EXHIBIT 10.2
DEALER MANAGER OPERATING AGREEMENT
     THIS DEALER MANAGER OPERATING AGREEMENT (the “Agreement”) is entered into
and effective as of November 19, 2009 (the “Effective Date”), by and between
Gladstone Commercial Corporation, a Maryland corporation (the “Company”), and
Halcyon Capital Markets, LLC, a Massachusetts limited liability company (the
“Dealer Manager”).
     WHEREAS, the Company is offering for sale in a private placement offering
(the “Offering”) up to 3,333,333 shares of the Company’s Senior Common Stock
(the “SCS Shares”) pursuant to a Confidential Private Placement Memorandum of
the Company dated November 19, 2009; and
     WHEREAS, pursuant to that certain Dealer Manager Agreement dated
November 19, 2009, the Dealer Manager has agreed to act as the dealer manager
for the Offering and the Company has agreed to pay certain commissions and fees
to the Dealer Manager for such services; and
     WHEREAS, the Company has agreed to advance funds to cover certain expenses
to enable the Dealer Manager to commence sales efforts in connection with the
Offering; and
     WHEREAS, the parties hereto desire to set forth their understanding of the
advancement of these expenses pursuant to the terms and conditions of this
Agreement.
     NOW, THEREFORE, in consideration of the premises and mutual covenants and
conditions contained in this Agreement and other good and valuable
consideration, the receipt, adequacy and sufficiency of which are hereby
acknowledged, the parties agree as follows:
     1. Budget. Attached as Exhibit A hereto is the initial budget of revenues
and expenses associated with the Offering (the “Budget”) agreed upon by the
Company and the Dealer Manager. The Dealer Manager agrees to use its best
efforts to utilize funds advanced by the Company pursuant to this Agreement in
accordance with the Budget. Material exceptions to the Budget must be approved
by the Company in advance. The Budget may be revised to adapt to changes in
market conditions or marketing plans upon the mutual agreement of the parties.
     2. Expense Advances. Subject to the terms and conditions below, the Company
hereby agrees to advance to the Dealer Manager a Mutually Agreed upon amount
each month based upon the budgeted “Projected Dealer Manager Cash Flow” line
item contained in the Budget. “Mutually Agreed” means that the Dealer Manager
and the Company must agree on the amount to be disbursed before the end of each
month and in order to do that the Dealer Manager will submit a projected use of
money from the prior disbursement by the 23rd day of the month based on the
actual spending and the projected spending. The Mutually Agreed upon amount to
be advanced by the Company for each calendar month shall be paid to the Dealer
Manager by wire transfer or other immediately available funds at least three
(3) days prior to the first day of such month; provided, that the amount
advanced for the first calendar month shall be payable after the Dealer Manager
furnishes satisfactory evidence to the Company of the admission of Dan Werry as
a member of the Dealer Manager. Expense advances advanced to the Dealer Manager
will be used only for the items set out in the Budget and for the amounts set
out in the Budget.
     3. Reimbursement of Advances. The Company may apply the portion of the
dealer manager fee (the “Halcyon DM Fee”) attributable to the Dealer Manager
(i.e., net of any marketing or

 

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other similar fees required to be paid to participating broker-dealers) against
funds previously advanced by the Company to the Dealer Manager in any given
month. The Halcyon DM Fee shall not be paid by the Company to the Dealer Manager
until the Projected Dealer Manager Cash Flow—Total Cumulative on the Budget has
reached positive and remains positive for two consecutive months. The maximum
total amount to be paid by the Company to the Dealer Manager from all sources
(not including the 7% commissions) shall not exceed 3.75% (including the 1% that
may be paid to participating broker-dealers as marketing fees) of the Gross
Offering Proceeds, meaning all SCS Shares sold by the Dealer Manager multiplied
by $15, except for SCS Shares sold to an Institution without the Company’s prior
written approval in accordance with the Dealer Manager Agreement. To the extent
that the maximum total amount paid to the Dealer Manager combined with expenses
advanced by the Company under this Agreement exceeds 3.75% (including any
amounts paid to broker-dealers by the Company) of the Gross Offering Proceeds,
the Dealer Manager shall reimburse the Company for such excess within five
(5) days of the ending of the Offering per Section 7 below.
     4. Monthly Reports. The Dealer Manager shall provide to the Company for
each calendar month, no later than the fifth day of the subsequent calendar
month, a report of actual expenses and sales pursuant to the Offering, in
sufficient detail to permit the Company to evaluate the performance of the
Dealer Manager in relation to the Budget. In addition the Dealer Manager shall
provide the following reports:
          (a) Weekly or daily on key accounts regarding the signing of the sales
agreement.
          (b) Weekly or daily on wholesalers regarding the sale of SCS Shares.
          (c) Any and all other reasonable documentation requested by the
Company.
     5. New Sponsor Approval. The Dealer Manager agrees that it shall not act as
dealer manager or provide similar services for any new sponsor of any private or
public offering without the prior written approval of the Company, which
approval shall not be unreasonably withheld. When determining whether to grant
such approval, the Company shall primarily consider the following factors:
(a) whether the proposed new sponsor will be offering directly competing
products (e.g., single-tenant, net lease properties); (b) whether there is a
reasonable probability that the credibility or reputation of the proposed new
sponsor could be detrimental to the goodwill of the Company and its affiliates,
and (c) if adding another offering would adversely distract the employees of the
broker-dealers from the sale of the SCS Shares.
     6. State Registrations. The Dealer Manager shall be registered as a
broker-dealer in every state that it intends to sell in within thirty (30) days
after the Effective Date, and shall not make any sales of SCS Shares unless and
until all such registrations are completed.
     7. Term and Termination.
          (a) Term. Unless earlier terminated as provided below, the term of
this Agreement (the “Term”) shall commence on the Effective Date and shall
terminate on the earlier to occur of (i) the effective date of the termination
of the Offering, (ii) the effective date of the termination of the Dealer
Manager Agreement, or (iii) a default under this Agreement.
          (b) Termination by the Company. Notwithstanding anything in this
Agreement or the Dealer Manager Agreement to the contrary, the Company may
terminate this Agreement in any of the following circumstances: (i) after the
earlier to occur of 120 days following the receipt by the Dealer

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Manager of the Offering’s third-party due diligence report and FINRA-compliant
marketing support materials or the date on which the Company has advanced
$500,000 to the Dealer Manager under this Agreement; (ii) in the event that the
Dealer Manager has not fully complied with its registration obligations pursuant
to Section 6 above; (iii) if the Investment Committee of the Company determines,
in its sole and absolute discretion, that market conditions or the business of
the Company may be adversely affected by continuing to offer the SCS Shares in
the Offering; or (iv) if the Dealer Manager does not furnish satisfactory
evidence of the admission of Dan Werry as a member of the Dealer Manager within
five (5) business days after the Effective Date.
          (c) Termination by the Dealer Manager. Notwithstanding anything in
this Agreement or the Dealer Manager Agreement to the contrary, the Dealer
Manager may terminate this Agreement in any of the following circumstances:
(i) the Company fails to make any payment to the Dealer Manager pursuant to this
Agreement within fifteen (15) days after such payment is due; (ii) the Company
or its representatives frustrate sales and marketing activities by (A) refusing
to participate in a sales or marketing event as reasonably requested by the
Dealer Manager or (B) unreasonably delaying the approval or production of
necessary support materials, third-party due diligence reports, or the execution
and maintenance of broker-dealer selling agreements; or (iii) the Company
sustains significant material damage to Company goodwill such that it becomes
highly unlikely that the Dealer Manager can sell the Company’s shares.
          (d) Effect of Termination. Upon a termination by the Company or the
Dealer Manager pursuant to subsection (b) or (c): (i) neither party shall have
any further obligations other than as specified under this Agreement; and
(ii) the parties shall reasonably cooperate to preserve and minimize any
disruption to relationships developed by the Dealer Manager with the
participating broker-dealers listed on Exhibit B in connection with the
Offering.
     8. Potential Future Additional Affiliated Dealer Manager. The Dealer
Manager understands, acknowledges and agrees that the Dealer Manager has been
appointed as dealer manager of the Offering of the SCS Shares on a non-exclusive
basis and that the Company may, in the future, enter into a separate dealer
manager agreement with Circadian Partners, LLC, an affiliate of the Company’s
adviser and a member firm of FINRA, for the sale of the SCS Shares on the same
or similar terms set forth in the Dealer Manager Agreement.
     9. Miscellaneous.
          (a) Assignment. This Agreement may not be assigned by either party,
except with the prior written consent of the other party. This Agreement shall
be binding upon the parties hereto, their heirs, legal representatives,
successors and permitted assigns.
          (b) Entire Agreement; Amendment. Other than the Dealer Manager
Agreement, which governs the relationship of the Dealer Manager and the Company
in connection with the Offering, this Agreement constitutes the complete and
exclusive statement of the agreement between the parties relating to the subject
matter hereof and supersedes all prior written and oral statements or agreements
with respect to such subject matter. This Agreement may be amended or modified
only in a writing signed by the parties.
          (c) Applicable Law and Venue. This Agreement was executed and
delivered in, and its validity, interpretation and construction shall be
governed by, the laws of the State of Virginia. The parties hereby agree that
venue for any action brought in connection with this Agreement shall lie
exclusively in McLean, Virginia.

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          (d) Counterparts. This Agreement may be executed in any number of
counterparts. Each counterpart, when executed and delivered, shall be an
original contract, but all counterparts, when taken together, shall constitute
one and the same agreement. Facsimile and electronic executions and deliveries
shall have the full force and effect of original signatures.

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          IN WITNESS WHEREOF, the undersigned have executed this Agreement,
effective as of the date first written above.

           
COMPANY:

Gladstone Commercial Corporation
      By:         Name:         Title:          
DEALER MANAGER:

Halcyon Capital Markets, LLC
      By:         Name:         Title:        

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Exhibit A
Budget
[See attached]

 

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Exhibit A
Gladstone $50M Reg D Offering

                                                                               
                                                Nov     Dec     Jan     Feb    
March     April     May     June     July     Aug     Sept     Oct              
        2009     2009     2009     2010     2010     2010     2010     2010    
2010     2010     2010     2010                       Month 1     Month 2    
Month 3     Month 4     Month 5     Month 6     Month 7     Month 8     Month 9
    Month 10     Month 11     Month 12       Total          
Broker Dealer Expenses:
                                                                               
                                 
 
                                                                               
                                 
Wholesalers Payroll
                                                                               
                                 
 
    Totals       14,640       14,640       21,840       21,840       21,840    
  21,840       39,840       39,840       39,840       39,840       39,840      
39,840         355,680  
 
                                                                               
                                 
Operations Payroll
                                                                               
                                 
 
    Totals       27,552       27,552       27,552       32,779       34,912    
  34,912       37,952       37,952       37,952       37,952       37,952      
37,952         412,971  
 
                                                                               
                                 
BD Sponsorship
                                                                               
                                 
 
    Totals       —       —       —       30,000       30,000       —      
105,000       22,500       22,500       7,500       7,500       —        
225,000  
 
                                                                               
                                 
Other Admin
                                                                               
                                 
 
    Totals       10,150       300       300       300       300       300      
300       300       300       300       300       300         13,450  
 
                                                                               
                                 
Other Marketing
                                                                               
                                 
 
    Totals       12,750       13,300       11,500       11,909       21,134    
  34,467       31,617       37,617       32,742       29,742       29,742      
—         266,520  
 
                                                                               
                                 
Start-Up
                                                                               
                                 
 
    Totals       116       10,000       5,750       1,300       800       663  
    —       —       —       —       —       —         18,629  
 
                                                                               
                                 
Other O/H
                                                                               
                                 
 
    Totals       7,300       6,800       6,800       6,800       6,800      
6,800       6,800       6,800       6,800       6,800       6,800       6,800  
      82,100  
 
                                                                               
                                 
Dues/Subscriptions
                                                                               
                                         
 
    Totals       —       650       —       —       —       —       —       —    
  —       —       —       —         650          
 
                                                                               
                                 
Total Broker/Dealer Expenses (Monthly)
            72,508       73,242       73,742       104,928       115,786      
98,982       221,509       145,009       140,134       122,134       122,134    
  84,892         1,375,000          
Broker Dealer Income:
                                                                               
                                 
Equity First Year — INPUT
    50                                                                          
                                                                             
 
                                                                               
                                         
Equity Raised
            —       —       —       1,250,000       2,500,000       6,250,000  
    6,250,000       6,250,000       6,250,000       6,250,000       6,250,000  
    8,750,000         50,000,000          
Halcyon DM Fee
    3.75 %     —       —       —       46,875       93,750       234,375      
234,375       234,375       234,375       234,375       234,375       328,125  
      1,875,000          
Cumulative Halcyon DM Fee
            —       —       —       46,875       140,625       375,000      
609,375       843,750       1,078,125       1,312,500       1,546,875      
1,875,000                    
Local BD Marketing Fees (1)
    1.00 %     —       —       —       (12,500 )     (25,000 )     (62,500 )    
(62,500 )     (62,500 )     (62,500 )     (62,500 )     (62,500 )     (87,500 )
      (500,000 )                                            
Commissions to Reg Reps in (2)
    7.00 %     —       —       —       87,500       175,000       437,500      
437,500       437,500       437,500       437,500       437,500       612,500  
      3,500,000                                              
Commissions Paid (2)
    7.00 %     —       —       —       (87,500 )     (175,000 )     (437,500 )  
  (437,500 )     (437,500 )     (437,500 )     (437,500 )     (437,500 )    
(612,500 )       (3,500,000 )        
 
                                                                               
                                 
Net Dealer Manager Income (Monthly)
            —       —       —       34,375       68,750       171,875      
171,875       171,875       171,875       171,875       171,875       240,625  
      1,375,000          
Total Cumulative
            —       —       —       34,375       103,125       275,000      
446,875       618,750       790,625       962,500       1,134,375      
1,375,000            
 
                                                                               
                                 
Projected Dealer Manager Cash Flow
            (72,508 )     (73,242 )     (73,742 )     (70,553 )     (47,036 )  
  72,893       (49,634 )     26,866       31,741       49,741       49,741      
155,733            
Total Cumulative
            (72,508 )     (145,750 )     (219,492 )     (290,045 )     (337,081
)     (264,188 )     (313,822 )     (286,956 )     (255,215 )     (205,474 )    
(155,733 )     0            
 
                                                                               
                                 
Issuer/Sponsor (GOOD) Costs:
                                                                               
                                 
 
                                                                               
                                                                               
                                                                   
Total GOOD Costs
            228,500       77,083       90,833       35,833       73,750      
34,500       23,000       67,750       31,500       21,500       65,750      
29,500         779,500  
Aggregate Counter
            228,500       305,583       396,417       432,250       506,000    
  540,500       563,500       631,250       662,750       684,250       750,000
      779,500            
 
                                                                               
                                 
GOOD Org & Off Income
                                                                               
                                         
 
                                                                               
                                 
Re-Couped Expense (50)
    1.56 %     —       —       —       19,487       38,975       97,437      
97,437       97,437       97,437       97,437       97,437       136,412        
779,500  
 
                                                                               
                                 
Advisor/GLDMGT Income
                                                                               
                                         
Total GLDMGT Income
            —       —       —       —       —       93,750       —       —      
269,531       —       —       468,750         832,031  
 
                                                                               
                                 
Combined Totals
                                                                               
                                 
 
                                                                               
                                 
Broker/Dealer
                                                                               
                                 
FM Broker/Dealer Expenses
            72,508       73,242       73,742       104,928       115,786      
98,982       221,509       145,009       140,134       122,134       122,134    
  84,892         1,375,000  
FM Broker/Dealer Income
            —       —       —       34,375       68,750       171,875      
171,875       171,875       171,875       171,875       171,875       240,625  
      1,375,000          
Broker/Dealer Total
            (72,508 )     (73,242 )     (73,742 )     (70,553 )     (47,036 )  
  72,893       (49,634 )     26,866       31,741       49,741       49,741      
155,733         0          
 
                                                                               
                                 
GOOD
                                                                               
                                 
GOOD Costs
            228,500       77,083       90,833       35,833       73,750      
34,500       23,000       67,750       31,500       21,500       65,750      
29,500         779,500  
GOOD Income
            —       —       —       19,487       38,975       97,437      
97,437       97,437       97,437       97,437       97,437       136,412        
779,500          
GOOD Total
            (228,500 )     (77,083 )     (90,833 )     (16,346 )     (34,775 )  
  62,937       74,437       29,687       65,937       75,937       31,687      
106,912         —          
 
                                                                               
                                 
GOOD & BD Cash Flow- Monthly
            (301,008 )     (150,325 )     (164,575 )     (86,898 )     (81,811 )
    135,830       24,803       56,553       97,678       125,678       81,428  
    262,645                    
GOOD & BD Cash Flow- Cumulative
            (301,008 )     (451,333 )     (615,909 )     (702,807 )     (784,618
)     (648,788 )     (623,984 )     (567,431 )     (469,752 )     (344,074 )    
(262,645 )     0         0          
 
                                                                               
                                 
GLD MGT
                                                                               
                                 
GLDMGT Expenses
                                                                               
                                 
GLDMGT Income
            —       —       —       —       —       93,750       —       —      
269,531       —       —       468,750         832,031          
GLDMGT Total
            —       —       —       —       —       93,750       —       —      
269,531       —       —       468,750         832,031          

 

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Exhibit B
Participating Broker-Dealers
[See attached]