EX-10.2 3 w76425exv10w2.htm EX-10.2 exv10w2
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

 

 

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]

 

 

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]