**Exhibit 10.1**
**PROMISSORY NOTE**

**LOAN TERMS TABLE**
**Lender**: KeyBank National Association, a national banking association, its successors andassigns
**Loan No**.: 10026291
**Lender’s Address**: 911 Main Street, Suite #1500, Kansas City, Missouri 64105
**Lender’s Facsimile No.**: (816) 221-8848
**Borrower**: CMI04 CANTON NC LLC, a Delaware limited liability company
**Borrower’s Address**: c/o Gladstone Commercial Corporation, 1616 Anderson Road, SecondFloor, McLean, Virginia, 22102
**Borrower’s Facsimile No.**: (973) 993-1954
**Borrower’s Tax Identification Number**: 91-2198700
**Property**: Real property located at 171 Great Oak Drive, Canton, North Carolina 28716, inHaywood County, North Carolina and certain personal property
**Note Date**: March 14, 2005
**Original Principal Amount**: $3,150,000.00
**Maturity Date**: April 1, 2030
**Anticipated Repayment Date**: April 1, 2010
**Interest Rate**: See Section 25.2
**Initial Interest Payment Per Diem**: $553.88
**Monthly Payment**: $ 20,935.63
**Monthly Payment Date**: May 1, 2005 and on the first day of each successive month thereafter
**Financial Statement Reporting Deposit**: $130.00
     1. **Loan Amount and Rate.**FOR VALUE RECEIVED, Borrower promises to pay to the order of Lender,the Original Principal Amount (or so much thereof as is outstanding from time to time, which isreferred to herein as the “**Outstanding Principal Balance**” or “**OPB**”), with interest on the unpaidOPB from the date of disbursement of the Loan (as hereinafter defined) evidenced by this PromissoryNote (“**Note**”) at the Interest Rate. Interest shall be calculated based on the daily rate which isproduced assuming a three hundred sixty (360) day year multiplied by the actual number of dayselapsed. The loan evidenced by this Note will sometimes hereinafter be called the “**Loan**”. Theabove Loan Terms Table (hereinafter referred to as the “**Table**”) is a part of the Note and all termsused in this Note that are defined in the Table shall have the meanings set forth therein.
     2. **Principal and Interest Payments.**Payments of principal and interest shall be made asfollows:
     (a) An interest payment on the date of disbursement of the Loan proceeds in an amountcalculated by multiplying the Initial Interest Payment Per Diem by the number of daysfrom (and including) the date of the disbursement of the Loan proceeds through the last day of thecalendar month in which the disbursement was made;
 

 

     (b) A Monthly Payment on each Monthly Payment Date until the Maturity Date, each of suchpayments to be applied: (i) to the payment of interest computed at the Interest Rate; and (ii) thebalance applied toward the reduction of the principal balance of the Loan; and
     (c) If not sooner paid, the balance of the principal amount of the Loan, all unpaid interestthereon, and all other amounts owed to Lender pursuant to this Note or any other Loan Document (ashereinafter defined) or otherwise in connection with the Loan or the security for the Loan shall bedue and payable on the Maturity Date.
     3. **Security for Note**. This Note is secured by a first deed of trust, mortgage, or deed tosecure debt (which is herein called the “**Security Instrument**”) encumbering the Property. ThisNote, the Security Instrument, and all other documents and instruments existing now or after thedate hereof that evidence, secure or otherwise relate to the Loan, including any assignments ofleases and rents, other assignments, security agreements, financing statements, guaranties,indemnity agreements (including environmental indemnity agreements), letters of credit, orescrow/holdback or similar agreements or arrangements, together with all amendments, modifications,substitutions or replacements thereof, are sometimes herein collectively referred to as the “**LoanDocuments**” or individually as a “**Loan Document**”. All amounts that are now or in the future becomedue and payable under this Note, the Security Instrument, or any other Loan Document, including anyPrepayment Consideration (as hereinafter defined) and all applicable expenses, costs, charges, andfees, will be referred to herein as the “**Debt**.” The remedies of Lender as provided in this Note,any other Loan Document, or under applicable law shall be cumulative and concurrent, may be pursuedsingularly, successively, or together at the discretion of Lender, and may be exercised as often asan occasion shall occur. The failure to exercise any right or remedy shall not be construed as awaiver or release of the right or remedy respecting the same or any subsequent default.
     4. **Financial Statement Reporting Deposit; Rebate of Deposit.**In order to further protect thecollateral for the Loan and to secure payment thereof, in addition to and concurrently with eachMonthly Payment, Borrower shall also pay to Lender a constant monthly amount equal to the FinancialStatement Reporting Deposit. On the first day of the fourteenth (14th) month following the date ofthe initial disbursement of funds under this Note (the “**Disbursement Date**”), and on an annual basisthereafter during the term of this Note, Lender shall remit to Borrower a portion of the FinancialStatement Reporting Deposit then held by Lender in an amount equal to the aggregate amount of theFinancial Statement Reporting Deposit actually received by Lender during the twelve (12) monthperiod ending upon the immediately prior annual anniversary of the Disbursement Date (the “**AnnualCompliance Period**”) provided that no Event of Default (as hereinafter defined), including anyfailure by Borrower to strictly comply with the financial reporting requirements set forth in theSecurity Instrument, is currently existing or has occurred in the Annual Compliance Period.
     5. **Payments.**All amounts payable hereunder shall be payable in lawful money of the UnitedStates of America to Lender at Lender’s Address or such other place as the holder hereof maydesignate in writing. Each payment made hereunder shall be made in immediately
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available funds and must state the Borrower’s Loan Number. If any payment of principal or intereston this Note is due on a day other than a Business Day (as hereinafter defined), such payment shallbe made on the next succeeding Business Day. Any payment on this Note received after 2:00 o’clockp.m. local time at the place then designated as the place for receipt of payments hereunder shallbe deemed to have been made on the next succeeding Business Day. All amounts due under this Noteshall be payable without set off, counterclaim, or any other deduction whatsoever. All paymentsfrom Borrower to Lender following the occurrence of an Event of Default shall be applied in suchorder and manner as Lender elects in reduction of costs, expenses, charges, disbursements and feespayable by Borrower hereunder or under any other Loan Document, in reduction of interest due onunpaid principal, or in reduction of principal. Lender may, without notice to Borrower or anyother person, accept one or more partial payments of any sums due or past due hereunder from timeto time while an uncured Event of Default exists hereunder, after Lender accelerates theindebtedness evidenced hereby, and/or after Lender commences enforcement of its remedies under anyLoan Document or applicable law, without thereby waiving any Event of Default, rescinding anyacceleration, or waiving, delaying, or forbearing in the pursuit of any remedies under the LoanDocuments. Lender may endorse and deposit any check or other instrument tendered in connectionwith such a partial payment without thereby giving effect to or being bound by any languagepurporting to make acceptance of such instrument an accord and satisfaction of the indebtednessevidenced hereby. As used herein, the term “Business Day” shall mean a day upon which commercialbanks are not authorized or required by law to close in the city designated from time to time asthe place for receipt of payments hereunder.
     6. **Late Charge.**If any sum payable under this Note or any other Loan Document is not receivedby Lender by close of business on the fifth (5th) day after the date on which it was due, Borrowershall pay to Lender an amount (the “**Late Charge**”) equal to the lesser of (a) five percent (5%) ofthe full amount of such sum or (b) the maximum amount permitted by applicable law in order to helpdefray the expenses incurred by Lender in handling and processing such delinquent payment and tocompensate Lender for the loss of the use of such delinquent payment. Any such Late Charge shallbe secured by the Security Instrument and other Loan Documents. The collection of any Late Chargeshall be in addition to, and shall not constitute a waiver of or limitation of, a default or Eventof Default hereunder or a waiver of or limitation of any other rights or remedies that Lender maybe entitled to under any Loan Document or applicable law.
     7. **Default Rate.**Upon the occurrence of an Event of Default (including the failure ofBorrower to make full payment on the Maturity Date), Lender shall be entitled to receive andBorrower shall pay interest on the Outstanding Principal Balance at the rate of five percent (5%)per annum above the Interest Rate (“**Default Rate**”) but in no event greater than the maximum ratepermitted by applicable law. Interest shall accrue and be payable at the Default Rate from theoccurrence of an Event of Default until all Events of Default have been fully cured. Such accruedinterest shall be added to the Outstanding Principal Balance, and interest shall accrue thereon atthe Default Rate until fully paid. Such accrued interest shall be secured by the SecurityInstrument and other Loan Documents. Borrower agrees that Lender’s right to collect interest atthe Default Rate is given for the purpose of compensating Lender at reasonable amounts for Lender’sadded costs and expenses that occur as a result of Borrower’s default and that are difficult topredict in amount, such as increased general overhead, concentration of
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management resources on problem loans, and increased cost of funds. Lender and Borrower agree thatLender’s collection of interest at the Default Rate is not a fine or penalty, but is intended to beand shall be deemed to be reasonable compensation to Lender for increased costs and expenses thatLender will incur if there occurs an Event of Default hereunder. Collection of interest at theDefault Rate shall not be construed as an agreement or privilege to extend the Maturity Date or tolimit or impair any rights and remedies of Lender under any Loan Documents. If judgment is enteredon this Note, interest shall continue to accrue post-judgment at the greater of (a) the DefaultRate or (b) the applicable statutory judgment rate.
     8. **Origination, Administration, Enforcement, and Defense Expenses**. Borrower shall pay Lender,on demand, all Administration and Enforcement Expenses (as hereinafter defined) now or hereafterincurred by Lender, together with interest thereon at the Default Rate, from the date paid orincurred by Lender until such fees and expenses are paid by Borrower, whether or not an Event ofDefault or Default then exists. For the purpose of this Note, “**Administration and EnforcementExpenses**” shall mean all fees and expenses incurred at any time or from time to time by Lender,including legal (whether for the purpose of advice, negotiation, documentation, defense,enforcement or otherwise), accounting, financial advisory, auditing, rating agency, appraisal,valuation, title or title insurance, engineering, environmental, collection agency, or other expertor consulting or similar services, in connection with: (a) the origination of the Loan, includingthe negotiation and preparation of the Loan Documents and any amendments or modifications of theLoan or the Loan Documents, whether or not consummated; (b) the administration, servicing orenforcement of the Loan or the Loan Documents, including any request for interpretation ormodification of the Loan Documents or any matter related to the Loan or the servicing thereof(which shall include the consideration of any requests for consents, waivers, modifications,approvals, lease reviews or similar matters and any proposed transfer of the Property or anyinterest therein), (c) any litigation, contest, dispute, suit, arbitration, mediation, proceedingor action (whether instituted by or against Lender, including actions brought by or on behalf ofBorrower or Borrower’s bankruptcy estate or any indemnitor or guarantor of the Loan or any otherperson) in any way relating to the Loan or the Loan Documents including in connection with anybankruptcy, reorganization, insolvency, or receivership proceeding; (d) any attempt to enforce anyrights of Lender against Borrower or any other person that may be obligated to Lender by virtue ofany Loan Document or otherwise whether or not litigation is commenced in pursuance of such rights;and (e) protection, enforcement against, or liquidation of the Property or any other collateral forthe Loan, including any attempt to inspect, verify, preserve, restore, collect, sell, liquidate orotherwise dispose of or realize upon the Loan, the Property or any other collateral for the Loan.All Administration and Enforcement Expenses shall be additional Debt hereunder secured by theProperty, and may be funded, if Lender so elects, by Lender paying the same to the appropriatepersons and thus making an advance on Borrower’s behalf.
     9. **Prepayment; Defeasance.**
     (a) **Restrictions.**Voluntary prepayment of this Note is prohibited except during the lastninety (90) days of the term when prepayment may be made in whole, but not in part, without paymentof any Prepayment Consideration (as hereinafter defined), on any Monthly Payment Date.Notwithstanding anything contained in this Article 9 to the contrary, provided no Default (ashereinafter defined) or Event of Default has occurred, no Prepayment Consideration
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shall be due in connection with a complete or partial prepayment resulting from: (i) theapplication of insurance proceeds or condemnation awards pursuant to the Security Instrument; or(ii) changes in tax or debt credit laws as may be required pursuant to the Security Instrument, butBorrower shall be required to pay all other sums due hereunder together with all interest accruedthereon. Any such partial prepayments shall reduce the Outstanding Principal Balance, but shallnot reduce the amount of the Monthly Payment.
     (b) **Defeasance.**
          (i) Provided that as of the Release Date (as hereinafter defined) the Debt has not beenaccelerated, no Event of Default exists, and no event has occurred that with the passage of time,giving of notice, or modification or termination of the automatic stay of Section 362 of the UnitedStates Bankruptcy Code may become an Event of Default (“**Default**”), Borrower may cause the releaseof the Property from the lien of the Security Instrument and the other Loan Documents(“**Defeasance**”) on any Monthly Payment Date following the date that is two (2) years and fifteen(15) days after the “startup day” within the meaning of Section 860G(a)(9) of the Internal RevenueCode of 1986, as amended (together with any successor statute and the related Treasury DepartmentRegulations including temporary regulations, the “**Code**”) of any “real estate mortgage investmentconduit” within the meaning of Section 860D of the Code (“**REMIC**”) that holds this Note uponBorrower’s satisfaction of the following conditions:
     (A) Borrower shall provide Lender not less than thirty (30) days prior written noticespecifying a Monthly Payment Date (such Date, or any extended date upon which Borrower andLender may mutually agree is referred to herein as the “**Release Date**”) on which theDefeasance Collateral (as hereinafter defined) is to be delivered;
     (B) On the Release Date Borrower shall pay in full all accrued and unpaid interest andall other sums due under this Note and under the other Loan Documents up to the ReleaseDate, including all costs and expenses (including attorneys’ fees) incurred by Lender or itsservicers or other agent(s) or to or on behalf of any rating agencies or other third partiesin connection with such release and related transactions (including the review of theproposed Defeasance Collateral and the preparation of the Defeasance Security Agreement (ashereinafter defined) and related documentation), together with a defeasance processing feein an amount equal to one-half of one percent (0.5%) of the then Outstanding PrincipalBalance but in no event less than (A) $7,500 or greater than (B) $20,000; and
     (C) Borrower shall deliver the following, all of which must be satisfactory to Lender,at or prior to the release of the Property and substitution of the Defeasance Collateral:
          (1) Direct, non-callable and non-redeemable securities evidencing an obligation to payprincipal and interest in a full and timely manner that are direct obligations of the UnitedStates of America for the payment of which its full faith and credit is pledged (the“**Defeasance Collateral**”) in amounts sufficient to pay all scheduled principal and interestpayments required under this Note, which securities provide for payments prior, but as closeas possible, to the Business Day prior to each
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successive Monthly Payment Date occurring after the Release Date, with each such paymentbeing equal to or greater than the amount of the corresponding Monthly Payment required tobe made hereunder for the balance of the term hereof plus the amount required to be paid onthe Maturity Date (the “**Scheduled Defeasance Payments**”), each of which shall be dulyendorsed by the holder thereof as directed by Lender or accompanied by a written instrumentof transfer in form and substance satisfactory to Lender (including such instruments as maybe required by the depository institution or other entity holding such securities or theissuer thereof, as the case may be, to effectuate book-entry transfers and pledges throughthe book-entry facilities of such institution) in order to perfect upon the delivery of theDefeasance Security Agreement (as hereinafter defined) a valid, first priority lien andsecurity interest therein in favor of Lender in conformity with all applicable state andfederal laws governing granting of such security interest;
          (2) any and all agreements, certificates, opinions, documents or instruments requiredby Lender in connection with the Defeasance including (a) a pledge and security agreement,in form and substance satisfactory to Lender, creating a first priority security interest infavor of Lender in the Defeasance Collateral (the “**Defeasance Security Agreement**”), and (b)any and all agreements, certificates, opinions, documents, or instruments required by Lenderthat affect or relate in any way to the maintenance by any REMIC that holds this Note of itsqualification and status for tax purposes as a REMIC;
          (3) a certificate of Borrower certifying that (a) all of the requirements set forth inthis Section 9(b) have been satisfied, (b) the transactions that are being carried outpursuant to this Section 9(b) (including specifically the release of the lien of theSecurity Instrument) are being effected to facilitate the disposition of the Property or anyother customary commercial transaction and not as part of an arrangement to collateralize aREMIC offering with obligations that are not real estate mortgages, and (c) the amounts ofthe Defeasance Collateral comply with all the requirements of this section including therequirement that the Defeasance Collateral shall generate monthly amounts equal to orgreater than the Scheduled Defeasance Payments required to be paid under this Note throughthe Maturity Date;
          (4) an opinion of counsel for Borrower, delivered by counsel acceptable to Lender,stating, among other things but without substantive qualification, that (a) Lender has avalid, duly perfected, first priority security interest in the Defeasance Collateral andthat the Defeasance Security Agreement is enforceable against Borrower in accordance withits terms, (b) neither the Defeasance nor any other transaction that occurs pursuant to theprovisions of this Section 9(b) has caused or will cause the Loan (including for thispurpose the Loan Documents) to cease to be a “qualified mortgage” within the meaning ofSection 860G of the Code, either under the provisions of Treasury Regulation Sections1.860G-2(a)(8) or 1.860G-2(b) (as such regulations may be amended or superseded from time totime) or under any other provision of the Code or otherwise, and (c) the tax qualificationand status of any REMIC or any other entity that holds this Note will not be adverselyimpaired or affected as a result of the Defeasance and/or any other transaction that occurspursuant to theprovisions of this Section 9(b). The opinions set forth in clauses (b) and (c) above may,in Lender’s discretion, be rendered by counsel to Lender at Borrower’s sole cost andexpense;
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          (5) a certificate and opinion delivered by an independent certified public accountingfirm acceptable to Lender certifying that the amounts of the Defeasance Collateral complywith all the requirements of this Section including the requirement that the DefeasanceCollateral shall generate monthly amounts equal to or greater than the Scheduled DefeasancePayments required to be paid under this Note through the Maturity Date. Upon Lender’srequest, such accounting firm shall also certify the change in the yield of the Loan thatresults from the Defeasance and any other transactions that occur pursuant to the provisionsof this Section 9(b), including supporting computations which shall be made in a manner thatis consistent with the provisions of Treasury Regulation Sections 1.1001-3(e)(1) and (2);
          (6) Upon Lender’s request, written confirmation from the rating agencies that haverated any of the securities issued by any REMIC that holds this Note to the effect that theDefeasance will not result in a downgrading, withdrawal or qualification of the respectiveratings in effect immediately prior to such Defeasance for any rated securities thenoutstanding or a waiver from any such rating agency stating that it has declined to reviewthe Defeasance. If required by any rating agency or Lender, a non-consolidation opinionwith respect to the Defeasance Obligor (as hereinafter defined) in form and substancesatisfactory to Lender and such rating agency; and
          (7) Borrower shall (unless otherwise agreed to in writing by Lender), at Borrower’sexpense, assign all of its obligations under this Note, together with the DefeasanceCollateral, to a successor entity (“**Defeasance Obligor**”) designated by Lender (which mayinclude an entity that is owned and/or controlled by Lender) that is a single purpose,bankruptcy remote entity as determined by Lender in its discretion. The Defeasance Obligorshall execute an assumption agreement pursuant to which it shall assume Borrower’sobligations under this Note, the Loan Documents, and the Defeasance Security Agreement. Asconditions to such assignment and assumption, Borrower shall (a) deliver to Lender anopinion of counsel delivered by counsel acceptable to Lender stating, among other things,that such assumption agreement has been duly authorized and is enforceable against Borrowerand the Defeasance Obligor in accordance with its terms, that the Note, the DefeasanceSecurity Agreement and the other Loan Documents, as so assumed, have been duly authorizedand are enforceable against the Defeasance Obligor in accordance with their respectiveterms, and that the delivery of the Defeasance Collateral to the Defeasance Obligor does notconstitute a fraudulent transfer, preferential payment, or other voidable transfer underapplicable bankruptcy law and (b) pay all costs and expenses including attorneys’ feesincurred by Lender or its servicer or other agent(s) in connection with such assignment andassumption (including the review of the proposed transferee and the preparation of theassumption agreement and related documentation). Upon such assumption, Borrower shall berelieved of its obligations under this Note, the Defeasance Security Agreement and the otherLoan Documents, other than those obligations which are specifically intended to survive thepayment of this Note and the termination, satisfaction or assignment of this Note, theDefeasance SecurityAgreement or the other Loan Documents or the exercise of Lender’s rights and remedies underany of such documents and instruments.
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          (ii) Upon compliance with the requirements of this Section, Lender shall release the Propertyfrom the lien of the Security Instrument and the other Loan Documents, and the DefeasanceCollateral shall secure this Note and all other obligations under the Loan Documents. Lender will,at Borrower’s expense, execute and deliver any agreements reasonably requested by Borrower torelease the lien of the Security Instrument from the Property. Borrower, pursuant to theDefeasance Security Agreement, shall authorize and direct that the payments received fromDefeasance Collateral be made directly to Lender and applied to satisfy the obligations of Borrowerunder this Note.
          (iii) Upon the release of the Property in accordance with this Section 9(b), Borrower shallhave no further right to prepay this Note. Borrower shall pay all costs and expenses incurred orto be incurred in connection with the Defeasance and related transactions, including all chargesimposed by any rating agencies and any revenue, documentary stamp or intangible taxes or any othertax or charge due in connection with the transfer of this Note or otherwise required to accomplishthe Defeasance and related transactions.
          (iv) If any notice of defeasance is given pursuant to Section 9(b)(i)(A), Borrower shall berequired to defease the Loan on the Release Date (unless such notice is revoked by Borrower priorto the Release Date in which event Borrower shall immediately reimburse Lender for any and allreasonable costs and expenses incurred by Lender in connection with Borrower’s giving of suchnotice and revocation).
          (v) At Borrower’s request, Lender may agree that Lender or its servicer or other agent, actingon Borrower’s behalf as Borrower’s agent and attorney-in-fact, shall purchase the DefeasanceCollateral that Borrower is required to deliver to Lender pursuant to Section 9(b)(i)(C)(1). Ifsuch an agreement is made then Borrower shall deposit with Lender or Lender’s servicer or otheragent, as directed by Lender or Lender’s agent(s), on or prior to the Release Date a sum of moneysufficient to purchase the Defeasance Collateral. By making such deposit Borrower shall therebyappoint Lender or Lender’s servicer or other agent as Borrower’s agent and attorney-in-fact, withfull power of substitution, for the purpose of purchasing the Defeasance Collateral with the fundsso provided and delivering the Defeasance Collateral to Lender pursuant to Section 9(b)(i)(C)(1).
          (vi) Notwithstanding any release of the Security Instrument or any Defeasance hereunder, theDefeasance Obligor shall be bound by and obligated under Sections 3.1 (Payment of Debt), 7.2(Further Acts Etc.), 7.4(a) (Estoppel Certificates), 11.2 (Application of Proceeds), 11.7 (OtherRights Etc.) and 14.2 (Marshalling and Other Matters) and Article 13 (Indemnification) of theSecurity Instrument; provided, however, that all references therein to “**Property**” or “**PersonalProperty**” shall be deemed to refer only to the Defeasance Collateral delivered to Lender.
     (c) **Default Prepayment.**If a Default Prepayment (as hereinafter defined) occurs, such DefaultPrepayment shall be deemed to be a voluntary prepayment under this Note and in such case theapplicable Prepayment Consideration (as hereinafter defined) shall be due and
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payable to Lender in connection with such Default Prepayment (unless Lender voluntarily andexpressly waives in writing the right to collect such Prepayment Consideration). The PrepaymentConsideration shall be secured by all security and collateral for the Loan and shall, after itbecomes due and payable, be treated as if it were added to the Outstanding Principal Balance forall purposes including accrual of interest, judgment on the Note, foreclosure (whether throughpower of sale, judicial proceeding, or otherwise) (“**Foreclosure Sale**”), redemption, and bankruptcy(including pursuant to Section 506 of the United States Bankruptcy Code or any successorprovision); without limiting the generality of the foregoing, it is understood and agreed that thePrepayment Consideration may be added to Lender’s bid at any Foreclosure Sale. If PrepaymentConsideration is due hereunder, Lender shall deliver to Borrower a statement setting forth theamount and determination of the Prepayment Consideration, and, provided that Lender shall have ingood faith applied the formula described below, Borrower shall not have the right to challenge thecalculation or the method of calculation set forth in any such statement in the absence of manifesterror, which calculation may be made by Lender on any day during the thirty (30) day periodpreceding the date of such prepayment.
     The term “**Default Prepayment**” shall mean a prepayment of any portion of the principal amountof this Note made after occurrence of a Default or Event of Default under any circumstancesincluding a prepayment in connection with (i) reinstatement of the Security Instrument provided bystatute under foreclosure proceedings or exercise of power of sale, (ii) any statutory right ofredemption exercised by Borrower or any other party having a statutory right to redeem or preventforeclosure or power of sale, (iii) any sale in foreclosure or under exercise of a power of sale orotherwise (including pursuant to a credit bid made by Lender in connection with such sale), (iv)any other collection action by Lender, or (v) exercise by any governmental authority of any civilor criminal forfeiture action with respect to any collateral for the Loan. PrepaymentConsideration shall be due and payable upon acceleration of the Loan in accordance with the termsof this Note, and the “Prepayment Date”, for the purpose of computing Prepayment Consideration,shall be the date of acceleration of the Loan in accordance with the terms of this Note. Exchangeof this Note for a different instrument or modification of the terms of this Note, includingclassification and treatment of Lender’s claim (other than non-impairment under Section 1124 of theUnited States Bankruptcy Code or any successor provision) pursuant to a plan of reorganization inbankruptcy shall also be deemed to be a Default Prepayment hereunder.
     The “**Prepayment Consideration**” (as the term is used in this Note) shall mean the presentvalue, as of the date of the occurrence of the Default, of the remaining scheduled payments ofprincipal and interest from the date of the occurrence of the Default through the Maturity Date(including any balloon payment), which shall be determined by discounting such payments at theDiscount Rate (hereinafter defined) less the amount of principal being prepaid. The term “**DiscountRate**” shall mean the rate that, when compounded monthly, is equivalent to the Treasury Rate(hereinafter defined) when compounded semi-annually. The term “**Treasury Rate**” shall mean the yieldcalculated by the linear interpolation of the yields, as reported in Federal Reserve StatisticalRelease H.15-Selected Interest Rates under the heading U.S. Government Securities/Treasury ConstantMaturities for the week ending prior to the Prepayment Date, of U.S. Treasury constant maturitieswith maturity dates (one longer and one shorter) most nearly approximating the Maturity Date. (IfRelease H.15 is no longer published, Lender shall select a comparable publication to determine theTreasury Rate.).
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     Borrower acknowledges that: (i) Lender has made the Loan to Borrower in reliance on, and theLoan has been originated for the purpose of selling the Loan in the secondary market to investorswho will purchase the Loan or direct or indirect interests therein in reliance on, the actualreceipt over time of the stream of payments of principal and interest agreed to by Borrower herein;and (ii) Lender or any subsequent investor in the Loan will incur substantial additional costs andexpenses in the event of a prepayment of the Loan; and (iii) the Prepayment Consideration isreasonable and is a bargained for consideration and not a penalty and the terms of the Loan are invarious respects more favorable to Borrower than they would have been absent Borrower’s agreementto pay Prepayment Consideration as provided herein. Borrower agrees that Lender shall not, as acondition to receiving the Prepayment Consideration, be obligated to actually reinvest the amountprepaid in any treasury obligation or in any other manner whatsoever. Nothing contained hereinshall be deemed to be a waiver by Lender of any right it may have to require specific performanceof any obligation of Borrower hereunder including to make payments hereunder strictly according tothe terms hereof or to furnish Defeasance Collateral.
     In addition to Prepayment Consideration, Borrower shall pay all hedging and breakage costs ofany kind and in any amount incurred by Lender due to any prepayment (including a DefaultPrepayment).
     10. **Maximum Rate Permitted by Law.**All agreements in this Note and all other Loan Documentsare expressly limited so that in no contingency or event whatsoever, whether by reason ofacceleration of maturity of the indebtedness evidenced hereby or otherwise, shall the amount agreedto be paid hereunder for the use, forbearance, or detention of money exceed the highest lawful ratepermitted under applicable usury laws. If, from any circumstance whatsoever, fulfillment of anyprovision of this Note or any other Loan Document at the time performance of such provision shallbe due shall involve exceeding any usury limit prescribed by law that a court of competentjurisdiction may deem applicable hereto, then, ipso facto, the obligations to be fulfilledshall be reduced to allow compliance with such limit, and if, from any circumstance whatsoever,Lender shall ever receive as interest an amount that would exceed the highest lawful rate, thereceipt of such excess shall be deemed a mistake and shall be canceled automatically or, iftheretofore paid, such excess shall be credited against the principal amount of the indebtednessevidenced hereby to which the same may lawfully be credited, and any portion of such excess notcapable of being so credited shall be refunded immediately to Borrower.
     11. **Events of Default; Acceleration of Amount Due.**Lender may in its discretion, withoutnotice to Borrower, declare the entire Debt, including the principal balance of the Loan, allaccrued interest, all costs, expenses, charges and fees payable under any Loan Document, andPrepayment Consideration immediately due and payable, and Lender shall have all remedies availableto it at law or equity for collection of the amounts due, if any of the following (the “**Events ofDefault**”) occurs:
          (a) Borrower fails to make full and punctual payment of any Monthly Payment or any otheramount payable on a monthly basis under this Note, the Security Instrument or any other LoanDocument within five (5) days of the date on which such payment was due; or
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          (b) Borrower fails to make full payment of the Debt when due, whether on the Maturity Date,upon acceleration or prepayment, or otherwise; or
          (c) Borrower fails to make full and punctual payment of any Late Charges, costs and expensesdue hereunder, or any other sum of money required to be paid to Lender under this Note, theSecurity Instrument or under any other Loan Document (other than any payment described insubclauses (a) and (b) immediately above), which failure is not cured on or before the fifth (5th)day after Lender’s written notice to Borrower that such payment is required.
          (d) an Event of Default occurs under the Security Instrument or any other Loan Document thathas continued beyond any applicable cure period therefor.
     12. **Time of Essence.**Time is of the essence with regard to each provision contained in thisNote.
     13. **Transfer and Assignment.**This Note may be freely transferred and assigned by Lender.Borrower’s right to transfer its rights and obligations with respect to the Debt, and to bereleased from liability under this Note, shall be governed by the Security Instrument.
     14. **Authority of Persons Executing Note.**Borrower warrants and represents that the persons orofficers who are executing this Note and the other Loan Documents on behalf of Borrower have fullright, power and authority to do so, and that this Note and the other Loan Documents constitutevalid and binding documents, enforceable against Borrower in accordance with their terms, and thatno other person, entity, or party is required to sign, approve, or consent to, this Note.
     15. **Severability.**The terms of this Note are severable, and should any provision be declaredby a court of competent jurisdiction to be invalid or unenforceable, the remaining provisionsshall, at the option of Lender, remain in full force and effect and shall in no way be impaired.
     16. **Borrower’s Waivers.**Borrower and all others liable hereon hereby waive presentation forpayment, demand, notice of dishonor, protest, and notice of protest, notice of intent toaccelerate, and notice of acceleration, stay of execution and all other suretyship defenses topayment generally. No release of any security held for the payment of this Note, or extension ofany time periods for any payments due hereunder, or release of collateral that may be granted byLender from time to time, and no alteration, amendment or waiver of any provision of this Note orof any of the other Loan Documents, shall modify, waive, extend, change, discharge, terminate oraffect the liability of Borrower and any others that may at any time be liable for the payment ofthis Note or the performance of any covenants contained in any of the Loan Documents.
     17. **Governing Law.**This Note shall be governed and construed generally according to the lawsof the jurisdiction in which the real property collateral for this Note is located without regardto the conflicts of law provisions thereof (“**Governing State**”).
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     18. **JURISDICTION AND VENUE.**BORROWER HEREBY CONSENTS TO PERSONAL JURISDICTION IN THEGOVERNING STATE. VENUE OF ANY ACTIONBROUGHT TO ENFORCE THIS NOTE OR ANY OTHER LOAN DOCUMENT OR ANY ACTION RELATING TO THE LOAN OR THEDEBT OR THE RELATIONSHIPS CREATED BY OR UNDER THE LOAN DOCUMENTS (“**ACTION**”) SHALL, AT THE ELECTIONOF LENDER, BE IN (AND IF ANY ACTION IS ORIGINALLY BROUGHT IN ANOTHER VENUE, THE ACTION SHALL AT THEELECTION OF LENDER BE TRANSFERRED TO) A STATE OR FEDERAL COURT OF APPROPRIATE JURISDICTION LOCATEDIN THE GOVERNING STATE. BORROWER HEREBY CONSENTS AND SUBMITS TO THE PERSONAL JURISDICTION OF THESTATE COURTS OF THE GOVERNING STATE AND OF FEDERAL COURTS LOCATED IN THE GOVERNING STATE INCONNECTION WITH ANY ACTION AND HEREBY WAIVES ANY AND ALL PERSONAL RIGHTS UNDER THE LAWS OF ANYOTHER STATE TO OBJECT TO JURISDICTION WITHIN SUCH STATE FOR PURPOSES OF ANY ACTION. Borrowerhereby waives and agrees not to assert, as a defense to any Action or a motion to transfer venue ofany Action, (i) any claim that it is not subject to such jurisdiction, (ii) any claim that anyAction may not be brought against it or is not maintainable in those courts or that this Note orany of the other Loan Documents may not be enforced in or by those courts, or that it is exempt orimmune from execution, (iii) that the Action is brought in an inconvenient forum, or (iv) that thevenue for the Action is in any way improper.
     19. **Notices.**Any notice required or permitted to be given hereunder must be in writing andgiven (a) by depositing same in the United States mail, addressed to the party to be notified,postage prepaid and registered or certified with return receipt requested; (b) by delivering thesame in person to such party; (c) by transmitting a facsimile copy to the correct facsimile phonenumber of the intended recipient (with a second copy to be sent to the intended recipient by anyother means permitted under this Section 19); or (d) by depositing the same into the custody of anationally recognized overnight delivery service addressed to the party to be notified. In theevent of mailing, notices shall be deemed effective three (3) days after posting; in the event ofovernight delivery, notices shall be deemed effective on the next Business Day following depositwith the delivery service; in the event of personal service or facsimile transmissions, noticesshall be deemed effective when delivered. For purposes of notice, the addresses of the partiesshall be as set forth in the Table. From time to time either party may designate another addressthan the address set forth for all purposes of this Note by giving the other party no less than ten(10) days advance notice of such change of address in accordance with the notice provisions hereof.A copy of any notice sent, transmitted or delivered to Lender shall also be delivered to DanielFlanigan, Esq., Polsinelli Shalton Welte Suelthaus, 700 W. 47th Street, Suite 1000,Kansas City, Missouri 64112, facsimile number: (816) 753-1536.
     20. **Avoidance of Debt Payments.**To the extent that any payment to Lender and/or any paymentor proceeds of any collateral received by Lender in reduction of the Debt is subsequentlyinvalidated, declared to be fraudulent or preferential, set aside and/or required to be repaid to atrustee, to Borrower (or Borrower’s successor) as a debtor in possession, or to a receiver,creditor, or any other party under any bankruptcy law, state or federal law, common law orequitable cause, then the portion of the Debt intended to have been satisfied by such payment orproceeds shall remain due and payable hereunder, be evidenced by this Note, and shall continue infull force and effect as if such payment or proceeds had never been received by Lender whether ornot this Note has been marked “paid” or otherwise cancelled or satisfied and/or has been deliveredto Borrower, and in such event Borrower shall be immediatelyobligated to return the original Note to Lender and any marking of “paid” or other similar markingshall be of no force and effect.
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     21. **Nonrecourse.**
          (a) Subject to the provisions of subsections (b) and (c) of this Section 21, Lender shall notbe entitled to recover any deficiency judgment against Borrower or any general partner (if any) ofBorrower on this Note, provided, however, the foregoing shall not be interpreted to: (i) impair oraffect the right of Lender to enforce any of its rights or remedies (other than any right to adeficiency judgment) provided for in any of the Loan Documents or under applicable law in fullaccordance with the terms thereof including the right of Lender to name Borrower or any generalpartner of Borrower as a party defendant in any action or suit for specific performance,foreclosure, or sale (or similar remedy) under the Security Instrument or any other Loan Document;(ii) impair or affect the validity or enforceability of any guaranty, indemnity agreement(including any environmental indemnity agreement), letter of credit, or other similar third partyagreement or undertaking made in connection with this Note, the Security Instrument, or any otherLoan Document; (iii) impair or affect Lender’s right to offset any and all amounts outstandingunder any of the Loan Documents against any claim or amount that may be asserted against Lender byBorrower or any partners, members, shareholders, or other owners of legal or beneficial interestsin Borrower; or (iv) affect the validity or enforceability of or impair the right of Lender tobring suit and obtain specific performance or personal, recourse judgment to enforce the liabilityof Borrower or any other person or entity to the extent of, and Borrower hereby agrees to bepersonally liable for, any loss, damage, cost, expense or liability incurred by Lender (includingall attorneys’ fees and expenses and other collection and litigation expenses) arising out of or inconnection with any of the following:
          (A) Borrower or any affiliate, agent, or employee of Borrower misappropriates any rentsor other Property income or collateral proceeds including insurance or condemnation proceedsor awards;
          (B) Borrower or any affiliate, agent, or employee of Borrower fails to apply or payover any tenant security deposits or other refundable deposits in accordance with the termsof the applicable lease or other agreement or the Security Instrument or any other LoanDocument;
          (C) Borrower or any affiliate, agent, or employee of Borrower receives rents or otherpayments from tenants more than one month in advance and fails to apply them in accordancewith the Loan Documents;
          (D) following the occurrence of an Event of Default, Borrower or any affiliate, agent,or employee of Borrower (including Borrower in its capacity as a debtor or debtor inpossession in a bankruptcy proceeding) fails either to apply rents or other Property income,whether collected before or after such Event of Default, to the ordinary, customary, andnecessary expenses of operating the Property or, upon demand, to deliver such rents or otherProperty income to Lender;
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          (E) waste is committed on the Property during a period while Borrower or any affiliate,agent, or employee of Borrower is in possession thereof (“waste” meaning the diminution inthe Property’s value resulting from Borrower’s negligent or willful failure to manage,maintain, repair and otherwise operate the Property in a commercially reasonable manner);
          (F) any damage to the Property or the Lender is caused as a result of the intentionalmisconduct or gross negligence of Borrower or any affiliate, agent, or employee of Borrower;
          (G) any Property is removed in violation of the terms of the Loan Documents;
          (H) Borrower fails, in accordance with the terms of the Loan Documents, to maintaininsurance or to pay taxes, assessments, or other liens or claims that could create liensaffecting the Property (unless Lender is escrowing funds therefor and fails to make suchpayments or has taken possession of the Property following an Event of Default, has receivedall rents from the Property applicable to the period for which such insurance, taxes orother items are due, and thereafter fails to make such payments);
          (I) there is any fraud or material misrepresentation by Borrower or any of itsaffiliates, any guarantor, any indemnitor or any agent, employee, or other person withactual or apparent authority to make statements or representations on behalf of Borrower,any affiliate of Borrower, or any guarantor or indemnitor (“apparent authority” meaning suchauthority as the principal knowingly or negligently permits the agent to assume, or which heholds the agent out as possessing); or
          (J) Borrower fails, following an Event of Default, to deliver to Lender on demand allsecurity deposits, books and records relating to the Property and in the possession orcontrol of Borrower or any affiliate, agent, or employee of Borrower.
          (b) Notwithstanding anything to the contrary in the provisions of subsection (a) of thisSection, subsection (a) of this Section shall not apply and Borrower and any general partner ofBorrower shall be personally liable for the Debt if (i) there shall be any violation of thedue-on-sale or due-on-encumbrance provisions of the Security Instrument, (ii) Borrower shall at anytime hereafter make an assignment for the benefit of its creditors, or (iii) the Property or anypart thereof shall at any time hereafter become property of the estate or an asset in (a) avoluntary bankruptcy, insolvency, receivership, liquidation, winding up, or other similar type ofproceeding, or (b) an involuntary bankruptcy or insolvency proceeding (other than one filed byLender) that is not dismissed within sixty (60) days of filing.
          (c) Nothing herein shall be deemed to constitute a waiver by Lender of any right Lender mayhave under Sections 506(a), 506(b), 1111(b) or any other provision of the United States BankruptcyCode to file a claim for the full amount of the Debt (as defined in the Security Instrument) or torequire that all collateral shall continue to secure all of the Debt.
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     22. **Miscellaneous.**Neither this Note nor any of the terms hereof, including the provisions ofthis Section, may be terminated, amended, supplemented, waived or modified orally, but only by aninstrument in writing executed by the party against which enforcement of the termination,amendment, supplement, waiver or modification is sought, and the parties hereby: (a) expresslyagree that it shall not be reasonable for any of them to rely on any alleged, non-written amendmentto this Note; (b) irrevocably waive any and all right to enforce any alleged, non-written amendmentto this Note; and (c) expressly agree that it shall be beyond the scope of authority (apparent orotherwise) for any of their respective agents to agree to any non-written modification of thisNote. This Note may be executed in several counterparts, each of which counterpart shall be deemedan original instrument and all of which together shall constitute a single Note. The failure ofany party hereto to execute this Note, or any counterpart hereof, shall not relieve the othersignatories from their obligations hereunder. If Borrower consists of more than one person orentity, then the obligations and liabilities of each person or entity shall be joint and severaland in such case, the term “Borrower” shall mean individually and collectively, jointly andseverally, each Borrower. As used in this Note, (i) the terms “include,” “including” and similarterms shall be construed as if followed by the phrase “without being limited to,” (ii) any pronounused herein shall be deemed to cover all genders, and words importing the singular number shallmean and include the plural number, and vice versa, (iii) all captions to the Sections hereof areused for convenience and reference only and in no way define, limit or describe the scope or intentof, or in any way affect, this Note, (iv) no inference in favor of, or against, Lender or Borrowershall be drawn from the fact that such party has drafted any portion hereof or any other LoanDocument, (v) the words “Lender” and “Borrower” shall include their respective successors(including, in the case of Borrower, any subsequent owner or owners of the Property or any partthereof or any interest therein and Borrower in its capacity as debtor-in-possession after thecommencement of any bankruptcy proceeding), assigns, heirs, personal representatives, executors andadministrators, (vi) the term “or” has, except where otherwise indicated, the inclusive meaningrepresented by the phrase “and/or”, (vii) the words “hereof”, “herein”, “hereby”, “hereunder”, andsimilar terms in this Note refer to this Note as a whole and not to any particular provision orsection of this Note, and (viii) an Event of Default shall “continue” or be “continuing” until suchEvent of Default has been waived in writing by Lender. Wherever Lender’s judgment, consent,approval or discretion is required under this Note or Lender shall have an option, election, orright of determination or any other power to decide any matter relating to the terms of this Note,including any right to determine that something is satisfactory or not (“**Decision Power**”), suchDecision Power shall be exercised in the sole and absolute discretion of Lender except as may beotherwise expressly and specifically provided herein. Such Decision Power and each other powergranted to Lender upon this Note or any other Loan Document may be exercised by Lender or by anyauthorized agent of Lender (including any servicer and/or attorney-in-fact), and Borrower herebyexpressly agrees to recognize the exercise of such Decision Power by such authorized agent. In theevent of a conflict between or among the terms, covenants, conditions or provisions of the LoanDocuments, the term(s), covenant(s), condition(s) and/or provision(s) that Lender may elect toenforce from time to time so as to enlarge the interest of Lender in its security, afford Lenderthe maximum financial benefits or security for the Debt, and/or provide Lender the maximumassurance of payment of the Debt in full shall control. BORROWER ACKNOWLEDGES AND AGREES THAT ITHAS BEEN PROVIDED WITH SUFFICIENT AND NECESSARY TIME AND OPPORTUNITY TO REVIEW THE TERMS OF THISNOTE, THE SECURITYINSTRUMENT, AND EACH OF THE LOAN DOCUMENTS, WITH ANY AND ALL COUNSEL IT DEEMS APPROPRIATE, AND THATNO INFERENCE IN FAVOR OF, OR AGAINST, LENDER OR BORROWER SHALL BE DRAWN FROM THE FACT THAT EITHERSUCH PARTY HAS DRAFTED ANY PORTION HEREOF, OR THE SECURITY INSTRUMENT, OR ANY OF THE LOANDOCUMENTS.
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     23. **Waiver of Counterclaim and Jury Trial. BORROWER HEREBY KNOWINGLY WAIVES THE RIGHT TOASSERT ANY COUNTERCLAIM, OTHER THAN A COMPULSORY COUNTERCLAIM, IN ANY ACTION OR PROCEEDING BROUGHTAGAINST BORROWER BY LENDER OR ITS AGENTS. ADDITIONALLY, BORROWER AND LENDER HEREBY KNOWINGLY,VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHT THEY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANYLITIGATION BASED ON THE LOAN OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH THE LOAN, THIS NOTE,THE SECURITY INSTRUMENT, OR ANY OTHER LOAN DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING,STATEMENT (WHETHER VERBAL OR WRITTEN), OR ACTION OF BORROWER OR LENDER. THIS PROVISION IS AMATERIAL INDUCEMENT FOR LENDER’S MAKING OF THE LOAN.**
     24. **Local Law Provisions.**In the event of any inconsistencies between the terms andconditions of this Section and any other terms and conditions of this Note (other than the termsand conditions of Section 25), the terms and conditions of this Section shall be binding.
     24.1 **Business Purpose.**This Loan is intended to be for commercial or businesspurposes.
     24.2 **Late Charge**. The first sentence of Section 6 is modified by adding thefollowing between “due”, and “Borrower”: “or on a later date if required byapplicable law,”.
     24.3 **Waiver of Counterclaim and Jury Trial.**The second sentence of Section 23is hereby modified by adding the following to the beginning thereof: “TO THE EXTENTPERMITTED BY APPLICABLE LAW,”.
     25. **Additional Provisions.**In the event of any inconsistencies between the terms andconditions of this Section and any other terms and conditions of this Note, the terms andconditions of this Section shall be binding.
     25.1 **Financial Statement Reporting Deposit; Rebate of Deposit**. Borrower’s obligationunder Section 4 to pay the monthly Financial Statement Reporting Deposit stated in the LoanTerms Table is hereby waived so long as Gladstone Commercial Corporation, a Marylandcorporation, is a publicly traded company.
     25.2 **Interest Rate.**From the date of disbursement of the Loan proceeds, until theAnticipated Repayment Date (as hereinafter defined) interest shall accrue on the OPBat a rate of 6.33 percent (6.33%) per annum (“**Initial Interest Rate**”). From and after theAnticipated Repayment Date (as hereinafter defined), interest shall accrue on the OPB at arate equal to the greater of: (i) Initial Interest Rate plus two (2) percent per annum; or(ii) the Treasury Rate for the week ending prior to the Anticipated Repayment Date plus two(2) percent per annum (“**Adjusted Interest Rate**”). As used in this Note, the term “InterestRate” shall mean the Initial Interest Rate or the Adjusted Interest Rate, as applicable.
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     25.3 **Prepayment Restrictions.**The first sentence of Section 9(a) is amended in itsentirety to provide as follows: Voluntary prepayment of this Note is prohibited exceptduring the period commencing on June 23, 2009 and ending on the Maturity Date whenprepayment may be made in whole, but not in part, without payment of any PrepaymentConsideration (as hereinafter defined) on any Monthly Payment Date.
          The fifth line of Section 9(a) is hereby modified by adding “and is continuing” between“occurred” and “,”.
          The following is added to the end of Section 9(a): “Borrower’s right to cause aDefeasance (as hereinafter defined) in accordance with Section 9(b) shall end on theAnticipated Repayment Date (as hereinafter defined).” In the tenth line of Section9(b)(i)(C)(1), and the final line of Section 9(b)(i)(C)(3), and the sixth line of Section9(b)(i)(C)(5), and the fourth line of the third paragraph of Section 9(c), and the second tolast line of the third paragraph of Section 9(c) the phrase “Maturity Date” is deleted andthe phrase “Anticipated Repayment Date” is substituted therefor.
          The third line of Section 9(b)(i)(B) is hereby modified by inserting “reasonable”between “including” and “attorneys’”.
          The second line of Section 9(b)(i)(C)(2) is hereby modified by inserting “reasonably”between “instruments” and “required”.
          The seventeenth line of the first paragraph of Section 9(b)(i)(C)(7) is hereby modifiedby inserting “reasonable” between “including” and “attorneys’”.
          The second and third lines of the second paragraph of Section 9(b)(i)(C)(7) is herebymodified by deleting the words “under any circumstances” and substituting “that has not beenwaived in writing by Lender” therefor.
     25.4 **Hyperamortization.**In the event that Borrower does not pay to Lender on or beforethe Anticipated Repayment Date, the outstanding principal balance of this Note together withall unpaid interest thereon and all other amounts owed to Lender pursuant to this Note orany other Loan Document, the following provisions shall apply:
          (a) From and after the Anticipated Repayment Date, interest shall accrue on the OPB atthe Adjusted Interest Rate. Interest accrued at the Adjusted Interest Rate and not paidpursuant to this Section 25.4 shall be deferred and added to the OPB of this Note (togetherwith all accrued interest thereon) and shall earn interest at the Adjusted Interest Rate tothe extent permitted by applicable law (such accrued interest,together with any interest accrued thereon is hereinafter defined as “**Accrued Interest**”).All of the OPB, including any Accrued Interest, shall be due and payable on the MaturityDate.
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          (b) Contemporaneously herewith, Borrower has executed a Collection and DisbursementAgreement (the “**Disbursement Agreement**”) pursuant to which Borrower has agreed that,commencing on the first day of the month preceding the Anticipated Repayment Date, Borrowershall cause all rents and all other income, proceeds and other revenues generated orotherwise derived from or attributable to the Property (collectively, “**Rents and Profits**”)to be deposited in a deposit account with a financial institution named by Lender (the“**Disbursement Account**”). The Disbursement Agreement provides that all sums deposited in theDisbursement Account shall be applied as set forth therein. From and after the AnticipatedRepayment Date, provided no Event of Default has occurred and no event has occurred which,with the passage of time, notice or both, would constitute an Event of Default, all funds inthe Disbursement Account shall be disbursed, unless Lender in its sole discretion determinesotherwise, by Lender from such account for the payment of the following items in thespecified order of payment:
          (i) First, payments to be made to the tax and insurance escrow funds inaccordance with the terms and conditions of the Security Instrument;
          (ii) Second, payment of the Monthly Payment (plus, if applicable, interest atthe Default Rate and any other charges then due to Lender under the Loan Documents)to be applied first to the payment of interest computed at the Initial Interest Ratewith the remainder applied to the reduction of the OPB of this Note;
          (iii) Third, payments required to be made to any other escrow or reserve fundsestablished pursuant to any of the Loan Documents;
          (iv) Fourth, payments of the monthly operating expenses incurred for theProperty (“**Monthly Operating Expenses**”), pursuant to the terms of the approvedAnnual Budget (as hereinafter defined), but excluding any Affiliate Expenses (ashereinafter defined);
          (v) Fifth, payment of Extraordinary Expenses (as hereinafter defined) approvedin writing by Lender, if any;
          (vi) Sixth, payment of any other amounts due under any of the Loan Documents,including, without limitation, any advances made by Lender thereunder for theprotection of the Property or Lender’s liens and security interests;
          (vii) Seventh, payment to Lender to be applied against the OPB of this Note(but not including any Accrued Interest) until such principal amount (not includingany Accrued Interest) is paid in full;
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          (viii) Eighth, payment of Accrued Interest;
          (ix) Ninth, payment of Affiliate Expenses; and
          (x) Tenth, payment to Borrower of any remaining funds.
          (c) Nothing provided above with respect to the Disbursement Account shall limit, reduceor otherwise affect Borrower’s obligations under the Loan Documents including, withoutlimitation, the obligations of Borrower to: (i) operate and maintain (and to pay currentlyall expenses to operate and maintain) the Property; (ii) make the Monthly Payments; (iii)fund all escrows or reserves established or required under the Loan Documents; and (iv)pay all other amounts due at any time under this Note, the Security Instrument, and theother Loan Documents, even though the sums available in the Disbursement Account may beinsufficient at any time to make such payments.
          (d) For each fiscal year commencing with the fiscal year in which the AnticipatedRepayment Date occurs, Borrower shall submit to Lender for Lender’s written approval anoperating budget for the next succeeding fiscal year, on a month by month basis, includingcash flow projections and all proposed capital replacements and improvements and otherexpenses of the Property (the “**Annual Budget**”) not later than sixty (60) days prior to thecommencement of such fiscal year, in form and substance satisfactory to Lender. Lendershall have the right to approve such Annual Budget and in the event that Lender objects tothe proposed Annual Budget submitted by Borrower, Lender shall advise Borrower of suchobjections and Borrower shall within five (5) days after receipt of notice of any suchobjections, revise such Annual Budget and resubmit the same to Lender. This procedure shallbe repeated until Lender approves an Annual Budget. Until such time as Lender approves aproposed Annual Budget, the most recently approved Annual Budget shall apply; provided thatsuch approved Annual Budget shall be adjusted to reflect actual increases in real estatetaxes, insurance premiums, and utility expenses and to defer any management fees, leasingcommissions, or other payments to, or any personal expenses of, Borrower or any person orentity which is directly or indirectly controlling, controlled by, or under common controlwith, Borrower or any guarantor or indemnitor with respect to the Loan (“**AffiliateExpenses**”). In the event that Borrower proposes to incur an extraordinary operating expenseor capital expense not set forth in the approved Annual Budget then in effect (an“**Extraordinary Expense**”), then Borrower shall promptly deliver to Lender a reasonablydetailed explanation of such proposed Extraordinary Expense for Lender’s written approval.Borrower covenants and agrees to incur costs only in accordance with the approved AnnualBudget.
     25.5 **Notices**. In addition to the requirements of Section 19 hereof, Lender shall usereasonable efforts to provide a courtesy copy of any notice required or permitted to begiven by Lender to Borrower hereunder to the following addressee: James D. Kelly, Esq.,Dickstein Shapiro Marin & Oshinsky LLP, 2101 L Street N.W., Washington, D.C. 20037,facsimile number (202) 887-0689.
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     Lender’s failure to send such courtesy copies shall not impair the effect of the noticesent to Borrower.
     25.6 **Nonrecourse**. The second and seventh lines of Section 21(a), and the second lineof Section 21(b) are hereby modified by inserting the words “member or” between “any” and“general”. The third line of Section 21(a) is hereby modified by inserting the phrase “orany person or entity having an ownership and/or equity, or legal and/or beneficial interestin any member or general partner of Borrower” between “Note” and “,”.
**[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]**
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     Intending to be fully bound, Borrower has executed this Note under seal effective as of theday and year first above written.           **Borrower:** By: **CMI04 CANTON NCLLC**,  (SEAL)    a Delaware limited liability company               By: GLADSTONE COMMERCIALLIMITED  (SEAL)      PARTNERSHIP, a Delaware limited      Partnership, its managing member                 By: GLADSTONECOMMERCIAL  (SEAL)         PARTNERS, LLC, a Delaware limited        liability company, its General Partner                 By: GLADSTONECOMMERCIAL  (SEAL)       CORPORATION, a Maryland       corporation, its manager                   By:                    Name: Robert J. Corry         Title: Principal                 [CORPORATE SEAL]