding between him and
the Company.
Directors are elected by a plurality of the votes present in person or
represented by proxy and entitled to vote at the meeting. Shares represented by
executed proxies will be voted, if authority to do so is not withheld, for the
election of the one nominee named below. In the event that the nominee should be
unavailable for election as a result of an unexpected occurrence, such shares
will be voted for the election of such substitute nominee as management may
propose. The nominee has agreed to serve if elected, and management has no
reason to believe that he will be unable to serve.
Set forth below is biographical information for each person nominated, each
person whose term of office as a director will continue after the Annual
Meeting, and each executive officer who is not a director.
NOMINEE FOR ELECTION FOR A THREE-YEAR TERM EXPIRING AT THE 2005 ANNUAL MEETING
NAME AND YEAR BACKGROUND
FIRST ELECTED DIRECTOR AGE INFORMATION
---------------------- -------- --------------------------------------------------------
ANTHONY W. PARKER (2001)............. 56 Mr. Parker has been a director of the Company since
August 23, 2001. In 1997, Mr. Parker founded Medical
Funding Corporation, a company which purchases medical
receivables. Mr. Parker currently serves as chairman of
Medical Funding Corporation.
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE IN FAVOR OF THE NAMED NOMINEE.
DIRECTORS CONTINUING IN OFFICE UNTIL THE 2003 ANNUAL MEETING
NAME AND YEAR BACKGROUND
FIRST ELECTED DIRECTOR AGE INFORMATION
---------------------- -------- --------------------------------------------------------
TERRY LEE BRUBAKER (2001)*........... 58 Mr. Brubaker has been our president and chief operating
officer and a director since May 2001. In March 1999,
Mr. Brubaker founded, and now serves as chairman of,
Heads Up Systems, a company providing process industries
with leading edge technology. From 1996 to 1999,
Mr. Brubaker served as vice president of the paper
group for the American Forest & Paper Association.
DAVID A.R. DULLUM (2001)............. 53 Mr. Dullum has been a director since August 23, 2001.
From 1995 to the present, Mr. Dullum has been a partner
of New England Partners, a venture capital firm focused
on investments in small and medium sized businesses in
the Mid-Atlantic and New England regions.
DIRECTORS CONTINUING IN OFFICE UNTIL THE 2003 ANNUAL MEETING
NAME AND YEAR BACKGROUND
FIRST ELECTED DIRECTOR AGE INFORMATION
---------------------- -------- --------------------------------------------------------
DAVID GLADSTONE (2001)*.............. 59 Mr. Gladstone is a founder of Gladstone Capital
Corporation and has been our chief executive officer and
chairman of our board of directors since our inception
in May, 2001. Prior to founding Gladstone Capital
Corporation, Mr. Gladstone served as chairman or vice
chairman of the board of directors of American Capital
Strategies, a publicly traded leveraged buyout fund and
mezzanine debt finance company, from June 1997 to August
2001. From 1974 to February 1997, Mr. Gladstone held
various positions, including chairman and chief
executive officer, with Allied Capital Corporation,
Allied Capital Corporation II, Allied Capital Lending
Corporation, Allied Capital Commercial Corporation and
Allied Capital Advisors, Inc. The Allied companies were
the largest group of publicly traded mezzanine debt
funds and were managers of two private venture capital
limited partnerships. From 1992 to 1997, Mr. Gladstone
served as a director, president and chief executive
officer of Business Mortgage Investors, a private
mortgage REIT managed by Allied Capital Advisors, Inc.
Mr. Gladstone served as a director of The Riggs National
Corporation (the parent of Riggs Bank) from 1993 to May
1997. He has served as a trustee of The George
Washington University and currently is a trustee
emeritus. Mr. Gladstone was the founder and managing
member of The Capital Investors, a group of angel
investors, and is currently a member emeritus. He is
also the chairman and owner of B & G Berry Corporation,
a large strawberry farming operation in California.
Mr. Gladstone is also a director of Capital Automotive
REIT, a publicly-traded real estate investment trust.
NAME AND YEAR BACKGROUND
FIRST ELECTED DIRECTOR AGE INFORMATION
---------------------- -------- --------------------------------------------------------
GEORGE STELLJES, III (2001).......... 40 Mr. Stelljes has been a director since August 23, 2001.
From 1999 to 2001, Mr. Stelljes was a co-founder and
managing member of Camden Partners, a private equity
firm which finances high growth companies in the
communications, healthcare and business services
sectors. From 1997 to 1999, Mr. Stelljes was a partner
of Columbia Capital, a venture capital firm focused on
investments in communications and information
technology. Prior to joining Columbia, Mr. Stelljes was
an executive vice president and a principal at Allied
Capital Corporation from 1989 to 1997. Mr. Stelljes
currently serves on the boards of directors of Dominion
Digital and Virginia Capital and is a Managing Member of
St. John's Capital and Amelia Capital, vehicles used to
make private equity investments. He is also a former
board member and regional president of the National
Association of Small Business Investment Companies.
EXECUTIVE OFFICERS WHO ARE NOT DIRECTORS
BACKGROUND
NAME AGE INFORMATION
---- -------- --------------------------------------------------------
HARRY BRILL*......................... 54 Mr. Brill has been our treasurer and chief financial
officer since May 2001. From 1995 to April 2001,
Mr. Brill served as a personal financial advisor.
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* Messrs. Gladstone, Brubaker and Brill are interested persons of the Company,
within the meaning of the Investment Company Act of 1940, as amended, due to
their positions as officers of the Company.
BOARD COMMITTEES AND MEETINGS
During the fiscal year ended September 30, 2001 the Board of Directors held
three meetings. The Board has an audit committee, a compensation committee and
an executive committee.
The audit committee operates pursuant to a written charter and makes
recommendations concerning the engagement of independent public accountants,
reviews with our independent public accountants the plans and results of the
audit engagement, approves professional services provided by our independent
public accountants, reviews the independence of our independent public
accountants and reviews the adequacy of our internal accounting controls.
Membership of the audit committee is comprised of Messrs. Dullum, Stelljes and
Parker, each of whom is considered an independent director under the rules
promulgated by the Nasdaq Stock Market. The Audit Committee did not meet during
the last fiscal year.
The compensation committee determines compensation for our executive
officers and administers the Company's Amended and Restated 2001 Equity
Incentive Plan. Membership of the compensation committee is comprised of
Messrs. Parker and Dullum, each of whom is an independent director. The
compensation committee met once during the last fiscal year.
The executive committee has the authority to exercise all powers of the
board of directors except for actions that must be taken by the full board of
directors under the Maryland General Corporation Law, including electing the
Chairman of the Board of Directors and the President. The Board of Directors may
appoint not fewer than three members to the Executive Committee; currently, the
membership is comprised of Messrs. Gladstone, Dullum and Stelljes. The Executive
Committee did not meet during the last fiscal year.
During the fiscal year ended September 30, 2001, each Board member attended
75% or more of the aggregate of the meetings of the Board and of the committees
on which he served, held during the period for which he was a director or
committee member, respectively.
REPORT OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS(1)
The Company's Audit Committee is comprised of Messrs. Dullum, Stelljes and
Parker, each of whom is not an officer or employee of the Company. Under the
applicable Nasdaq rules, all members are independent. The Board of Directors has
adopted a written charter for the Audit Committee, which is included as
Exhibit A to this Proxy Statement.
The Audit Committee met after the close of the fiscal year to review and
discuss the audited financial statements with management and the accountants,
Ernst & Young LLP. Based on these discussions, the Audit Committee recommended
to the Board of Directors that the audited financial statements be included in
the Company's Annual Report of Form 10-K.
The discussions with Ernst & Young LLP also included the matters required by
Statement on Auditing Standards No. 61. The Audit Committee received from
Ernst & Young LLP written disclosures and the letter regarding its independence
as required by Independence Standards Board Standards No. 1. This information
was discussed with Ernst & Young LLP.
AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
George Stelljes, III, Chairman David A.R. Dullum Anthony W. Parker
------------------------
(1) The material in this report is not "soliciting material," is not deemed
"filed" with the SEC, and is not to be incorporated by reference into any filing
of the Company under the 1933 or 1934 Act.
PROPOSAL 2
RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
The Board of Directors has selected Ernst & Young LLP as the Company's
independent auditors for the fiscal year ending September 30, 2001 and has
further directed that management submit the selection of independent auditors
for ratification by the stockholders at the Annual Meeting. Ernst & Young LLP
has audited the Company's financial statements since its inception in 2001.
Representatives of Ernst & Young LLP are expected to be present at the Annual
Meeting, will have an opportunity to make a statement if they so desire and will
be available to respond to appropriate questions.
Stockholder ratification of the selection of Ernst & Young LLP as the
Company's independent auditors is not required by the Company's Bylaws or
otherwise. However, the Board is submitting the selection of Ernst & Young LLP
to the stockholders for ratification as a matter of good corporate practice. If
the stockholders fail to ratify the selection, the audit committee and the Board
will reconsider whether or not to retain that firm. Even if the selection is
ratified, the audit committee and the Board in their discretion may direct the
appointment of different independent auditors at any time during the year if
they determine that such a change would be in the best interests of the Company
and its stockholders.
The affirmative vote of the holders of a majority of the shares present in
person or represented by proxy and voting at the Annual Meeting will be required
to ratify the selection of Ernst & Young LLP. For purposes of this vote
abstentions and broker non-votes will not be counted for any purpose in
determining whether this matter has been approved.
AUDIT FEES. During the fiscal year ended September 30, 2001, the aggregate
fees billed by Ernst & Young LLP for the audit of the Company's financial
statements for such fiscal year and for the review of the Company's interim
financial statements was $21,400.
FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES. During the
fiscal year ended September 30, 2001, the aggregate fees billed by Ernst & Young
LLP for information technology consulting fees was $0.
ALL OTHER FEES. During the fiscal year ended September 30, 2001, the
aggregate fees billed by Ernst & Young LLP for professional services other than
audit and information technology consulting fees was $105,000.
The Audit Committee has determined the rendering of the information
technology consulting services and all other non-audit services by Ernst & Young
LLP is compatible with maintaining the auditor's independence.
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE IN FAVOR OF PROPOSAL 2.
SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the ownership
of the Company's Common Stock as of January 23 by: (i) each director and nominee
for director; (ii) each of the executive officers named in the Summary
Compensation Table; (iii) all executive officers and directors of the Company as
a group; and (iv) all those known by the Company to be beneficial owners of more
than five percent of its Common Stock. Except as otherwise noted, the address of
the individuals below is c/o Gladstone Capital Corporation, 1616 Anderson Road,
Suite 208, McLean, VA 22102.
BENEFICIAL OWNERSHIP(1)
------------------------
NUMBER OF PERCENT OF
NAME AND ADDRESS SHARES TOTAL
---------------- ----------- ----------
David Gladstone............................................. 990,959(2) 9.5%
Terry Lee Brubaker.......................................... 220,876(3) 2.2%
Harry Brill................................................. 50,500(4) *
David A.R. Dullum........................................... 2,000(5) *
215 Great Falls Street
Falls Church, VA 22046
George Stelljes, III........................................ 1,000(5) *
1101 Pennsylvania Avenue, N.W., Suite 6614
Washington, DC 20005
Anthony W. Parker........................................... 2,700(5) *
c/o Medical Funding Corporation
818 Connecticut Avenue, Suite 325 Washington, DC 20036
All executive officers and directors as a group (6 1,268,035(6) 11.90%
persons)..................................................
------------------------
* Less than 1%
(1) This table is based upon information supplied by officers, directors and
principal stockholders. Unless otherwise indicated in the footnotes to this
table and subject to community property laws where applicable, the Company
believes that each of the stockholders named in this table has sole voting and
investment power with respect to the shares indicated as beneficially owned.
Applicable percentages are based on 10,060,178 shares outstanding on
January 23, 2002, adjusted as required by rules promulgated by the Securities
and Exchange Commission (the "SEC").
(2) Includes (i) 6,666 shares underlying options that are immediately
exercisable and (ii) 400,000 shares underlying options that may be acquired
pursuant to early exercise features of the options and that vest on August 23,
2002 and are subject to a repurchase right in favor of the Company if
Mr. Gladstone does not satisfy the option's vesting requirements. In any event,
shares acquired upon an early exercise may not be disposed of until the vesting
period has been satisfied.
(3) Includes (i) 6,666 shares underlying options that are immediately
exercisable and (ii) 100,000 shares underlying options that may be acquired
pursuant to early exercise features of the options and that vest on August 23,
2002 and are subject to a repurchase right in favor of the Company if
Mr. Brubaker does not satisfy the option's vesting requirements. In any event,
shares acquired upon an early exercise may not be disposed of until the vesting
period has been satisfied.
(4) Includes (i) 15,000 shares underlying options that are immediately
exercisable and (ii) 25,000 shares underlying options that may be acquired
pursuant to early exercise features of the options and that vest on August 23,
2002 and are subject to a repurchase right in favor of the Company if Mr. Brill
does not satisfy the option's vesting requirements. In any event, shares
acquired upon an early exercise may not be disposed of until the vesting period
has been satisfied.
(5) Each of the Company's non-employee directors is entitled to receive an
option to purchase 10,000 shares of the Company's Common Stock upon the receipt
of an order from the SEC approving such grant. The Company's application to the
SEC is currently pending.
(6) Includes (i) 28,332 shares underlying options that are immediately
exercisable and (ii) 525,000 shares underlying options that may be acquired
pursuant to early exercise features of the options and that vest on August 23,
2002 and are subject to a repurchase right in favor of the Company if the holder
does not satisfy the option's vesting requirements. In any event, shares
acquired upon an early exercise may not be disposed of until the vesting period
has been satisfied.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 (the "1934 Act")
requires the Company's directors and executive officers, and persons who own
more than ten percent of a registered class of the Company's equity securities,
to file with the SEC initial reports of ownership and reports of changes in
ownership of Common Stock and other equity securities of the Company. Officers,
directors and greater than ten percent stockholders are required by SEC
regulation to furnish the Company with copies of all Section 16(a) forms they
file.
To the Company's knowledge, based solely on a review of the copies of such
reports furnished to the Company and written representations that no other
reports were required, during the fiscal year ended September 30, 2001, all
Section 16(a) filing requirements applicable to its officers, directors and
greater than ten percent beneficial owners were complied with; except that
Messrs. Gladstone, Brubaker and Brill each filed one amended Form 4, covering
one transaction each, and Messrs. Dullum, Parker and Stelljes each filed one
Form 4 late, covering one transaction each.
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
SUMMARY OF COMPENSATION
The following table shows for the fiscal year ended September 30, 2001
compensation awarded or paid to, or earned by, all the directors and the two
highest paid executive officers of the Company (collectively, the "Compensated
Persons") in each capacity in which each Compensated Person served. Certain of
the Compensated Persons served as both officers and directors of the Company.
COMPENSATION TABLE
(2) (3)
AGGREGATE TOTAL COMPENSATION
(1) COMPENSATION FROM FROM COMPANY PAID TO
NAME OF PERSON, POSITION THE COMPANY(1) COMPENSATED PERSONS
------------------------ ----------------- --------------------
Mr. David Gladstone,.................................... $41,667 $41,667
Chief Executive Officer and Chairman of the Board of
Directors(2)
Mr. Terry Lee Brubaker,................................. $41,667 $41,667
President, Chief Operating Officer and Director
Mr. David A.R. Dullum,.................................. $13,000 $13,000
Director
Mr. George Stelljes III,................................ $12,000 $12,000
Director
Mr. Anthony W. Parker,.................................. $13,000 $13,000
Director
------------------------
(1) The Company paid no perquisites to Compensated Persons in excess of the
lesser of $50,000 or 10% of the Compensated Person's aggregate salary and bonus
for the year.
(2) Mr. Gladstone's aggregate compensation includes (a) annual compensation of
$41,667 in salary and (b) long-term compensation of 800,000 shares of Common
Stock underlying options.
STOCK OPTION GRANTS AND EXERCISES
The Company grants options to its executive officers under its Amended and
Restated 2001 Equity Incentive Plan (the "2001 Plan"). As of January 23, 2002,
options to purchase a total of 663,330 shares were outstanding under the 2001
Plan, options to purchase 586,670 shares of Common Stock had already been
exercised and options to purchase 250,000 shares remained available for grant
thereunder.
Effective July 23, 2001, the Company adopted the 2001 Plan, for the purpose
of attracting and retaining the services of executive officers, directors and
other key employees. Under the 2001 Plan, the Board of Directors or compensation
committee may award incentive stock options within the meaning of Section 422 of
the Code, or ISOs, to employees, and nonstatutory stock options to employees,
and, subject to receipt of an order from the SEC, non-employee directors. In
addition, the 2001 Plan permits the granting of rights to purchase restricted
stock.
The Company has authorized for issuance, to employees and directors,
1,500,000 shares of capital stock under the 2001 Plan. The share reserve
consists of common stock and preferred stock. Options granted under the 2001
Plan may be exercised for a period of no more than 10 years from the date of
grant. Unless sooner terminated by the Board of Directors, the 2001 Plan will
terminate on June 1, 2011, and no additional awards may be made under the 2001
Plan after that date.
Options granted under the 2001 Plan entitle the optionee, upon exercise, to
purchase shares of capital stock from the Company at a specified exercise price
per share. ISOs must have a per share exercise price of no less than the fair
market value of a share of stock on the date of the grant or, if the optionee
owns or is treated as owning, under Section 424(d) of the Code, more than 10% of
the total combined voting power of all classes of our stock, 110% of the fair
market value of a share of stock on the date of the grant. Nonstatutory stock
options granted under the 2001 Plan must have a per share exercise price of no
less than the fair market value of a share of stock on the date of the grant.
Options are not transferable other than by laws of descent and distribution and
are generally exercisable during an optionee's lifetime only by the optionee.
The compensation committee administers the 2001 Plan and has the authority,
subject to the provisions of the 2001 Plan, to determine who will receive awards
under the 2001 Plan and the terms of such awards. This committee has the
authority to adjust the number of shares available for options,
the number of shares subject to outstanding options and the exercise price for
options following the occurrence of events such as stock splits, dividends,
distributions and recapitalizations.
Participants in the 2001 Plan may be provided with an opportunity to
purchase restricted stock. These shares may be subject to a time-based vesting
schedule, or the attainment of performance goals established by the compensation
committee. The purchase price for restricted stock will not be less than the
fair market value of the stock on the date of purchase. Upon a participant's
termination of service, the Company may have the option to repurchase the
unvested shares of stock at the original purchase price paid by a participant
for such shares, if any. The specific terms and conditions of restricted stock
purchases shall be governed by individual agreements in a form approved by the
compensation committee. Restricted stock purchased under the 2001 Plan is
transferable if so determined by the compensation committee in its discretion.
Upon specified corporate transactions, as defined in the 2001 Plan, all
outstanding awards under the 2001 Plan may either be assumed or substituted for
by the surviving entity. If the surviving entity does not assume or substitute
similar awards, the awards held by the participants whose continuous service has
not terminated prior to the corporate transaction will be accelerated in full
and then terminated to the extent not exercised prior to the corporate
transaction. With respect to any other awards which are not assumed or
substituted and are held by participants whose continuous service has terminated
on or prior to the corporate transaction, such awards will not be accelerated
unless otherwise provided in a written agreement between the Company, or any of
its affiliates, and the participant.
Upon a change in control, as defined in the 2001 Plan, awards held by
participants whose continuous service has not terminated prior to the change in
control shall be subject to additional acceleration of vesting, but only to the
extent as provided in any written agreement between the Company, or any of its
affiliates, and the participant.
The following tables show for the fiscal year ended September 30, 2001,
certain information regarding options granted to, exercised by, and held at year
end by the Company's three executive officers (the "Executive Officers"):
OPTION GRANTS IN LAST FISCAL YEAR
POTENTIAL REALIZABLE
VALUE AT ASSUMED ANNUAL
INDIVIDUAL GRANTS RATES OF STOCK
---------------------------------------------------------------------- PRICE APPRECIATION
NUMBER OF SECURITIES % OF TOTAL OPTIONS EXERCISE OR FOR OPTION TERM(1)
UNDERLYING OPTIONS GRANTED TO EMPLOYEES BASE PRICE EXPIRATION -----------------------
NAME GRANTED (#) IN FISCAL YEAR ($/SH) DATE 5% ($) 10% ($)
---- -------------------- -------------------- ----------- ---------- ---------- ----------
Mr. Gladstone........ 800,000 64.0% $15.00 8/22/11 7,544,000 19,128,000
Mr. Brubaker......... 200,000 16.0% $15.00 8/22/11 1,886,000 4,782,000
Mr. Brill............ 50,000 4.0% $15.00 8/22/11 472,000 1,196,000
------------------------
(1) The potential realizable value is based on the term of the option at the
time of its grant (10 years). It is calculated by assuming that the stock price
on the date of the grant appreciates at the indicated annual rate, compounded
annually for the entire term of the option and that the option is exercised and
sold on the last day of its term for the appreciated stock price. The amounts
represent certain assumed rates of appreciation only, in accordance with the
rules of the SEC, and do not reflect the Company's estimate or projection of
future stock price performance. Actual gains, if any, are dependent on the
actual future performance of the Company's Common Stock and no gain to the
optionee is possible unless the stock price increases over the option term,
which will benefit all stockholders.
AGGREGATED OPTION EXERCISES IN FISCAL 2001,
AND VALUE OF OPTIONS AT END OF FISCAL 2001
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS
SHARES ACQUIRED VALUE FY-END (#) AT FY-END ($)
NAME ON EXERCISE (#) REALIZED ($)(1) VESTED/UNVESTED(2) VESTED/UNVESTED(3)
---- --------------- --------------- ------------------ ------------------
Mr. Gladstone........................ 393,334 $0 6,666/400,000 7,599/456,000
Mr. Brubaker......................... 93,334 $0 6,666/100,000 7,599/114,000
Mr. Brill............................ 10,000 $0 15,000/25,000 17,100/28,500
------------------------
(1) Value realized is calculated as the closing market price on the date of
exercise, net of option exercise price, but before any tax liabilities or
transaction costs.
(2) Unvested options vest on August 23, 2002. Shares underlying unvested options
may be acquired pursuant to early exercise features of the options and are
subject to a repurchase right in favor of the Company if the executive does not
satisfy the option's vesting requirements. In any event, shares acquired upon an
early exercise may not be disposed of until the vesting period has been
satisfied.
(3) The value of unexercised options is calculated as the closing market price
on September 30, 2001 less the exercise price. "In-the-money" options are those
with an exercise price that is less than the closing market price on
September 30, 2001.
EMPLOYMENT AGREEMENTS
In June, 2001, the Company entered into employment agreements with
Messrs. Gladstone and Brubaker as executive officers of the Company. Each
agreement provides for a three-year term. The initial three-year term will be
extended for additional successive periods of one year, unless the Company gives
three months' prior written notice of its intention to terminate the agreement
without cause. Messrs. Gladstone and Brubaker each have the right to terminate
their respective employment agreement at any time by giving the Company three
months' prior written notice.
If the Company should terminate either Messrs. Gladstone or Brubaker's
employment by reason of his disability, he would be entitled to receive, for two
years, the difference between his then current base salary plus annual bonus and
any long-term disability benefits. Additionally, his unvested options which
would have vested within two years of the termination date would immediately
vest. All vested options would expire unless exercised (and all outstanding
loans resulting from the prior exercise of any options would have to be repaid)
within 18 months of the termination date. If the Company should terminate either
executive officer's employment for any reason other than disability or cause, he
would be entitled to receive his base salary and annual bonus for a period of
two years from the date of termination, although he could choose to forgo the
payments and thus obtain a release from non-compete provisions applicable during
this period. These payments would also be made if the senior executive officer
resigned for good reason, which generally includes the Company's materially and
adversely changing his responsibilities and duties or materially breaching its
compensation obligations under the employment agreement. The executive officer
will also receive severance if he is terminated in connection with a change of
control or if he is not notified that the employment agreement will be continued
upon a change in control. Mr. Gladstone's employment agreement also defines
"good reason" as a determination by him of a material difference with the
Company's board of directors. Additionally, any unvested stock options held by
Messrs. Gladstone or Brubaker would generally vest if employment were terminated
for any reason other than a disability or cause or if the executive officer
resigned with good reason.
In the event that the Company should terminate Messrs. Gladstone or
Brubaker's employment for cause or if either executive officer voluntarily
terminates his employment for other than good reason, all unvested stock options
would be forfeited and he would have no more than 90 days to exercise any
vested but unexercised options (and to repay any outstanding loans resulting
from the prior exercise of any options).
Upon termination of employment, each senior executive officer would be
subject to certain non-compete covenants. In the case of Mr. Brubaker, these
covenants would generally apply for two years, although should Mr. Brubaker
resign for good reason, the covenants would apply for only one year following
the date of resignation. The covenants applicable to Mr. Gladstone are generally
shorter, although in essentially all cases Mr. Gladstone would be prohibited
from competing with the Company for at least one year from the completion of the
Company's initial public offering. As noted above, during periods when the
executive officers are receiving severance payments from the Company, they may
terminate these covenants prohibiting competition by foregoing such severance
payments.
COMPENSATION OF DIRECTORS
Each non-employee director of the Company receives a yearly retainer of
$10,000 and a per meeting fee of $1,000 with no additional fee paid in
connection with attending committee meetings. In the fiscal year ended
September 30, 2001, the total compensation paid to non-employee directors was
$38,000. The members of the Board of Directors are also eligible for
reimbursement for their expenses incurred in connection with attendance at Board
meetings in accordance with Company policy.
Each non-employee director of the Company is eligible to receive stock
option grants under the 2001 Plan. The Company has submitted an application to
the SEC for the approval of option grants to its non-employee directors, as
required by SEC rules governing business development companies. This application
is currently pending. Upon the receipt of an order from the SEC approving such
grants, each member of the Company's Board of Directors who is not an employee
of the Company will be granted an option to purchase 10,000 shares of Common
Stock of the Company. Moreover, each non-employee director will receive an
additional grant of an option to purchase 10,000 shares of Common Stock on the
date of the annual meeting of stockholders of each year. If the Company has not
received an order from the SEC by the Annual Meeting, both the initial and first
annual grants will be made on the date the Company receives the order.
The exercise price of options granted under the 2001 Plan is 100% of the
fair market value of the Common Stock subject to the option on the date of the
option grant. Each option to be issued to the Company's non-employee directors
will become exercisable as to 50% of the option shares on the first anniversary
of the date of the grant, and will become fully exercisable on the second
anniversary of the date of the grant. The term of options granted to the
non-employee directors will be ten years. In the event of a merger of the
Company with or into another corporation or a consolidation, acquisition of
assets or other change-in-control transaction involving the Company, each option
either will continue in effect, if the Company is the surviving entity, or will
be assumed or an equivalent option will be substituted by the successor
corporation, if the Company is not the surviving entity. If the successor
corporation does not assume the options, the vesting of each option will
accelerate and the option will terminate if not exercised prior to the
consummation of the transaction.
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS ON
EXECUTIVE COMPENSATION
Section 162(m) of the Internal Revenue Code (the "Code") limits the Company
to a deduction for federal income tax purposes of no more than $1 million of
compensation paid to certain Executive Officers in a taxable year. Compensation
above $1 million may be deducted if it is "performance-based compensation"
within the meaning of the Code.
The statute containing this law and the applicable proposed Treasury
regulations offer a number of transitional exceptions to this deduction limit
for pre-existing compensation plans, arrangements and binding contracts. As a
result, the Compensation Committee believes that at the present time it is quite
unlikely that the compensation paid to any Named Executive Officer in a taxable
year which is subject to the deduction limit will exceed $1 million. Therefore,
the Compensation Committee has not yet established a policy for determining
which forms of incentive compensation awarded to its Executive
Officers shall be designed to qualify as "performance-based compensation." The
Compensation Committee intends to continue to evaluate the effects of the
statute and any final Treasury regulations and to comply with Code
Section 162(m) in the future to the extent consistent with the best interests of
the Company.
COMPENSATION COMMITTEE REPORT
The Compensation Committee of the Board of Directors (the "Committee") is
composed of Mr. Parker and Mr. Dullum, neither of whom is currently an officer
or employee of the Company. The Committee is responsible for establishing the
Company's compensation programs for the Company's executives and other key
employees by evaluating their performance and determining compensation policies
and levels.
COMPENSATION PHILOSOPHY
The goals of the compensation program are to align compensation with
business objectives and performance and to enable the Company to attract, retain
and reward executive officers and other key employees who contribute to the
long-term success of the Company and to motivate them to enhance long-term
stockholder value. Key elements of this philosophy are:
- The Company pays competitively with leading finance companies with which
the Company competes for talent. To ensure that pay is competitive, the
Company regularly compares its pay practices with these companies and sets
it pay parameters based on this review.
- The Company maintains annual incentive opportunities sufficient to provide
motivation to achieve specific operating goals and to generate rewards
that bring total compensation to competitive levels.
- The Company provides significant equity-based incentives for executives
and other key employees to ensure that they are motivated over the
long-term to respond to the Company's business challenges and
opportunities as owners and not just as employees.
BASE SALARY. The Committee annually reviews each executive officer's base
salary. When reviewing base salaries, the Committee considers individual and
corporate performance, levels of responsibility, prior experience, breadth of
knowledge and competitive pay practices.
ANNUAL INCENTIVES. The Company maintains an annual incentive award program
for executive officers and other key employees of the Company to earn additional
annual compensation. The actual incentive award earned depends on the extent to
which Company and individual performance objectives are achieved. The Committee
and the full Board of Directors review and approve the annual performance
objectives for the Company and individual officers. No incentive bonuses were
accrued or paid for the fiscal year ending September 30, 2001.
The Company objectives consist of operating, strategic and financial goals
that are considered to be critical to the Company's fundamental long-term
goal--building stockholder value. For fiscal 2001, these goals were:
- completing the Company's initial public offering; and
- identifying a sufficient number of prospective investment opportunities.
After the end of the fiscal year, the Committee evaluates the degree to
which the Company has met its goals and establishes a total incentive award
pool. Individual awards are determined by evaluating each participant's
performance against objectives and allocating a portion of the award pool based
on the participant's contributions during the year. Awards are paid in cash and
distributions are made in the October following the performance year.
LONG-TERM INCENTIVES. The Company's long-term incentive program consists of
the 2001 Plan. The option program utilizes vesting periods to encourage key
employees to continue in the employ of
the Company. Through option grants, executives receive significant equity
incentives to build long-term stockholder value. Grants are made at 100% of fair
market value on the date of grant. Executives receive value from these grants
only if the Company's Common Stock appreciates over the long-term. The size of
option grants is determined based on competitive practices at leading companies
in the finance industry and the Company's philosophy of significantly linking
executive compensation with stockholder interests. In 2001 the Committee granted
stock options that will vest over a one-year period to its Executive Officers.
Such grants were intended to provide incentive to successfully complete the
initial public offering and to maximize stockholder value over the next several
years. The Committee believes this approach creates an appropriate focus on
longer term objectives and promotes executive retention.
CORPORATE PERFORMANCE AND CHIEF EXECUTIVE OFFICER COMPENSATION
Mr. Gladstone's base salary for the fiscal year ended September 30, 2001 was
$200,000. He was not paid a bonus for the year. In setting this amount, the
Committee took into account (i) its belief that Mr. Gladstone is one of the
leading CEOs of finance companies who has significant and broad-based experience
in the finance industry; (ii) the scope of Mr. Gladstone's responsibilities,
especially following the Company's initial public offering; and (iii) the
Board's confidence in Mr. Gladstone's ability to lead the Company's continued
development. Considering these factors, Mr. Gladstone was granted options to
purchase an aggregate of 800,000 shares of Common Stock as an incentive for
future performance, an amount the Committee determined was consistent with
competitive practices.
During the fiscal year ended September 30, 2001, the Company achieved most,
but not all, of its corporate objectives. The Committee rated Mr. Gladstone's
individual performance as above average.
CONCLUSION
Through the plans described above, a significant portion of the Company's
compensation program and Mr. Gladstone's compensation are contingent on Company
performance, and realization of benefits is closely linked to increases in
long-term stockholder value. The Company remains committed to this philosophy of
pay for performance, recognizing that the competitive market for talented
executives and the volatility of the Company's business may result in highly
variable compensation for a particular time period.
COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
David A.R. Dullum, Chairman Anthony W. Parker
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Company's compensation committee consists of Mr. Parker and Mr. Dullum,
both of whom are independent directors.
PERFORMANCE MEASUREMENT COMPARISON(1)
The following graph shows the total stockholder return of an investment of
$100 in cash on August 24, 2001 for (i) the Company's Common Stock, (ii) the
Standards & Poor's 500 Index (the "S&P 500") and (iii) the Company's peer
group(2). All values assume reinvestment of the full amount of all dividends and
are calculated as of August 24, 2001 (the first day of trading of the Company's
Common Stock) and September 30, 2001:
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
GLADSTONE CAPITAL S&P 500 PEER GROUP
August 24, 2001 $100.00 $100.00 $100.00
September 30, 2001 $96.13 $87.84 $96.67
AUGUST 24, 2001 SEPTEMBER 30, 2001
--------------- ------------------
Gladstone Capital Corporation............................... $100.00 $96.13
S&P 500..................................................... $100.00 $87.84
Peer Group.................................................. $100.00 $96.67
------------------------
(1) This Section is not "soliciting material," is not deemed "filed" with the
SEC and is not to be incorporated by reference in any filing of the Company
under the 1933 Act or the 1934 Act whether made before or after the date hereof
and irrespective of any general incorporation language in any such filing.
(2) The Company's peer group is composed of Allied Capital Corporation and
American Capital Strategies, Ltd. The returns of each company assume
reinvestment of dividends and have been weighted according to their respective
stock market capitalization for purposes of arriving at a peer group average.
CERTAIN TRANSACTIONS
At September 30, 2001, the Company had loans outstanding in the principal
amount of $5,900,010 to Mr. Gladstone, $1,400,010 to Mr. Brubaker and $150,000
to Mr. Brill, all of whom are executive officers of the Company. These loans
were extended in connection with the exercise of stock options by each of the
executive officers. Each such loan is evidenced by a full recourse promissory
note secured by the shares of common stock purchased upon the exercise of the
options. The interest rate on each
such loan is 4.9% per annum. The first quarterly interest payment for each loan
was due and paid on January 1, 2002.
In May 2001, the Company issued and sold 43,508 shares of its Common Stock
for an aggregate purchase price of $652,631 to Mr. Gladstone.
In its Articles of Incorporation and Bylaws, the Company has agreed to
indemnify certain officers and directors by providing, among other things, that
the Company will indemnify such officer or director, under the circumstances and
to the extent provided for therein, for expenses, damages, judgments, fines and
settlements he or she may be required to pay in actions or proceedings which he
or she is or may be made a party by reason of his or her position as a director,
officer or other agent of the Company, and otherwise to the fullest extent
permitted under Maryland law and the Company's Bylaws.
OTHER MATTERS
The Board of Directors knows of no other matters that will be presented for
consideration at the Annual Meeting. If any other matters are properly brought
before the meeting, it is the intention of the persons named in the accompanying
proxy to vote on such matters in accordance with their best judgment.
By Order of the Board of Directors
/s/ Terry Brubaker
Terry Brubaker
Secretary
February 26, 2002
A copy of the Company's Annual Report to the Securities and Exchange
Commission on Form 10-K for the fiscal year ended September 30, 2001 is
available without charge upon written request to: Corporate Secretary, Gladstone
Capital Corporation, 1616 Anderson Road, Suite 208, McLean, Virginia 22102.
EXHIBIT A
GLADSTONE CAPITAL CORPORATION
CHARTER OF THE AUDIT COMMITTEE
OF THE BOARD OF DIRECTORS
PURPOSE:
The purpose of the Audit Committee (the "COMMITTEE") of the Board of
Directors of Gladstone Capital Corporation, a Maryland corporation (the
"COMPANY"), shall be to (i) review the engagement of the independent public
accountants, including the scope, extent and procedures of the audit and the
compensation to be paid therefor and all other matters the Committee deems
appropriate; and (ii) to perform such other functions as may be deemed necessary
or convenient in the efficient and lawful discharge of the foregoing.
COMPOSITION:
The Committee shall be comprised of a minimum of three (3) independent
members of the Board of Directors. The members of the Committee will serve at
the discretion of the Board of Directors. Each such member shall hold office
until his or her resignation or until otherwise determined by the Board of
Directors. All members must be able to read and understand fundamental financial
statements, including but not limited to, a balance sheet, income statement, and
cash flow statement. At least one (1) member of the Committee must have past
employment experience in finance or accounting, requisite professional
certification in accounting, or other comparable experience or background,
including a current or past position as a chief executive or financial officer
or other senior officer with financial oversight responsibilities.
FUNCTIONS AND AUTHORITY:
The operation of the Committee shall be subject to the Bylaws of the
Company, as in effect from time to time, and Section 2-411 of the Maryland
General Corporation Law. The Committee shall have the full power and authority
of the Board of Directors to carry out the following responsibilities:
I. To review the engagement of the independent public
accountants, including the scope, extent and procedures of
the audit and the compensation to be paid therefor, and all
other matters the Committee deems appropriate.
II. To evaluate, together with the Board of Directors, the
performance of the independent public accountants and, if so
determined by the Committee, recommend that the Board of
Directors replace the independent public accountants.
III. To review and approve all professional non-audit services
provided to the Company by its independent public
accountants and to consider the possible effect of such
services on the independence of the public accountants.
IV. To assist and to interact with the independent public
accountants so that they may carry out their duties in the
most efficient and cost effective manner.
V. To review the Company's balance sheet, profit and loss
statement and statements of cash flows and shareholders'
equity for each interim period, and any changes in
accounting policy that have occurred during the interim.
Also, the Committee shall discuss the results of the
quarterly review and any other matters required to be
communicated to the Committee by the independent public
accountants under generally accepted accounting standards.
VI. To evaluate the cooperation received by the independent
public accountants during their audit examination, including
their access to all requested records, data and information,
and to elicit the comments of management regarding the
responsiveness of the independent public accountants to the
Company's needs.
VII. To receive written statements from the independent public
accountants delineating all relationships between the public
accountants and the Company consistent with Independence
Standards Board Standard No. 1, to consider and discuss with
the public accountants any disclosed relationships or
services that could affect the public accountants'
objectivity and independence, and if so determined by the
Committee, take, or recommend that the Board take,
appropriate action to oversee the independence of the public
accountants.
VIII. To consult with the independent public accountants and to
discuss with the senior management of the Company the scope
and quality of internal accounting and financial reporting
controls in effect.
IX. Perform such other functions and have such other powers as
may be necessary or convenient in the efficient discharge of
the foregoing.
X. To report to the Board of Directors from time to time, or
whenever it shall be called upon to do so.
MEETINGS:
The Committee will hold at least one regular meeting per year and additional
meetings as the Committee deems appropriate. The Chairman of the Board of
Directors and the Chief Executive Officer of the Company may attend any meeting
of the Committee, except for portions of the meetings where his, her or their
presence would be inappropriate, as determined by the Committee.
MINUTES AND REPORTS:
Minutes of each meeting of the Committee shall be kept and distributed to
each member of the Committee, members of the Board of Directors who are not
members of the Committee and the Secretary of the Company. The Committee shall
report to the Board of Directors from time to time, or whenever so requested by
the Board of Directors.
GLADSTONE CAPITAL CORPORATION
PROXY SOLICITED BY THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MARCH 26, 2002
The undersigned hereby appoints David Gladstone and Terry Brubaker,
and each of them, as attorneys and proxies of the undersigned, with full
power of substitution, to vote all of the shares of stock of Gladstone
Capital Corporation which the undersigned may be entitled to vote at the
Annual Meeting of Stockholders of Gladstone Capital Corporation to be held at
the third floor conference room of the Company's principal executive office
at 1616 Anderson Road, McLean, VA 22101 on Tuesday, March 26, 2002 at 10:00
a.m. (local time), and at any and all postponements, continuations and
adjournments thereof, with all powers that the undersigned would possess if
personally present, upon and in respect of the following matters and in
accordance with the following instructions, with discretionary authority as
to any and all other matters that may properly come before the meeting.
UNLESS A CONTRARY DIRECTION IS INDICATED, THIS PROXY WILL BE VOTED
FOR THE NOMINEE LISTED IN PROPOSAL 1 AND FOR PROPOSAL 2, AS MORE SPECIFICALLY
DESCRIBED IN THE PROXY STATEMENT. IF SPECIFIC INSTRUCTIONS ARE INDICATED,
THIS PROXY WILL BE VOTED IN ACCORDANCE THEREWITH.
(Continued and to be signed on reverse side)
GLADSTONE CAPITAL CORPORATION
To change your address, please mark this box. / / P.O. BOX 11046
NEW YORK, N.Y. 10203-0046
DETACH PROXY CARD HERE
--------------------------------------------------------------------------------
/ / PLEASE VOTE, DATE AND Please sign exactly as your name or names appear
PROMPTLY RETURN THIS hereon. If the stock is registered in the names
PROXY IN THE ENCLOSED of two or more persons, each should sign.
RETURN ENVELOPE WHICH Executor, administrator, trustee, guardian and
IS POSTAGE PREPAID IF attorneys-in-fact should add their titles. If
MAILED IN THE UNITED signer is a corporation, please give full
STATES. corporate name and have a duly authorized officer
sign, stating title. If signer is a partnership,
please sign in partnership name by authorized
person.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE NOMINEE FOR DIRECTOR LISTED
BELOW.
PROPOSAL 1: To elect one director to hold office until the 2005 Annual Meeting
of Stockholders and until his successor is elected.
Nominee: Anthony W. Parker FOR the nominee listed / / WITHHOLD AUTHORITY to vote / /
for the nominee listed.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSAL 2.
FOR AGAINST ABSTAIN
PROPOSAL 2: To ratify the selection of Ernst & Young LLP as independent auditors / / / / / /
of the Company for its fiscal year ending September 30, 2002.
Shareholder sign here Date
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Co-Owner sign here
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