Gladstone Commercial (GOOD) 8-K Gladstone Commercial Corporation Announces its Intention to Sell up to $50 Million in Senior Common Stock

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 asExhibit 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

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 onExhibit 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]

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

Exhibit B

Participating Broker-Dealers

[See attached]