ARTICLES OF AMENDMENT AND RESTATEMENT
                                     TO THE
                            ARTICLES OF INCORPORATION
                                       OF
                          GLADSTONE CAPITAL CORPORATION
                            (A MARYLAND CORPORATION)
 
 
         These Articles of Amendment and Restatement were duly adopted by the
directors and the stockholders of Gladstone Capital Corporation (the
"CORPORATION") by unanimous written consent pursuant to Section 2-408(c) and
Section 2-505 of the Annotated Code of Maryland, Corporations and Associations.
 
         The Corporation's Articles of Incorporation authorized Ten Million
(10,000,000) shares of common stock, with a par value of $.001 per share
("COMMON STOCK"). The written consent adopting these Articles of Amendment and
Restatement authorizes Fifty Million (50,000,000) shares of Common Stock, with a
par value of $.001 per share. Upon filing of these Articles of Amendment and
Restatement, the Corporation's total capitalization will consist of Fifty
Million (50,000,000) shares of capital stock, all of which initially shall be
shares of Common Stock.
 
         In accordance with Section 2-609 of the Annotated Code of Maryland,
Corporations and Associations, the Corporation desires to amend and restate its
charter as currently in effect and does hereby adopt these Articles of Amendment
and Restatement, which shall be all of the provisions of the Articles of
Incorporation in effect following such amendment and restatement:
 
FIRST:  The name of the corporation is:  GLADSTONE CAPITAL CORPORATION.
 
SECOND:  The purposes for which the Corporation is organized are as follows:
 
         A. To loan money; to acquire, by purchase, subscription or in any other
manner, take, receive, hold, use, employ, sell, assign, transfer, exchange,
pledge, release, mortgage, lease, dispose of and otherwise deal in and with any
shares of stock or other shares, voting trust certificates, bonds, debentures,
notes, mortgages or other obligations, securities or evidences of indebtedness,
and any certificates, receipts, warrants or other instruments evidencing rights
or options to receive, purchase or subscribe for the same or representing any
other rights or interests therein or in any property or assets, issued or
created by any individual, association, partnership, joint venture, corporation,
government (or subdivision or agency thereof) or other legal entity, wherever
organized and wherever doing business; to possess and exercise in respect
thereof any and all of the rights, powers and privileges of individual holders
including, without limitation, the right to vote any shares of stock so held or
owned and, upon a distribution of the assets or a division of the profits of the
Corporation, to distribute any such shares of stock or other shares, voting
trust certificates, bonds or other obligations, securities or evidences of
indebtedness (or the proceeds thereof) among the stockholders of the
Corporation;
 
         B. To render advice and consulting services to corporations,
individuals, partnerships, limited liability companies, business trusts and
other business entities; to enter into contracts with any of such entities for
the purpose of carrying out such advisory and consulting
 
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services; to register as an investment adviser with any agencies and in any
jurisdictions; and to do all such other acts as may be related to or incidental
to the purposes of an investment adviser, merchant bank or similar financial
institution;
 
         C. To purchase, acquire, hold, own, improve, develop, sell, convey,
assign, release, mortgage, encumber, use, lease, hire, manage, deal in and
otherwise dispose of real property and personal property of every name and
nature or any interest therein, improved or otherwise, including stocks and
securities of other corporations;
 
         D. To borrow or raise money and to issue bonds, debentures, notes or
other obligations of any nature (and in any manner permitted by law) for money
so borrowed or in payment for property purchased, or for any other lawful
consideration, and to secure the payment thereof, and of the interest thereon,
by mortgage upon, pledge, conveyance or assignment in trust of, the whole or any
part of the property of the Corporation, real or personal, including contract
rights, whether at the time owned or thereafter acquired; to sell, pledge,
discount or otherwise dispose of such bonds, debentures, notes or other
obligations of the Corporation;
 
         E. To engage in, operate and acquire interests in any kind of business,
of whatever nature, which may be permitted by law;
 
         F. To do any act or thing and exercise any power suitable, convenient
or proper for the accomplishment of any of the purposes set forth herein or
incidental to such purposes, or which at any time may appear conducive to or
expedient for the accomplishment of any of such purposes; and
 
         G. To have and exercise any and all powers and privileges now or
hereafter conferred by the general laws of the State of Maryland upon
corporations formed under such laws.
 
         The foregoing enumeration of the purposes of the Corporation is made in
furtherance and not in limitation of the powers conferred upon the Corporation
by law. The mention of any particular purpose is not intended in any manner to
limit or restrict the generality of any other purpose mentioned, or to limit or
restrict any of the powers of the Corporation. The Corporation shall have, enjoy
and exercise all of the powers and rights now or hereafter conferred by the laws
of the State of Maryland, it being the intention that the purposes set forth in
each of the paragraphs of this Article shall, except as otherwise expressly
provided, in no way be limited or restricted by reference to or inference from
the terms of any other clause or paragraph of this or any other Article of these
Articles of Incorporation, or of any amendment thereto, and shall each be
regarded as independent, and construed as powers as well as purposes; PROVIDED,
HOWEVER, that nothing herein contained shall be deemed to authorize or permit
the Corporation to carry on any business or exercise any power, or do any act
which a corporation formed under the general laws of the State of Maryland may
not at the time lawfully carry on or do.
 
THIRD: The post office address of the principal office of the Corporation in the
State of Maryland is: 300 East Lombard Street, Baltimore, Maryland 21202. The
name of the Resident Agent of the Corporation in this State is The Corporation
Trust Incorporated whose address is 300 East Lombard Street, Baltimore, Maryland
21202.
 
 
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FOURTH:
 
         A. The total number of shares of stock of all classes which the
Corporation has authority to issue is Fifty Million (50,000,000) shares of
capital stock, with a par value of one tenth of one cent ($.001) per share,
amounting in aggregate par value to Fifty Thousand Dollars ($50,000). All of
such shares are initially classified as Common Stock. The board of directors of
the Corporation (the "BOARD OF DIRECTORS") may classify and reclassify any
unissued shares of capital stock by setting or changing in any one or more
respects the preferences, conversion or other rights, voting powers,
restrictions, limitations as to dividends, qualifications, terms or conditions
of redemption or other rights of such shares of stock.
 
         B. The following is a description of the preferences, conversion and
other rights, voting powers, restrictions, limitations as to dividends,
qualifications and terms and conditions of redemption of the Common Stock of the
Corporation:
 
            (1) Each share of Common Stock shall have one vote, and, except as
otherwise provided in respect of any class of stock hereafter classified or
reclassified, the exclusive voting power for all purposes shall be vested in the
holders of the Common Stock;
 
            (2) Subject to the provisions of law and any preferences of any
class of stock hereafter classified or reclassified, dividends, including
dividends payable in shares of another class of the Corporation's stock, may be
paid on the Common Stock of the Corporation at such time and in such amounts as
the Board of Directors may deem advisable; and
 
            (3) In the event of any liquidation, dissolution or winding up of
the Corporation, whether voluntary or involuntary, the holders of the Common
Stock shall be entitled, after payment or provision for payment of the debts and
other liabilities of the Corporation and the amount to which the holders of any
class of stock hereafter classified or reclassified having a preference on
distributions in the liquidation, dissolution or winding up of the Corporation
shall be entitled, together with the holders of any other class of stock
hereafter classified or reclassified having (if any such class of stock is
participating preferred stock or preference stock) or not having a preference on
distributions in the liquidation, dissolution or winding up of the Corporation,
to share ratably in the remaining net assets of the Corporation.
 
         C. Subject to the foregoing, the power of the Board of Directors to
classify and reclassify any of the shares of capital stock shall include,
without limitation, subject to the provisions of these Articles of
Incorporation, as they may subsequently be amended, authority to classify or
reclassify any unissued shares of such stock into a class or classes of
preferred stock, preference stock, special stock or other stock, and to divide
and classify shares of any class into one or more series of such class, by
determining, fixing, or altering one or more of the following:
 
            (1) The distinctive designation of such class or series and the
number of shares to constitute such class or series; PROVIDED that, unless
otherwise prohibited by the terms of such or any other class or series, the
number of shares of any class or series may be decreased by the Board of
Directors in connection with any classification or reclassification of unissued
shares and the number of shares of such class or series may be increased by the
Board of Directors in connection with any such classification or
reclassification, and any shares of any
 
 
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class or series which have been redeemed, purchased, otherwise acquired or
converted into shares of Common Stock or any other class or series shall become
part of the authorized capital stock and be subject to classification and
reclassification as provided in this sub-paragraph;
 
            (2) Whether or not and, if so, the rates, amount and times at which,
and the conditions under which, dividends shall be payable on shares of such
class or series, whether any such dividends shall rank senior or junior to or on
a parity with the dividends payable on any other class or series of stock, and
the status of any such dividends as cumulative, cumulative to a limited extent,
or non-cumulative and as participating or non-participating;
 
            (3) Whether or not shares of such class or series shall have voting
rights, in addition to any voting rights provided by law and, if so, the terms
of such voting rights;
 
            (4) Whether or not shares of such class or series shall have
conversion or exchange privileges and, if so, the terms and conditions thereof,
including provision for adjustment of the conversion or exchange rate in such
events or at such times as the Board of Directors shall determine;
 
            (5) Whether or not shares of such class or series shall be subject
to redemption and, if so, the terms and conditions of such redemption, including
the date or dates upon or after which they shall be redeemable and the amount
per share payable in case of redemption, which amount may vary under different
conditions and at different redemption dates; and whether or not there shall be
any sinking fund or purchase account in respect thereof, and if so, the terms
thereof;
 
            (6) The rights of the holders of shares of such class or series upon
the liquidation, dissolution or winding up of the affairs of, or upon any
distribution of assets of, the Corporation, which rights may vary depending upon
whether such liquidation, dissolution or winding up is voluntary or involuntary
and, if voluntary, may vary at different dates, and whether such rights shall
rank senior or junior to or on a parity with such rights of any other class of
series of stock;
 
            (7) Whether or not there shall be any limitations applicable, while
shares of such class or series are outstanding, upon the payment of dividends or
making of distributions on, or the acquisition of, or the use of moneys for
purchase or redemption of, any stock of the Corporation, or upon any other
action of the Corporation, including action under this sub-paragraph, and, if
so, the terms and conditions thereof; and
 
            (8) Any other preferences, rights, restrictions, including
restrictions on transferability, and qualifications of shares of such class or
series, not inconsistent with law and the Articles of Incorporation, as they may
subsequently be amended.
 
         D. For the purposes hereof and of any Articles Supplementary to these
Articles of Incorporation providing for the classification or reclassification
of any shares of capital stock or of any other charter document of the
Corporation (unless otherwise provided in any such articles or documents), any
class or series of stock of the Corporation shall be deemed to rank:
 
 
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            (1) prior to another class or series either as to dividends or upon
liquidation, if the holders of such class or series shall be entitled to the
receipt of dividends or of amounts distributable on liquidation, dissolution or
winding up, as the case may be, in preference or priority to holders of such
other class or series;
 
            (2) on a parity with another class or series either as to dividends
or upon liquidation, whether or not the dividend rates, dividend payment dates
or redemption or liquidation price per share thereof be different from those of
such others, if the holders of such class or series of stock shall be entitled
to receipt of dividends or amounts distributable upon liquidation, dissolution
or winding up, as the case may be, in proportion to their respective dividend
rates or redemption or liquidation prices, without preference or priority over
the holders of such other class or series; and
 
            (3) junior to another class or series either as to dividends or upon
liquidation, if the rights of the holders of such class or series shall be
subject or subordinate to the rights of the holders of such other class or
series in respect of the receipt of dividends or the amounts distributable upon
liquidation, dissolution or winding up, as the case may be.
 
FIFTH: The number of directors of the Corporation shall be in accordance with
the provisions of the General Corporation Law of the State of Maryland and shall
initially be two (2); which number may be changed pursuant to the provisions set
forth in the Bylaws of the Corporation, but shall never be less than the number
permitted by law. The names of the Directors of the Corporation who shall act
until their successors are duly elected and qualify are: David Gladstone and
Terry Brubaker.
 
SIXTH: The following provisions are hereby adopted for the purpose of defining,
limiting and regulating the powers of the Corporation and of the Board of
Directors and stockholders:
 
         A. The Board of Directors is hereby empowered to authorize and direct
the issuance from time to time or at any time or times of the shares of stock of
the Corporation of any class, now or hereafter authorized, any options or
warrants for such shares permitted by law, any rights to subscribe to or
purchase such shares and any other securities of the Corporation, for such
consideration as the Board of Directors may deem advisable, subject to such
limitations and restrictions, if any, as may be set forth in the Bylaws of the
Corporation.
 
         B. Unless specifically provided elsewhere herein or in any Articles
Supplementary, no holder of shares of stock of the Corporation of any class, now
or hereafter authorized, shall have any preferential or preemptive right to
subscribe for, purchase or receive (i) any shares of stock of the Corporation of
any class, now or hereafter authorized, (ii) any options or warrants for such
shares permitted by law, (iii) any rights to subscribe to or purchase such
shares, or (iv) any other securities of the Corporation which may at any time or
from time to time be issued, sold or offered for sale by the Corporation.
 
         C. The Board of Directors is hereby empowered to adopt Bylaw provisions
with respect to the indemnification of officers, employees, agents and other
persons and to make such other indemnification as they shall deem expedient and
in the best interests of the Corporation, and to the extent permitted by law.
 
 
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         D. The provisions relating to certain special voting requirements set
forth in Title 3, Subtitle 6 of the General Corporation Law of the State of
Maryland and the provisions relating to certain control shares set forth in
Title 3, Subtitle 7 of the Maryland General Corporation Law shall be applicable
to the Corporation generally, but shall not be applicable pursuant to Sections
3-603(e)(iii) and 3-702(b) thereof, respectively, to the shares of the
Corporation which are owned by, or which shall in the future be issued to and
owned by, any employee stock ownership plan, incentive stock ownership plan or
other similar plan established now or in the future for the benefit of the
Corporation's directors, officers, employees or affiliates, and, without
limiting the foregoing, none of such shares owned by any such plan shall, for
purposes of such subtitles, be aggregated with any shares owned individually by
any beneficiaries of any such plan.
 
         E. (1) The Board of Directors is hereby authorized to make, amend,
alter, repeal or rescind the Bylaws of the Corporation; PROVIDED, HOWEVER, that
if any provision of the Bylaws requires more than a majority of the members of
the Board of Directors to provide a waiver in connection with, or to consent or
approve an action or omission, then the Board of Directors may only amend,
alter, repeal or rescind such provision with the affirmative vote of that
percentage of directors that would have been required to provide such waiver,
consent or approval.
 
            (2) The holders of 75% of the capital stock of the Corporation,
voting together as a single class is hereby authorized to make, amend, alter,
repeal or rescind the Bylaws of the Corporation; PROVIDED, HOWEVER, that if any
provision of the Bylaws requires more than the holders 75% of the capital stock
of the Corporation to provide a waiver in connection with, or to consent or
approve an action or omission, then the stockholders of the Corporation may only
amend, alter, repeal or rescind such provision with the affirmative vote of that
percentage of stockholders that would have been required to provide such waiver,
consent or approval.
 
         F. The Corporation reserves the right to amend these Articles of
Incorporation in any way which alters the contract rights, as expressly set
forth in these Articles of Incorporation, of any outstanding stock of the
Corporation and substantially adversely affects any of the rights of any of the
holders of any outstanding stock of the Corporation; PROVIDED, HOWEVER, that if
the Maryland General Corporation Law or these Articles of Incorporation require
more than a majority of the Board of Directors, more a than majority of the
capital stock of the Corporation voting together as a single class, or more than
a majority of both the directors and the stockholders to provide a waiver in
connection with, or to consent or approve an action or omission, then the Board
of Directors or stockholders of the Corporation, or both, as applicable, may
only amend, alter, repeal or rescind such provision with the affirmative vote of
that percentage of the Board of Directors or stockholders, or both, as
applicable, that would have been required to provide such waiver, consent or
approval.
 
SEVENTH:
 
         A. The Corporation shall indemnify (i) its directors and officers,
whether serving the Corporation or at its request any other entity, to the full
extent permitted by the General Laws of the State of Maryland now or hereafter
in force (as limited by the Investment Company Act of 1940, as amended, or by
any valid rule, regulation or order of Securities and Exchange Commission
thereunder, in each case as now or hereafter in force (the "1940 ACT")),
including the advance of expenses under the procedures and to the full extent
permitted by law and (ii)
 
 
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other employees and agents to such extent as shall be authorized by the Board of
Directors or the Corporation's Bylaws and be permitted by law. The foregoing
rights of indemnification shall not be exclusive of any other rights to which
those seeking indemnification may be entitled. The Board of Directors may take
such action as is necessary to carry out these indemnification provisions and is
expressly empowered to adopt, approve and amend from time to time such bylaws,
resolutions or contracts implementing such provisions or such further
indemnification arrangements as may be permitted by law. No amendment to or
repeal of this Article SEVENTH shall limit or eliminate the right to
indemnification provided hereunder with respect to acts or omissions occurring
prior to such amendment or repeal.
 
         B. To the fullest extent permitted by Maryland statutory or decisional
law, as amended or interpreted and as limited by the 1940 Act, no director or
officer of this Corporation shall be personally liable to the Corporation or its
stockholders for money damages. No amendment to or repeal of this Article
SEVENTH shall limit or eliminate the benefits provided to directors and officers
under this provision with respect to any act or omission which occurred prior to
such amendment or repeal.
 
EIGHTH:  The duration of the Corporation shall be perpetual.
 
 
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         IN WITNESS WHEREOF, I, Terry Lee Brubaker, President of Gladstone
Capital Corporation, hereby acknowledge on behalf of Gladstone Capital
Corporation that the foregoing Articles of Amendment and Restatement to the
Articles of Incorporation are the corporate act of said corporation under the
penalties of perjury this _____ day of _______, 2001.
 
 
 
                                           ----------------------------------
                                           Terry L. Brubaker, President