EXHIBIT 10.1

 

MANAGEMENT AND COST SHARING AGREEMENT

 

This Management and Cost Sharing Agreement (the “Agreement”) is entered into as
of this 29th day of October, 2004, by and among G&L Realty Corp., a Maryland
corporation (“GLR”), G&L Senior Care Properties, LLC, a Nevada limited liability
company (“Senior Care LLC”), and G&L Realty Corp., LLC, a Nevada limited
liability company (“Manager”), with reference to the following facts:

 

WHEREAS, GLR is currently operating in two business segments: (i) the business
segment of developing, owning and operation medical office buildings (“MOBs”)
and (ii) the business segment of developing, owning, and leasing skilled nursing
facilities (“SNFs”) and assisted living facilities (“ALFs”), but has determined
to dividend to the holders of its common stock its SNF and ALF assets and
businesses by the distribution of its membership interests in Senior Care LLC to
the holders of its common stock;

 

WHEREAS, there is a significant overlap between the executives and employees who
provide services to GLR’s MOB business and GLR’s SNF/ALF business;

 

WHEREAS, Senior Care LLC was formed to hold and operate GLR’s SNF and ALF assets
and businesses;

 

WHEREAS, GLR has formed Manager for the purpose of employing the employees and
executive officers, and owning or leasing the facilities and assets of GLR’s MOB
business and GLR’s SNF/ALF business;

 

WHEREAS, the parties believe that it would be in the respective best interests
of GLR, Senior Care LLC and Manager if these executives and employees were to
continue to provide management and administrative services to both GLR and
Senior Care LLC, and if GLR and Senior Care LLC were to contract with Manager to
provide to them management and administrative services with respect to their
respective businesses even after GLR has distributed the membership interests of
Senior Care LLC to its common stockholders;

 

NOW, THEREFORE, in consideration of the above stated premises, the terms of this
agreement and other valuable consideration, the receipt and sufficiency of which
is hereby acknowledged, the parties hereto do hereby agree as follows:

 

1. Retention of Manager. Each of GLR and Senior Care LLC hereby retain Manager
to provide such management, administrative and bookkeeping services as GLR,
Senior Care LLC and their respective subsidiaries may from time to time require.

 

2. Duties of Manager. Manager shall provide such management, administrative and
bookkeeping services (i) to GLR and its subsidiaries as GLR may from time to
time reasonably request and (ii) to Senior Care LLC and its subsidiaries as
Senior Care LLC may from time to time reasonably request. Such services shall be
provided with a

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commercially reasonable standard of care; provided, however, that for liability
purposes, the standard of care imposed will be the same as if such services were
being provided by individuals serving directly as officers and/or employees of
the entity holding such services, or the standard of care required by the
officers and employees of a corporation organized under the laws of the state of
Nevada, whichever standard is more lenient. As between Manager and GLR on the
one hand, and Senior Care LLC on the other hand, the employees of Manager will
under no circumstances be deemed to be the employees of Senior Care LLC or any
of its subsidiaries, and Manager and GLR will be responsible for paying all
employment taxes and levies (including social security and other withholding
taxes), subject only to Senior Care LLC’s obligation to pay to Manager its
allocable portion of such costs and expenses.

 

3. Contract Oversight. The performance by Manager under this Agreement will be
subject to the general oversight of a committee (the “Contract Management
Committee”) comprised of not less than one representative of each of GLR and
Senior Care LLC. The function of this committee shall be one of general contract
oversight and contract administration. Action may only be taken by unanimous
approval of the members of the Contract Management Committee. Each party’s
representative shall, however, be entitled to full and complete access to the
books and records of the Manager, and to reasonable access, during regular
business hours, to the Manager’s officers and employees. The representatives of
GLR and Senior Care LLC shall receive no compensation from the Manager for their
services on the Contract Management Committee, and will not be deemed as a
result of their services on the Contract Management Committee to be employees or
officers of Manager.

 

4. Limitation on Liability of GLR. In no event will Senior Care LLC or any of
its subsidiaries have any claim against GLR or any subsidiary of GLR other than
Manager with respect to any action taken, or not taken, by Manager. Senior Care
LLC agrees that under no circumstances shall it sue or permit any of its
subsidiaries to sue GLR or any of its subsidiaries other than Manager, with
respect to any action taken, or not taken, by Manager; provided, however, that
the above limitations do not apply to any action brought by Senior Care LLC to
enforce its rights under this Agreement.

 

5. Cost Sharing Provisions.

 

5.1 In consideration of the services provided by Manager, each of GLR and Senior
Care LLC agree to contribute to the operating costs and expenses of Manager in
proportion to the extent to which they and their respective subsidiaries make
use of Manager’s services, with the intention that each year 100%, but no more
than 100%, of the costs and expenses of the Manager are recouped from GLR and
Senior Care LLC on such a proportional basis. In other words, it is intended
that Manager be operated on a break even basis, and not as a profit center for
GLR. Such amounts shall be funded by GLR and Senior Care LLC monthly in arrears,
as billed by Manager, as determined by Manager in its sole discretion, in
accordance with this Agreement. All payments shall be made not less than thirty
(30) days of billing. Notwithstanding the above, Manager may

 

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elect to maintain cash reserves so as to have at all times not less than one nor
more than three months working capital available to it, in which case the
amounts needed to fund such working capital reserve shall be paid by GLR and
Senior Care LLC within thirty (30) days of demand by Manager, such amounts to be
funded in proportion to the allocation ratios of GLR and Senior Care LLC then in
effect.

 

5.2 Initially, for the period through December 31, 2005, the costs and expenses
of Manager will be allocated 35% to GLR and 65% to Senior Care LLC; provided,
however, that in the event of any extraordinary matter requiring a greater than
expected expenditure of resources by Manager, the costs and expenses related to
such matter may be billed directly to GLR or Senior Care LLC, as the case may
be, and without reference to any general cost sharing allocation then in effect.

 

5.3 Not later than September 30 of each year, beginning September 30, 2005, the
Contract Management Committee will meet and confer in order to determine the
projected budget and cost allocation for the following year, commencing as of
January 1st of each such year. Any such budget and allocation will be subject to
the reasonable review and approval of GLR’s independent outside directors. On
January 1st, any working capital reserve will be adjusted to reflect such agreed
upon going forward cost allocation, with the party receiving a reduced
allocation receiving a proportionate working capital refund and the party
receiving an increased allocation being obligated to make a proportionate
increased contribution to such working capital reserves.

 

5.4 Not later than March 30 of each year, beginning March 30, 2006, the Contract
Management Committee will meet and confer in order to determine whether the
allocations for the year most recently completed were appropriate and fair to
the parties. In the event that it is agreed that an adjustment in the allocation
should be made, GLR will pay to Senior Care LLC or Senior Care LLC will pay to
GLR such amount as may be agreed to be appropriate to adjust such allocation
within thirty (30) days of the date of such determination.

 

5.5. Neither GLR nor Senior Care LLC will be liable for any bonus payments to
any officer or employee of Manager, except for bonus payments specifically
approved by such party or bonus payments made in accordance with the annual
budget on which the allocation for such year has been based.

 

6. Term. This agreement will have an initial term of approximately three years
through December 31, 2007. Thereafter, this agreement will continue on a year to
year basis, from December 31 to December 31, until cancelled by either GLR or
Senior Care LLC on not less than six (6) months notice.

 

7. Indemnity. Each party agrees to indemnify Manager against any liabilities to
third parties incurred in connection with the provision of services by Manager
to such party or

 

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to any one or more of its subsidiaries pursuant to this Agreement, so long as
such action or failure to act was within the scope of the obligations and
authority of the Manager under this Agreement, or otherwise taken or not taken
in the reasonable and good faith belief that such action or failure to act was
in accordance with the Manager’s obligations and authority under this Agreement
or otherwise in the best interests of such party or its subsidiary, as the case
may be. This indemnity shall include reasonable costs of defense (including
reasonable attorneys fees) of any such claim, which costs shall be advanced
against receipt of proof of payment, subject to the obligation of the Manager to
reimburse such advances in the event that it is ultimately determined, by the
non-appealable action of a court of competent jurisdiction, that GLR or Senior
Care LLC, as the case may be, was not under any obligation to indemnify Manager
with respect to such claim. Manager agrees to cooperate with the defense of any
such claim, and not to settle any such claim without the consent of the party
providing indemnification with respect thereto (such consent not to be
unreasonably refused or delayed). Manager agrees to settle any claim on the
terms specified by the party providing the indemnification, so long as such
settlement is without cost to Manager and does not require the Manager to
confess any wrongdoing or to be subject to any ongoing injunctive relief. It is
agreed that Manager shall carry commercially reasonable amounts of liability
insurance, and that the cost of such insurance shall be an operating cost of the
Manager to be allocated between GLR and Senior Care LLC like any other operating
cost of the Manager. The indemnification obligations of GLR and Senior Care LLC
shall not apply to any claim to the extent covered by any such insurance, and
all such insurance policies shall name GLR and Senior Care LLC, and their
respective subsidiaries, as additional named insureds, and shall waive all
rights of subrogation as against the parties and their respective subsidiaries.
Manager agrees to give prompt notice of any claim, but failure to give such
prompt notice shall not be a defense to any indemnification obligation under
this Agreement, except to the extent that the party having such indemnification
obligation can prove actual prejudice from such delay.

 

8. Accounting Books and Records. The accounting books and records of the Manager
shall be maintained in accordance with generally accepted accounting principles,
applied on a consistent basis, and shall be audited annually by an independent
accounting firm selected by the Contract Management Committee, subject to the
approval of GLR, such approval not to be unreasonably withheld, conditioned or
delayed. Initially, the auditing firm will be the same firm that audits GLR. The
cost of any such audit shall be treated as an operating cost of the Manager.

 

9. Dispute Resolution.

 

9.1 If a dispute arises regarding the interpretation of, arising out of, or
related to this Agreement that cannot be resolved through informal means, the
parties hereto shall submit such dispute to mediation in accordance with the
Commercial Mediation Rules of the American Arbitration Association if they can
agree to do so, otherwise to formal arbitration in accordance with the
Commercial Arbitration Rules of the American Arbitration Association; provided,
however, that if the parties begin in mediation, any party to the dispute may
require arbitration at any time upon written notice in accordance with the
Commercial Arbitration Rules.

 

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9.2 To the extent permitted by applicable law, arbitration proceedings shall be
conducted by a single agreed upon arbitrator. If the parties cannot agree on an
arbitrator, then each party shall select one arbitrator who shall select a third
arbitrator. Any arbitrations shall be held in Clark County, Nevada. Without
limitation of their general authority, the arbitrators shall have the right to
order reasonable discovery in accordance with the Nevada Rules of Civil
Procedure. The final decision of the arbitrators shall be binding and
enforceable without further legal proceedings in court or otherwise; provided,
however, that any party may enter judgment upon the award in any court of
competent jurisdiction. The final decision arising from arbitration shall be
accompanied by a written opinion and decision, which shall describe the
rationale underlying the award and shall include findings of fact and
conclusions of law.

 

9.3 All parties shall have a duty to participate in mediation or arbitration
proceedings in good faith and to pursue the same in a timely manner.

 

9.4 Notwithstanding any provision of this Section 9, the requirement to mediate
or arbitrate disputes shall not apply to any action for equitable relief with
respect to this Agreement or any matter it contemplates. The forum for any such
action shall be the appropriate court in Clark County, Nevada, and all Parties
agree to both subject matter and in personam jurisdiction in that forum for such
purpose.

 

9.5 Notwithstanding any provision of this Section 9.5, the parties consent to
the jurisdiction of the appropriate court in Clark County, Nevada, for the entry
and enforcement of any judgment upon any arbitration award rendered, and all
parties agree to both subject matter and in personam jurisdiction for such
purposes.

 

10. Miscellaneous.

 

10.1 Notices. Any notice, payment, demand, or communication required or
permitted to be given by any provision of this Agreement shall be in writing and
shall be hand delivered, sent via facsimile, overnight delivery or registered or
certified mail, return receipt requested. Notice shall be effective: (a) if hand
delivered, when delivered; (b) if sent via facsimile, on the day of transmission
thereof on a proper facsimile machine with confirmation; (c) if sent via
overnight delivery, on the day of delivery thereof by a reputable overnight
courier service, delivery charges prepaid and with signed acknowledgement of
delivery; and (d) if mailed, on the fourth business day after the deposit of
such item in the mail, postage prepaid, return receipt requested. Notices shall
be addressed or sent to the parties of their last known address or facsimile
telephone numbers; provided that the address, telephone, email or fax number of
any party may be changed from time to time by notice given pursuant to this
section.

 

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10.2 Binding Effect. Except as otherwise provided in this Agreement, every
covenant, term, and provision of this Agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective successors,
transferees, assigns, heirs and personal representatives.

 

10.3 Construction. The terms of this Agreement were negotiated at arm’s length
by the parties hereto. The covenants, terms and provisions contained herein
shall not be construed in favor of or against any party because that party or
its counsel drafted this Agreement, but shall be construed simply according to
its fair meaning as if all parties prepared this Agreement, and any rules of
construction to the contrary are hereby specifically waived.

 

10.4 Time. In computing any period of time pursuant to this Agreement, the day
of the act, event or default from which the designated period of time begins to
run shall not be included, but the time shall begin to run on the next
succeeding day. The last day of the period so computed shall be included, unless
it is a Saturday, Sunday or legal holiday, in which event the period shall run
until the end of the next day that is not a Saturday, Sunday or legal holiday.

 

10.5 Headings. Section and other headings contained in this Agreement are for
reference purposes only and are not intended to describe, interpret, define, or
limit the scope, extent, or intent of this Agreement or any provision hereof.

 

10.6 Severability. Except as otherwise provided in the succeeding sentence,
every provision of this Agreement is intended to be severable, and, if any term
or provision of this Agreement is illegal or invalid for any reason whatsoever,
such illegality or invalidity shall not affect the legality or validity of the
remainder of this Agreement.

 

10.7 Variation of Terms. All terms and any variations thereof shall be deemed to
refer to masculine, feminine, or neuter, singular or plural, as the identity of
the person or persons may require.

 

10.8 Governing Law. The laws of Nevada shall govern the validity of this
Agreement, the construction of its terms, and the interpretation of the rights
and duties arising hereunder. All rights and remedies of each person under this
Agreement shall be cumulative and in addition to all other rights and remedies
which may be available to the person from time to time, whether under this
Agreement, at law, in equity or otherwise.

 

10.9 Counterpart Execution. This Agreement may be executed in any number of
counterparts with the same effect as if all of the parties had signed the same
document. All counterparts shall be construed together and shall constitute one
agreement.

 

10.10 Attorneys’ Fees. The prevailing party in any dispute arising from the
terms or subject matter of this Agreement shall be entitled to payment by the
other party of the prevailing party’s costs and expenses, including, without
limitation, such party’s attorneys’ fees, incurred in connection with resolving
such dispute.

 

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10.11 Creditors. None of the provisions of this Agreement shall be for the
benefit of or enforceable by any creditors of any party or the creditors of any
Managing Director or any Member.

 

10.12 Third Party Beneficiaries. There are no third party beneficiaries to this
Agreement.

 

G&L REALTY CORP.

By:

 

/s/ Daniel M. Gottlieb

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Daniel M. Gottlieb

Its:

 

Chief Executive Officer

G&L SENIOR CARE PROPERTIES, LLC

By:

 

G&L SENIOR CARE PARTNERSHIP, L.P.

Its:

 

MANAGING MEMBER

   

By:

 

G&L REALTY CORP.

   

Its:

 

GENERAL PARTNER

       

By:

 

/s/ Daniel M. Gottlieb

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Daniel M. Gottlieb

       

Its:

 

Chief Executive Officer

G&L REALTY CORP., LLC

By:

 

/s/ Daniel M. Gottlieb

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Daniel M. Gottlieb

Its:

 

Managing Director

 

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