Exhibit 10.31
FIRST AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT
     THIS FIRST AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT (this
“Amendment”) is made as of the 29th day of June, 2006, by and among GLADSTONE
COMMERCIAL CORPORATION and GLADSTONE COMMERCIAL LIMITED PARTNERSHIP, as
Borrowers (together, the “Borrowers”), the GUARANTORS signatory hereto, as
guarantors (collectively, the “Guarantors”), and BRANCH BANKING AND TRUST
COMPANY, as Administrative Agent (the “Administrative Agent”) and a Bank, FIRST
HORIZON BANK, as a Bank (“First Horizon”), and COMPASS BANK, as a Bank
(“Compass”, and together with the Administrative Agent and First Horizon, the
“Banks”).
R E C I T A L S:
     The Borrowers, the Guarantors, the Administrative Agent and the Banks have
entered into a certain Amended and Restated Credit Agreement dated as of
March 17, 2006 (the “Credit Agreement”). Capitalized terms used in this
Amendment which are not otherwise defined in this Amendment shall have the
respective meanings assigned to them in the Credit Agreement.
     The Borrowers have requested the Administrative Agent and the Banks to
amend the Credit Agreement and the Note payable to First Horizon to modify
certain provisions thereof:
     (i) to exercise $7,500,000 of the $32,500,000 “accordion”, thereby
increasing the aggregate Commitments from $67,500,000 to $75,000,000, by
increasing First Horizon’s commitment by $7,500,000,
     (ii) to amend certain definitions in the Credit Agreement in order to
provide that interest payable on Trust Preferred Debt be treated as interest for
purposes of the Debt Service Coverage Ratio covenant (Section 5.3) rather than
Restricted Payments for purposes of the Restricted Payment covenant
(Section 5.6), and
     (iii) to amend certain schedules to reflect that notes evidencing Mortgage
Receivables are now held by Branch Banking and Trust Company of Virginia, as
custodian pursuant to that certain Custodial Service Agreement and Fee Schedule
dated as of April 27, 2006 (the “Custodial Service Agreement”) by and between
Branch Banking and Trust Company of Virginia, as Custodian and Gladstone
Commercial Corporation.
     The Administrative Agent, the Banks, the Borrowers and the Guarantors
desire to amend the Credit Agreement and the Note payable to First Horizon upon
the terms and conditions hereinafter set forth.
     NOW, THEREFORE, in consideration of the Recitals and the mutual promises
contained herein and for other good and valuable consideration, the receipt and
sufficiency of which are

 

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hereby acknowledged, the Borrowers, the Guarantors, the Administrative Agent and
the Banks, intending to be legally bound hereby, agree as follows:
     SECTION 1. Recitals. The Recitals are incorporated herein by reference and
shall be deemed to be a part of this Amendment.
     SECTION 2. Increase in First Horizon Commitment; Reduction in “Accordion”,
Amendment to Section 2.1(B), New Note. Pursuant to Section 2.1(B) of the Credit
Agreement, First Horizon’s commitment is hereby increased by $7,500,000, thereby
increasing the total Commitments from $67,500,000 to $75,000,000 and reducing
the remaining “accordion” in Section 2.1(B) from $32,500,000 to $25,000,000, and
Section 2.1(B) is hereby so amended to reduce the amount in the third line
thereof from $32,500,000 to $25,000,000. The new Commitment of First Horizon
shall be as set forth opposite the name of First Horizon on the signature pages
hereof and the Borrowers shall execute and deliver a new Note identical to the
existing Note but reflecting such increased Commitment and First Horizon shall
return the existing Note to the Company for cancellation. The Administrative
Agent and Compass, by their respective signatures hereto, acknowledge the
increased Commitment of First Horizon.
     SECTION 3. Further Amendments. The Credit Agreement is hereby further
amended as set forth in this Section 3.
     SECTION 3.01. Amendment of Definition of Consolidated Interest Expense. The
last line of the definition of “Consolidated Interest Expense” is hereby amended
to delete the phrase “but excluding interest with respect to Trust Preferred
Debt” and substitute therefor the phrase “including without limitation interest
with respect to Trust Preferred Debt”.
     SECTION 3.02. Amendment of Definition of Restricted Payment. The definition
of “Restricted Payment” is hereby amended (a) to delete clause (iii) thereof in
its entirety, (b) to insert the word “or” at the end of clause (ii) and (c) to
delete the word “or” immediately preceding (iii) and substitute a period
therefor.
     SECTION 3.03. Amendment of Schedules II, III, 2.14 and 4.26. In order to
correctly reflect the changed location of Mortgage Receivable notes pursuant to
the terms of the Custodial Service Agreement, Schedules II, III, 2.14 and 4.26
to the Credit Agreement are each hereby amended and restated to read in its
entirety as set forth on Schedules II, III, 2.14 and 4.26 hereto, respectively.
     SECTION 4. Conditions to Effectiveness. The effectiveness of this Amendment
and the obligations of the Administrative Agent and the Banks hereunder are
subject to the following conditions, unless the Required Banks waive such
conditions:
          (a) receipt by the Administrative Agent from each of the parties
hereto of a duly executed counterpart of this Amendment signed by such party;
          (b) the fact that the representations and warranties of the Borrower
contained in Section 6 of this Amendment shall be true on and as of the date
hereof;

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          (c) receipt by First Horizon of the new Note reflecting the new
Commitment level of First Horizon; and
          (d) receipt by Administrative Agent and the Banks of all costs, fees
and expenses payable to Administrative Agent or any Bank, to the extent then
due.
     SECTION 5. No Other Amendment or Waiver. Except for the amendments set
forth above, the text of the Credit Agreement shall remain unchanged and in full
force and effect. This Amendment is not intended to effect, nor shall it be
construed as, a novation. The Credit Agreement and this Amendment shall be
construed together as a single agreement. Nothing herein contained shall waive,
annul, vary or affect any provision, condition, covenant or agreement contained
in the Credit Agreement, except as herein amended, nor affect nor impair any
rights, powers or remedies under the Credit Agreement as hereby amended. The
Banks and the Administrative Agent do hereby reserve all of their rights and
remedies against all parties who may be or may hereafter become secondarily
liable for the repayment of the Obligations. The Borrower promises and agrees to
perform all of the requirements, conditions, agreements and obligations under
the terms of the Credit Agreement, as heretofore and hereby amended, the Credit
Agreement, as amended, and the other Loan Documents being hereby ratified and
affirmed. The Borrower hereby expressly agrees that the Credit Agreement, as
amended, and the other Loan Documents are in full force and effect.
     SECTION 6. Representations and Warranties. The Borrowers and the Guarantors
hereby represent and warrant to the Administrative Agent and each of the Banks
as follows:
          (a) No Default or Event of Default, nor any act, event, condition or
circumstance which with the passage of time or the giving of notice, or both,
would constitute an Event of Default, under the Credit Agreement or any other
Loan Document has occurred and is continuing.
          (b) The Borrowers and the Guarantors each have the power and authority
to enter into this Amendment and the new Note and to do all acts and things as
are required or contemplated hereunder or thereunder to be done, observed and
performed by them.
          (c) Each of this Amendment and the new Note has been duly authorized,
validly executed and delivered by one or more authorized officers or managers of
the Borrowers and the Guarantors and constitutes the legal, valid and binding
obligation of the Borrowers and the Guarantors enforceable against each of them
in accordance with its terms, provided that such enforceability is subject to
general principles of equity.
          (d) The execution and delivery of this Amendment and the new Note and
the performance by the Borrowers and the Guarantors hereunder and thereunder do
not and will not require the consent or approval of any regulatory authority or
governmental authority or agency having jurisdiction over the Borrowers or the
Guarantors nor be in contravention of or in conflict with the articles of
incorporation, bylaws, operating agreement or other organizational documents of
the Borrower or the Guarantors or the provision of any statute, or any judgment,
order or indenture, instrument, agreement or undertaking, to which the Borrowers
or the

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Guarantors is party or by which the assets or properties of the Borrower or the
Guarantors are or may become bound.
     SECTION 7. Counterparts. This Amendment may be executed in multiple
counterparts, each of which shall be deemed to be an original and all of which,
taken together, shall constitute one and the same agreement.
     SECTION 8. Governing Law. This Amendment shall be construed in accordance
with and governed by the laws of the State of North Carolina.
     SECTION 9. Effective Date. This Amendment shall be effective as of the date
hereof.
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